A jury sided with Sutter Health on Friday in the longstanding federal lawsuit accusing the health care system of anti-competitive business practices that have driven up health care costs by more than $400 million.
The unanimous verdict means Sacramento, Calif.-based Sutter successfully defended himself against allegations that he illegally forced insurers to include all of his 24 hospitals in their contracts, a practice known as tied selling. The 10-member jury also found that Sutter did not force health plans to enter into contracts that prevented them from referring patients to non-Sutter hospitals at lower cost.
The class action, Sidibe c. Sutter Health, was filed in 2012. The trial’s opening arguments were held on February 10, and the month-long proceedings featured long days filled with testimony.
James Conforti, acting CEO of Sutter, said in a statement that Sutter was “extremely pleased” with the verdict.
“After hearing many hours of testimony from witnesses, insurance plan representatives, provider organizations and experts, the jury concluded that Sutter Health did not engage in anti-competitive behavior and did not not lead consumers to pay higher prices or premiums as claimed by the plaintiffs,” he said.
The lawsuit and testimony during the trial had detailed the ways Sutter allegedly forced millions of people to overpay for health care, both by preventing insurers from reducing out-of-pocket costs for their members and by charging higher prices . The class was made up of more than 3 million people who allegedly overpaid more than $411 million over six years. Sutter had to pay up to $1.2 billion under a law that allows courts to triple damages that plaintiffs had sought to deter from similar behavior.
Sutter, a nonprofit with $13 billion in annual revenue, had argued through its attorneys that it faced stiff competition in its Northern California markets, particularly from Kaiser Permanente, an integrated healthcare system based in Oakland, California. To prove that Sutter is not engaging in the “liaison,” his lawyers showed insurance contracts that did not list all of his hospitals, including a 2014 Anthem Blue Cross of California contract that listed only four Sutter hospitals. .
Sutter’s Conforti said Friday that the jury’s decision is important not just for Sutter, but for all health care providers in California, because it validates their right to choose whether or not to participate in health plan networks and ensures that they do not interfere with the ability to provide coordinated care. Lawyers for the healthcare system had argued during the lawsuit that antitrust laws did not require Sutter to agree to every level or network.
The case against Sutter rested in part on an expert in antitrust economics, Tasneem Chipty, who analyzed 140 million hospital health plan transactions and determined that 97% of the higher costs allegedly caused by Sutter’s actions were passed on to the premium payers.
From the outset of the trial, Sutter had worked to persuade the jury that he had no market power in Northern California and therefore could not violate state antitrust laws.
One of Sutter’s witnesses, Gautam Gowrisankara, a Columbia University professor and expert in health economics, said the market for Chipty’s model is incorrect because it ignores Kaiser. He said individuals in the class could choose Kaiser, Sutter or different insurance products.
Glenn Melnick, a professor of public policy at the University of California’s Sol Price School of Public Policy, disagreed with this argument and said in an interview that it was not correct to describe Kaiser, which is both a health plan and a provider, as an alternative to other health care. plan options, such as Aetna or Blue Cross and Blue Shield, as this is a separate product market.
“It’s like saying, ‘I’m going to have Monopoly SUVs, and if you don’t like my Monopoly prices, go get yourself a four-door sedan,'” he said.
Melnick added that he thought the information presented by both sides at trial was too technical for a jury.
“I’m an expert in this area, I know that,” he said. “And yet I’m sitting here listening and saying, ‘Why are they asking these questions? These are just mind-numbing details. “”
Melnick was not involved in the lawsuit, but provided reports to plaintiffs’ attorneys for this case and a similar case in California showing Sutter charging higher prices than competitors.
Sutter paid $575 million in 2019 to settle a very similar case in California court: UFCW & Employers Benefit Trust v. Sutter Health, which State Attorney General Xavier Becerra joined in 2018. The main difference is that this case was brought by insured employers who pay their own claims.
Experts had predicted that the Sidibe case would be harder to win because it was brought by employers who had taken out health insurance for their workers. To win, it must therefore be proven that the insurers passed on the higher costs to the premium payers.