California attorney general sues Northern California health care giant Sutter Health

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Doug Smith/Staff

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California Attorney General Xavier Becerra filed a lawsuit against Sutter Health on March 30, alleging anticompetitive activities that drove up health care costs for Northern California patients.

Becerra’s legal action comes amid the controversy surrounding the imminent closing of Sutter Health’s Alta Bates medical center in Berkeley.

An investigation by the attorney general’s office found that Sutter Health practices violated the Cartwright Act, an antitrust law. The lawsuit alleges that the not-for-profit organization imposed an all-or-nothing basis that constrained insurance companies’ negotiations, prevented insurance companies from giving consumers lower-cost health plan options, set excessively high out-of-network rates and restricted publication of provider cost information and rates.

The lawsuit press release cited research released March 26 by the UC Berkeley Nicholas C. Petris Center. The Petris Center report focuses on California health care market consolidation, and it presented findings of an increased pace of market consolidation in California from 2010 to 2016.

By Federal Trade Commission standards, health care market consolidation across the majority of California counties warrants concern and scrutiny, according to this report. Consolidation of health care entities in Northern California has increased medical costs for consumers, the study states.

“Prices for similar services are 30 percent higher in Northern California than Southern California, and the study attributes much of this to the consolidation of health care in Northern California,” said Richard Scheffler, the lead author of the report and director of the Nicholas C. Petris Center.

Sutter Health has disputed the allegations outlined by Becerra’s lawsuit.

Karen Garner, Sutter Health spokesperson, said in a statement that there is healthy competition in the region, citing 15 major hospital systems and 142 hospitals in Northern California — including Kaiser Permanente, Dignity, Adventist, Tenet, UC and more. Data from the Office of Statewide Health Planning and Development show that Sutter Health average total costs for inpatient stay are lower than costs at other Northern California hospitals, according to Garner.

“Unfortunately, the California attorney general’s filing is factually inaccurate. It mischaracterizes the activities of our not-for-profit organization. … Our integrated network plays a valuable role in providing communities with more efficient care—and in helping lower healthcare costs,” Garner said in the statement.

Sutter Health’s move toward a closure of the Alta Bates medical center might indicate some liability in the attorney general’s filing, according to Ben Bartlett, Berkeley District 3 City Council member.

Bartlett said Sutter Health’s decision to close Alta Bates and refusal to transfer the facility to another operator indicates the organization’s inclination to keep its control over the region. Bartlett added that without Alta Bates, local patients would have to travel to Sutter Health’s Summit Campus in Oakland.

“As of now, Sutter has indicated its intention to close Alta Bates, and that’s something that we’re finding hard to change,” Bartlett said. “Hopefully the lawsuit will encourage them to rethink its positions.”

Contact Michele Meltzer at [email protected] and follow her on Twitter at @michele_meltzer.