Sacramento-based Sutter Health successfully defeated a class-action lawsuit alleging that it had used its market power to negotiate higher rates from major insurers, thereby assuring inflated premiums for roughly 3 million employers and individuals.
Jurors returned a verdict Friday in the antitrust trial before Federal Magistrate Laurel Beeler in U.S. District Court in San Francisco. The health care giant fended off what would have been treble damages totaling roughly $1.2 billion.
James Conforti, the interim president and chief executive officer for Sutter Health, said company leaders were “extremely pleased with the verdict” in Sutter Health’s favor.
“After hearing many hours of testimony from witnesses, insurance plan representatives, provider organizations and experts, the jury found that Sutter Health did not engage in anti-competitive conduct and did not cause consumers to pay higher prices or premiums as plaintiffs alleged,” Conforti said.
In a statement issued before the case began, Sutter leaders said: “This case is about Sutter’s contracting practices with the 5 largest insurance companies in California. We look forward to telling our story in court and 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.”
The case, Sidibe v. Sutter Health, hinged upon many of the same legal arguments made by the California Department of Justice when it launched a lawsuit against Sutter over anti-competitive practices in 2018. Sutter settled that suit before it could go to trial, agreeing to change a number of business practices and to pay a $575 million settlement. The company admitted no wrongdoing.
In the case decided Friday, plaintiffs had alleged that the health care provider forced Aetna, Anthem Blue Cross, Blue Shield of California, HealthNet and United HealthCare to use all its hospitals if they wanted to do business with the company. If the insurers refused, plaintiffs said, they could contract with none of Sutter’s hospitals.
Jurors said Friday that the plaintiffs had not proven that insurers were forced to do this or that Sutter had indeed tied the purchase of services at one hospital to agreements to purchase them at all hospitals.
“This decision is important not only for Sutter Health but for all healthcare providers in California,” Conforti said. “It validates that health care providers, including doctors and hospitals, have a right to evaluate whether to participate in health plan networks and ensure that they don’t interfere with the ability to provide coordinated patient care.”
During the trial, the Sacramento-based health care provider vigorously defended its negotiation tactics, saying that big insurers wield a great deal of power but that Sutter fought hard against deep discounts that would hurt its bottom line.
In its court filings, Sutter said it had agreed to offer the insurers discounted rates with the expectation that hospitals in the network would receive a certain amount of traffic.
“The premise of such volume-discount contracts is that the insurer will actually include the hospital in its networks and not take steps to decrease the volume of patients the hospital can expect from being in-network,” Sutter’s attorneys said in their filings. “If, after entering the agreement and accepting the discounted rates,the insurer were to exclude the hospital or encourage patients not to use it, that would defeat the discount-for-volume quid pro quo of the contract.”