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Our Take: Jury finds in Sutter Health’s favor in class-action antitrust lawsuit

Mar 14, 2022

The federal trial in which plaintiffs accused Northern California’s Sutter Health of engaging in anticompetitive practices ended Friday when, after less than 10 hours of deliberating, the jury returned a verdict favoring the health system.

The trial began a month ago, although the lawsuit, Sidibe v. Sutter Health, was originally filed in 2012.

Plaintiffs in the case claimed that Sacramento-based Sutter Health, a nonprofit health system with 24 hospitals, 36 surgery centers, and more than 200 clinics, took advantage of its dominant presence in certain markets to engage in “all-or-nothing” contracting practices with insurers, meaning if payers wanted to include any Sutter Health facilities in their network, they had to include all of them.

As a result, the lawsuit claimed, health plan members were discouraged from using other, less-expensive providers in markets where Sutter Health has multiple competitors, and health plans paid more for the health care services Sutter Health provided. The health plans — Aetna, Anthem Blue Cross, Blue Shield of California, Health Net, and United Healthcare — in turn raised members’ premiums to cover the increased costs.

Attorneys for the plaintiffs in the class-action case presented their arguments on behalf of more than 3 million individuals and employers who purchased policies from the insurers since 2011. They claimed the insurance premium overcharges between 2011 and 2017 totaled $411 million and sought three times that amount, or approximately $1.2 billion, in damages.

Attorneys for Sutter Health argued that the health system’s arrangements with the insurers were based on a “volume discount” and that Sutter Health did not engage in anticompetitive practices. They pointed out that Sutter Health competes with another large health system — Oakland, Calif.-based Kaiser Permanente — in several Northern California markets and said Sutter Health’s agreements with the insurers were meant to lower the total cost of care.

(Several economists poked holes in the argument about Kaiser Permanente saving as a competitor, since Kaiser Permanente is a closed system that does not contract with plans like Anthem Blue Cross and Blue Shield of California, Maria Dinzeo wrote in an article published by Courthouse News Service.)

“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,” James Conforti, Sutter Health’s interim president and CEO, said in a statement posted on the health system’s website.

Conforti added that the jury’s decision “validates that health care providers, including doctors and hospitals, have a right to evaluate whether to participate in health plan networks and ensure that they don’t interfere with the ability to provide coordinated patient care.”

Our Take: In 2018, when California’s attorney general filed an antitrust suit against Sutter Health, we said to keep an eye out for how the case played out because it could affect how regulators view hospital and health system mergers (i.e., greater market consolidation can encourage anticompetitive practices).

The AG’s case was eventually combined with a lawsuit filed against Sutter by a labor union in 2014, which gained class-action status in 2017 when roughly 1,500 self-funded health plans joined as plaintiffs.

In addition to alleging that Sutter exerted its power as a dominant provider in numerous Northern California markets to stifle competition, the plaintiffs also claimed that the health system overcharged patients and health plans for services provided — to the tune of $756 million.

It looked as if Sutter was going to fight the lawsuit, right up to the day that opening arguments were set to start in October 2019. But then the health system agreed to settle.

In the settlement, which received final court approval last August, Sutter agreed to pay the plaintiffs $575 million but admitted no wrongdoing.

The settlement barred Sutter from engaging in all-or-nothing contracting practices and limited what the health system can charge patients for out-of-network services. It also stipulated that Sutter must give health plans access to pricing and quality information, which the plans can share with their members, and that the health system’s business operations are to be monitored for 10 years.

So why did Sutter settle the earlier case and not the one that just went to trial? Maybe because the stakes were higher in the first case — Sutter could have ended up paying almost $3 billion if it had gone to trial and lost, The Associated Press reported back then.

Or maybe Sutter settled the first case because the industry was paying such close attention, since it would have set a considerable precedent. By settling, Sutter did what Atrium Health and CHI Franciscan had already done in similar antitrust litigation. The settlement was mentioned in a couple of news cycles, but overall the impact was minimal.

Maybe Sutter thought its odds of prevailing were better in the more recent case, which didn’t have the weight of the state AG’s office behind it.

It doesn’t really matter why, though. Sutter went to court this time and won.

So, the precedent that some were hoping for — that the jury would find in favor of “the class” and that such a verdict would eventually restore more competition to markets across the country, potentially resulting in lower prices and better access to services — hasn’t been set.

Instead, even though Sutter Health is barred from entering into all-or-nothing contracts with payers because of the settlement in the earlier case, the outcome of this case could signal to other providers who enjoy market dominance that such negotiating practices are acceptable. Or at least the consequences are.

What else you need to know
Moderna intends to begin clinical trials of vaccines for 15 pathogens by 2025. As part of the global public health strategy the company announced last week, Moderna said it would expand its portfolio to 15 mRNA vaccine programs targeting pathogens identified by the World Health Organization and the Coalition for Epidemic Preparedness Innovations as the biggest public health risks, including HIV, tuberculosis, and malaria. It is also launching mRNA Access, a program that will offer researchers the use of Modern’s mRNA technology to investigate new vaccines for emerging or neglected infectious diseases.

Optum and Cigna are among the investors who participated in a recent $30 million round of funding for Flume Health, a digital health plan administrator. The two insurers made the investments through their venture arms, along with five other investors, Flume noted in a blog post. Flume uses its operating platform to help health care providers and other businesses launch new health plans quickly and more easily. The platform replaces traditional third-party administrators with “a single chassis” that allows new plans to scale as they add new members, while leveraging data integrations and a workflow engine, according to Flume. Firefly Health, a virtual-first primary care startup, used Flume’s platform to launch its health plan for small and mid-size employers within six months.

Humana is exploring new ways to use data collected via Fitbit devices to assist members of its Medicare Advantage (MA) plans, Fierce Healthcare reported. Humana’s partnership with Fitbit goes back nearly a decade. In late 2020, the Louisville, Ky.-based insurer gave out more than 116,000 Fitbit devices to MA members. Now, the company is looking into two potential areas for using the data it is gathering through the wearables: encouraging members to engage in healthy behaviors by rewarding them when they do, and helping members who have complex chronic conditions to better understand and predict their risk of serious adverse events.

Six large health systems have formed the Evolve Health Alliance, a human resources collaboration that will share best practices to “improve the diversity, well-being, and engagement of their respective workforces,” with the thought that it will also improve patient care in their communities. Alliance members include AdventHealth, Atrium Health, Henry Ford Health System, Intermountain Healthcare, Northwell Health, and OhioHealth. The concept of the alliance formed  after Intermountain Healthcare and Northwell Health assisted each other with staffing shortages during the pandemic, according to a news release.

Anthem will change its name to Elevance Health, if shareholders approve the company’s plans to rebrand; a vote will be taken at a meeting on May 18. The proposed name combines the words “elevate” and “advance.” The planned rebranding is the first step toward optimizing the company’s brand portfolio, Anthem stated in a press release, noting that Anthem Blue Cross Blue Shield health plans would not undergo name changes.

Executive moves

Dr. Paul Rothman will retire as the CEO of Johns Hopkins Medicine and dean of the medical faculty for the Johns Hopkins University School of Medicine, effective July 1. Dr. Theodore DeWeese, currently vice dean or clinical affairs and president of the Johns Hopkins Clinical Practice Association, will serve as interim CEO and dean, according to a news release.

Dr. Craig Thompson, president and CEO of Memorial Sloan Kettering Cancer Center, will step down from those roles when the board of trustees appoints a successor. Dr. Thompson, who has served in both capacities since November 2010, will stay on as the head of his laboratory, the center said in the statement announcing the leadership change.

Reno, Nev.-based Renown Health announced Friday that Dr. Tony Slonim is no longer president and CEO of the health system, disclosing that he was let go “with cause” following an internal investigation. In a statement published by 2News.com, the health system said that Dr. Thomas Graf, who is Renown’s chief clinical and quality officer, will serve as interim CEO, and Sy Johnson, the health system’s chief operating officer, will serve as interim president.

What we’re reading
The Hospice Paradox: How Medicare Fails Americans At The End Of Life. Health Affairs Forefront, 3.11.22

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