By Jenny Gold OCTOBER 16,
2019
SAN
FRANCISCO — Sutter Health has reached a tentative settlement agreement in a
closely watched antitrust case brought by self-funded employers, and later
joined by the California Attorney General’s Office. The agreement was announced
in San Francisco Superior Court on Wednesday morning, just moments before
opening statements were expected to begin.
While
representatives for both sides confirmed they had reached a tentative
settlement, they would not divulge details of the agreement, which must be
approved by the court. Superior Court Judge Anne-Christine Massullo told
the jury impaneled for the case that details likely would be made public during
approval hearings in February or March.
There
were audible cheers from the jury following the announcement that the trial,
which was expected to last three months, would not continue. Officials with the
attorney general’s office and Sutter Health declined requests for comment.
Sutter
stood accused of violating California’s antitrust laws by using its market
power to illegally drive up prices. Health care costs in Northern California,
where Sutter is dominant, are 20% to 30% higher than in Southern California,
even after adjusting for cost of living, according to a 2018 study from the
Nicholas C. Petris Center at the University of California-Berkeley that was
cited in the complaint.
The
case was a massive undertaking, encompassing years of work and millions of
pages of documents, California Attorney General Xavier Becerra said beforehand.
If the plaintiffs prevailed, Sutter was expected to face damages of up to $2.7
billion.
The
nonprofit giant has 24 hospitals, 34 surgery centers and 5,500 physicians
across Northern California, with $13 billion in operating revenue in 2018. The
state’s lawsuit alleged Sutter has aggressively bought up hospitals and
physician practices throughout the Bay Area and Northern California, and
exploited that market dominance for profit.
Among
other tactics, it accused Sutter of employing an “all-or-none” approach to
contracting with insurance companies, demanding that an insurer that wanted to
include any one of the Sutter hospitals or clinics in its network must include
all of them — even if some of those facilities were more expensive than a
competitor.
Sutter
Health consistently denied the allegations, saying its large, integrated health
system offers tangible benefits for patients, including more seamless,
high-quality care and increased access for residents in rural areas. Sutter
also disputed that its prices are higher than other major health care
providers, saying its internal analyses tell a different story.
The
case was expected to have nationwide implications on how hospital systems
negotiate prices with insurers. Even with details of the agreement not yet
public, attorneys and patient advocates said they expect the settlement to mark
a pivotal moment.
David
Balto, a former federal regulator who is now an antitrust lawyer in
Washington D.C., called the developments “precedent-setting.”
“You
have all these metropolitan markets where you have large hospital systems, but
Sutter Health in the Bay Area is like the filet mignon of the problem,” Balto
said. “The problems in San Francisco are bigger than anywhere else. And you see
that in how Sutter has exploited its market power to the nth degree.”
Sutter’s
tactics were hard to challenge under antitrust law, Balto added. But “what
[Becerra] did was bring together hard facts with top-notch scholarship proving
there was an overwhelming problem and that Sutter’s strong-arm tactics were the
cause of the problem.”
Anthony
Wright, executive director of the advocacy group Health Access California, said
he wasn’t privy to the settlement details, but that he expected it
to include “some meaningful remedies in terms of adjusting some of the
anti-competitive practices and contract provisions that Sutter has advanced
over the years.”
“While
we await the details of the settlement,” he said, “the lawsuit itself sends a
strong signal to hospital chains across the nation and all health care
providers planning to adopt predatory prices.”
Jaime
King, associate dean and a professor of law at UC Hastings College of the Law,
said Sutter’s decision to settle “in some ways is not a surprise. On the eve of
trial, we often see big settlements.”
Still,
she said, it comes at a cost: “I think it’s a shame we won’t ever get to see
the evidence that would have been brought forward in this case about Sutter’s
contracting and pricing practices. There are a lot of very large health systems
that are charging a lot of money for their services, and this case had the
opportunity to give us much more insight into what we’re spending our health
care dollars on.”
Sutter
continues to face trial on a separate federal antitrust lawsuit.
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