CA Joins Whistleblower Suit Against Sutter Health

California Insurance Commissioner Dave Jones has intervened in a whistleblower lawsuit against Sutter Hospitals for alleged false billing of what Jones said could be "hundreds of millions of dollars" for anesthesia services, his office has announced.

"Sutter's alleged fraud comes at the expense of the private health insurance industry, which initially pays for the services, but, ultimately, this unjust burden falls on the shoulders of California's consumers, who must foot the bill for inflated health care premiums," Jones said in a media release.

"We believe the amount of the fraudulent charges is in the hundreds of millions of dollars, if not more. As Insurance Commissioner, I will use the full resources of this Department to root out insurance fraud in all forms and hold all those who engage in such fraud fully accountable."

Sutter Health posted a statement on its website denying the allegations. "Sutter Health believes this case is without merit and that our anesthesia charges are appropriately billed. We intend to vigorously defend this matter," the statement read in part.

In a 23-page complaint filed in California Superior Court in Sacramento, Jones' office alleges that Sutter falsely used an anesthesia billing code to charge for services and supplies that patients and insurers had already paid for, either through other charges on the hospital bill or through the anesthesiologist's bill.

In some instances, the complaint alleges, the billing code was charged even though no anesthesiologist was in the operating room and general anesthesia wasn't provided. Jones' office is seeking unspecified monetary penalties and damages, and injunctive relief.

The suit was originally filed by Rockville Recovery Associates Limited, a New York-based auditor hired by The Guardian Life Insurance Company of America to identify fraudulent claims filed from 2002-2008. Rockville allegedly discovered the fraud after reviewing bills submitted to Guardian by Sutter Hospitals, including at an onsite audit at one of Sutter's facilities, the complaint alleges.

The defendants are Sutter and New York-based Multiplan, Inc., an intermediary whose agreements with Sutter allegedly prevented insurers from meaningfully auditing Sutter's bills. As a result, health insurers paid inflated claims and passed on the costs to consumers in higher premiums, the complaint alleges.

Based in Sacramento, not-for-profit Sutter Health operates 24 hospitals in Northern California, and accounts for more than one-third of the hospital revenue generated in the region.

In the media release, Jones pointed to a recent Los Angeles Times report that hospitals in Northern California's six most populous counties collect 56% more revenue per patient per day than in Southern California's six most populous counties. The article cited Sutter as the "driving force" of those higher costs.

Sutter Health said it remains "committed to compliant billing and charging practices. Our charges are transparent and available to the public and our contracts with health insurance plans are thoroughly negotiated with these sophisticated companies. Since these rates are negotiated, they cannot be fairly characterized as false after the fact."

Sutter said it has asked Rockville Recovery Associates Ltd. to provide evidence to support the allegations. "To date, they have produced nothing to suggest that any bills submitted by any Sutter hospitals were false or fraudulent," the Sutter statement read. "Our negotiated prices reflect Sutter Health's significant financial commitments to comply with California's costly seismic regulations bring lifesaving technology to the bedside and take care of increasing numbers of patients who are unable to pay."