Sutter Health is scheduled to go to trial in October in a lesser-known antitrust case whose allegations are remarkably similar to those the health system paid $575 million to settle in 2019.
The case, Sidibe v. Sutter Health, was filed a few years before its closely-watched cousin, UFCW & Employers Benefit Trust v. Sutter Health, which took the spotlight when California’s Attorney General joined in 2018. Both lawsuits accuse the Sacramento, Calif.-based healthcare giant of imposing all-or-nothing contracts that have forced people to overpay by hundreds of millions of dollars over the years. That is, with a key difference: While the UFCW case centers on harm to self-insured plans, Sidibe concerns fully insured plans.
The contrast adds a layer of complexity that could make the case harder for the Sidibe plaintiffs to win. It’s easier to prove harm to employers with self-insured plans, since they pay medical bills themselves and accept the risk of covering members’ healthcare costs, which means they’re directly affected by Sutter’s alleged conduct. Proving harm to fully insured plans—employers that buy plans from insurance carriers—requires the extra step of proving those insurers passed on the higher costs to premium payers.
“It just seems like that’s going to be a bit of a challenge to prove,” said Bill Horton, a partner with Jones Walker and co-chair of its healthcare industry team, who is not involved in the case.
If the plaintiffs succeed, the case could empower fully insured plan members across the country to fight such anticompetitive practices, said Glenn Melnick, a professor of public policy at the University of Southern California’s Sol Price School of Public Policy. He said his research has found that every health system is either actively engaged in the tying practice or trying to through buying more hospitals.
“This model has been copied across the country,” he said.
To prove their harm, the fully insured plans are using a complicated regression model developed by antitrust economics expert, Dr. Tasneem Chipty, the founder of Matrix Economics who has done similar work for other hospital antitrust cases.
Chipty analyzed more than 120 million health plan and hospital transactions to compare Sutter’s hospital prices to those of non-Sutter hospitals. The idea was to learn what percentage of Sutter’s overcharges insurers passed onto their members in the form of higher premiums. She found a 97% pass-through rate, with slight variations by insurer. Chipty calculated $390 million worth of damages for 2011 through 2017, plus more for the subsequent years, said Matthew Cantor, an attorney with Constantine Cannon who serves as lead counsel for the Sidibe plaintiffs.
The judge in the case, U.S. Magistrate Judge Laurel Beeler, wrote in a July 2020 order certifying the class that Chipty “has shown the sound methodological steps through which she calculated damages.”
Notices are currently being sent out to members of the affected class—estimated at more than 2 million people, both employers and individuals, Cantor said. They include anyone living in nine specific areas in Northern California who paid premiums to Anthem Blue Cross, Aetna, Blue Shield of California, Health Net or UnitedHealthcare since 2011. The judge rejected the plaintiffs’ request to extend that back to 2008.
This case is unique in that seeks payouts for the individual premium payers who were allegedly harmed by Sutter’s practices, Horton said. Typically, antitrust disputes like this concern providers and payers, and the underlying members are left out, he said.
“It’ll be interesting to see if the court finds there is relief at the consumer level as opposed to simply the payer level,” Horton said.
Sutter is trying to get the case dismissed, but Cantor said the judge’s decision to set a trial date and the fact that the judge in the parallel UCFW case rejected the same motion bodes well for the plaintiffs. Sutter declined to comment and attorneys representing the health system did not respond to requests for comment.
Another difference between the Sidibe case and the UCFW case is that the former is being tried in federal court, whereas UCFW is a state case. Cantor said antitrust cases are typically litigated in federal court. The Sidibe complaint alleges violations of the federal Sherman Antitrust Act, California’s Cartwright Act—the state’s version of the antitrust law—and the California Unfair Competition Law.
Like UFCW, Sidibe accuses Sutter of forcing health plans to require members to get all of their care from Sutter providers, with penalties for using non-Sutter providers. In addition to sizable monetary payouts, both cases seek injunctive relief to prevent Sutter from engaging in such practices in the future.
Although the parties agreed to settle the UFCW case before trial, Sutter doesn’t have to abide by the terms until the judge approved a final settlement. Sutter has declined insurers’ requests to abide by the settlement terms ahead of the approval. Terms include scrapping all-or-nothing contracts and limits on charges to out-of-network insurers.
Given how expensive and complicated antitrust trials tend to be, both parties will probably want to negotiate a settlement ahead of the trial date, Horton said. Avoiding trial will also allow Sutter to keep details of its business practices private. The UFCW settlement was announced the day opening arguments were set to begin.
“I wouldn’t plan my October around watching the trial at this stage,” Horton said.