Sacramento-based Sutter Health began defending itself Thursday against a $1.2 billion class-action lawsuit alleging that the health care giant illegally used its market power to negotiate insurance contracts that resulted in inflated premiums for roughly 3 million employers and individuals.
Attorneys on both sides spent much of Thursday morning arguing over legal procedure, witnesses and evidence before Federal Magistrate Laurel Beeler in U.S. District Court in San Francisco. If Sutter were to lose this case, the damages would be trebled and would total roughly $1.2 billion.
In a statement issued Thursday regarding the case, Sutter leaders said: "This case is about Sutter's contracting practices with the 5 largest insurance companies in California. We look forward to telling our story in court and demonstrating that in Northern California's highly competitive market, Sutter's integrated healthcare network provides high-quality care that creates efficiencies, drives down total cost of care and benefits the diverse communities we serve."
The case, Sidibe v. Sutter Health, hinges upon many of the same legal arguments made by the California Department of Justice when it launched a lawsuit against Sutter over anti-competitive practices in 2018. Sutter settled that suit before it could go to trial, agreeing to change a number of business practices and to pay a $575 million settlement. The company admitted no wrongdoing.
In the current case, plaintiffs are alleging that the health care provider forced Aetna, Anthem Blue Cross, Blue Shield of California, HealthNet and United HealthCare to use all its hospitals if they wanted to do business with the company. If the insurers refused, plaintiffs said, they could contract with none of Sutter's hospitals.
There was a time before the year 2000, the plaintiffs said, when insurers had been able to pick and choose hospitals, seeking out those that provided high-quality care at lower costs than other Sutter facilities. Or, the plaintiffs said, insurers could have used tiered plans to charge higher premiums if employers or individuals opted to use pricier Sutter hospitals.
The Sacramento-based health care provider stopped negotiating such deals, the plaintiffs alleged, as part of a strategy to drastically increase what it was paid. Insurers attempted to negotiate better terms but ultimately buckled under the pressure of termination, according to plaintiff's filings.
"Sutter has repeatedly acknowledged ... that consumers want lower-cost narrow network products and that the offering of such products would subject Sutter to greater price competition," the plaintiffs said in their court documents.
In its court filings, Sutter said it had agreed to offer the insurers discounted rates with the expectation that hospitals in the network would receive a certain amount of traffic.
"The premise of such volume-discount contracts is that the insurer will actually include the hospital in its networks and not take steps to decrease the volume of patients the hospital can expect from being in-network," Sutter's attorneys said in their filings. "If, after entering the agreement and accepting the discounted rates,the insurer were to exclude the hospital or encourage patients not to use it, that would defeat the discount-for-volume quid pro quo of the contract."
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February 12, 2022 at 01:05AM
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Did Sutter use market power to overcharge insurers? That's the $1.2B question in court - North Bay Business Journal
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