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Landmark Antitrust Suit Settled: Game Changer for Anticompetitive Behavior

Posted By Louise Probst, Tuesday, January 7, 2020
Updated: Tuesday, January 7, 2020

Kamala Harris’ presidential campaign may have sputtered out, but an investigation that she initiated in 2011 has resulted in a settlement that is sure to have employers, insurers, and health systems taking notice, including many BHC employer members with worksites in Northern California.

 

Harris, then California’s Attorney General, began investigating whether Sutter Health’s market power led to predatory pricing and unfair financial burden on the people and businesses of Northern California. Sutter Health’s sprawling network of hospitals, surgery centers, and urgent care clinics makes it one of the nation’s largest health systems, with annual revenue of about $13 billion. 

 

The price hikes were striking in Sutter Health’s case. Health care costs in Northern California run 20% to 30% higher than in Southern California, with patient admissions averaging $4,000 more than at other hospitals around the state. A cesarean delivery in Sacramento costs $27,067, nearly double the price in Los Angeles and New York. Health care economists view Sutter Health’s actions as part of an alarming consequence of hospital consolidation that has resulted in higher prices. 

 

Harris’ successor, Attorney General Xavier Becerra, joined a class action suit by unions and over 1,500 self-funded employers. The case, expected to deliver about $2.5 billion in damages, was settled in October 2019. Details of the final agreement show that Sutter Health agreed to:

  • Make a $575 million payment to compensate employers, unions, and the state and federal governments, without any admission of wrongdoing;
  • Stop "all-or-nothing" contracting deals with insurers and cease anticompetitive bundling of services and products;
  • Limit what it charges patients for out-of-network services; and
  • Be subject to a court-approved compliance monitor to oversee its contracting practices for the next 10 years.   

We all know that initiating legal action such as this takes significant investment and fortitude. UFCW & Employers Benefit, the group of unions and employers who brought this suit, deserve our recognition. They 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.” 


California Attorney General Becerra claimed,
"When one health care provider can dominate the market, those who shoulder the cost of care — patients, employers, insurers — are the biggest losers. Today’s settlement will be a game changer for restoring competition in our health care markets."


While the impact of this case and the other pending anticompetitive suits will take time to fully appreciate, let us hope it spurs much-needed competition in health care. It is the first sign that courts and antitrust regulators are ready to focus on the impact of health care consolidation on the American public.

 

Warm regards,

Louise Y. Probst

BHC Executive Director

 

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