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Analysis

PBGH CEO on Sutter Health Antitrust Settlement: 'I Don't Think This Issue Will Go Away'

By Jack O'Brien  
   October 28, 2019

Elizabeth Mitchell, CEO of the Pacific Business Group on Health, weighs in on the recent settlement between Sutter Health and the California Attorney General's office.

Despite a recent settlement between Sutter Health and a group of self-funded employers along with the California Attorney General's office, the issue of high healthcare costs and pricing concerns is likely to continue in the Golden State, according to an industry observer.

The Sutter Health antitrust case was settled in mid-October, bringing a sudden end to a healthcare trial that garnered widespread attention from provider organizations. 

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

Related: Surprise Settlement In Sutter Health Antitrust Case

While the final details of the case have not been released yet, there is still interest in the healthcare industry about what concessions were made by each side in the case and how the settlement may impact the industry at large. 

Related: Hospital Giant Sutter Health Faces Legal Reckoning Over Medical Pricing

Elizabeth Mitchell, CEO of the Pacific Business Group on Health (PBGH), told HealthLeaders that the case was another example of how important it is for employers to review pricing practices, especially for hospital services.

"We think that there will be a lot to be learned from this case when we understand what the injunctive release will include," Mitchell said. "There is a need to ensure a functional marketplace for healthcare purchasing and this could create that opportunity for California and potentially the rest of the country."

Related: Sutter Health, Affiliates to Pay Back $30M for Medicare Advantage Overpayments

Provider consolidation has become a focus of California's healthcare market in recent years, with several reports pointing to significant market concentrations in counties across the state.

A September 2018 study conducted by RAND Corporation and the Nicholas C. Petris Center on Health Care Markets and Consumer Welfare School of Public Health at the University of California, Berkeley found that more than a dozen California counties were deemed "hot spots," or markets that deserve additional regulatory review. 

Researchers urged state legislators to pass additional oversight measures to address the potential negative consequences of healthcare M&A activity.

As it relates to large employers, Mitchell said that businesses are continually looking for innovative arrangements that prioritize quality care options and affordability for their employees. This may require providers who have been "seeking to maximize prices," she says, to rethink their business models in concentrated markets.

She pointed to PBGH's Employers Centers of Excellence Network, which has allowed businesses to contract with certain providers for affordable care options that improve health outcomes.

Related: DOJ Takes Aim at Sutter Health, Claiming Inflated MA Risk Scores

However, Mitchell said that some contracting practices from large integrated systems "prohibit that discernment and identification of variation, which we all know exists and has important implications for patients."

Despite the ruling in the Sutter case, Mitchell said that the larger issue around pricing for medical care in California is not fully resolved.  

"I don't think this issue will go away, it will remain front and center for a lot of folks paying for medical care," Mitchell said. "There's a lot of interest in partnering with clinicians for high value care, but these anti-competitive practices really inhibit that."

Related: Hospitals Claim Their Mergers Reduce Costs, Disputing Other Studies

Editor's note: This story was updated on October 31.

Jack O'Brien is the finance editor at HealthLeaders, a Simplify Compliance brand.

Photo credit: Sutter Health sign on medical office. Sutter Health is a not-for-profit health system in Northern California - San Francisco, California, USA - July 12, 2019 - Image / Editorial credit: Michael Vi / Shutterstock.com


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