State Judge OKs $575M Sutter Health Antitrust Settlement

The company must make the settlement payment's while coping with COVID-19-related reductions in patient revenue.

A California judge late last week approved a landmark $575 million antitrust settlement against Sacramento-based Sutter Health. The company now must operate under new rules designed to curb its ability to dictate the price of health care in Northern California, the “Merced (Calif.) Sun-Star” reported.

Superior Court Judge Anne-Christine Massullo approved the settlement nearly two years after Sutter tentatively agreed to the deal and seven years after a health insurance plan run by the United Food and Commercial Workers Union sued the health care giant. The state joined the case in 2018.

The state and others said Sutter — with 24 main hospitals, 12,000 doctors and $13 billion in annual revenue — used its market power to strong-arm employers and insurers into lopsided contract terms that inflated prices for a wide range of services. Because of an “umbrella effect,” Sutter’s high prices allowed its competitors to raise their rates, too, critics said.

State officials frequently cited various studies showing the high cost of medical care in Northern California, including a 2016 report showing that cesarean births cost about $27,000 on average in Sacramento, nearly twice the cost of Los Angeles.

Among other stipulations, Sutter agreed to end “all-or-nothing” contracts that critics said were forcing insurers and big employers to cover services they didn’t necessarily want at Sutter hospitals and clinics. Sutter will be under a court-approved independent monitor’s supervision for 10 years. In addition, Sutter agreed to pay $575 million in damages to the employers and insurers.

“This is a groundbreaking settlement and a win for Californians,” Attorney General Rob Bonta said in a prepared statement. “Sutter will no longer have free rein to engage in anticompetitive practices that force patients to pay more for health services.”

The final agreement was delayed by several weeks because of a fight over attorney’s fees. The judge approved $186 million in fees and costs, leaving $389 million for employers and insurers. Sutter didn’t admit to wrongdoing in the settlement and repeatedly has downplayed the impact of the changes coming in its business practices.

Sutter’s legal troubles aren’t over. A class-action lawsuit filed by a group of Bay Area patients, alleging the same basic charges, is scheduled to go to trial in October in federal court in San Francisco.

Meanwhile, Sutter is vowing to trim costs after encountering losses last year because of the COVID-19 pandemic, which raised operating expenses while depressing patient revenue. It has eliminated more than 1,400 positions in the past year and a half, in a combination of layoffs and buyouts. Sutter posted $321 million in operating losses last year despite receiving $800 million from the federal government in COVID-19 relief funding. Lately, it has appeared to turn things around and recorded a $106 million operating profit in the second quarter of this year.