Jenny Gold, Kaiser Health News
Six months after agreeing to a $575 million settlement in a intently watched antitrust case filed by California Attorney General Xavier Becerra, Sutter Health has but to pay a single greenback, and no operational adjustments have gone into impact. The nonprofit well being care large was accused of utilizing its market dominance in Northern California to illegally drive up costs.
Late final week, attorneys for Sutter filed a movement requesting that San Francisco Superior Court Judge Anne-Christine Massullo delay approval of the settlement for a further 90 days, resulting from “catastrophic” losses stemming from the COVID-19 pandemic. Massullo initially was scheduled to rule on the settlement in February, however in April granted an earlier request from Sutter for a 60-day delay within the proceedings.
In courtroom paperwork supporting its request, Sutter argues the pandemic has upended the monetary panorama for hospitals and made quite a few elements of the settlement untenable. Last month, Sutter reported an working lack of $404 million by April, citing declining affected person income and bills ensuing from the pandemic. System officers stated that loss took under consideration the greater than $200 million the system acquired in COVID-19 reduction funds from the federal authorities by way of the CARES Act.
“We’re in a crisis situation,” David C. Kiernan, a lawyer representing Sutter, advised Massullo throughout a settlement convention earlier this month. “There are certain provisions that, if they went into effect today, would interfere with Sutter’s ability to provide coordinated and integrated care to patients in California.”
The settlement, introduced in December, marked a dramatic flip in a long-running legal battle initiated in 2014 as a class-action lawsuit filed by the United Food and Commercial Workers International Union & Employers Benefit Trust, representing employers, unions and native governments whose staff use Sutter providers. Becerra’s workplace joined the case in 2018.
Sutter has 24 hospitals, 34 surgical procedure facilities and 5,500 physicians throughout Northern California, with $13 billion in working income in 2019. Among different allegations, the state’s lawsuit argued Sutter has aggressively purchased up hospitals and doctor practices all through the Bay Area and Northern California, and exploited that market dominance for revenue.
Health care prices in Northern California, the place Sutter is dominant, are 20% to 30% larger than in Southern California, even after adjusting for price of residing, in line with a 2018 research from the Nicholas C. Petris Center on the University of California-Berkeley that was cited within the criticism.
In agreeing to the settlement, Sutter didn’t admit wrongdoing. Throughout the proceedings, it has maintained that its built-in well being system gives tangible advantages for sufferers, together with reasonably priced charges and constant high-quality care.
Still, underneath phrases of the settlement, Sutter agreed to finish a bunch of practices that Becerra alleged unfairly stifled competitors. Among different circumstances, the settlement requires Sutter to restrict what it costs sufferers for out-of-network providers and enhance transparency by permitting insurers and employers to present sufferers pricing data.
Sutter Health spokesperson Amy Thoma Tan, in a press release to KHN, stated the well being care system “has not objected to any aspect of the settlement” however is asking whether or not the settlement approval course of ought to be deferred, “given the extreme disruption to the health care industry caused by COVID-19 and the potential for COVID-19 to materially impact certain settlement terms.”
In the courtroom papers filed final week, Sutter’s attorneys went additional, arguing that the settlement “could not make sense in its present kind and will jeopardize Sutter’s potential to proceed offering care.
“In this regard, Plaintiffs’ assertion that they won’t reassess even a single provision of a proposed injunction negotiated previous to COVID-19 is troublesome as a result of it ignores the possibly dangerous penalties of railroading the settlement by to approval in such an unsure time,” they continued.
The courtroom submitting notes some particular settlement phrases Sutter now considers problematic. Among them is a provision that requires Sutter to finish its all-or-nothing contracting offers with payers, which demanded that an insurer that needed to incorporate any one of many Sutter hospitals or clinics in its community should embrace all of them. Also cited is a provision that will restrict the dimensions of price will increase. Sutter says within the submitting that it now may have to extend costs greater than anticipated to pay for private protecting gear and different unanticipated prices ensuing from the pandemic.
In its submitting, Sutter doesn’t particularly object to the $575 million settlement quantity. But Jaime King, an affiliate dean at UC Hastings College of the Law who has adopted the case, stated the request for a delay might be a tactical technique to assist such a transfer.
“The longer they can delay, the more they can show they have significant losses from COVID-19, which allows them to plead for a lower settlement,” King stated.
While Becerra’s workplace has acknowledged the tough circumstances that the pandemic has created for California hospitals, state attorneys stated the settlement is binding and shouldn’t be delayed additional.
“The plaintiffs are not going to renegotiate the settlement,” Emilio Varanini, a lawyer from Becerra’s workplace, advised Massullo final month. “It’s even more in the public interest in an era of COVID-19 that COVID-19 not be an excuse to allow anticompetitive acts that will hurt consumers.”
Richard Grossman, lead counsel for the plaintiffs within the class-action lawsuit, echoed that sentiment. “Every hospital system in California is required to abide by California’s antitrust statutes, and they are all required to abide by the rules of competition that are prescribed by our legislature,” Grossman advised KHN. “Sutter does not get an exception to that because there is a pandemic.”
Sutter has earned a mean 43% annual revenue margin over the previous decade from medical remedies paid for by business insurers, like that supplied by the plaintiff firms, in line with a latest evaluation by Glenn Melnick, a well being care economist on the University of Southern California. “Google and Apple would be jealous of those profit margins!” Melnick stated.
Without a settlement in place, critics stated, Sutter can proceed to make use of the negotiating ways that the lawyer common known as anticompetitive. Some famous, with irony, that the greater than $200 million in reduction funds Sutter acquired from the federal CARES Act was primarily based on a system that awarded funds in line with a hospital’s prior-year revenues — which means Sutter was compensated for a pricing system the lawyer common argued was artificially inflated.
“I’d be curious if they’re trying to get in their last licks on using these types of tactics to inflate prices in one last round of negotiations with insurers and other payers,” stated Anthony Wright, government director of the advocacy group Health Access California.
Kaiser Health News (KHN) is a nationwide well being coverage information service. It is an editorially unbiased program of the Henry J. Kaiser Family Foundation which isn’t affiliated with Kaiser Permanente.