Sutter Health Settles $575 Million California Antitrust Suit, Agrees to Change Practices

California hospital system Sutter Health has agreed to pay $575 million to the state, local governments, and some employers and union-employer trusts after settling an antitrust lawsuit filed by California Attorney General Xavier Becerra.

Becerra filed the lawsuit in March 2018, alleging that the company charges prices that far exceed the market rate, and then uses the profits to acquire other health firms and overcompensate executives. Becerra joined the UFCW & Employers Benefit Trust, which administers health benefits to certain union employees, on the suit.

“It is our obligation to protect you against anti-competitive, illegal market activities,” Becerra said at a Friday press conference. “Today’s announcement is a far-reaching deal that lets us say to Californians, ‘we want you to get that best coverage you can, because we understand that health is life, and health care is indispensable.’”

Sutter made a motion to eliminate the allegations in March, but the Superior Court of San Francisco denied it. 

The settlement places several requirements on Sutter, which Becerra hopes will address some of the anti-competitive practices alleged in the suit. Under the agreement, Sutter must:

• limit what it charges patients for out-of-network services
• increase transparency by giving plan members access to pricing and quality information
• stop “all or nothing” contracting deals
• end anti-competitive “bundling” of services and products
• work with a Department of Justice-selected “monitor” who will enforce these terms for the next 10 years

Sutter Health did not admit wrongdoing in the case, and the court has not yet approved the deal. That decision could be made at a hearing in February.

“We were 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,” said Flo Di Benedetto, Sutter’s senior vice president and general counsel, in a written statement.

The hospital system serves 3 million patients across 22 counties. Just a few major health groups serve the majority of patients in Northern California, which experts say allows them to wield unfair leverage when negotiating service costs with insurance companies. 

A 2018 study from UC Berkeley found that health market consolidation increased substantially between 2010 and 2016, directly resulting in higher prices for breast cancer exams, cardiovascular care and respiratory infection treatment, among other services.

Christopher Whaley, a policy researcher with a Santa Monica-based think-tank called the RAND Corporation, said health systems, insurers and employers across the nation have kept a close eye on the Sutter lawsuit.  He said the settlement marks a big step in the push to end hospital antitrust practices.

“This is one of the key issues in the U.S. health care system, and it’s happening right in our corner of the world,” Whaley said. “Everyone’s looking to see how things will work in California.”

Illegal consolidation practices are often blamed for rising health care prices, but Becerra acknowledged that the size of the health care system isn’t inherently the problem. Hospitals often buy up other health firms in the name of “integration,” or giving patients more treatment options within the same health system. 

“There’s nothing wrong with integration if it’s done for the purpose of providing better care for a better price,” Becerra said. “It’s not our job to disintegrate all these companies into little pieces simply because we’re afraid of’ bigness’. It’s for the purpose of making sure there’s competition.”

Sutter Health recently settled a different suit with a whistleblower, who alleged the health system paid doctors for patient referrals. 

Correction: This story was corrected to reflect the accurate name, website and description of one of the plaintiffs in this case.

Editor's Note: Sutter Health is a major donor to Capital Public Radio.