Sutter Health, the large hospital system in Northern California, said Friday that it had agreed to pay $575 million to settle claims of anti-competitive behavior brought by the California state attorney general as well as unions and employers.
In addition to the settlement amount — which will go to compensate employers, unions and the state and federal governments — Sutter will also be prohibited from engaging in several practices that the state attorney general and others said the hospital system used to ensure its dominance.
It will be barred from so-called “all or nothing” agreements, which the attorney general said required insurers to include all of Sutter’s medical facilities if they wanted to include some of the system’s hospitals. And it will be required to limit what it can charge patients for out-of-network services, which the state said would prevent people from facing surprise medical bills.
“If we’re going to treat something that’s precious and lifesaving like a business, then the marketplace for health care must be vibrant and competitive so that the best in the business can rise to the top naturally,” Xavier Becerra, California’s attorney general, said in a news conference Friday. “This first-in-the-nation settlement is one of the largest actions against anti-competitive conduct in the health care marketplace across the country.”
The UFCW & Employers Benefit, the group of unions and employers who also brought the suit, said in a statement: “From the outset, our goal has been to not only achieve justice for the members of the class, but to also put an end to the anticompetitive behavior that has allowed Sutter to charge inflated prices.”
Representatives for Sutter said the settlement did not acknowledge wrongdoing. “We were able to resolve this matter in a way that enables Sutter Health to maintain our integrated network and ability to provide patients with access to affordable, high-quality care,” said Flo Di Benedetto, Sutter’s senior vice president and general counsel, in a statement.
The health system also said it never required insurers to agree to “all or nothing” arrangements.
A tentative settlement was announced in October, just as the trial was to begin. The class-action lawsuit had accused Sutter of using its regional dominance to corral insurers so that patients could not go elsewhere for less expensive or higher quality care.
The settlement will need to be approved by a court, and a hearing is scheduled for Feb. 25 in the Superior Court of California in San Francisco. An independent monitor will ensure the agreement is followed.
The lawsuit represented a fresh legal attack on health systems accused of using their size to thwart competition and had been highly anticipated by both hospitals and health insurers.
Sutter had long been viewed as a classic example of a hospital system that grew too big, leading to higher prices in the region. For instance, hospital care for a heart attack costs around $25,000 in San Francisco, where Sutter has facilities, but the price is closer to $15,000 in parts of Los Angeles.
Sutter denied that it engaged in any activities that harmed competition in the region.
Sutter continues to face a federal antitrust lawsuit.
