The judge overseeing a major antitrust lawsuit against Sutter Health has approved a preliminary settlement several months after it was originally proposed.
Following a hearing on Tuesday, San Francisco Superior Court Judge Anne-Christine Massullo gave the green light on the preliminary settlement, which was crafted by both Sutter and the parties that sued the massive not-for-profit health system: California’s Attorney General, UFCW & Employers Benefit Trust and other health plans. The decision triggers class member notification and paves the way for final settlement approval, currently scheduled for July.
The historic settlement, which includes a $575 million payout from Sacramento, Calif.-based Sutter, was originally announced in late 2019 on the eve of trial. Instead of granting preliminary approval in September 2020, Massullo sent the parties back to the drawing board, citing diversity issues in their process to choose a monitor to oversee Sutter’s settlement compliance. The initial finalists only included white male candidates and the parties selected Jesse Caplan, managing director of corporate oversight with Affiliated Monitors in Boston.
Following their revamped search, the parties chose Dionne Lomax, Affiliated Monitors’ managing director of antitrust and trade regulation. At Tuesday’s hearing, Malinda Lee, an attorney for the Attorney General’s office, said Lomax is “exceptionally well qualified” and distinguished herself with the strength of her interviews and experience.
This time, the judge agreed.
“I was very impressed by the thorough second round of interviews given,” Massullo said at Tuesday’s hearing. “The court appreciates the time that was spent and the outreach and the diverse pool that resulted from that outreach.”
The parties said their new monitor selection process included a 45-day application period in which they sent a request for proposal to almost 650 recipients. The team received 12 proposals, over three-quarters of which contained proposed lead or co-lead monitors who were people of color and-or women, LGBTQ or some combination.
Prior to her current role, Lomax, a Black woman, spent four years as a trial attorney in the healthcare sector of the U.S. Department of Justice’s antitrust division. While in private practice, she represented health systems, medical associations, multispecialty physician groups, pharmaceutical companies and medical devicemakers.
Described in court records as a “third-party neutral who serves as an officer of the court,” the monitor has the important duties of investigating compliance, taking complaints from the plaintiffs and insurers, compelling disclosures of confidential documents, interviewing witnesses, inspecting records, hiring staff and experts and making enforcement recommendations to the court. The monitor role will last for 10 years, with the possibility of a one-time renewal for another three years.
In the meantime, Sutter, which did not immediately respond to a request for comment, has not had to comply with the settlement terms, despite insurers’ requests that it do so. The settlement includes crucial reforms such as limiting how much the system can charge out-of-network insurers. Insurers, employers and self-funded plans also will no longer have to include all of Sutter’s hospitals, clinics or other commercial products in their plans’ networks. Sutter also will no longer be able to force those plans to buy more services or products than needed. The health system will have to offer stand-alone prices that are lower than bundled package prices to allow more choice.
Sutter will also have to give insurers, employers and self-funded plans access to pricing, quality and cost information that was previously kept secret.
Lower patient volumes and higher expenses—both side effects of the COVID-19 pandemic—triggered a sizable operating loss for Sutter in 2020. The health system lost $321 million on $13.2 billion in operating revenue in 2020, a 2.4% loss margin. The health system’s operating loss was even higher in 2019 because it had set aside $575 million for the antitrust settlement.