A California judge has approved a final settlement in the landmark antitrust case against Sutter Health, almost two years after the parties agreed to settle the case.
Sutter must now adhere to a sweeping set of rules governing its business practices, something the Sacramento, California-based not-for-profit health system had declined to do in the interim. Judge Anne-Christine Massullo of the San Francisco Superior Court issued her ruling Friday.
In addition to agreeing to these restrictions, Sutter must pay $575 million, part of which will go to class members who allegedly had to pay more for medical care because of practices like all-or-nothing contracting.
The long-running case against Sutter hinges on charges that its anticompetitive practices led to higher healthcare costs for Northern Californians compared to other parts of the state. The United Food and Commercial Workers and Employers Benefit Trust initiated the lawsuit in 2014.
Then-California Attorney General Xavier Becerra joined the case in 2018. In late 2019, the parties announced they had reached a settlement agreement, but the judge didn’t grant preliminary approval until earlier this year.
The final settlement limits what Sutter can charge patients for out-of-network services. the deal also bars Sutter from interfering in insurers’ decisions to design plans that steer members to lower-cost settings. Sutter can no longer penalize insurers or self-funded employers for choosing to include some, but not all, of its facilities in their networks, a practice known as all-or-nothing contracting. And the system can’t or terminate or threaten to terminate a contract with an insurer that declines to designate Sutter Health facilities as centers of excellence.
The settlement also limits Sutter Health’s annual price increases.
The agreement is designed to increase transparency for health plans, employers and policyholders by compelling Sutter Health to disclose price, quality and cost information about its providers.
California Attorney General Rob Bonta (D) described the settlement as “groundbreaking” and called it a “win for Californians” in a news relase.
“Sutter will no longer have free rein to engage in anticompetitive practices that force patients to pay more for health services,” Bonta said. “Under the terms of our agreement, Sutter’s transparency must increase, and practices that decrease accessibility and affordability of healthcare must end.”
The judgment will remain in effect for 10 years, and may be extended for three additional years.
Dionne Lomax of Affiliated Monitors in Boston will oversee Sutter’s compliance for the duration of the agreement. Lomax will have the authority to investigate complaints from employers and insurers, compel the disclosure of documents, interview witnesses, hire staff and experts, and make recommendations to the court concerning enforcement.
Massullo sent the parties’ attorneys back to the drawing board in their search for a monitor last year after she expressed concern about a lack of diversity in their application and interview team. They originally chose Jesse Caplan with Affiliated Monitors.
Following some wrangling over attorney’s fees, Massullo approved $152 million from the settlement to pay the class plaintiffs’ attorneys, plus $13 million for litigation expenses. Massullo granted $11.5 million to the state attorney general, plus $8.2 million for litigation expenses.
Following those distributions, $389 million will be left for the class members. Members were required to submit claims by May 28, but the judge noted that late claims may be considered.
The ruling brings closure to a matter that was settled almost two years ago, Sutter Health said in a statement. The agreement allows the health system to maintain its integrated network and its ability to provide affordable care, spokesperson Amy Thoma Tan wrote in an email.
“We look forward to continuing to work with our health plan partners at the same time we continue to care for the underserved in our communities,” Thoma Tan said.
The settlement will have a significant, beneficial economic impact for businesses, employees and their families by allowing purchasers to provide health benefits that offer greater affordability and quality, Elizabeth Mitchell, CEO of the Purchaser Business Group on Health, said in a news release. About 20 employer members of the group are class members in the lawsuit.
“The Sutter settlement also proves that with collective and bold action, we can reclaim some of the excessive health care charges paid by American businesses and workers and reduce the kind of wasteful spending that impedes job and wage growth,” Mitchell said. The case offers a roadmap for federal policy that would make the U.S. healthcare system more competitive and affordable, she said.