SACRAMENTO, Calif. — Northern California’s largest hospital system has agreed to pay $575 million over allegations that it violated state antitrust laws.
The 122-page settlement claims that the enormous not-for-profit medical provider, Sutter Health, engaged in practices that stifled competition which led to increased healthcare costs across the region. The company has agreed to change some of its business practices.
The details of how the settlement will be paid out, is yet to be determined and still unclear. That decision will be made after the settlement agreement is approved by the courts, which is expected in February, 2020.
A University of California Berkeley report found that inpatient hospital procedures in Northern California cost 70% more compared to those in Southern California.
For instance, average inpatient procedures cost $131,586 in Southern California compared to $223,278 in Northern California – a difference of more than $90,000.
California’s Attorney General Xavier Becerra announced the settlement agreement at the state's Department of Justice office in Sacramento on Friday.
“When one healthcare provider can dominate the market, those who shoulder the cost of care — patients, employers, insurers — are the biggest losers,” said Attorney General Becerra. “Today’s settlement will be a game changer for restoring competition in our healthcare markets. Sutter has agreed to pay over half a billion dollars to compensate those who challenged its billing practices. It must operate with more transparency."
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The Sacramento based medical provider is comprised of 24 hospitals, 36 surgery centers, and 16 cardiac and cancer centers. The network includes 12,000 physicians and more than 53,000 employees providing healthcare services to more than 3 million Californians, according to its website.
The company engaged in anticompetitive business practices over the past several years that led to increased medical costs for patients in Northern California, Becerra said. Those practices include requiring insurers accept “all-or-nothing” service agreements and forced bundling of services or products, some of which may not be needed by individual customers.
Under the terms of the settlement, Sutter has agreed to:
- Pay $575 million to employers, unions, and others covered under the class action suit and cover legal costs. How the settlement will be paid out hasn't been determined.
- Stop “all-or-nothing” contracting deals: Sutter was accused of requiring insurers, employers, and self-funded payers to include all of Sutter’s facilities in their plans, a practice which increases the cost of consumer premiums. Per the settlement agreement, Sutter is required to allow insurers, employers, and self-funded payers to offer choices of Sutter facilities they may use in their plans’ network.
- Cease forced bundling of services and products: The practice required insurers, employers and self-funded payers to purchase more services and products from Sutter than needed. Sutter will be required to offer stand-alone pricing that would be lower than a bundled price, providing more choice to the consumer.
- Limit out-of-network charges: Sutter will limit how much it charges patients for out-of-network hospital visits, to prevent patients from paying overpriced or surprise medical bills.
- 10 year oversight: Sutter has agreed to cooperate with a court-approved compliance monitor to ensure that the company is following the terms of the agreement.
- Set definitions of clinical integration: Requires Sutter to meet strict standards in order to claim it has a clinically integrated system beyond sharing of electronic health records.
- Halt measures denying lower-cost plans: Allow consumers to purchase more affordable health plan options for networks or products.
Sutter Health’s Senior Vice President and General Counsel Flo Di Benedetto released the following statement on Friday:
“Sutter Health is committed to keeping our care connected so patients continue to receive affordable, high-quality, personalized and coordinated care,” Sutter officials said by e-mail. “Despite the increasing cost of care and operating in high-wage markets, we remain focused on making healthcare more affordable for our patients.”
The company went on to say per the settlement agreement, the company has not admitted to any wrongdoing. On its website, Sutter Health touts its integrated care benefits provide patients innovative and high-quality care, accessibility, and affordability.
A full copy of the settlement is available HERE.
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