California Attorney General Xavier Becerra announced on March 9 the preliminary approval of the settlement agreement from a class action lawsuit filed against Sutter Health in December 2019.

The lawsuit alleged that Sutter Health – who serves over 3 million people in the state, including over 100,000 residents at its Tracy campus – was using anti-competitive practices, which resulted in higher healthcare costs in the Northern California region. The settlement requires Sutter to pay $575 million in damages, prohibits any further anti-competitive conduct and requires the healthcare corporation to adhere to a list of guidelines.

“Today’s settlement represents a huge step toward making healthcare more accessible and affordable for patients who need it, especially for Northern California patients served by Sutter,” said Becerra. “This landmark settlement will require Sutter to stop practices that drive patients into more expensive health services and to operate with more transparency. The California Department of Justice will continue to work to keep the healthcare market competitive so that patients, families, and employers aren’t left holding the bag when big players dominate the market.”

The settlement is the result of a case that originated in 2014 by United Food and Commercial Workers International Union and Employers Benefit Trust and a group of individual plaintiffs. Becerra had also filed a previous complaint and lawsuit in March 2018 alleging the same reasons.

Becerra’s complaint accuses Sutter – the largest healthcare provider in California – of violating the Cartwright Act, passed in 1907 to help mitigate monopolies and trade restraints. He references studies done by both the Los Angeles Times and University of California Berkeley, which summarizes disparities between the costs for healthcare and healthcare revenue in the six most populous counties of both Northern and Southern California, respectively.

According to the analysis from L.A. Times in March 2011, hospitals in Northern California collected 56% more revenue per-patient per-day from insurance companies than its Southern California counterparts. The report by U.C. Berkeley in March 2018 states the further evidence shows “the consolidated market in Northern California has led to higher prices for consumers.” U.C. Berkeley included statistics that showed the average hospital inpatient procedure in Southern California costs $131,586, while Northern California averages $223,278 for hospital inpatient procedures.

Becerra’s complaint highlights four key points to how Sutter engaged in anti-competitive behavior:

• Sutter prevented insurance companies from negotiating contract terms on anything other than a “all or nothing” system-wide basis.

• Sutter prevented insurance companies from giving consumers more low-cost health plan options

• Sutter set excessively high out-of-network rates

• Sutter restricted publication of provider cost information and rates, which limited its amount of transparency.

The order in the settlement -- approved by Judge Anne-Christine Massullo of the Superior Court of California in San Francisco on March 9 -- says that in addition to paying $575 million to employers, unions and others covered under the class action lawsuit, Sutter must do the following:

• Limit what it charges for out-of-network healthcare services

• Increase its transparency by permitting patients to view pricing, additional cost information and quality of service

• Halt measures that deny patients access to lower-cost plans

• stop “all-or-nothing” contract deals

• Cease anti-competitive bundling of services and products

• Cooperate with a court-approved compliance monitor; and

• Clearly set definitions on clinical integration and patient access considerations

“The ruling enables the settlement approval process to continue moving toward final approval, which will ultimately help preserve our integrated network of care and is in the best interests of our patients and the communities we serve,” said a Sutter Health spokesperson to the Tracy Press.

According to the court document, the hearing for final settlement approval is set for July 19.

• contact Brianna Guillory at bguillory@tracypress.com or 209-830-4229.

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