Owner system

California’s healthcare system has not abused its market power

SACRAMENTO, Calif. (AP) — A federal jury on Friday dismissed allegations that a large Northern California health care system abused its market power to raise costs for consumers and businesses.

The verdict follows a month-long civil trial in a class action lawsuit against Sutter Health on behalf of more than 3 million employers and people served by the Sacramento-based nonprofit system.

The plaintiffs argued unsuccessfully that the company caused nearly $400 million in excess insurance premium costs between 2011 and 2017 and sought treble damages, up to $1.2 billion.

Lawyers who filed the antitrust lawsuit said Sutter Health, which operates 24 hospitals with more than 12,000 doctors and 16,000 nurses, entered into agreements with large insurance companies that discouraged patients from using insurance and cheaper hospitals.

Sutter Health interim president and CEO James Conforti said the verdict was important not just for his company, “not just for Sutter Health, but for all healthcare providers in California.”

The decision, he said in a statement, “validates that health care providers, including doctors and hospitals, have the right to assess whether they wish to participate in health plan networks and ensure they do not interfere with the ability to provide coordinated patient care and do not lead to surprise bills.

Friday’s verdict comes two years after the company settled similar claims after state officials and consumer advocates widely blamed Sutter’s practices as the reason Northern California residents were paying typically $3,000 higher health insurance premiums than in Southern California.

A typical inpatient procedure in the northern part of the state could have cost $90,000 more than in Southern California, they said.

In the pending lawsuit, plaintiffs said Sutter used his dominance in seven mostly rural northern California regions to lock in insurers in four other communities where there was more competition.

This, they claimed, left Sutter overloading his own departments and in turn resulted in hundreds of millions of dollars in overcharged insurance premiums by Anthem Blue Cross, Blue Shield of California, Aetna, United Healthcare and Health Net. .

Sutter successfully countered that he had not engaged in anti-competitive behavior and denied that his practices were driving up prices. He said his deal with insurance companies amounted to a “volume discount”.

He said he was in competition with an even larger health system, Kaiser Permanente, and argued that his agreements with five of the largest American insurance companies were not only legal, but aimed at helping patients of Sutter and reduce the total cost of care.

The jurors, without comment, dismissed the allegation that Sutter sold hospital services to inpatients in competitive areas only if the insurer also purchased services in non-competitive areas.

They also dismissed claims that Sutter forced health plans to accept contracts that prevented the plans from referring patients to non-Sutter hospitals at lower cost.

The law authorizes triple the damages if the plaintiffs had won their case. Lawyers have filed a lawsuit on behalf of four people who have paid health insurance premiums and two companies that have paid premiums for their employees since 2011, but included in the class action all persons or companies occupying the same post in much of Northern California.

Plaintiffs’ attorneys estimated that this includes 3 million patients and employers served by the Sutter Health System.

Two years ago, Sutter paid other plaintiffs $575 million to settle similar claims that the company artificially increased patient costs through anticompetitive practices. He also agreed, through a separate settlement with the state, to accept a court-approved monitor for 10 years to ensure he no longer works through insurance companies to increase patient costs.

The California attorney general then alleged that Sutter used his market power to prevent insurance companies from using inducements to steer patients to cheaper healthcare providers, making it harder for patients to use Sutter’s cheaper competitors, although Sutter denied the allegations and did not admit wrongdoing. .

The 2019 settlement prohibited Sutter from what state officials called an “all-or-nothing” approach — requiring insurance companies to include all hospitals in the health system in their provider networks, even if that did not provide financial benefits. The settlement also improved price transparency while limiting what Sutter could charge for out-of-network procedures.

About 1,400 self-funded employers and unions settled the lawsuit two years ago. They also initially sought damages that could have exceeded $1 billion.