Legal, Hospitals

Judge gives preliminary approval to Sutter’s $575M antitrust settlement

Sutter would pay $575 million, and would have to limit out-of-network costs and cease “all-or-nothing” contracting with health plans, according to the settlement.

A sweeping antitrust settlement that would require Sutter Health to change its billing practices and negotiations with payers is nearing a close.  Superior Court of San Francisco Judge Anne-Christine Massullo gave preliminary approval to the $575 million settlement on Tuesday — more than a year after Sutter first agreed to the terms.

The case, first brought against Sutter by grocers’ union United Food & Commercial Workers, alleged that the health system used its market power to prevent health plans from negotiating for smaller networks, forcing them to sign “all or nothing” contracts to cover all of its facilities. California Attorney General Xavier Becerra’s office joined the case in 2018. Sacramento-based Sutter has 24 acute care hospitals and 12,000 physicians, making it the second-largest health system in California.

After agreeing to settle in October 2019, Sutter sought to delay the settlement, citing “catastrophic” losses from the pandemic, but was ultimately denied by the court. A final settlement approval is set for July 19.

The sweeping settlement would require Sutter to pay $575 million to employers, unions and other in the class action suit. But the bigger impact comes from limitations to what Sutter can charge patients for out-of-network services, and requirements that it end “all-or-nothing” contracting deals with payers.

It also would have to permit health plans to give members pricing, quality and cost information — a response to allegations that Sutter used confidentiality provisions to restrict payers from sharing that information.

Finally, Sutter would have to set clear definitions for clinical integration, and would have to work with a court-approved compliance monitor for at least 10 years.

“The settlement makes clear that for Sutter to claim it has clinically integrated a system, it must meet strict standards beyond regional similarities or the mere sharing of an electronic health record, and must be integrating care in a manner that takes into consideration the quality of care to the patient population,” the California Attorney General’s Office stated in a news release.

In an emailed statement, a Sutter spokesperson said the ruling would allow the settlement approval process to move toward final approval, “which will ultimately help preserve our integrated network of care and is in the best interests of our patients and the communities we serve.”

Emma Hoo, director of value-based purchasing for Purchaser Business Group on Health (PBGH), said the settlement was “an important signal to the market that plans and providers should move quickly to integrate the transparency requirements and consumer protections spelled out in the injunctive relief into their contracts.”

Twenty of PBGH’s members joined the class action lawsuit. Monetary settlement aside, Hoo said, “The greater dollar value to employers, unions and families, lies in the injunctive relief, which establishes fundamental changes to Sutter’s business practices.”  

The case could open the door for other states to more closely examine negotiations between hospitals and insurers. Becerra’s nomination as Health and Human Services secretary is also notable. During Senate confirmation hearings, he said he would continue his work going after anti-competitive practices in healthcare.

  Photo credit: Mykola Velychko, Getty Images