Closings focus on whether Sutter Health has market power

The monthlong antitrust trial against Sutter Health is nearing its end after attorneys gave closing arguments Wednesday focusing on whether the company has the power to dominate the Northern California market.

The plaintiffs allege Sutter used overwhelming market power to pressure health insurance companies into all-or-nothing contracts for the Northern California market, causing 3 million families and businesses to overpay $411 million for health services.

But defense attorney Jeffrey A. LeVee of Jones Day told the jury, "If you conclude that plaintiffs have not demonstrated that Sutter has market power, this case should be over, because both causes of action require it." Sidibe v. Sutter Health, 3:12-cv-04854, (N.D. Cal., filed Sept. 17, 2012).

Plaintiffs' attorney Matthew L. Cantor of Constantine Cannon LLP contended the evidence has shown Sutter does have the market power to "coerce health plans into these forced contractual arrangements" as well as commit anti-competitive actions and restrain trade.

Cantor told the jury at the outset of the trial he would show that Sutter abused the fact that it is the "only game in town" in various Northern California markets. Using this exclusivity, Sutter pressured health plans into placing Sutter hospitals into their preferred tier and excluding lower-cost competition in its networks, he argued.

In response, defense attorney David C. Kiernan of Jones Day argued in opening statements that if Sutter were as powerful as plaintiffs claimed, negotiations between Sutter and some of the most powerful insurance companies in the world would not be as contentious and time consuming. Sutter would presumably be able to have any of their demands fulfilled, he said.

Both sides frequently referred to their opening statements Wednesday to show the jury they followed through on the points they said they would prove a month ago.

Cantor said plaintiffs were successful in proving Sutter has contractual clauses that prevent tiering and steering customers to lower-cost options as well as confidentiality clauses to prevent health plans from being transparent to customers about costs for them to make more informed decisions.

Sutter "force[s] the health plans into these contracts that they did not want," Cantor said. "Sutter is the 800-pound gorilla in the market." He also argued plaintiffs proved Sutter had a "stranglehold" on communities in which the tying hospitals are located. He said big health insurance companies needed Sutter more than Sutter needed them, which resulted in Sutter requiring systemwide agreements. He told the jury that all the contracts they saw this past month were systemwide.

Moreover, he said that Sutter's conduct prevented the creation of narrow and tiered health networks with absurd nonparticipation rates. "The health plans uniformly stated that the [nonparticipation] rates that Sutter charged in their contracts was uniformly higher, materially higher, than what they would pay for out-of-network services without the Sutter [nonparticipation] costs," he said.

In his closing, LeVee chose to focus on the plaintiffs' claims of Sutter's market power.

"What is market power? It's the ability to increase prices or reduce output without losing market share. Did the plaintiffs give you evidence of that? The answer is no," he said.

LeVee also implied the plaintiffs were litigating in bad faith, saying Sutter only called employees as witnesses while the plaintiffs brought biased witnesses from insurance companies, who have a lot at stake on this trial. He asserted the insurance companies were not the plaintiffs in name but were still the true plaintiffs.

LeVee emphasized on Kaiser Permanente's relevance to this case. He argued there is intense competition in the Northern California market for medical services and the evidence has shown Sutter's market share has been declining year over year, mostly to Kaiser.

He claimed in opening statements plaintiffs wanted to leave Kaiser out of the discussion because they "have no competitors" but now the jury should know Kaiser is the elephant in the room and is relevant to the case.

Kaiser has almost twice the market share of Sutter and witnesses have said both companies see each other as "principal competitor[s]," LeVee said.

He also argued that while the costs of providing medical services have shot up in the past decades, Sutter's prices have gone down outside of the claim period of 2006-2008.

"If Sutter had market power ... would it be so laser focused on getting its costs down when it could willy-nilly raise prices?" LeVee asked.