Colorado’s attorney general is forcing a national anesthesiology practice with private-equity ownership to sever contracts with five hospitals in the state because it created a monopoly in the Denver and Durango markets, forcing patients and their insurance companies to pay higher prices to be sedated during surgeries.
A settlement between the attorney general’s office and U.S. Anesthesiology Partners, filed late Monday afternoon in Denver District Court, also will loosen the company’s stranglehold on its Colorado employees by requiring it to dissolve non-compete agreements that prevent doctors from switching to new practices.
And the company, known as USAP, will pay a $200,000 penalty to the state to conclude the attorney general’s two-year antitrust investigation. Colorado will be able to use that money to provide restitution where possible and pay for consumer education or consumer protection enforcement, according to the agreement between the state and the anesthesiology company.
The five hospitals where exclusive contracts will be severed are St. Anthony Hospital in Lakewood, St. Anthony North Hospital in Westminster, Longmont United Hospital, Mercy Hospital in Durango and OrthoColorado Hospital, an orthopedic and spine specialty hospital in Lakewood. All five hospitals are part of CommonSpirit Health, one of the nation’s largest nonprofit health systems.
Those five hospitals were chosen because they are the most profitable for USAP, said Lawrence Pacheco, a spokesman for Attorney General Phil Weiser. The attorney general believes competitiveness will be restored by separating those five hospitals from USAP’s business.
U.S. Anesthesiology Partners used a “nefarious business model” in which the company bought as many Colorado anesthesiology practices as it could, locked in doctors with non-compete agreements and signed exclusive contracts with hospitals, Weiser said in an exclusive interview with The Denver Post.
“This particular way was a domination strategy,” Weiser said. “How do I build up a market share? How do I dominate the market share?”
Dr. Henri Acosta, who is on USAP’s Colorado leadership team, said in an emailed statement to The Post that the anesthesiology group settled with the Colorado Attorney General’s Office to focus on its health care business.
“We felt that it was in the best interest of our patients, health system partners and the communities we support to resolve the inquiry, regardless of its merits,” Acosta said. “Our resources are better spent taking care of patients than paying legal fees to defend ourselves against these claims. USAP remains committed to focusing on what matters most — providing the highest quality care to Coloradans.”
Efforts on Monday afternoon to reach CommonSpirit executives about the settlement were unsuccessful.
The settlement gives USAP 60 days to come up with a transition plan for the five hospitals, Weiser said. The company must work in good faith to dissolve the contracts on a reasonable timeline or give a 180-day notice that the contracts have been terminated.
Doctors, physician assistants and nurses working at those five hospitals will be allowed to leave USAP but will be able to continue working at those locations so surgeries are not disrupted. Doctors working for USAP at other Colorado hospitals also will be allowed to drop their non-compete agreements.
“The incessant drive for returns”
U.S. Anesthesiology Partners, which is based in Dallas and owned in part by the private equity firm Welsh, Carson Anderson & Stowe, does business in eight states and is facing scrutiny from the federal government.
The Colorado attorney general’s complaint against USAP warns of the dangers when private equity becomes invested in health care.
“What happens when private equity firms take over the practice of medicine? The incessant drive for returns on investment can stifle competition that normally leads to innovation and efficiencies in health care delivery, the improvement of the quality of care and the lowering health care costs for everyone,” the complaint states.
In September, the Federal Trade Commission filed an antitrust lawsuit against USAP for its business practices in Texas, where it acquired more than a dozen anesthesiology practices and drove up prices for their services. The FTC’s lawsuit followed a Washington Post investigation that focused on the company’s business practices in Colorado.
U.S. Anesthesiology Partners used its Texas strategy in Colorado to dominate the market, Weiser said. Colorado’s settlement does not impact the anesthesiology group’s operations in Texas or the other states where it does business.
“They saw in Texas this was a dominant business model and they sought to bring this model to Colorado,” Weiser said.
The company entered the Colorado market in 2015 and began buying anesthesia practices in the Denver area. Within six years, USAP had bought out its major competitors and had established control of surgical anesthesia at the two largest hospital systems in Denver, which accounted for more than 70% of health plan reimbursements in the market, according to the attorney general’s court filings.
“They acquired more practices and they raised rates again,” Weiser said. “We documented 20-to-30% price increases. Hospitals had nowhere to go because they locked up so much of the market.”
That resulted in higher costs for hospital patients and their employer-provided health insurance plans.
The company negotiated reimbursement rates so that their charges were 30% to 40% higher than competing groups in the Denver area, Weiser said. That created a financial windfall for USAP and its private equity owners.
By 2021, the company had exclusive or semi-exclusive contracts with 16 of 21 hospitals in metro Denver. And it had exclusive contracts with both Durango hospitals.
USAP started discussions in 2017 about an exclusive anesthesiology contract with CommonSpirit — then known as Centura Health — and by July 2020 it had exclusive contracts with all of Centura’s Colorado hospitals, the court documents stated.
The Texas-based company still has exclusive contracts in the Denver area with all HCA hospitals, SCL Health and National Jewish Health. Some hospitals such as Denver Health, UC Health and Children’s Hospital Colorado employ their own anesthesiology doctors and staff.
No choice but to accept prices
Once U.S. Anesthesiology Partners locked in those exclusive contracts, insurers had no choice but to accept those prices, Weiser said.
The anesthesiology group would put pressure on insurance companies by threatening to terminate existing contracts as they were about to expire, according to the AG’s settlement. Commercial health and employer-funded plans then would have to bear the cost of much higher out-of-network billing, costing them millions in surgical anesthesia services.
Even as USAP squeezed insurance companies for higher rates, the firm experienced staffing problems. Doctor attrition, lack of recruitment, a national shortage of anesthesiologists and the COVID-19 pandemic contributed to shortages.
In 2021, hospitals started complaining about staffing shortages leading to delayed, postponed and canceled surgeries, but they had no choice but to stick with USAP, according to court documents. The contracts between the hospitals and USAP prohibited medical centers from bringing in temporary or supplemental doctors to fill the gaps.
Doctors have been complaining about USAP’s business model, expressing frustration with the non-compete agreements they signed, Weiser said.
Now doctors will be freed from those agreements and will be able to move to different practices or establish new anesthesiology groups. But the settlement will allow time for a transition. Wesier said his staff was intentional in how they negotiated the agreement so as not to interrupt surgery schedules at the five Colorado hospitals.
Despite the settlement, USAP does not agree with Weiser’s view of the company’s business practices, Acosta said.
Still, “this agreement preserves USAP’s physician-owned, clinician-led model and our ability to continue serving most of the same Colorado patients and hospital systems we do today. USAP has provided high-quality care for more than one million Colorado patients over the past eight years, regardless of insurance or ability to pay,” Acosta said in a statement.
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