The national anesthesia practice that monopolizes the market in Durango and Denver must terminate exclusive contracts with five CommonSpirit hospitals over the next 60 days, according to terms of an agreement filed Monday in Denver District Court.

Per the terms of a 2020 exclusive contract with Mercy Hospital, U.S. Anesthesia Partners was the sole provider of anesthesia care at the largest hospital in the region. The agreement will not only severe that contract, but also establishes that USAP must phase out the noncompete clauses that currently prevent anesthesiologists from creating alternative practices.

USAP will also pay $200,000 in monetary relief to the Attorney General’s office.

“There will be real choice in the (Durango) market,” said Attorney General Phil Weiser in an interview with The Durango Herald. “There will be two different practice groups who will have to compete against one another and there won’t be non-competes or exclusive contracts that interfere with free and fair competition.”

The monopoly enabled USAP to negotiate reimbursement rates for anesthesia care that are 30% to 40% higher than its competitors, Weiser said.

Scheduled surgeries at Mercy will continue uninterrupted.

“Mercy Hospital is blessed to have a team of anesthesiology providers who have cared for our community for many years,” CommonSpirit spokesman Kevin Massey said in an emailed statement. “We will work alongside them throughout this transition to ensure our patients continue to receive the same high-quality care they have come to expect.”

USAP is a national anesthesiology practice that began in 2015 buying up private practices in the Denver metro-area market. It is owned, in part, by Welsh, Carson Anderson & Stowe, a Texas-based private equity firm.

USAP engaged in a two-part maneuver to monopolize the surgical anesthesia market, eliminate competition and negotiate reimbursement contracts with health insurance plans that would benefit USAP’s private equity investors, Weiser said.

In 2015, the practice started to buy smaller independent anesthesiology practices in the Denver area, according to allegations made in the attorney general’s complaint, filed Monday in Denver District Court.

By 2020, USAP had acquired so many competitors that there were no longer any independent surgical anesthesia groups capable of fully staffing a hospital in the Denver market (except for “closed staffing” facilities at which providers are directly employed by the hospital).

With a dominant share of the anesthesia market secured, USAP threatened to terminate contracts with major health plans, which forced insurers to agree to higher reimbursement rates or pay out-of-network prices for anesthesia care.

USAP’s squeeze on the Durango market began in July 2020, when it signed an exclusive contract with Mercy Hospital. A spokesman for CommonSpirit said that at the time, most of the anesthesiologists employed by the hospital joined USAP.

The following year, it signed an exclusive contract with Animas Surgical Hospital, Weiser said.

“The current situation in Durango is a classic monopoly,” Weiser said. “There are only two options, and they are the same option.”

The increased rates cost health plans millions, the complaint argued.

U.S. Anesthesia Partners is being sued by the Federal Trade Commission for engaging in a similar set of tactics in Texas.

USAP denied Weiser’s allegations in a news release. Spokesman Tony Good declined to answer any questions.

“We strongly disagree with the accusations and assertions claimed by the Attorney General,” said USAP-Colorado physician Dr. Henri Acosta in the release. “The USAP Colorado practice has a proud history of providing high-quality patient care and excellent anesthesia services to the facilities we serve.”

Weiser said the hospitals in question can be viewed as victims, in some cases, and as poor visionaries of the future, in others. In a labor marketplace such as Durango, where shortages have impacted a wide range of industries, hospitals have limited options.

In a statement made through USAP’s spokesman, Dr. Jim Birgenheier, president of the medical staff at Mercy, said clinicians there are dedicated minimizing disruption and providing access to quality care in the area.

“We aren’t sure why the AG picked Mercy in Durango as part of the settlement agreement,” Birgenheier’s written statement read, in part. “As clinicians, we have served Durango for years, providing high-quality anesthesia care and acting with the utmost integrity.”

Weiser said the agreement targeted a set of divestitures that will free up competition across the state.

The situation in Durango was an obvious monopoly, he said, and was “clearly a target for us to address.”

The terms of Monday’s agreement compel USAP to soften, although not entirely relinquish, its hold on Colorado’s surgical anesthesia market.

In addition to Mercy, USAP will release four other CommonSpirit hospitals from exclusive contracts: St. Anthony Hospital in Lakewood, St. Anthony North Hospital in Westminster, Longmont United Hospital and OrthoColorado Hospital in Lakewood.

The clinicians working at those facilities will no longer be subject to noncompete provisions in their employment contracts, and USAP has agreed to phase out such clauses entirely over the next 18 months.

“Everyone was locked up and they were forced to stick with an arrangement that was anti-competitive, and that was harming patients,” Weiser said of the agreements.

Under terms of the agreement, USAP must work with the hospitals in question to develop a comprehensive transition plan. Going forward, the practice must also report the planned acquisition of any more anesthesia practices or development of new exclusive agreements in the state for a period of three years.

Although USAP called the inquiry “misguided” in its news release, the organization felt it was best to resolve the issue, “regardless of its merits.”

“Our resources are better spent taking care of patients than paying legal fees to defend ourselves against erroneous claims,” Dr. Acosta said.

Although not required by the agreement, USAP will also cease service at Animas Surgical Hospital.

The hospital’s CEO, Meggin Roberts, notified staff members in an email Tuesday that while the decision “presents us with unexpected change, please rest assured that we are proactively addressing this situation to ensure the continuity of quality care for our patients and providers.”

The USAP anesthesia clinicians in Durango cover ASH and Mercy, spokesman Good said.

CommonSpirit has similarly committed to a smooth transition.

“Under the Stipulated Consent Agreement and Judgment negotiated by the Colorado Attorney General, USAP is required to work with Mercy Hospital to ensure there are no disruptions to patient care,” spokesman Massey said. “We value these incredible anesthesiology teams and look forward to partnering with them into the future.”

rschafir@durangoherald.com