FTC suing anesthesiology that grew by acquisition
December 04, 2023
In some welcomed news, FTC is suing a private equity firm for its acquisitions of anesthesiology practices to dominate a market. Known as a "roll-up," a larger firm or practice acquires smaller competitors to gain market share. In this case, although the size of each individual acquisition was below the reporting threshold, the outcome is that the firm now controls 60% of the anesthesiology market in Texas and is therefore able to exert outsized influence on pricing.
The firm responded that its rates "have not exceeded the rate of medical cost inflation for close to 10 years," but it seems that a firm having that type of market share is an issue, particularly if it grew primarily by acquisition. The increased market share tends to result in increased rates (whether early on or later), which in turn get passed along to insurers, employers, and ultimately, patients. Although firms like the one in question may tout the benefits of scale, having many smaller competitors fosters greater competition (known in economics as a "perfect market" when no one firm is able to change the price), which tends to result in better outcomes for consumers.