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Surprise settlement reached in big Sutter Health case over medical pricing

Blue Shield, Sutter Health sparring
Sutter Health runs 24 hospitals in Northern California, including this hospital in Davis, Calif.
(Ken James / Bloomberg)

Sutter Health has reached a tentative settlement agreement in a closely watched antitrust case brought by self-funded employers, and later joined by the California Attorney General’s Office. The agreement was announced in the San Francisco Superior Court on Wednesday morning, just before opening arguments were expected to begin.

Details have not been made public, and the parties declined to talk to reporters. Superior Court Judge Anne-Christine Massullo told the jury that details will likely be made public during the approval hearings in February or March.

There were audible cheers from the jury following the announcement that the trial, which was expected to last for three months, would not continue.

Sutter stood accused of violating California’s antitrust laws by using its market power to illegally drive up prices. Healthcare costs in Northern California, where Sutter is dominant, are 20% to 30% higher than in Southern California, even after adjusting for cost of living, according to a 2018 study from the Nicholas C. Petris Center at UC Berkeley cited in the complaint.

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The case was a massive undertaking, representing years of work and millions of pages of documents, California Atty. Gen. Xavier Becerra said before the trial. Sutter was expected to face damages of up to $2.7 billion.

Sutter Health consistently denied the allegations and argued that it used its market power to improve care for patients and expand access to people in rural areas. The nonprofit chain has 24 hospitals, 34 surgery centers and 5,500 physicians across Northern California, and had $13 billion in operating revenue in 2018.

The case was expected to have nationwide implications on how hospital systems negotiate prices with insurers. It is not yet clear what effect, if any, a settlement agreement would have on Sutter’s tactics or those of other large systems.

This story was written for Kaiser Health News, an editorially independent publication of the Kaiser Family Foundation.


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