A lawsuit over high health care bills filed on behalf of more than 3 million employers and people seeks as much as $1.2 billion from a large Northern California health system in an antitrust class-action trial getting underway Thursday.
Plaintiffs in the lawsuit allege in court documents that Sutter Health abused its market power and “caused enormous adverse economic impacts” by discouraging patients from using lower-cost insurance and lower-cost hospitals.
Sutter Health said in a statement Wednesday that it looks forward to “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.”
Suit Alleges Sutter Overcharges for Services
The lawsuit claims Sutter used its market power for inpatient services in seven mostly rural Northern California areas where it is the only or dominant hospital to bind insurers in four other communities where it has competition.
That allowed Sutter to overcharge for its own services, the lawsuit alleged, and caused nearly $400 million in insurance premium overcharges to the plaintiffs between 2011-2017. Five companies provided the health insurance: Anthem Blue Cross, Blue Shield of California, Aetna, United Healthcare, and Health Net.
The law allows triple damages if the plaintiffs win against Sutter Health, meaning a potential award of $1.2 billion.
The named plaintiffs are four people who paid health insurance premiums and two companies that paid premiums for their employees since 2011, but the class includes any individuals or companies in the same position across much of Northern California.
The plaintiffs’ attorneys estimate that includes 3 million patients and employers. The system operates 24 hospitals with more than 12,000 doctors and 16,000 nurses.
It’s the second such lawsuit filed against Sutter Health.
System Settled Similar Lawsuits in Past
The health system two years ago paid different plaintiffs $575 million to settle similar claims that it used anti-competitive practices to artificially increase patients’ costs and agreed then in a separate settlement with the state to accept a court-approved monitor for 10 years to make sure it no longer works through insurance companies to increase patients’ costs.
California’s attorney general alleged then that Sutter used its market power to block insurance companies from using incentives to steer patients to cheaper health care providers.
Critics said that practice made it more difficult for patients to use Sutter’s lower-priced competitors, though the Sacramento-based nonprofit denied the allegations and did not admit wrongdoing.
The 2019 settlement also prohibited Sutter from continuing what state officials called an “all or nothing” approach that required insurance companies to include all of the health system’s hospitals in their provider networks even if it didn’t make financial sense.
And it increased pricing transparency while limiting what Sutter could charge for out-of-network procedures.
In the current case, U.S. Magistrate Judge Laurel Beeler in San Francisco found in favor of the case going to trial, stating in part that “the contracts were systemwide and required health plans to include Sutter inpatient services in the (noncompetitive) markets.”
A jury will decide if that was to force higher prices that were passed on to patients through higher premiums, the judge ruled.
Sutter said there is no evidence that it worked to maintain its monopoly power in the seven communities where it dominates. And systemwide volume discounting in turn lowers prices, the company said.
“The indisputable evidence shows that Sutter did not violate the antitrust laws but sought only to properly give effect to a valid volume discount,” Sutter said in court papers.
Northern California Prices Significantly Higher
State officials and consumer advocates largely blamed Sutter’s previous practices for Northern California residents typically paying health insurance premiums that were $3,000 higher than in Southern California at the time. A typical inpatient procedure in the northern part of the state might have cost $90,000 more than in Southern California.
Sutter has argued that insurance companies were to blame for bumping up costs and noted there were no allegations that its contracts affected patient care. Despite the antitrust claims, it said there is plenty of competition.
About 1,400 self-funded employers and unions settled the lawsuit two years ago. They also initially sought damages that could have exceeded $1 billion.
The trial getting underway in a San Francisco courtroom includes the far larger group of employers and individual patients, with an even bigger potential price tag for alleged damages.
Jury selection was Wednesday in advance of Thursday’s opening. The trial is expected to take four to six weeks.