Sutter Health Destroys Evidence for Case on High Healthcare Prices

November 20, 2017 - A state judge ruled that California-based Sutter Health intentionally destroyed 192 boxes of documents that pertained to a lawsuit accusing the health system of inflating healthcare prices and practicing anticompetitive behavior.

In the ruling, obtained by California Healthline, San Francisco County Superior Court Judge Curtis E.A. Karnow stated that “the destruction was done knowing that the evidence was relevant to antitrust issues.”

UFCW & Employers Benefit Trust, a health plan for grocery workers, filed the lawsuit against Sutter Health in April 2014. The plan argued that the health system of 24 hospitals violated antitrust and healthcare competition laws.

Sutter Health allegedly included gag clauses in its contracts that prevented patients from accessing negotiated rates and selecting lower cost providers. The health system also reportedly included “all-or-nothing” terms in contracts that required every facility in Sutter Health to be included in plan networks.

A 2016 analysis in the Journal of Health Care Organization also found that prices at Sutter Health and Dignity Health were 25 percent greater than at other hospitals in the state. Researchers attributed the price gap of almost $4,000 per patient admission to the health systems using their market power to negotiate higher rates.

Sutter Health countered that its pricing policies are comparable to its competitor’s strategies and the health system did not engage in antitrust behaviors.

The 2014 lawsuit called on Sutter Health to produce all documents relating to “all-or-nothing” terms, the system’s pricing strategy, market share, and governmental investigations pertaining to the system’s compliance with antitrust or unfair competition laws.

Following the lawsuit, Sutter Health’s Vice President and Chief Contracting Officer of the Managed Care department Melissa Brendt and the system’s in-house counsel Daniela Almeida ordered Brendt’s executive assistant, Sina Santagata, to destroy 192 boxes containing Managed Care department documents. The destroyed documents included a decade’s worth of papers going back to 1995.

Sutter Health contended that the destruction was “made on the spur of the moment during an interruption in a meeting.” The health system also compared the destruction to an automated process in which the papers were “auto-deleted.”

However, Judge Karnow ruled that the health system knowingly destroyed the documents because Brendt personally chose the 10-year timeframe for the boxes to be destroyed. The boxes in question were not supposed to be destroyed until Jan. 1, 2035, according to Records Management policies.

Santagata also stated in court that she was not aware of any other occasion in which the Managed Care department authorized the destruction of documents in storage.

She added that she had conferred several times with both Brendt and Almeida about the boxes according to policy, which requires a certification prior to the destruction that states the documents are not needed for a legal hold. Brendt and Almedia knew of the UFCW & Employers Benefit Trust lawsuit, but still approved of the destruction.

Judge Karnow pointed to an email from Santagata to Brendt that proved the destruction was intentional. Santagata wrote in a confidential email, “I’ve pushed the button…if someone is in need of a box between 3/15/95 & 11/23/05…I’m running and hiding…’Fingers crossed’ that I haven’t authorized something the FTC will hunt me down for.”

Sutter Health argued that the FTC reference was just a joke. Santagata testified that she was being sarcastic in the email and she did not know what FTC [Federal Trade Commission] stood for when she composed the email.

Judge Karnow wrote that “there are infinite topics for jokes, and the choice of this one is strong evidence in UEBT’s [UFCW & Employers Benefit Trust] favor.”

He ordered Sutter Health to analyze email backup tapes covering 2002 to 2005 for documents relating to the same topics that were destroyed. He will also consider UFCW & Employers Benefit Trust’s motion for the judge to issue an adverse jury instruction.

The trial is scheduled to occur on June 2019, California Healthline reported.