My last post covered the legislative activity (Congress) concerning private equity’s role and investment in healthcare, particularly physician practices and hospitals https://rhislop3.com/legislation-restricting-pe-role-in-healthcare/ . Aside from legislation, a myriad of federal agencies are equally engaged.
Federal Inquiry into Private Equity Control in Health Care
In 2024, the Federal Trade Commission (FTC), the Department of Justice’s Antitrust Division (DOJ), and the U.S. Department of Health and Human Services (HHS) collectively initiated a cross-government public inquiry to assess the growing impact of private equity and other corporate entities on health care delivery and operations. This initiative reflects enhanced regulatory attention to the evolving dynamics of the health care sector.
For example, the FTC, DOJ, and HHS were actively investigating private equity (PE) in healthcare due to concerns that profit-maximizing strategies—such as roll-up acquisitions and high debt loads—compromise patient care, safety, and costs. A March 2024 workshop and joint inquiry highlighted concerns over PE ownership of clinics and nursing homes. The transcript from that workshop is available here: final-trancsript-ftc-opp-be-private-equity-healthcare-workshop-3-5-24
Concerns Regarding Corporate Involvement in Health Care Transactions
Private equity firms and other corporate stakeholders have become increasingly active in health care transactions, prompting concerns that profit motives may compromise the quality of patient care. The joint inquiry aims to evaluate how specific market transactions contribute to consolidation within the industry, generate financial returns for investors, and potentially adversely affect patient outcomes, worker safety, quality standards, and affordability for both patients and taxpayers.
Request for Information on Health Care Transactions
To facilitate this examination, the agencies issued a Request for Information (RFI) seeking public commentary on transactions involving health systems, insurers, private equity funds, and alternative asset managers. The RFI addresses deals concerning providers, facilities, and ancillary services, including those not subject to pre-merger notification requirements under the Hart-Scott-Rodino Antitrust Improvements Act.
FTC Enforcement Action Against USAP and Welsh Carson
A key enforcement action arising from increased regulatory scrutiny is the FTC’s lawsuit against U.S. Anesthesia Partners (USAP) and Welsh Carson. Filed under Section 13(b) of the FTC Act in the U.S. District Court for the Southern District of Texas in September 2023, the complaint alleges that private equity firm Welsh Carson implemented a roll-up strategy to establish a dominant provider of hospital-based anesthesia services in Texas.
Welsh Carson reportedly founded USAP in 2012 to pursue a series of acquisitions, initially in Houston and subsequently in Dallas, other Texas regions, and beyond. In February 2024, USAP entered into an agreement with the Colorado Attorney General to settle an antitrust investigation related to its conduct in that state. The FTC further contends that Welsh Carson exercised control over USAP’s operations and deployed similar roll-up strategies in emergency medicine and radiology.
Alleged Anticompetitive Conduct and Market Effects
According to the FTC, USAP bolstered its position in the Texas market through price-setting arrangements with certain independent anesthesia providers and by entering into agreements to avoid direct competition with another major provider. USAP’s share of hospital anesthesia cases in Texas reportedly increased from 8% in 2013 to 43% in 2021, while revenue share grew from 13% to 57% during the same period.
The FTC asserts that USAP holds monopoly power in the Houston and Dallas markets for commercially insured, hospital-based anesthesia services and maintains a leading position in Austin. The agency alleges that USAP leveraged this market strength to negotiate higher prices with commercial insurers, resulting in tens of millions of dollars in increased costs across Texas without corresponding procompetitive benefits. The complaint includes claims of monopolization, conspiracy to monopolize, unlawful mergers, restraint of trade, and unfair competitive practices, seeking judicial intervention to prohibit such conduct, prevent future violations, and grant equitable relief, which could extend to divestment of assets.
Legal Proceedings and Judicial Determinations
Both USAP and Welsh Carson sought dismissal of the FTC’s complaint, contesting the sufficiency of the allegations and the FTC’s statutory authority to seek injunctive relief under Section 13(b) absent concurrent administrative proceedings or ongoing conduct. Additional constitutional objections were raised concerning the FTC’s organizational structure. Welsh Carson argued that the FTC’s approach improperly circumvented established corporate law principles and failed to clearly attribute specific actions among the various Welsh Carson entities named.
The district court granted Welsh Carson’s motion to dismiss but denied USAP’s. The court concluded that Section 13(b) authorizes only prospective relief for ongoing or imminent violations, with redress for past conduct requiring administrative procedures under Section 5(b). It found the FTC did not sufficiently allege current or imminent misconduct by Welsh Carson, particularly given its minority, non-controlling interest post-relationship. The court indicated, however, that the FTC could bring a new action if evidence of impending violations by Welsh Carson emerges.
FTC Settlement with Welsh Carson
In January 2025, the FTC announced a settlement with Welsh, Carson, Anderson & Stowe and its affiliates (“Welsh Carson”) addressing a potential second administrative antitrust case FTC Secures Settlement with Private Equity Firm in Antitrust Roll-Up Scheme Case | Federal Trade Commission . The FTC alleged that Welsh Carson, via its portfolio company USAP, engaged in anticompetitive acquisitions intended to suppress competition and raise prices for anesthesiology services in Texas.
Under a proposed consent order, Welsh Carson is required to restrict its involvement with USAP and provide advance notice to the FTC regarding specified future acquisitions and investments in anesthesia and other hospital-based physician practices. The proposed consent order is available here for download. 2010031USAPWelshCarsonOrder
What to Expect Near Term
As of now (April 2026), federal regulatory activity for private equity (PE) investment in healthcare remains largely flexible compared to the Biden administration. The focus now is traditional antitrust enforcement rather than PE-specific measures. The second Trump administration has pursued a wide deregulatory approach regarding business and private capital, while maintaining healthcare as a key area for competition and consumer protection oversight. Although numerous legislative efforts aimed at restricting PE ownership have been introduced (see my last post referenced in the first paragraph) there is currently little probability of progress. Enforcement actions continue to address issues of consolidation, fraud and abuse, and quality of care. At the same time, states have emerged as the primary drivers of new regulatory challenges.
Where PE can improve its posture is via a more disciplined investment approach through the engagement of more healthcare executives as operators and analysts. Transactions are financial but still, operationally focused. I’ve watched too many transactions, or potential transactions ignore clear economic and social and policy trends in healthcare, so much so that the investment opportunity is ill-likely to generate desired returns or not run afoul of emerging scrutiny and regulatory trends. Additionally, operating partners need to have the experiential depth and savvy to navigate post-acquisition challenges during integration, particularly focused on operations culture and quality systems. The focus needs to be that quality pays – good care will continue and always has, to drive superior operating results.