California's Attorney General Xavier Becerra is suing Northern California's Sutter Health for what he calls "anticompetitive practices" that allegedly have jacked up healthcare costs for the region's consumers.
Sutter Health is the largest hospital system in Northern California, with 24 acute care hospital facilities, 31 ambulatory surgery centers, nine cancer centers, six specialty care centers, nine major physician organizations, 8,200 physicians and 48,000 employees located in 19 counties.
The AG's office said Sutter's anticompetitive behavior included establishing, increasing and maintaining Sutter's power to control prices and exclude competition; foreclosing price competition by Sutter's competitors; and enabling Sutter to impose prices for services and products that far exceeded the prices it would have been able to charge in an "unconstrained, competitive market."
The AG's complaint states Sutter perpetrated the anticompetitive behavior by allowing insurance companies to negotiate with the system only on an "all or nothing" system-wide basis, such that insurers are required under the terms of their contracts with Sutter Health to negotiate with the entire Sutter system or face termination of their contract. Additionally, the complaint claims Sutter prevented insurance companies from giving consumers more low-cost health plan options and set "excessively high" out-of-network rates for patients who had to seek care outside of their provider network which exceeded those of Sutter's competitors and Medicare rates. Finally, the complaint alleged that Sutter hindered price transparency by restricting publication of provider cost information and rates.
These business practices violate the Cartwright Act, which prohibits trusts, defined as a combination of capital, skill or acts by two or more persons, to create or carry out restrictions in trade or commerce. It also bans sales or leases of products on the condition that the purchaser do business with a competitor such that competition is substantially lessened or creates a monopoly.
"Sutter Health is throwing its weight around in the healthcare market, engaging in illegal, anticompetitive pricing that hurts California families," said AG Becerra. "These tactics are risking Californians' lives by driving up the cost of healthcare for everyone. Big business should not be able to throttle competition at the expense of patients."
Sutter Health said in a statement that they are still reviewing the complaint filed against them.
"Sutter Health has held average overall rate increases to health plans to the low single digits since 2012 in spite of our actual expenses for labor, facilities and technology increasing more than 37 percent during the same time period. .. It's also important to note that healthy competition and choice exists across Northern California," the statement read in part.
Requests for further comment had not been returned at the time of publishing.
A recent report from University of California, Berkeley found that rampant consolidation in the Northern California market had driven up healthcare costs. It said 44 counties across the state had highly concentrated hospital markets. In fact, the report said Northern California is "considerably more concentrated" than Southern California across all healthcare market concentration measures analyzed, with inpatient prices 70 percent higher, outpatient prices 17- 55 percent higher depending on the physician's specialty and Affordable Care Act premiums were 35 percent higher than in Southern California.
After accounting for input cost differences such as wages, procedure prices were still often 20-30 percent higher in Northern California than Southern California.
"The vast majority of counties in California warrant concern and scrutiny according to the DOJ/FTC Guidelines. Consumers are paying more for healthcare as a result of market consolidation. It is now time for regulators and legislators to take action," the study authors wrote.
Twitter: @BethJSanborn
Email the writer: beth.sanborn@himssmedia.com