Mid-December 2019, California-based Sutter Health (Sutter) reached a settlement with the state of California and the United Food and Commercial Workers (UFCW) & Employers Benefit Trust that it drove up healthcare prices.
According to allegations made by Xavier Becerra, California’s Attorney General; the United Food and Commercial Workers International Union and Employers Benefit Trust; and class action plaintiffs, Sutter, the largest hospital system in Northern California, engaged in anticompetitive practices that led to higher healthcare costs for patients in Northern California as compared to other places throughout the state.
The litigation initially started in 2014, when UFCW & Employers Benefit Trust joined individual plaintiffs in filing a lawsuit challenging Sutter’s practices in rendering services and charging prices. They sought compensation for unlawful and anticompetitive business practices, which they allege caused them to pay more than necessary for healthcare services and products. Then, in March 2018, Attorney General Becerra filed a similar lawsuit on behalf of the citizens of California seeking injunctive relief to force Sutter to stop engaging in anticompetitive business practices moving forward.
As part of the settlement, Sutter agreed to pay $575 million in compensation and make changes to its operations and practices. The $575 million payment is to compensate employers, unions, and others covered under the class action lawsuit, as well as to cover legal costs and fees.
Additionally, going forward, Sutter is limited in what it can charge patients for out-of-network services and is to increase transparency by allowing insurers, employers, and self-funded payors to provide plan members with access to pricing, quality, and cost information.
Sutter must also stop measures that deny patients access to lower cost plans and stop all-or-nothing contracting deals, allowing insurers, employers, and self-funded payors to include some of Sutter’s hospitals, clinics, or other commercial products in their plans’ network. Sutter is also to make facilities such as their rural hospitals and Sutter hospitals in San Francisco available to insurers, employers, and self-funded payors as part of commercial benefit plans.
Sutter shall also stop any anticompetitive bundling of services and products, which previously forced insurers, employers, and self-funded payors to purchase for their plan offerings more services or products from Sutter than were needed. Sutter is now to offer a stand-alone price that is to be lower than any bundled package.
Sutter will also need to cooperate with a court-approved compliance monitor for at least ten years. The monitor will receive and investigate complaints made against Sutter.
The court has set a hearing to hear and finalize the settlement on February 25, 2020.
“When one healthcare provider can dominate the market, those who shoulder the cost of care — patients, employers, insurers — are the biggest losers,” said Attorney General Becerra. “[This] settlement will be a game changer for restoring competition in our healthcare markets. Sutter has agreed to pay over half a billion dollars to compensate those who challenged its billing practices. It must operate with more transparency. It must stop practices that drive patients into more expensive health services and products. And it must operate under the watchful eye of a court-approved monitor selected by the Attorney General’s Office for at least 10 years. This first-in-the-nation comprehensive settlement should send a clear message to the markets: if you’re looking to consolidate for any reason other than efficiency that delivers better quality for a lower price, think again. The California Department of Justice is prepared to protect consumers and competition, especially when it comes to healthcare.”
However, not everyone is pleased with the settlement. The American Hospital Association has warned it will increase healthcare costs, “Unfortunately, it will be several dominant commercial health insurance companies — not consumers — that will benefit from terms that will allow those insurers to cherry-pick the hospitals with which they contract, as well as eliminate incentives for them to work with hospitals to develop and sustain value-based care,” said AHA General Counsel Melinda Hatton in a statement.