December 1, 2023

Health Insurance

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Sutter Health defeats antitrust challenge in jury trial

Dive Brief:

  • A federal jury in San Francisco on Friday found that Sutter Health did not engage in anti-competitive contracting practices in a class action lawsuit, first filed in 2012, which accused the health system of inflating insurance premiums and co-payments for 3 million California consumers by as much as $411 million.
  • The plaintiffs — individuals and small companies — claimed the Sacramento, California-based hospital system was able to overcharge for medical services because of its dominant market position in Northern California, driving up the cost of healthcare.
  • The jury rejected those allegations, concluding after a month-long trial that Sutter Health did not tie together its hospital services or force health plans to agree to contracts that prevented them from steering patients to lower-cost, non-Sutter hospitals, according to court documents. 

Dive Insight:

The case, Sidibe v. Sutter Health, accused the nonprofit of using its market power to impose pricing and contractual terms on health plans including Aetna, Anthem Blue Cross Blue Shield of California, Health Net and UnitedHealthcare in violation of federal antitrust and unfair competition laws.

The plaintiffs argued Sutter Health demanded “all-or-nothing” arrangements that required insurers to purchase its inpatient hospital services in multiple “tied markets” in order to offer health plans in Northern California, resulting in artificially high prices.

Sutter Health denied that it violated antitrust or unfair competition laws or that its practices caused increases in insurance prices, and the jury sided with the hospital system.

“The jury’s decision reached the substance of the claims, finding squarely that Sutter Health did not tie together its hospital services, did not force insurance companies to agree to contracts that prevented insurance companies from introducing networks, and did not restrain competition,” James Conforti, Sutter Health’s interim CEO, said in a statement.

The lawsuit accused Sutter Health of wielding monopoly power in some areas because Kaiser Permanente, the other large hospital system in Northern California, does not participate in those markets. However, Sutter Health characterized Oakland, California-based Kaiser as its competitor.

Conforti said the jury’s decision is important for all healthcare providers in California.

“It validates that healthcare providers, including doctors and hospitals, have a right to evaluate whether to participate in health plan networks and ensure that they don’t interfere with the ability to provide coordinated patient care and will not lead to surprise bills,” he said.

The verdict comes less than a year after a federal judge approved a $575 million antitrust settlement against Sutter Health to resolve allegations of anti-competitive practices. In that lawsuit, brought by the California attorney general and the United Food and Commercial Workers union, Sutter Health was accused of using its market power to pressure employers and insurers during contract negotiations involving healthcare policies.

As part of the settlement, Sutter Health agreed to stop the practice of all-or-nothing contracting deals and allow insurers to include some but not necessarily all of its hospitals in their plan networks. Sutter Health denied engaging in all-or-nothing negotiations in the case.

Separately, last year Sutter Health also agreed to pay $90 million to settle allegations that it knowingly submitted inaccurate information about the health of beneficiaries enrolled in Medicare Advantage plans, in violation of the False Claims Act. 

In the settlement with the Justice Department, Sutter Health entered into a five-year corporate integrity agreement with the HHS Office of Inspector General that requires the health system to implement a risk assessment program and submit to annual reviews by an independent organization.