California Sues Sutter Health, Alleging Excessive Pricing

California’s lawyer basic introduced a lawsuit Friday in opposition to Sutter Health, alleging the hospital large engaged in anticompetitive conduct that drove up costs for sufferers and employers within the state.

The lawsuit marked a daring transfer by state Attorney General Xavier Becerra in opposition to the dominant well being care system in Northern California as considerations mount nationally about consolidation amongst hospitals, insurers and different business middlemen.

“It’s time to hold health care corporations accountable,” Becerra mentioned at a information convention Friday. “We seek to stop Sutter from continuing this illegal conduct.”

Sutter, which owns 24 hospitals, reported web revenue of $893 million final 12 months on $12.four billion in income.

In a press release Friday, Sutter mentioned it had not but seen the state’s criticism and couldn’t touch upon particular claims.

Overall, Sutter mentioned, “healthy competition and choice exists across Northern California” for customers searching for medical care, and that its prices for an inpatient keep are decrease than what different close by hospitals cost.

“Sutter Health is proud to save patients, government payers and health plans hundreds of millions of dollars each year by providing more efficient and integrated care,” the assertion mentioned.

This high-profile authorized struggle will appeal to consideration from employers and policymakers throughout the nation amid rising alarm concerning the monetary implications of business consolidation. Large well being techniques are gaining market clout and the flexibility to lift costs by buying extra hospitals, outpatient surgical procedure facilities and physicians’ places of work.

Martin Gaynor, a well being care economist at Carnegie Mellon University, mentioned California’s lawsuit might portend extra litigation on the state stage.

“There are a number of markets in the U.S. that are dominated by one very large, powerful health system,” Gaynor mentioned. “It could be that we’re going to see a new level of activity by state antitrust enforcers looking at competition in their own backyards.”

The complaints about Sutter’s excessive costs and market energy have continued for years.

A 2016 study discovered that hospital costs at Sutter and Dignity Health, the 2 largest hospital chains in California, have been 25 p.c greater than at different hospitals across the state. Researchers on the University of Southern California mentioned the large well being techniques used their market energy to drive up costs — making the typical affected person admission at each chains almost $four,000 costlier.

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This week, researchers at University of California-Berkeley issued a report that examined the consolidation of the hospital, doctor and medical insurance markets in California from 2010 to 2016. The authors mentioned 44 of California’s 58 counties had “highly concentrated” hospital markets.

The downside is worse in Northern California, and the report mentioned costs for medical procedures are sometimes as much as 30 p.c greater there than in Southern California, which has extra competitors.

“Consumers are paying more for health care as a result of market consolidation. It is now time for regulators and legislators to take action,” in accordance with the report by the Petris Center on Health Care Markets and Consumer Welfare at UC-Berkeley.

After the report was issued Monday, Becerra mentioned his workplace could be reviewing these findings and pledged to use extra scrutiny to well being care mergers and anticompetitive practices throughout the state.

Sutter Health has wolfed up physician practices throughout the Bay Area, gaining market muscle that has pushed prices upward. Obstetricians employed by Sutter Health, for instance, are reimbursed about thrice extra for a similar service than unbiased medical doctors, in accordance with a KHN review of OB-GYN charges on a number of insurers’ on-line price estimators. It’s a key cause why Northern California is the most expensive place within the nation to have a child.

Becerra’s lawsuit may construct off an identical civil case filed in 2014 by a grocery employees’ well being plan.

“It’s time to hold health care corporations accountable,” California Attorney General Xavier Becerra mentioned at a information convention Friday. (Ana B. Ibarra/KHN)

The plaintiffs in that case, scheduled for trial subsequent 12 months, allege Sutter is violating antitrust and honest competitors legal guidelines. The plaintiffs have been requesting paperwork associated to contracting practices, equivalent to “gag clauses” that forestall sufferers from searching for negotiated charges and selecting a less expensive supplier. They are also difficult “all-or-nothing” phrases that require each facility in a well being system to be included in insurance coverage networks.

In November, the state judge dealing with the grocery employees’ case mentioned Sutter was “grossly reckless” when it deliberately destroyed 192 packing containers of paperwork that employers and labor unions have been searching for within the lawsuit. San Francisco County Superior Court Judge Curtis E.A. Karnow mentioned Sutter destroyed paperwork “knowing that the evidence was relevant to antitrust issues. … There is no good explanation for the specific and unusual destruction here.”

The lead plaintiffs, the United Food and Commercial Workers and its Employers Benefit Trust, are a joint employer-union well being plan that represents greater than 60,000 staff, dependents and retirees. The courtroom licensed its case as a category motion in August, permitting lots of of different employers and self-funded well being plans to probably profit from the litigation.

In addition to its 24 hospitals, Sutter’s nonprofit well being system has 35 surgical procedure facilities, 32 urgent-care clinics and greater than 5,000 physicians in its community.

KHN senior correspondent Jenny Gold and reporter Ana Ibarra contributed reporting.

This story was produced by Kaiser Health News, which publishes California Healthline, a service of the California Health Care Foundation.

Chad Terhune:”>, @chadterhune

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