The Federal Trade Commission recently sued the largest anesthesia-provider in Texas and its private equity owners.
As the dominant provider in Houston and Dallas, ten-times larger by revenue than its nearest competitor in Texas, US Anesthesia Partners Inc is accused by the FTC of reducing competition and unfairly raising prices.
According to the FTC complaint, private equity firm Welsh Carlson Anderson & Stowe noticed a fragmented market 11 years ago. They began a process of “rolling-up” anesthesia practices in Texas cities Houston, Dallas, Austin, San Antonio, Tyler, and Amarillo, until they’d built a behemoth involving 1,000 doctors, 750 nurses and over a dozen practices.
As a result of its dominant position in its major markets, the FTC claims, the firm controls 60 percent of hospital-only anesthesia costs statewise, and 43 percent of cases. With that, the firm has been able to raise prices significantly, with reimbursement rates twice the median of other providers in Texas. The FTC quotes an email from a member of the anesthesia firm who wrote “Cha-ching” after completing another anesthesia practice acquisition, on the expectation that they would be able to extract monopolistic profits from their dominant position.
I have three reasons for mentioning this lawsuit against the anesthesiologist private-equity roll-up.
The first, most trivial point, is about the dangers of email in business.
You guys, this is in no way legal or financial advice but seriously, avoid writing “Cha-ching” in a celebratory email if you work for a private equity firm. Sure, you can think it, you might even say it to your buddy over post-acquisition drinks, but just please don’t write it down. That email could cost you and your partners a lot of money.
The second, more profound point, is that this case gives us a sense of an important federal government and national business trend in 2023.
We are in year 3 of a significant shift to a much more activist antitrust phase of the federal government in its enforcement of market competition. Lina Khan, the FTC commissioner, embodies this shift. She established herself as a leading scholar rethinking antitrust rules with respect to technology giants such as Amazon, with a highly influential article entitled “Amazon’s Antitrust Paradox” written while she was still a law student at Yale University.
Most of the attention toward the FTC’s actions in recent years – with Khan as chairwoman – has focused on how the commission might target tech industry giants, such as Amazon, Alphabet (Google), Microsoft, and Apple for anti-competitive practices.
This anesthesia roll-up case in Texas is an example outside of the technology industry of the FTC’s more activist stance. Traditionally the FTC focused on correcting situations where a monopolistic business might unfairly raise prices because of an absence of competition. But watch the tech space over the next year as the FTC is expected to bring more aggressive enforcement there on anti-trust theories beyond “monopolies lead to higher prices for consumers.”
For its part, US Anesthesia rejects the FTC’s case and says it is based on “flawed legal theories and a lack of medical understanding about anesthesia.”
My third reason for bringing this up is personal. This is a follow-up to an earlier post I wrote in which I mentioned an anesthesia-billing problem that I found absolutely egregious.
I got an in-network preventive colonoscopy in June 2022 (to celebrate turning 50), covered by my insurance company Blue Cross Blue Shield of Texas. This procedure included anesthesia (because duh), but I learned 11 months later, in May 2023, that the anesthesiologist Alamo Sedation Associates was not considered in-network for my insurance at the time. I had first met the anesthesiologist who did the procedure approximately 90 seconds before going under, while gowned and sideways on a gurney. It had never occurred to me to look over my shoulder and ask at that special moment, “Hey, are you in-network with Blue Cross Blue Shield?”
In May 2023, Alamo Sedation Associates sent me an invoice of $1,920 for their service. A month later this bill was reduced to $1,785.82 when BCBS paid $134.18 as an in-network payment. Over the course of the next 4 months I refused to pay the $1,785.82 balance.
Astute readers wrote to me in August that a federal law passed January 2022 made this kind of ‘surprise bill’ illegal. Blue Cross Blue Shield representatives, when presented with this situation by me over at least a half-dozen phone calls, claimed this law only applied to emergency-room bills. Most times I called them they claimed “oh, it should be resolved at some point, but we can’t promise it will be.” Four months later it wasn’t resolved.
Meanwhile, collection agency Quantified Management Services, hired by Alamo Sedation Associates, began to threaten my credit for non-payment of $1,785.82, via letters and phone texts in late August.
From the Alamo Sedation Associates PLLC website: “We accept any insurance that the facility where you are having the service accepts. Because we are an ancillary provider, we typically do not need to contract separately with your insurance to be processed in-network (several BCBS plans are the exception).” The first two sentences simply aren’t true, and the parenthetical phrase at the end is what drove me crazy, for months. Alamo Sedation Associates did not have a live person who would answer any of my phone calls, only an automated voicemail system and recorded messages about where to pay their invoice. Although I don’t think they are part of US Anesthesia Partners, the vibe the Alamo Sedation Associates PLLC website gives is that they are owned by a for-profit company based 3,000 miles away and unreachable on any day ending in the letter Y.
Blue Cross Blue Shield failed to resolve the bill after 6 months and countless phone calls. I imagine this same scenario being played out among tens of thousands of patients, most of whom would either pay the bill or have their credit wrecked. The experience was awful, predatory, and I think, illegal.
Charles Riley of Riley and Riley, Attorneys at Law in San Antonio, who represents patients in disputes with health care providers and insurance companies, disagreed with BCBS.
Once I signed on with Riley, he wrote a letter letting them know he represented me and disputed the charge. The bill was zeroed out by BCBS, the anesthesia provider, and the collection agency. I found out about Riley’s success with my situation last week.
In terms of consumer and patient harm, ignoring the federal surprise billing law, threatening my credit, and refusing to honor the in-network claim, I believe and my attorney believe that both Alamo Sedation Associates and Blue Cross Blue Shield were in dangerous potential class-action lawsuit territory for them. By zeroing out my bill, they avoided us finding out for sure. But if you are stuck in a similar situation, I’d recommend you find an attorney like the one who represented me.
There’s nothing wrong with the practice of anesthesiology. This is essential medicine! But the part of the business that involves surprise billing, jacking up prices in Texas, being jerked around by your insurance company for six months, and ignoring consumer protection laws isn’t great.
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