Alleged Exclusionary Contracting for Outpatient Services

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Counsel for an outpatient surgery center retained Cornerstone Research and Professor Emeritus Richard Arnould to assess whether exclusivity agreements between a hospital system and health plans restrained competition and raised prices.

The defendant, the largest hospital system in the region, had negotiated exclusive contracts with four of the area’s largest commercial health plans, making it the only in-network provider of outpatient surgical services for subscribers of those plans. Professor Emeritus Richard Arnould of the University of Illinois at Urbana-Champaign examined the relevant geographic markets for inpatient and outpatient services to assess whether the hospital system restrained competition and foreclosed a substantial share of the market.

Professor Arnould assessed market power and evaluated evidence that the exclusive arrangements raised prices.

Professor Arnould also evaluated whether the exclusive arrangements raised prices for outpatient surgical services. He reviewed price data for similar services paid by the same plans in other regions. He also estimated the rates that the stand-alone surgical center would likely have negotiated with the plans at issue and found them to be lower than the rates charged by the defendant hospital system.

He concluded that the hospital system was able to foreclose a substantial share of the market for outpatient surgical services. Finally, Professor Arnould estimated the damages that the surgical center incurred due to reduced patient referrals, given its out-of-network status.


For additional information about this case, please contact Mike Keeley.

William W. Holder

Dean, Alan Casden Dean’s Chair, and Professor of Accounting,
Leventhal School of Accounting,
Marshall School of Business,
University of Southern California;
Senior Advisor, Cornerstone Research

Russell R. Wermers

Bank of America Professor of Finance;
Director, Center for Financial Policy;
Robert H. Smith School of Business;
University of Maryland

Christopher M. James

William H. Dial/SunBank Eminent Scholar in Finance and Economics,
Warrington College of Business Administration,
University of Florida;
Senior Advisor, Cornerstone Research