Sutter Health, CA Reach $575M Settlement Over Anti-Trust Concerns

December 23, 2019 - California Attorney General Xavier Bacerra recently announced a $575 million settlement with Sutter Health to resolve the health system’s alleged anti-trust behaviors, which a class action lawsuit claimed resulted in higher healthcare costs.

The allegations against the largest hospital in California began in 2014 when the United Food and Commercial Workers International Union and Employers Benefit Trust and other plaintiffs filed a lawsuit that questioned Sutter’s anticompetitive business practices. In March of 2018, Bacerra announced that the state filed a similar lawsuit against Sutter seeking to correct its anti-trust practices in the future. 

The complaint alleged that Sutter Health engaged in anticompetitive behavior to increase and maintain power to control prices and exclude competition. This enabled the health system to set far higher prices for hospital services and ancillary prices than would have been charged in a competitive market, plaintiffs stated.

In addition, the hospital set “excessively high” out-of-network rates for patients who received care outside of the network. The lawsuits also claims the health system used profits from illegal pricing practices for more acquisitions, executive compensation, and to finance its own insurance line. 

“When one healthcare provider can dominate the market, those who shoulder the cost of care — patients, employers, insurers — are the biggest losers,” Becerra said in the Dec. 20 announcement. “Today’s settlement will be a game changer for restoring competition in our healthcare markets.”

This settlement is one of the largest legal actions in the country attacking anticompetitive behavior in the healthcare sector and includes unprecedented levels of injunctive relief to restore competition in the market, Becerra highlighted.

“This first-in-the-nation comprehensive settlement should send a clear message to the markets: if you’re looking to consolidate for any reason other than efficiency that delivers better quality for a lower price, think again,” he said. “The California Department of Justice is prepared to protect consumers and competition, especially when it comes to healthcare.”

In addition to paying over half a million dollars, the settlement requires that Sutter Health also must increase their price transparency and limit out-of-network patient charges. The 24-hospital health system must ensure patients have access to lower-cost plans while stopping all-or-nothing contract deals, Becerra reported.

Other stipulations in the settlement included the prohibition of anticompetitive bundling of services and products, and at least ten years of court-approved compliance monitoring, the announcement emphasized.

Sutter Health expressed satisfaction with the recent settlement, saying on its website that the health system was “able to resolve this matter in a way that enables Sutter Health to maintain our integrated network and ability to provide patients with access to affordable, high-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,” Flo Di Benedetto, senior vice president and general counsel of Sutter Health, added in the announcement. “There were no claims that Sutter’s contracting practices with insurance companies affected patient care or quality. In fact, Sutter’s quality of care is nationally recognized with the majority of our hospitals and care facilities outperforming state and national averages in nearly every measure of quality.”

Despite the agreement, Benedetto stressed that the health system will need to make some changes to operations following its payout to the state.

“As an organization, we will have to evaluate future capital investments based on the impact of the settlement,” Benedetto stated.

Although healthcare mergers and acquisitions in California greatly increased prices for consumers, over-consolidation proved to be a major concern in Northern California, a University of California Berkley study found.

Specifically, one outpatient cardiology procedure in Southern California costed almost $18,000 compared to nearly 29,000 in Northern California, A cesarean section at Sutter costed more than $27,000 in 2016, nearly double what it costs in Los Angeles or New York, making Northern California one of the most expensive hospitals in the country to have a baby.

The Sutter Health settlement is Bacerra’s latest victory in the ongoing fight to keep California markets balanced and provide affordable care to ensure patient satisfaction.