Sutter to pay $575M, change contracting practices in antitrust settlement

By | December 23, 2019

Dive Brief:

  • Sutter Health will be required to pay $ 575 million in cash and agree to several conditions aimed at improving provider competition in Northern California under a settlement agreement made public Friday afternoon. The agreement reached in October averted a trial accusing the area’s dominant health system of anti-competitive practices.
  • The company must cease any contracts that require all of Sutter’s facilities be in network or none of them, cap out-of-network charges and stop bundling services without offering them for a lower stand-alone price, according to the agreement, which is scheduled for a preliminary approval hearing in February.
  • Sutter will also have a court-approved compliance monitor for at least 10 years and achieve certain standards for declaring it has clinically integrated a system. Sharing an EHR or having regional similarities will not suffice.

Dive Insight:

The agreement, which was achieved through “contentious arm’s-length negotiations spanning a year and dozens of in-person and telephonic mediation and negotiation sessions,” hits on a number of hot-button issues in healthcare, including price transparency and fair competition.

Sutter and other providers maintain that M&A and integration allow systems to streamlines processes, lowering overhead and merging best practices to ensure care quality. The American Hospital Association issued a report making this claim in September, but experts were quick to question its conclusion.

In response to the details of the Sutter agreement being announced, AHA said the terms will increase costs and undermine value-based care. “Unfortunately, it will be several dominant commercial health insurance companies — not consumers — that will benefit from terms that will allow those insurers to cherry-pick the hospitals with which they contract, as well as eliminate incentives for them to work with hospitals to develop and sustain value-based care. Consumers in rural or vulnerable communities are most likely to be disadvantaged by the settlement,” the group’s general counsel, Melinda Hatton, said in a statement.

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In addition to the contract changes Sutter has agreed to, the system will be required to give insurers, employers and self-funded payers access to pricing and quality information so that members can compare options.

The provisions are similar to legislation that leaders of the Senate health committee introduced this session. That bill would have banned anti-steering and all-or-nothing contract clauses along with gag clauses that keep provider costs and quality data secret.

Negotiations stalled, however, over the bill’s surprise billing ban — which payers and providers fought with fervor and extensive lobbying funds. It could potentially gain speed again next year, but Congress will still be working through impeachment proceedings and facing the deepening partisan squabbles of an election year.

HHS has taken on price transparency recently in regulations that require hospitals and insurers to make their negotiated rates public. Hospitals have filed suit to have the requirements tossed, arguing they violate the First Amendment and wouldn’t achieve the goal of lowering costs and informing consumers.

The case against Sutter began in 2014 when the United Food and Commercial Workers labor union, which operates a trust for employee healthcare benefits, sued the system to challenge the all-or-nothing contracts. California Attorney General Xavier Becerra filed a second suit four years later and the cases were combined.

Just days before the jury trial was set to begin in October, the settlement was announced.

Becerra said Friday the agreement is a game-changer. “This first-in-the-nation comprehensive settlement should send a clear message to the markets: if you’re looking to consolidate for any reason other than efficiency that delivers better quality for a lower price, think again,” he said in a statement.

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The monetary agreement is about 60% of the $ 980 million the plaintiffs had requested, which is “in the upper range of the recovery rates in settlements approved by courts,” according to the document.

In a statement, Sutter noted the agreement includes no admission of guilt. “We were able to resolve this matter in a way that enables Sutter Health to maintain our integrated network and ability to provide patients with access to affordable, high-quality care,” the system said.

The agreement has similarities to one North Carolina’s Atrium Health agreed to with that state’s attorney general and the U.S. Department of Justice. It barred “anticompetitive steering restrictions in contracts” with payers and providers in the Charlotte area.”

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