Anesthesia group working in North Texas hospitals accused of driving up charges

The Federal Trade Commission is suing a doctors group that provides anesthesia services to dozens of Texas hospitals, including many in Dallas-Fort Worth.

The FTC alleges that U.S. Anesthesia Partners has bought some of the largest anesthesia groups in the state. With this portfolio of practices, the group has raised prices for its services much higher than they originally were, according to the suit.

In Dallas-Fort Worth, U.S. Anesthesia Partners provides services for 57% of all anesthesia cases in hospitals, and is six times larger than the next largest group in the area, according to the suit.

The lawsuit is significant because it has targeted both the physicians group and the private equity firm behind it, and also because it has highlighted a practice that has become commonplace in health care, said Atul Gupta, an assistant professor at the Wharton School of the University of Pennsylvania.

“There’s nothing unusual about what the private equity firm did,” Gupta said. “It’s the same modus operandi where the private equity firms roll up the physician practices, they increase their market power in the local market, and then they exploit that advantage in the negotiations with insurance.”

The FTC accused the physicians group and the private equity firm that finances it, Welsh Carson, of exploiting “the fact that anesthesia services are critical to modern surgery; hospitals need to offer anesthesia services, and patients, their employers, and insurers must pay for them, even if choices dwindle and prices go up.”

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In a statement on its website, U.S. Anesthesia Partners called the lawsuit “overreaching and misinformed” and denied that the group had violated anti-competition laws.

According to the suit, U.S. Anesthesia Partners started by acquiring physician groups in Houston before setting its sights on Dallas and Fort Worth in 2014. It acquired six physician groups in the area before, in 2016, it added Sundance Anesthesia of Fort Worth to its growing collection. Sundance had an exclusive contract with Texas Health Resources Southwest Fort Worth hospital, according to the lawsuit.

The group’s chief operating officer celebrated the acquisition, saying: it was “a huge win, that’s a key THR site we didn’t have. Great work,” according to the complaint.

Private equity firms first became interested in health care entities in the early 2000s, Gupta said. After the 2008 financial crisis, the trend cooled before resuming, and now private equity firms own hospitals, nursing homes, physicians groups and more.

Private equity’s unique financing structure can sometimes be beneficial to companies, Gupta said, but health care operates a bit differently.

“The evidence is very consistent,” said Gupta, who has researched the effect of private equity ownership of nursing homes. “Across different segments, whether it’s hospitals, nursing homes, physicians practices, research has found that prices go up.”

This means that the prices a physicians group bills to an insurance company will increase. The cost paid by the patient usually increases as well, in the form of increased co-pays or deductibles.

The federal government accused Anesthesia Partners of increasing prices in multiple ways. First, by acquiring so many practices, it could reduce competition in local markets and increase prices. Second, the group entered into price-setting agreements with independent anesthesia groups it had not acquired, so that almost all providers in a local market were charging more, the suit claimed.

In its statement, U.S. Anesthesia Partners said its prices are “consistent with industry practice and are reasonable and necessary to support a viable medical practice and rising labor costs.”

Generally, consolidation of any kind in health care will cause the cost of services to go up, said Charles Miller, a senior policy adviser with Texas 2036.

Market consolidation has helped to increase the high cost of health care in the U.S., both as it affects individual people and the cost of the health care system as a whole. The United States pays more for health care than any other rich nation in the world, but typically has worse health outcomes than its peers that are paying less.

A first step toward tackling health care costs and increasing competition in health care markets, Miller said, is to increase transparency on who actually owns different entities in health care and how much they are charging for their services.