Court Approves $575 Million Settlement in Sutter Health Antitrust Case
Settlement agreement includes injunctive relief that will ensure Sutter competes on price and quality.
San Francisco, Calif. | August 27, 2021 – Today the Superior Court of California County of San Francisco approved the settlement resolving the antitrust class action that alleged that the Sutter Health hospital system leveraged its market power to engage in anticompetitive conduct, insulate itself from competition, and charge inflated prices.
The case settled in 2019 when Kellogg Hansen partner Daniel Bird was minutes from giving the opening statement. It has been heralded as a landmark case in the effort to take on inflated healthcare prices. In reporting on the settlement, The New York Times described the lawsuit as "a fresh legal attack on health systems accused of using their size to thwart competition" that has been "highly anticipated by both hospitals and health insurers." (The New York Times, "Sutter Health to Pay $575 Million to Settle Antitrust Lawsuit," December 20, 2019.)
“This settlement shows employers and unions have the ability to level the playing field and stop the anticompetitive practices of dominant hospital systems that are driving up the cost of healthcare and lowering wages for millions of employees across the country,” Mr. Bird said following final approval of the settlement. “We are incredibly proud of the results and thankful to the Court for its role in ensuring a fair and just process in this monumental case.”
The Kellogg Hansen trial team included Aaron Panner, Kenneth Fetterman, Linda Elliott, and Jacob Hartman. Kellogg Hansen was joined in the case by counsel from the California Attorney General’s Office, as well as co-counsel Pillsbury & Coleman, LLP; Farella Braun + Martel LLP; Cohen Milstein Sellers & Toll PLLC; and McCracken, Stemerman & Holsberry, LLP.
Background on the Settlement
The settlement agreement requires Sutter to pay $575 million to class members and to implement specific changes to its practices for at least ten years under the supervision of a court-appointed monitor.
The settlement agreement has eight key features regarding Sutter’s conduct:
- Prevents Sutter from unreasonably restricting the ability of insurers to create narrow or tiered networks or otherwise to incentivize patients to choose non-Sutter providers.
- Prevents Sutter from using “must have” providers to require insurers to include unwanted Sutter providers in their networks, and from conditioning the participation of “must have” providers “on the tier in which the Insurer places them.”
- Limits Sutter’s out-of-network rates for out-of-network trauma care, for out-of-network emergency-room care, for charges for Sutter physicians providing emergency-room non-trauma care, and for certain other charges.
- Allows insurers to provide self-insured payers with pricing terms and claims data, and allows enrollees to have access to pricing, quality, and/or cost information concerning Sutter providers.
- Preserves Sutter’s ability to engage in discounting and generally allows Sutter to offer lower prices for bundles of providers as long as a standalone price is also offered separately for those providers subject to certain exceptions. At the same time, it also provides procedural safeguards to ensure that Sutter’s use of bundled pricing does not prevent health plans from excluding certain Sutter providers from their networks.
- Limits Sutter’s conduct with respect to insurers’ ability to offer Centers of Excellence. Those limitations preserve health plans’ ability to exclude Sutter providers from Centers of Excellence programs and to remove Sutter providers that fail to meet pre-disclosed criteria.
- Prevents Sutter from enforcing “provisions in prior, existing, or future contracts with Insurers that violate or are inconsistent with the terms of [the settlement] or promulgate in future contracts terms that violate or are inconsistent with the terms of [the settlement].”
- Installs a court-appointed monitor, who will ensure compliance with the settlement.
Case Caption: UFCW & Employers Benefit Trust v. Sutter Health, No. CGC 14-538451 (Cal. Super. Ct.).