Private equity-run U.S. Anesthesia Partners to end Colorado health care monopoly under agreement with Attorney General Phil Weiser
Feb. 27, 2024 (DENVER)—Attorney General Phil Weiser today announced an agreement with U.S. Anesthesia Partners of Colorado, Inc. (USAP), a health care company owned in part by private equity firm Welsh Carson Anderson & Stowe, resolving a Department of Law investigation into the company’s anticompetitive business practices that drove up prices for consumers receiving surgical anesthesia services. In addition to the required divestitures and changes to the company’s practices, USAP will also pay $200,000 in monetary relief under the agreement.
“When private equity gets involved in health care with a focus on raising prices to make a quick buck, bad things happen for consumers,” Weiser said. “USAP’s overall business model focused less on serving patients, and more on increasing profits through acquisitions and anticompetitive tactics. Today’s action promises to reestablish a competitive market, which will enable better care for patients, lower costs for consumers, and fewer employment restrictions for health care professionals.”
Starting in 2015, USAP began purchasing anesthesia practices in the Denver Metro Area, modeling their plan on a similar approach the company took in Texas earlier in the decade. By 2021, USAP bought out all its major competitors and established control of surgical anesthesia at the two largest hospital systems in the Denver area, accounting for more than 70% of health plan reimbursements.
The result of USAP’s successful cornering of the Denver-area surgical anesthesia market was higher costs for consumers and their employer-provided health insurance plans, onerous non-compete restrictions on health care professionals, and patients often facing delays or outright cancellation of their surgeries. At the same time, USAP charged reimbursement rates at 30-40% higher than competing groups in the Denver Metro Area, creating a financial windfall for USAP and its private equity ownership.
Cornering the Denver Metro Area surgical anesthesia market
In 2014, prior to USAP’s entry into the Denver-area health care market, the independent surgical anesthesia market centered around three hospital systems that contracted with several different anesthesia practices to provide services. Under this open staffing model, independent anesthesiologists and other health care professionals competed to provide the best service offering. Certain hospitals, like Denver Health, Children’s Hospital Colorado, and University Hospital, by contrast, employ their own staff and have closed staffing systems.
By 2021, USAP established a dominant position in the independent surgical anesthesia market, entering into exclusive or semi-exclusive contracts to provide anesthesia services at 16 of the 21 Denver-area hospitals that allow health care professionals to compete for services. This market dominance let USAP leverage its strength to charge significantly higher prices, increasing costs for patients and their employer-sponsored health insurance plans. That left insurers with little choice but to cave to USAP’s increasingly high reimbursement rate demands.
Higher costs, coverage issues
While the company put the squeeze on insurers to charge rates significantly higher than the few competitors who remained in the market, they encountered difficulties staffing surgeries. Doctor attrition, lack of health professional recruitment, and the lingering effects of the COVID-19 pandemic all contributed to these shortages. Even before COVID-19 overwhelmed hospitals, however, USAP was beginning to feel the effects of a growing national shortage of anesthesia professionals, impacting its ability to respond to hospitals’ demands for greater surgical capacity to make up for profits lost during the pandemic.
By 2021, hospitals took notice of these staffing shortages and started to complain about surgeries being delayed, postponed, or canceled. While this could have been seen by the hospitals as a breach of contract, none of the hospital systems that had exclusive contracts with USAP terminated their agreements with the company. By this time, USAP had acquired most of the remaining independent anesthesia groups, leaving the hospitals with no ability to replace USAP at most of their facilities. That was true even for hospitals’ efforts to bring in temporary or supplemental anesthesia providers to make up for coverage gaps.
Despite these problems, and in the absence of choice and competition in the marketplace, hospitals continued to contract with USAP, even as the company demanded subsidy increases as high as 1,200%.
The settlement announced today includes multiple provisions designed to restore competition to the Denver-area anesthesia market. USAP will divest its exclusive contracts at five Colorado hospitals—St. Anthony Hospital, St. Anthony North Hospital, OrthoColorado Hospital, and Longmont United Hospital in the Denver-Boulder market, and Mercy Hospital in Durango. USAP clinicians serving those facilities will be allowed to leave USAP and continue to service those hospitals to ensure continuity of care. This requirement includes strict provisions designed to reduce disruptions to patient care at those facilities.
The company will also release and modify non-compete agreements with clinicians to make them less onerous and more narrowly tailored. USAP will also completely end their non-compete agreement practice within 18 months of the agreement taking effect.
The $200,000 USAP agreed to pay the state may be used for any restitution where possible, consumer education or consumer protection enforcement, or efforts to advance the public welfare.
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