California’s attorney general has filed a lawsuit against Sutter Health, the largest system in the northern part of the state, claiming the organization’s anticompetitive practices have driven up healthcare prices throughout the region
The charges in the lawsuit (PDF) are “not new to Sutter,” AG Xavier Becerra said at a press conference Friday afternoon. The filing follows a statewide investigation into healthcare costs that revealed wide price disparities between the northern and southern parts of the state.
“Sutter Health is throwing its weight around in the healthcare market, engaging in illegal, anticompetitive pricing that hurts California families,” Becerra said in an announcement. “Big business should not be able to throttle competition at the expense of patients.”
Sutter was able to jack up prices for care at its facilities in several ways, according to the lawsuit:
- Forcing insurance companies to negotiate with it in an “all-or-nothing” systemwide fashion
- Blocking payers from offering patients low-cost health plan options
- Charging extremely high rates for out-of-network visits
- Limiting price transparency
Karen Garner, a spokesperson for Sutter, said in a statement emailed to FierceHealthcare that the system is “aware that a complaint was filed, but we have not seen it at this time, so we cannot comment on specific claims.”
Garner said that data from the state’s Office of Statewide Health Planning and Development show lower prices at Sutter Health facilities compared to other providers operating in Northern California. Sutter has also kept rate increases for its health plan in “low single digits since 2012,” she said.
“It’s also important to note that healthy competition and choice exists across Northern California,” Garner said. “There are 15 major hospital systems and 142 hospitals in Northern California, including Kaiser Permanente, Dignity, Adventist, Tenet, UC and more. And health plans can elect to include or exclude parts of the Sutter Health system from their networks, and health plans have been doing so for many years.”
Multiple California employers and labor unions have taken action against the health system for anticompetitive practices prior to the AG’s involvement. Sutter came under fire late last year after it was revealed that in 2015 it destroyed 192 boxes of documents that these entities sought as evidence, which the system said was a regrettable mistake.
A California judge said there was “no good reason” for Sutter to have destroyed the documents and said the “most generous interpretation” was that the system was “grossly reckless.”
The AG’s lawsuit also alleges that in addition to driving up healthcare costs in Northern California, Sutter’s actions enriched its executives, and fueled acquisitions that led to further consolidation and funding for its own health plan.
Becerra’s office was spurred to act, according to the announcement, following the release earlier this week of a report from the University of California that detailed how much consolidation has impacted healthcare costs in the state, with northern regions especially affected.
The average cost for an inpatient stay in Northern California was $223,278, compared to an average of $131,586 in the southern regions, according to the report (PDF).
Kathleen Foote, senior assistant attorney general in California who heads the antitrust unit, said at the press conference that taking action against Sutter’s practices should lead to increased competition that benefits both price and care quality.
A video of the full press conference is embedded below: