PE-backed anesthesiology group ends contracts with 5 Colorado hospitals, phases out noncompetes to resolve monopoly inquiry

A private-equity-backed anesthesia provider group that’s been in federal regulators’ crosshairs has reached a voluntary agreement with the state of Colorado to cut ties with five hospitals, thereby resolving its allegations of anticompetitive conduct.

According to Colorado Attorney General Phil Weiser’s office, U.S. Anesthesia Partners (USAP) of Colorado began purchasing practices in the Denver metro area in 2015 and by 2021 had “established control of the two largest hospital systems in the Denver area, accounting for more than 70% of health plan reimbursements.”

That strategy led to reimbursement rate charges 30% to 40% higher than other competitors, “onerous” noncompete contracts and care delays or cancellations for patients, the attorney general said.

The claims echo those made by the Federal Trade Commission (FTC) against USAP last September within its home state of Texas. Both Weiser and the FTC pointed to the influence of USAP’s private equity backer, Welsh, Carson, Anderson & Stowe, as a driving force in the alleged roll-ups, higher charges and employment restrictions.

“When private equity gets involved in healthcare with a focus on raising prices to make a quick buck, bad things happen for consumers,” Weiser said in a Tuesday release. “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 healthcare professionals.”

In its own statement on the agreement, USAP described the attorney general’s investigation as “misguided” and said that its resources are better spent resolving the inquiry than paying legal fees.

“We strongly disagree with the accusations and assertions claimed by the Attorney General. The USAP Colorado practice has a proud history of providing high-quality patient care and excellent anesthesia services to the facilities we serve,” Henri Acosta, M.D., a member of USAP-Colorado, said in the release. “Our preference would have been to maintain the relationships with the hospitals impacted by this settlement, and our goal is to work collaboratively with our colleagues who serve those sites to ensure as smooth a transition as possible. USAP Colorado will continue to focus on meeting the anesthesia needs of our facility partners and patients going forward.”

Under the agreement, which is not an admission of liability or wrongdoing, USAP will divest its exclusive contracts at five CommonSpirit facilities: St. Anthony Hospital, St. Anthony North Hospital, OrthoColorado Hospital, Longmont United Hospital and Mercy Hospital. USAP clinicians at these facilities will see their noncompetes waived, though USAP-Colorado will work with the clinicians to find a mutually agreeable termination date so that services at the hospitals are not interrupted.

More broadly, USAP-Colorado will be modifying the noncompete agreements with its clinicians “to make them less onerous and more narrowly tailored,” and will completely end noncompete agreement practices within 18 months, the attorney general’s office said.

USAP-Colorado, in its statement, said that the agreed-upon changes “are a continuance” of standards and legal changes made by the state in recent years and that they “had been contemplated for time” by the company.

USAP will also pay the state $200,000 as reimbursement of costs and attorneys’ fees.

The attorney general’s office’s complaint contrasted the “open staffing model” common among most Denver-area hospitals contracting with independent anesthesiologists in 2014 with the exclusive or semi-exclusive contracts USAP held among 16 of 21 hospitals without closed staffing systems in 2021.

Staffing difficulties spurred by COVID-19 and a macro-level shortage of anesthesia professionals led to surgery scheduling issues and could have been viewed as a breach of contract by the hospitals yet none terminated their agreements with USAP as few independent groups remained to replace its physicians, the office noted.

“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 office wrote in its release.

The allegations have parallels to USAP’s other alleged scheme that the FTC said “has cost Texans tens of millions of dollars more each year.” There, regulators said USAP similarly scooped up anesthesiology providers to gain control of multiple markets but additionally worked with another unnamed large anesthesia services provider to “stay out of USAP’s territory.”

USAP spans Colorado, Texas, Florida, Nevada, Washington, Kansas, Indiana, Tennessee, Maryland and the District of Columbia. It includes more than 4,500 clinicians.

USAP and Welsh, Carson, Anderson & Stowe have vowed to fight back against the FTC’s claim. So far, the government hasn’t backed down—in December, the Biden administration listed both groups as focal points in its broader push against anticompetitive practices and “corporate greed in healthcare,” while legislators have opened their own inquiries into the companies’ practices.