Sutter Health is taking an interesting approach and utilizing its market share to possibly force employers into arbitration clauses and protect its market strength.
Sutter Health has hospitals in more than 100 communities in Northern California; it reported $11 billion in revenue last year, with an operating profit of $287 million.
Sutter Health, a large network of doctors and hospitals in Northern California that has long been accused of abusing its market power, is now squaring off against major U.S. corporations in a closely watched legal fight.
The battle is over Sutter’s demand that companies sign an arbitration agreement to resolve any legal disputes with the health system. If firms don’t sign the agreement, Sutter says, the companies will have to pay sharply higher rates for medical treatment of their employees at Sutter’s hospitals, surgery centers and clinics – 95 percent of Sutter’s full charge.
Some companies and labor unions say Sutter’s ultimatum is aimed at preventing them from joining an ongoing class-action lawsuit that accuses the giant health system of imposing anticompetitive terms and “illegally inflated prices” for health care. Sutter disputes the allegations, and says its charges are in line with those of its peers.
“Their choice is between two unacceptable alternatives,” Lansky said in his filing. “Pay 95 percent out-of-network pricing for enrollees that access Sutter services, or agree to give up their claims in this litigation.”Major insurers are split in their reaction to Sutter’s move. Industry giants Anthem and Aetna are urging customers to accept arbitration in order to remain in the network, while rival Blue Shield of California says it opposes Sutter’s request. Blue Shield has clashed publicly with Sutter before over contract terms and prices.
The lawsuit over antitrust violations and unfair competition alleges that Sutter’s hospital prices in San Francisco have exceeded those of competitors by as much as 56 percent. It also says an overnight hospital stay at Sutter hospitals in San Francisco or Sacramento costs at least 38 percent more than a comparable stay in the more competitive Los Angeles market.
California Attorney General Kamala Harris has been investigating Sutter and other big medical providers for several years over potential harm to consumers. A spokeswoman for her office says the attorney general can’t comment on any ongoing investigations.”Sutter’s market share is over 35 percent in eight counties and over 45 percent in six counties,” Perry Pogany, Anthem’s vice president for account management, wrote to customers in February. “Sutter is able to secure significant and unique concessions in its carrier contracts due to its position in northern California.”
Melnick and other economists say the lack of competition among health care providers in Northern California helps explain why the premiums there for health insurance are about 25 percent higher, on average, than premiums in the southern part of the state.
Covered California has reported a similar pattern, with an average rate increase of 7 percent for policyholders in Northern California this year, compared to 1.8 percent for plans in southern California.
Kaiser Health News is a national health policy news service that is part of the nonpartisan Henry J. Kaiser Family Foundation.