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A jury sided with Sutter Health on Friday in the long-running federal lawsuit accusing the health system of anticompetitive business practices that drove up healthcare costs by more than $400 million.
The unanimous verdict means Sacramento, California-based Sutter has successfully defended against claims that it illegally forced insurers to include all 24 of its hospitals in their contracts, a practice known as tying. The 10-member jury also found Sutter did not force health plans into contracts that prevented them from steering patients to lower-cost, non-Sutter hospitals.
The class-action case, Sidibe v. Sutter Health, was filed in 2012. Opening arguments in the trial were Feb. 10, and the month-long proceedings included long days packed with witness testimony.
James Conforti, Sutter’s interim CEO, said in a statement Sutter is “extremely pleased” with the verdict.
“After hearing many hours of testimony from witnesses, insurance plan representatives, provider organizations and experts, the jury found that Sutter Health did not engage in anticompetitive conduct and did not cause consumers to pay higher prices or premiums as plaintiffs alleged,” he said.
The lawsuit and testimony during the trial had detailed the ways Sutter allegedly forced millions of people to overpay for healthcare, both by preventing insurers from lowering their members’ out-of-pocket costs and charging higher prices. The class consisted of more than 3 million people who allegedly overpaid by more than $411 million over six years. Sutter faced having to pay up to $1.2 billion under a law that allows courts to triple the damages plaintiffs had sought to deter similar behavior.
Sutter, a not-for-profit system with $13 billion in annual revenue, had maintained through its attorneys that it faces vigorous competition in its Northern California markets, particularly from Kaiser Permanente, an integrated health system based in Oakland, California. To prove Sutter does not engage in “tying,” its attorneys showed insurer contracts that did not feature all of its hospitals, including a 2014 Anthem Blue Cross of California contract that only listed four Sutter hospitals.
Sutter’s Conforti said Friday the jury’s decision is important not only for Sutter, but for all healthcare providers in California because it validates their right to choose whether to participate in health plan networks and ensure they don’t interfere with the ability to provide coordinated care. The health system’s attorneys had argued during the trial that antitrust laws don’t require Sutter to agree to every tier or network.
The case against Sutter relied in part on an antitrust economics expert, Tasneem Chipty, who analyzed 140 million hospital-health plan transactions and determined 97% of the higher costs allegedly caused by Sutter’s actions were passed onto premium payers.
From the trial’s start, Sutter had worked to persuade the jury that it does not have market power in Northern California and therefore cannot violate the state’s antitrust laws.
One of Sutter’s witnesses, Columbia University professor and healthcare economics expert Gautam Gowrisankara, testified that the market in Chipty’s model is incorrect because it ignores Kaiser. He said individuals within the class could choose Kaiser, Sutter or different insurance products.
Glenn Melnick, a public policy professor at the University of California’s Sol Price School of Public Policy, disagreed with that argument and said in an interview it’s not correct to depict Kaiser, which is both a health plan and provider, as an alternative to other health plan options, like Aetna or Blue Cross and Blue Shield, because it’s a separate product market.
“That’s like saying, ‘I’m going to have the monopoly on SUVs, and if you don’t like my monopoly prices, go get a four-door sedan,” he said.
Melnick added he thought the information both sides presented during the trial was too technical for a jury.
“I’m an expert in this area, I know this,” he said. “And still, I’m sitting here listening and saying, ‘Why are they asking these questions? This is just mind-numbing detail.'”
Melnick was not involved in the trial, but provided reports for the plaintiff attorneys for this and a similar California case showing that Sutter charged higher prices than its competitors.
Sutter paid $575 million in 2019 to settle a very similar case in a California court: UFCW & Employers Benefit Trust v. Sutter Health, which then-state Attorney General Xavier Becerra joined in 2018. The main difference is that case was brought by self-insured employers that pay their own claims.
Experts had predicted the Sidibe case would be more difficult to win because it was brought by employers that bought health insurance for their workers. Prevailing thus requires proving the insurers passed on the higher costs to premium payers.
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