California sues Sutter for anticompetitive practices, high costs
- California Attorney General Xavier Becerra has sued Sutter Health, northern California's largest healthcare system, for "illegal anti-competitive conduct" that it says has resulted in higher healthcare costs.
- The complaint alleges that the profits from Sutter's "illegal pricing practices" — including overcharging — have gone toward acquisitions, executive wages and the financing of its own insurance arm. Sutter said in a statement that it cannot comment on the specific claims.
- This antitrust suit follows a six-year investigation into Sutter, and will potentially join a concurrent class-action antitrust lawsuit against the 24-hospital system that seeks reparations for overcharges. San Francisco County Superior Court Judge Curtis E.A. Karnow ruled in November that Sutter employees intentionally destroyed 192 boxes of evidence "relevant to antitrust issues."
The AG is hoping this case will set a regulatory precedent for challenging large healthcare systems and the wave of mergers and acquisitions that have washed over the industry. Markets like northern California, where systems like Sutter maintain regional control, are experiencing increased costs of care.
Sutter in a statement said it "is proud to save patients, government payers and health plans hundreds of millions of dollars each year by providing more efficient and integrated care."
Complaints have been lodged against the nonprofit healthcare system and its pricing practices for years. A 2008 FTC report found that healthcare prices increased 28.4% to 44.2% after Sutter's merger with Oakland's Summit Medical Center in 2000. A 2016 study from USC found that hospital prices at Sutter were 25% higher than any other California hospital.
Last week, a report from researchers at University of California-Berkeley found that healthcare costs were 30% higher in northern California, where Sutter has consolidated market power, than they were in southern California.
California's state regulators are concerned over Sutter's market power. Other state regulators are watching as well, as providers look to build their regional market share through consolidation.
In 2017, researchers found more than 560 hospital mergers had occurred since 2010. Since the publication of the viewpoint in JAMA, several additional hospital deals have been announced. Last week, Jefferson Health and Einstein Healthcare Network signed a nonbinding letter of intent to merge.
Last month, Mercy Health and Bon Secours announced their intent to create a 43-hospital system across seven states.
Federal regulators have blocked some health systems' mergers in the past. The NorthShore-Advocate proposal was blocked in March 2017 with the Federal Trade Commission arguing the merger of the two Chicago-area systems would increase costs and decrease care quality.
However, federal regulators have not acted aggressively to fight health system merger proposals. With that in mind, the industry will be closely watching the California lawsuit.
- Kaiser Health News California Takes On Health Giant Over High Costs
- State of California Department of Justice Attorney General Becerra Sues Sutter Health for Anti-competitive Practices that Increase Prices for California Families
- Healthcare Dive Hospital consolidation has spotty track record, experts say
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