One of California’s largest hospital systems has reached an agreement to settle a massive class-action lawsuit over allegations that it abused its market power and has been overcharging patients for medical bills.
Wednesday’s announcement of an agreement offered no details but came just in time to avoid a trial, with attorneys preparing to give opening statements Thursday.
The antitrust lawsuit against Sutter Health, which operates 24 hospitals with 5,500 doctors across Northern California, was first brought by employers and unions in 2014 and later joined by California’s attorney general, Xavier Becerra, who filed a similar lawsuit last year after a six-year investigation.
Jennifer Molina, a spokeswoman for Becerra, confirmed the settlement but said she could not comment further until the court approves the agreement.
San Francisco Superior Court Judge Anne-Christine Massullo set a timeline February or March for the next round of hearings to approve the settlement, a court spokesman said.
Sutter Health spokeswoman Amy Thoma Tan also confirmed “the parties have reached a settlement agreement to resolve the case” but gave no other details.
In a 49-page complaint, Becerra alleged that Sutter has pursued numerous anticompetitive practices as it snuffed out competition and became the largest hospital system in Northern California. The lawsuit points to research showing that health care costs in Northern California are higher than elsewhere in the state and said Sutter was largely to blame for the higher costs.
At issue are several of Sutter Health’s contracting policies that Becerra says have allowed the company to “thoroughly immunize itself from price competition.”
One way insurance companies keep costs down is to steer patients to cheaper health care providers through a variety of incentives. Becerra says Sutter Health bans insurance companies from using these incentives, making it harder for patients to use their lower-priced competitors.
Becerra also says Sutter has an “all or nothing” approach to negotiating with insurance companies, requiring them to include all the company’s hospitals in their provider networks even if it doesn’t make financial sense to do so.
The complaint noted that Sutter’s assets rose to $15.6 billion in 2016 from $6.4 billion in 2005.
Sutter Health, a Sacramento-based nonprofit, denies the claims, saying it faces fierce competition across the San Francisco Bay Area and the Sacramento Valley and insurance companies are to blame for pushing up costs.
Becerra’s office sought injunctive relief to halt Sutter’s alleged anti-competitive behavior, not monetary damages. But the private litigation brought by a class of about 1,400 self-funded employers sought damages that could exceed $1 billion.
News of the settlement was applauded by health care consumer advocacy coalition Health Access California.
“While we are eager to see the details of the settlement, the landmark lawsuit itself sends a strong signal to hospital chains across the nation,” the coalition’s executive director Anthony Wright, said in a statement. “All health care providers will think twice, knowing that adopting Sutter Health’s predatory tactics may come with the possibility of legal action.”