California Attorney General Xavier Becerra on March 30 announced the filing of a lawsuit against Sutter Health for limiting competition in the Northern California health care market and monopolizing prices. According to a press release that accompanied the filing, the action aims to ensure fair prices for California families and “restore competition” in the health care market by preventing Sutter Health from continuing “unlawful conduct under state antitrust laws …”

Sutter Health is the largest hospital system in Northern California, with facilities in 20 counties north of Merced. That area encompasses more than 79 Sutter Health facilities, including acute care hospitals, ambulatory surgery, cancer and specialty care centers, and nine major physician organizations supporting 56,200 physicians and employees. Additionally, according to the press release, “Sutter Health negotiates contracts on behalf of a variety of other affiliated physician groups, the largest being the Palo Alto Medical Foundation.”

The complaint claims that Sutter Health engaged in illegal “anticompetitive behavior,” leading to higher prices in Northern California health care by:

“Establishing, increasing and maintaining Sutter Health’s power to control prices and exclude competition.”

“Foreclosing price competition by Sutter Health’s competitors.”

“Enabling Sutter Health to impose prices for hospital healthcare services and ancillary products that far exceed the prices it would have been able to charge in an unconstrained, competitive market.”

Additionally, the complaint contends that “the excess profits Sutter Health received from illegal pricing practices went toward waves of acquisitions, extreme levels of executive compensation and financing its own insurance arm.”

“Sutter Health is throwing its weight around in the healthcare market, engaging in illegal, anticompetitive pricing that hurts California families,” Becerra said in the release. “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. The California Department of Justice is dedicated to ensuring that all families in our state can access quality, affordable healthcare no matter where they live.”

Sutter Health issued a response on the same day the lawsuit was filed:

“We are currently reviewing the complaint, so we cannot comment on specific claims. Sutter Health is proud to save patients, government payers and health plans hundreds of millions of dollars each year by providing more efficient and integrated care. It’s important to note that publicly available data from the OSHPD (Office of Statewide Health Planning and Development) show(s) that on average, total charges for an inpatient stay in a Sutter hospital are lower than what other Northern California hospitals charge.”

Sutter Health also maintains that “healthy competition and choice exists across Northern California.” The full response is available in the “Newsroom” on the Sutter Health website.

The Sutter Health lawsuit has been portrayed by Becerra as part of a larger crusade to maintain or increase competition in California markets and protect consumers. In connection with the lawsuit, the Attorney General’s office pointed out that according to a recent report by the University of California, Berkeley, Petris Center on Health Care Markets and Consumer Welfare, “The rapid consolidation of health care markets in California has led to rising health care costs for consumers throughout the state. Market consolidation in Northern California was especially glaring. The cost of the average inpatient hospital procedure in Northern California ($223,278) exceeded that in Southern California ($131,586) by more than $90,000.”

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