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• Sep 4, 2024 Northern California health care giant charged 30% more than other hospitals, study finds Catherine Ho: cho@sfchronicle.com 
  

  https://www.sfchronicle.com/health/article/sutter-health-charged-30-hospitals-new-study-19731388.php

  
  

  New research from University of Southern California health
  economists has found evidence that Sutter Health began implementing allegedly
  anticompetitive contracting practices in the early 2000s that resulted in
  prices 30% higher than at comparable hospitals.

  
  

  The findings echo some of the claims in recent lawsuits —
  including one that had been resolved in Sutter’s favor — accusing the health
  care giant of abusing its market power to charge insurers and consumers higher
  prices for medical care.

  It is of particular consequence to residents of Northern
  California, where most Sutter hospitals are located, and who previous studies
  show pay more for medical care than their counterparts in Southern California
  due to more health care consolidation in the northern part of the state.

  
  
  

  Prior to the early 2000s, Sutter’s prices were similar to
  those of other hospitals, according to the study, published in August in the
  Journal of Hospital Management and Health Policy. But after the early 2000s,
  when Sutter began adopting a contracting practice known as “all or nothing” —
  in which a large health system that owns virtually all the hospitals in a
  region can compel insurers to contract with all its hospitals or none at all —
  Sutter’s prices began to surge, becoming 30% higher than those at comparable
  California hospitals, the research found.

  
  
  

  The contracting tactic prevents insurers from being able to
  negotiate with individual hospitals for lower prices. It is one — but not the
  only — way that large systems can leverage their market power to drive up
  prices that ultimately lead to consumers paying higher premiums and
  out-of-pocket costs, health policy experts say.

  
  
  

  “What we show is that these contracting practices do in fact
  release the health systems from competitive pressures,” said the study’s lead
  author Glenn Melnick, a professor at USC’s Sol Price School of Public Policy.
  “In doing so, they are able to raise their prices above market levels. That is
  typical monopoly behavior — you get control of the market and do what you can
  to protect your power in the market.”

  
  
  

  Sutter, which has denied anticompetitive conduct, said the
  analysis is flawed and that Melnick is biased because he was a consultant in
  antitrust lawsuits against Sutter.

  
  
  

  In one of those lawsuits, Sidibe v. Sutter Health,
  plaintiffs accused Sutter of using its market power to drive up prices for
  insurers and consumers. The suit, filed in 2012, was thought to have been
  resolved in 2022 when a jury sided with Sutter. But it was recently revived
  after an appeals court reversed the decision and sent the case back to the
  lower court for a new trial.

  
  
  

  “The study repackages the same tired allegations a jury
  unanimously rejected two years ago,” Sutter Health said in a statement. “Sutter
  looks forward to retrying this case and prevailing a second time.”

  
  
  

  Melnick said he was a paid consulting expert early on in the
  Sidibe case and in a second antitrust suit against Sutter, but is no longer
  involved.

  
  
  

   

  
  
  

  The study analyzes Sutter’s prices from the period of 1995
  to 1999 to two subsequent periods, 2001 to 2005 and 2010 to 2019. It compares
  the average difference in price across Sutter hospitals, which are all in
  Northern California, to comparable non-Sutter hospitals across California,
  while controlling for other factors that might affect prices.

  
  
  

  While the study focuses on one particular contracting
  practice by one provider and its effects on price in specific periods of time,
  consolidation in the health care sector and its consequences for consumers is a
  part of a broader and ongoing problem, policy experts say.

  
  
  

  High health care costs top the list of Americans’ financial
  worries, according to recent polling by KFF, a nonprofit health policy
  research, polling and news organization. And ample research shows the more
  consolidated the health care industry becomes, the more consumers pay for care.

  
  
  

  “What a paper like this demonstrates is a compelling problem
  that needs to be addressed in our health care system here in California:
  consolidation and an imbalance in market forces is not serving consumers well,”
  said Kristof Stremikis, director of market analysis and insight at the
  nonprofit California Health Care Foundation. “If anyone needed more evidence
  that consolidation is driving up prices, here’s one more piece.”

  
  
  

  It is especially relevant for Northern California residents,
  who previous studies have shown pay 20%-30% more for medical services than
  Southern California residents, even after adjusting for the Bay Area’s higher
  cost of living and wages. This is in part because health systems are more
  consolidated in the northern part of the state, where giants like Sutter,
  Kaiser Permanente, UC Health and Dignity Health dominate the market.

  
  
  

  The USC study relied in part on previously confidential
  documents on contracting practices that are not typically available to
  researchers or the public. Providers consider such information trade secrets.
  In this case, researchers were able to access the documents because they were
  part of the Sidibe lawsuit.

  
  
  

  “From a research perspective it was a gold mine because we
  got to look behind the curtain,” Melnick said.

  
  
  

  It’s not clear if the findings will factor in the Sidibe
  case. During the 2022 trial, evidence of Sutter’s conduct prior to 2006 — such
  as the documents the researchers analyzed for the study — was excluded. An
  appeals court in June reversed the decision, in part because they found that
  the pre-2006 evidence shouldn’t have been excluded, and sent the case back to
  the lower court.

  
  
  

  A new trial date has yet to be scheduled but could be in the
  first quarter of 2025, said Matthew Cantor, the lead attorney for the
  plaintiffs.

  
  
  

  In a separate but similar lawsuit, a union trust that pays
  for workers’ health care, United Food and Commercial Workers International
  Union, aka UFCW, and Employer Benefit Trust, sued Sutter in 2014, alleging
  anticompetitive behavior and overcharging payers. That suit was later combined
  with another similar case brought in 2018 by then-Attorney General Xavier
  Becerra, which similarly alleged Sutter abused its market power to raise prices
  and harm consumers.

  
  
  

  Those two cases were combined for purposes of a trial, and
  were settled in 2019, right before the trial was slated to begin. Sutter agreed
  to pay $575 million to employers, unions and the government but did not admit
  wrongdoing.

  
  
  

  Health Care Reporter

  
  
  

  Catherine Ho covers health care at The San Francisco
  Chronicle. Before joining the paper in 2017, she worked at The Washington Post,
  the Los Angeles Times and the Daily Journal, writing about business, politics,
  lobbying and legal affairs. She’s a Bay Area native and alum of UC Berkeley and
  the Daily Californian.

  
  
  

   

  
  
  
• August 7, 2023 – California Healthline: As a Union Pushes to Cap Hospital CEO Pay, It’s Accused of Playing Politics
  _{… Glenn Melnick, a health care economist at the University of Southern California, said he understands SEIU-UHW’s motive but questioned whether…}
• August 4, 2023 – Los Angeles Daily News: Union pushing to cap hospital CEO pay accused of playing politics _{Glenn Melnick, a health economist at the University of Southern California, said he understands SEIU-UHW’s motive but questioned whether other…}
• June 26, 2023 – Modern Healthcare: Physician-pwned hospitals have lower prices: study _{…Said Glenn Melnick, a health economist and public policy professory at the University of Southern California and a researcher at its Schaeffer…}
• May 28, 2023 – The Guam Daily Post: California hospitals seek a broad bailout, but they don’t all need it _{…are big fans of these giant bailouts, where the relatively rich hospitals benefit as well as the ones who really need it,” said Glenn Melnick, …}
• May 25, 2023 – Becker’s Hospital Review: Analysis suggests only a ‘sliver’ of California’s hospitals are truly in crisis _{…ones who really need it,” said Glenn Melnick, PhD, a health economist at the University of Southern Californa. “A big chunk of the hospitals, …}
• May 9, 2023 – Oakland Post: Hospital Closures, Cuts in Services Loom for Some Communities. How the State May Step in to Help. _{“But there are a few that genuinely appear to be at risk if this surge continues,” said Glenn Melnick, a health economist at the University of…}
• April 20, 2023 – Los Angeles Times: Beverly Hospital in Montebello files for bankruptcy in effort to avoid closure _{“2022 was a very difficult year for hospitals in general,” said Glenn Melnick, a USC professor focused on health finance.}
• March 29, 2023 – Los Angeles Times: Inflation is falling but your health premiums may be about to soar. Here’s why. _{…at a big jump in [health insurance] premiums and out-of-pocket costs,” said Glenn Melnick, an expert in health economics and finance at USC.}
• March 26, 2023 – Los Angeles Times: Hospitals complain problems persist a year after L.A. Care was hit with record fines _{…”but the patients who are there tend to be sicker than they were pre-COVID,” said Glenn Melnick, a USC professor focused on health finance,…}
• February 21, 2023 – KQED: One Hospital Closed. How Many More Will Follow? _{Glenn Melnick, a health economist, professor and director, Center for Health Financing, Policy and Management, Price School of Public Policy,…}
• February 13, 2023 – KQED: ‘Half of California Hospitals Are in the Red’: Pandemic Troubles Pile Up for ERs _{“These disruptions led to unexpected, unbudgeted cash shortfalls,” said Glenn Melnick, USC professor and health economist.}
• January 9, 2023 – LAist: Why Hospitals Are Struggling to Meet Earthquake Safety Deadline _{Glenn Melnick, a health economist at the University of Southern California, said progress could be slow because there isn’t much financial…}
• December 21, 2022 – Bloomberg Law: California Plans Deny Mental Health Claims Despite New Law _{… on the judgment of the individual providers,” said Glenn Melnick, a professor of health-care finance at the University of Southern California.}
• November 28, 2022 – The Center Square: Union to push for health care minimum wage in California _{… there are few substitutes for hospital care, that these higher costs will show up as higher prices and higher premiums later,” Glenn Melnick, …}
• November 21, 2022 – Modern Healthcare: Health systems see increasing claim denials as payer ‘delay tactic’ _{… companies are making these decisions, said Glenn Melnick, professor at the University of Southern California Sol Price of Public Policy.}
• November 16, 2022 – CalMatters: Nurse practitioner requirements are changing, allowing them to practice without physician supervision _{… to communities that need them, particularly in rural areasm said Glenn Melnick, a health economist at the University of Southern California.}
• November 4, 2022 – The News & Observer: NC hospitals say they lose billions on Medicare. New report tells very different story. _{Glenn Melnick, the Blue Cross of California chair in Healthcare Finance at the University of Southern California, reviewed the report and said the…} 
• October 25, 2022 – KFF Health News: Hospitals Said They Lost Money on Medicare Patients. Some Made Millions, a State Report Finds. _{But Glenn Melnick, a health economics and finance professor at the University of Southern California who reviewed the North Carolina data, …} 
• July 9, 2020 – Fierce Biotech: Amid surgem hospitals hesitate to cancl nonemergency surgeries _{…a surge in COVID-19 patients when it occurs, said Glenn Melnick, a professor of health economics at the University of Southern California.}

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