Sutter Health has reached an undisclosed preliminary agreement to settle allegations of antitrust behavior brought by self-funded employers and California's Office of the Attorney General (AG), the state AG's office announced Wednesday.
The lawsuit dates back to 2014, when the United Food and Commercial Workers and Employers Benefit Trust filed a suit against Sutter. The case was certified as a class action lawsuit on behalf of 1,500 self-funded employers and trusts within California.
The health plans had sought $900 million in damages.
The health plans' lawsuit was later combined with a lawsuit filed by the California Attorney General Xavier Becerra (D) in 2018. Becerra's office sought injunctive relief for Sutter to stop alleged anticompetitive practices.
In that lawsuit, the attorney general accused Sutter of engaging in "anticompetitive contractual practices" that raised the prices of health care services in Northern California to levels above what it would have been able to charge in a competitive market. The lawsuit contended Sutter's actions "injured the general economy of Northern California and thus of the state."
For instance, the lawsuit alleged Sutter imposed "gag clauses" that blocked network vendors—insurers that put together provider networks—from disclosing information about prices negotiated with Sutter. The lawsuit contended that this practice limited consumers' ability to compare and seek out better pricing.
Further, the lawsuit alleged Sutter used "all-or-nothing" contract terms that required all of the system's facilities to be included in health insurance networks, and set "punitively high" out-of-network prices.
Sutter denied the allegations against it. The health system said it used its market power to bolster care for rural residents.
Sutter reaches settlement
The settlement agreement will resolve both cases, the San Francisco Chronicle reports.
The details of the settlement are not yet public, though Judge Anne-Christine Massullo, who is overseeing the case in the San Francisco Superior Court, told jurors that the details would likely be made public in February or March during approval hearings.
A Sutter spokesperson told the Sacramento Bee on Wednesday that the company expects the deal to be approved in a few months. Sutter has maintained that the allegations were unwarranted.
Jonathan Grossman, an antitrust attorney at Cozen O'Connor, who isn't involved in the suit, said he'd expect the settlement will likely involve a small amount of damages in exchange for a commitment from Sutter that its practices that were the subject of the lawsuit will end.
While experts said the litigated case would carry significance nationwide, Grossman noted that the settlement means the case won't provide any legal precedent on hospital or insurer practices. "If you are a hospital system in Denver, you don't have the same kind of takeaways as you do if there was a trial litigated to conclusion," he said (Gold, "Shots," Kaiser Health News/NPR, 10/16; Abelson, New York Times, 10/16; Ho, San Francisco Chronicle, 10/16; Bannow, Modern Healthcare, 10/16; Anderson, Sacramento Bee, 10/16).