The California Attorney General announced the terms of a settlement agreement reached with Sutter Health, the largest hospital system in Northern California. The Sutter network consists of some 24 acute care hospitals, 36 ambulatory surgery centers, and 16 cardiac and cancer centers. It also includes some 12,000 physicians and over 53,000 employees. In addition, Sutter negotiates contracts on behalf of the Palo Alto Medical Foundation and many affiliated physician groups.

The settlement resolves allegations by the Attorney General, the United Food and Commercial Workers International Union and Employers Benefit Trust, and class action plaintiffs, that Sutter’s anticompetitive practices led to higher healthcare costs for patients in Northern California compared to other places in the state.

As a result of the settlement, Sutter will pay $575 million in compensation and make significant changes in its operations and practices to restore competition in Northern California’s healthcare market.

This litigation against Sutter began in 2014 when the United Food and Commercial Workers International Union and Employers Benefit Trust and numerous individual plaintiffs – later consolidated into a class action – filed their lawsuit challenging Sutter’s practices in rendering services and setting prices.

They sought compensation for what they alleged were unlawful, anticompetitive business practices, which caused them to pay more than necessary for healthcare services and products.

In March of 2018, the California Attorney General filed a similar lawsuit against Sutter on behalf of the people of California principally seeking injunctive relief to compel Sutter to correct its anticompetitive business practices moving forward. The separate lawsuits were combined by the court into one case.

In October of 2019, on the eve of trial, the parties reached an agreement to settle the lawsuits. The settlement must be approved by the court. The court has set a hearing on the settlement for February 25, 2020.

Under the terms of the 122 page settlement agreement, Sutter will be required to pay $575 million to compensate employers, unions, and others covered under the class action and to cover costs and fees associated with the legal efforts.  And limit what it charges patients for out-of-network services, helping ensure that patients visiting an out-of-network hospital do not face outsized, surprise medical bills.  And increase transparency by permitting insurers, employers and self-funded payers to provide plan members with access to pricing, quality, and cost information, which helps patients make better care decisions.

Sutter has also agreed to cease anticompetitive bundling of services and products which forced insurers, employers, and self-funded payers to purchase for their plan offerings more services or products from Sutter than were needed. Sutter must now offer a stand-alone price that must be lower than any bundled package price to give insurers, employers, and self-funded payers more choice