Are “all or nothing” contracts by hospital systems anti-competitive?—evidence from a recent antitrust lawsuit

Abstract: The expansion of multi-hospital systems has gained increased attention as a key driver of rising hospital prices. Limited access to confidential contracts between hospitals and health plans has constrained our measurement and analysis of the mechanisms behind the ability of systems to secure higher prices. This study incorporates information from recently disclosed confidential documents related to a major hospital antitrust lawsuit in Northern California (Sidibe vs. Sutter Health). Court documents combined with before and after pricing data allowed analysis of Sutter Health’s adoption of systemwide “all-or-nothing” contracting. The results show that before imposing “all-or-nothing” contracts in the early 2000s, Sutter member hospitals’ prices were constrained by competitive market forces and were paid prices similar to control group hospitals. However, after implementing “all-or-nothing” contracting, Sutter’s prices were no longer subject to competitive market forces. Their prices increased and remained substantially above prices at control group hospitals—a +30% difference. These findings offer vital, qualitative, and quantitative evidence of specific behaviors that undermine market competition, leading to higher prices. The study sheds light on how the adoption of “all-or-nothing” contracting by multi-hospital systems can eliminate competitive constraints, enabling them to command significantly higher prices from health plans. This insight is crucial for policymakers, regulators, and stakeholders seeking to address the rising costs of healthcare and promote a more competitive and affordable healthcare landscape. The study’s access to previously confidential documents provides a rare glimpse into the inner workings of hospital pricing strategies and their impact on market dynamics.