California attorney general announces Sutter will pay $575 million to settle antitrust suit
Sutter Health agreed to pay out $575 million in damages and have its business operations monitored for 10 years as part of a settlement with the California Department of Justice in an antitrust lawsuit originally filed nearly six years ago by a grocery workers’ union health plan, Attorney General Xavier Becerra announced Thursday.
“When one health care provider can dominate the market, those who shoulder the cost of care — patients, employers, insurers — are the biggest losers,” Becerra said. “Today’s settlement will be a game changer for restoring competition in our health care markets. Sutter has agreed to pay over half a billion dollars to compensate those who challenged its billing practices. It must operate with more transparency. And it must operate under the watchful eye of a court-approved monitor.”
Becerra said in a news conference Thursday that the lawsuit should send a message to all health companies that the California Department of Justice would do whatever is necessary to protect consumers and competition, but he was careful to note that there were no findings of wrongdoing as part of this settlement.
Sacramento-based Sutter’s legal counsel said the company was happy to resolve the matter in a way that allowed it to maintain its integrated network and quality care.
“Together with the Attorney General, the parties selected an experienced monitor who will oversee the agreement, which specifies parameters for contracting between Sutter Health and insurance companies going forward,” said Flo Di Benedetto, a Sutter senior vice president and general counsel. “There were no claims that Sutter’s contracting practices with insurance companies affected patient care or quality.”
Becerra’s team has worked closely with the grocery workers union, the United Food and Commercial Workers International Union, which has oversight of its members health and retirement benefits through the UFCW & Employers Benefit Trust. UFCW leader Jacques Loveall said the settlement represents an extraordinary victory for working people, their employers and all Californians struggling with the high cost of health care.
“Our case focused on allegations that Sutter has leveraged its market power to insulate its providers from competition on price and quality, thereby allowing it to charge inflated prices,” said Loveall, the chair of the UFCW & Employers Benefit Trust, in a prepared statement. “After five and a half years of litigation, Sutter ... has agreed to comprehensive injunctive relief that will stop the anti-competitive conduct at the heart of this litigation and ensure that Sutter competes on price and quality.”’
Attorney general’s goal: Restore competition
Becerra said his goal was to end to a number of Sutter practices, including a contract provision that prevented insurers from paying incentives to doctors to steer patients toward providers offering services that were less expensive but equal to or better in quality.
The attorney general’s lawsuit alleged that Sutter was capable of getting insurers to give up steering patients by denying access to its multimarket health care system with 24 state-licensed hospitals, more than 4,000 acute care beds, 35 outpatient centers and relationships with upward of 12,000 physicians.
These kinds of tactics, Becerra said, contribute to higher health care costs in Northern California than in Southern California. The attorney general’s team noted that the cost of an inpatient procedure averaged $223,278 in the north state but $131,586 in the south.
Testimony in the Sutter antitrust trial was about to begin in mid-October when Becerra announced that Sutter had agreed to negotiate a settlement. In addition to paying damages and agreeing to monitoring, Sutter would also be required to:
- End its practice of requiring health plans to contract with all of its hospitals and clinics in order to get access to the few they want. That means Sutter must make its rural hospitals, the Alta Bates Summit Medical Center and Sutter hospitals in San Francisco available in its commercial health care benefit plans.
- Stop bundling of services and products that force insurers, employers and self-funded payers to purchase more services or products than were needed in order to get access to those they wanted. Sutter now must offer a standalone price lower than any bundled package price.
- Limit what it charges for out-of-network services, helping to ensure that patients do not receive surprise medical bills from out-of-network providers.
- Increase transparency by giving insurers, employers and self-funded payers access to pricing, quality and cost information that helps patients make decisions about where to go for care.
- Meet standards for coordination of care if it wants to claim that it has a clinically integrated system. The mere fact that hospitals are geographically close or that they share electronic records will not be enough to make this claim.
- Pay the costs related to the monitor. Jesse Caplan of Boston-based Affiliated Monitors will have the authority to investigate Sutter’s compliance, field complaints from health plans and plaintiffs and make recommendations to the court about enforcing the order.
Terms require court approval
The attorney general, the grocery workers’ union and Sutter Health are seeking approval of the settlement terms from the San Francisco Superior Court. Any damages recovered will go to compensate employers and self-funded health plans who brought the class action, along with their attorneys.
The general counsel for the American Hospital Association, Melinda Hatton, described the settlement as a huge win for big commercial insurers, not consumers, because the insurers will be able to cherry-pick the hospitals with which they want to contract. Hatton said the agreement will also eliminate incentives for those insurers to work with hospitals to develop and sustain value-based care.
“Consumers in rural or vulnerable communities are most likely to be disadvantaged by the settlement,” Hatton said. “The settlement will also increase the cost of health care, making contracting with dominant insurers more expensive on top of the costs hospitals already bear from excessive inappropriate denials of claims for payment and other tactics that generate revenue for insurers while delaying payments for care to both hospitals and patients.”
However, consumer advocate Anthony Wright said he believes these settlement provisions will help prevent Sutter, the largest hospital system in Northern California, from using and abusing its market power to inflate prices.
“This landmark settlement provides real reforms that may mean Northern California consumers get some relief from high health prices due to Sutter Health’s practices,” said Wright, executive director of Health Access California. “We are excited about the agreement to limit out-of-network charges, helping prevent inflated surprise medical bills, which might jump-start the stalled negotiations (on these issues) in Congress and the state Capitol. We will continue to work on surprise medical bills, hospital concentration, and health care prices in the new year.”
This story was originally published December 20, 2019 at 1:59 PM.
