California AG Announces $575M Settlement in Sutter Antitrust Case

The settlement between Sutter Health and a group of self-funded employers along with the California Attorney General's office was reached in mid-October.

California Attorney General Xavier Becerra announced a $575 million settlement with Sutter Health Friday afternoon.

The Sacramento–based nonprofit health system was accused by prosecutors of violating state antitrust laws by wielding its massive market power in Northern California to drive up prices.

The settlement between Sutter and a group of self-funded employers along with the California Attorney General's office was reached in mid-October.

"This first-in-the-nation settlement is one of the largest actions against anti-competitive conduct in the healthcare marketplace across the country, with unprecedented levels of injunctive relief to restore competition in the market. It is a game changer," Becerra said in a press conference.

As part of the agreement, Sutter will limit what it charges patients for out-of-network services, stop 'all-or-nothing' contracting deals, and abide by a court-approved compliance monitor for the next 10 years.

Additionally, Sutter will stop measures that deny patients access to lower-cost plans, offer a stand-alone price that is lower than any bundled package price, and increase price transparency to insurers and employers.

Sutter, which reported an operating revenue of $13 billion in 2018, was expected to face up to $2.7 billion in damages before a settlement was reached just ahead of when opening arguments were slated to begin on October 16.

Becerra made the announcement two days after he announced that California, along with 20 other states, were prepared to file a petition for certiorari with the U.S. Supreme Court to challenge the Fifth Circuit Court of Appeals' ruling on the Affordable Care Act.

The American Hospital Association (AHA) criticized the settlement in a press release, saying that "dominant commercial health insurance companies" will benefit from the terms of the agreement.

"The settlement will also increase the cost of healthcare, making contracting with dominant insurers more expensive on top of the costs hospitals already bear from excessive inappropriate denials of claims for payment and other tactics that generate revenue for insurers while delaying payments for care to both hospitals and patients," Melinda Hatton, AHA general counsel, said in a statement. "It will also divert resources that hospitals, like Sutter, use to provide benefits to their communities."