California AG says Sutter shouldn’t use coronavirus to delay $575M antitrust deal
California Attorney General Xavier Becerra asked a San Francisco Superior Court judge on Thursday to deny a request from Sacramento-based Sutter Health to delay finalizing a $575 million antitrust lawsuit settlement reached in December 2019.
In a news release issued about the filing, Becerra stated: “We are in the midst of a global pandemic, so it is more important than ever that we make health care more accessible and affordable for patients who need it.”
Sutter filed a motion for a continuance on June 12, asking Judge Anne-Christine Massullo to delay a preliminary approval hearing that had been scheduled for this week until either three months after a decision on the motion or until 30 days after Gov. Gavin Newsom lifted California’s state of emergency and stay-at-home orders.
Sutter spokesperson Amy Thoma Tan provided The Sacramento Bee with a statement from company leaders that, in part, read: “Adjusting our entire integrated network to respond to COVID-19 has been an incredibly costly and challenging endeavor that will significantly impact us for years to come.”
The health care giant’s motion details extraordinary steps that company leaders are considering after posting a $1 billion loss from its operations and investments in the first quarter of 2020.
In their motion, Sutter leaders said they were evaluating whether to “shut down, divest or convert to other uses” some of its general acute care hospitals that serve more than 100 Northern California communities. The company also is looking at whether to consolidate service lines in its facilities, the filing noted.
The antitrust settlement addresses allegations made by a grocery workers health plan, the United Food and Commercial Workers and Employers Benefit Trust, in a 2014 lawsuit that Sutter was using anti-competitive practices to ensure it could overcharge for services.
In March 2018, Becerra announced that the California Department of Justice had been quietly investigating the practices alleged in UEBT lawsuit for six years and had found evidence that Sutter was unfairly inflating medical costs. He sued under the Cartwright Act, alleging antitrust behavior.
A few months later, a San Francisco judge ruled that the Justice Department’s case could be consolidated with the grocery workers’ lawsuit. On the eve of the case was heading to court in October 2019, the Attorney General announced that all parties had reached a tentative settlement.
In December, Becerra shared details of the agreement. Among requirements Sutter had to meet:
▪ Pay $575 million in compensation to UFCW and other plaintiffs involved in what became a class-action lawsuit.
▪ Have its business practices monitored for 10 years.
▪ End a practice of requiring health plans to contract with all of its hospitals and clinics in order to get access to the few they want.
▪ 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.
Attorneys for the UFCW & Employers Benefit Trust and other plaintiffs joined Becerra in filing the motion Thursday requesting that the judge deny Sutter’s request for a continuance. The two parties said: “Any possibility that COVID-19-related concerns may eventually justify some future modification to the injunction provides no basis for delaying approval of the parties’ settlement.”
Sutter also indicated in its motion that the business climate has so changed that limits in the tentative settlement “may be too low to cover the unprecedented and unforeseeable increase in expenditures to respond to COVID-19 particularly given declining revenue.” Other provisions, company leaders asserted, could constrain the company from using all possible resources to respond to COVID-19.
In a motion opposing Sutter’s request for a continuance, the Attorney General said any delays would mean that Sutter could continue its anti-competitive practices amid a pandemic, harming consumers and the state’s economy.
Emergencies such as COVID-19 are not an excuse for Sutter or any other health care entity to skirt their obligations under antitrust law, Becerra’s team stated in the motion. Moreover, they said, the settlement itself contains mechanisms by which material changes in the health care environment may be used to seek appropriate modifications.
In the statement Sutter sent to The Bee, company executives said: “Sutter has not objected to any aspect of the settlement. Sutter has, however, asked to defer preliminary approval 90 days given the extreme disruption to the health care industry caused by COVID-19 and the potential for COVID-19 to materially impact certain settlement terms.”
Justice officials write in their lawsuit that Sutter’s underlying claims of COVID-19 losses are largely “paper” losses based on a first-quarter drop in the market value of the company’s multibillion-dollar investment portfolio .
“Sutter has received hundreds of millions of dollars in government aid since the crisis began and $1 billion from Centers for Medicare & Medicaid Services as part of the Accelerated and Advance Payment Program,” the DOJ attorneys wrote, “and its current assets exceed current liabilities by $4.5 billion.”
Becerra said in the news release: “This landmark settlement requires Sutter to stop practices that drive patients into more expensive health services and to operate with more transparency....This settlement was reached more than six months ago. It’s time for Sutter to stop shirking its responsibilities to the people of California.”
This story was originally published June 25, 2020 at 5:59 PM.
