Sutter Health defeats federal antitrust lawsuit over rate negotiations

Sutter Health did not use its market power to negotiate higher rates from major insurers and drive up consumer prices, a federal jury in San Francisco ruled on Friday.

The class-action lawsuit alleged that the company’s actions resulted in inflated premiums for roughly three million employers and individuals. The plaintiffs sought treble damages of around $1.2 billion.

“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 anticompetitive conduct and did not cause consumers to pay higher prices or premiums as plaintiffs alleged,” said James Conforti, the company’s interim president and CEO.

Related: Landmark settlement in Sutter Health antitrust case creates opportunity for billing reform

Sutter Health, based in Sacramento, operates 24 acute-care hospitals and more than 200 clinics in Northern California. 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 went to trial, agreeing to change a number of business practices and pay a $575 million settlement. The company admitted no wrongdoing.

In the latest case, plaintiffs alleged that the company forced Aetna, Anthem Blue Cross, Blue Shield of California, HealthNet and United HealthCare to use all of 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 the plaintiffs had not proved 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.

During the trial, Sutter Health vigorously defended its negotiation tactics, saying 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.

“This decision is important not only for Sutter Health but for all health care 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.”

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