In a high-stakes legal battle over medical market power, Sutter Health has accused California Attorney General Xavier Becerra of overstepping his powers and acting like a “health-care policy czar.”
Becerra filed an antitrust lawsuit against the large Sacramento-based health system in March. The complaint accuses Sutter of illegally quashing competition and for years overcharging consumers and employers. The case has attracted widespread attention amid growing concerns nationally about consolidation among hospitals, insurers and other industry players.
In court papers filed last week, Sutter said the attorney general’s lawsuit is “unprecedented in scope and threatens to upend Sutter’s business model.” The nonprofit chain asked the court to decline to hear the case because Becerra wants “to assume the role of health-care policy czar” so he can “dismantle the Sutter system.”
Sutter owns 24 hospitals and 36 surgery centers, in addition to working with more than 5,500 physicians across its network. The health system had $12.4 billion in revenue last year. Sutter denies the allegations of price gouging and said its charges are in line with what other nearby hospitals charge.
The Sutter case is being closely watched in the industry because the chain has grown so dominant in the Northern California marketplace.
“The Sutter story is representative of what is happening in a lot of markets nationally,” said Barak Richman, a professor of law and business administration at Duke University.
However, he said, there is no easy fix. “Once mergers are allowed it’s very hard to break them up and inject new competition.”
To reduce Sutter’s market power, the state’s lawsuit seeks to force Sutter to negotiate reimbursements separately for each of its hospitals and to prohibit Sutter executives from sharing the details of those negotiations across their facilities. Becerra said Sutter has required insurers and employers to contract with its facilities systemwide or face “excessively high out-of-network rates.”
In a May 14 court filing, Sutter said the creation of “walled-off negotiating teams” would harm consumers by boosting the market power of large health insurers, such as Anthem Blue Cross and Aetna.
A San Francisco County Superior Court judge has already granted Becerra’s request to merge his case with a similar class-action suit, led by a health plan covering unionized grocery workers.
The plaintiffs in the class action are seeking to recoup $700 million for alleged overcharges plus damages of $1.4 billion if Sutter is found liable for antitrust violations. The combined cases are scheduled for trial next year.
Chad Terhune, a senior correspondent at California Healthline and Kaiser Health News, talked with KQED health editor Carrie Feibel about what this litigation may mean for patients and the health care industry.