Federal judge issues final approval of $575M Sutter Health anticompetitive settlement

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After seven years of litigation, a federal judge last week granted final approval for a $575 million settlement with Sutter Health, a Northern Californian health system that was accused of anticompetitive business practices.

In addition to having to pay millions in compensation, Sutter Health must adopt a number of new business practices to encourage transparency and restore competition in the area. The money will be distributed among employers and union trusts to offset claimed overcharges.

"This is a groundbreaking settlement and a win for Californians," Attorney General Rob Bonta said by statement. "Sutter will no longer have free rein to engage in anticompetitive practices that force patients to pay more for health services. Under the terms of our agreement, Sutter's transparency must increase, and practices that decrease the accessibility and affordability of healthcare must end. A competitive healthcare market is essential to ensuring patients and families aren't bearing the brunt of healthcare costs while one company dominates the market."

The case against Sutter Health began in 2014 as a class-action suit brought by the United Food and Commercial Workers and Employers Benefit Trust (UEBT) and was later joined by then California Attorney General Xavier Becerra on behalf of the people of California.

It alleged that Sutter Health had imposed price secrecy, all-or-nothing and anti-tiering provisions in its contracts with the health plans that led them to pay more than necessary for healthcare services and products.

In October 2019, one day before the case was set to go to trial, Sutter Health agreed to settle the case. The terms of the settlement were announced that December.

The health system attempted to delay the settlement approval last year, citing "catastrophic" losses related to the coronavirus pandemic preventing it from being able to pay up. But the Superior Court of California, County of San Francisco, denied Sutter Health's request to delay the approval.

WHAT'S THE IMPACT?

The finalized settlement requires that Sutter Health make a number of changes to the way it conducts business.

It must limit out-of-network charges so patients don't receive surprise medical bills, provide access to pricing information to increase transparency, allow payers to offer cost-saving health plan options and stop anticompetitive practices like all-or-nothing contracting, high-price bundles and claiming it's an integrated system without clear definitions.

Additionally, the health system will need to cooperate with a court-ordered compliance monitor for 10 years to ensure it's following the settlement requirements.

THE LARGER TREND

Described as a "landmark" settlement, this case could have nationwide implications for how health systems negotiate with insurers, should other state attorneys general start examining and challenging local practices.

Also this week, Sutter Health agreed to pay the federal government $90 million to settle allegations that it submitted false information about its Medicare Advantage beneficiaries. The health system paid $30 million back in 2019 related to these charges and now owes the remaining $60 million, according to a statement.

ON THE RECORD

"Today's ruling brings closure to this matter, which was settled almost two years ago. This voluntary settlement enables Sutter Health to maintain our integrated network and ability to provide patients with access to affordable, high-quality care," Sutter Health said in a statement.

"Sutter's quality of care is nationally recognized, with the majority of hospitals and care facilities outperforming state and national averages in many measures of quality. We look forward to continuing to work with our health plan partners at the same time we continue to care for the underserved in our communities."

Twitter: @HackettMallory
Email the writer: mhackett@himss.org