Sutter Health defeats billion-dollar antitrust claim

After a monthlong trial and less than 10 hours of deliberations over two days, nine jurors unanimously rendered a verdict Friday that potentially saved Sutter Health $1.2 billion in damages, finding it did not force health plans to agree to contracts preventing them from steering patients to lower cost non-Sutter hospitals.

The jury also found Sutter did not sell inpatient hospitals services at certain Sutter hospitals, where Sutter was the "only game in town," only if buyers purchased inpatient services for Sutter hospitals in more competitive regions. Sidibe v. Sutter Health, 3:12-cv-04854, (N.D. Cal., filed Sept. 17, 2012).

The class action alleged Sutter used its market power to pressure health insurance companies into all-or-nothing contracts for the Northern California market and caused 3 million families and businesses to overpay $411 million for health services.

"This decision is important not only for Sutter Health, but for all health care providers in California," James Conforti, the interim Sutter Health president and chief executive officer, said in a statement Friday. "It validates that health care providers, including doctors and hospitals, have a right to evaluate whether to participate in health plan networks and ensure that they don't interfere with the ability to provide coordinated patient care and will not lead to surprise bills. Sutter Health looks forward to continuing to care for the more than 3 million patients it serves in Northern California."

Attorney Matthew L. Cantor of Constantine Cannon LLP, who spoke for the plaintiffs during the trial, said in an interview Friday, "In our view, the evidence demonstrates that Sutter's conduct harmed the class members and consumers. Given today's verdict we are currently evaluating our next steps."

Sutter was represented by Jeffrey A. LeVee and David C. Kiernan of Jones Day; and by Robert H. Bunzel, Patrick M. Ryan and Oliver Q. Dunlap of Bartko Zankel Bunzel & Miller.

The lawsuit revolved around claims that Sutter Heath forced Aetna, Anthem Blue Cross Blue Shield of California, HealthNet and United HealthCare into all-or-nothing deals, which Sutter agreed to stop using after a similar case in Southern California last year ended with a $575 million settlement agreement. The class action alleged that the deals also contained provisions that prevented health insurance providers from accurately tiering Sutter services and steering patients to lower-cost non-Sutter hospitals as well as confidentiality clauses that prevented the providers from being transparent to customers about costs for them to make more informed decisions.

The plaintiffs also alleged that Sutter had an absurdly high nonparticipation rate, which suppressed the creation of narrow and tiered networks. "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," Cantor said in closing arguments Wednesday.

Sutter argued that its conduct was legal and appropriate and that its contracting practices actually lowered costs for patients year over year because it was able to provide "volume discount[s]." LeVee said in closing statements that while costs for providing medical services have shot up in the past decades, Sutter's prices have been going down over the years.

The key issue the attorneys focused on in closing was whether Sutter had the power to control the Northern California market.

LeVee told the jury Wednesday, "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."

Cantor argued Wednesday that Sutter was "the 800-pound gorilla in the market," and had a "stranglehold" on communities in which Sutter was the only hospital. He also said witnesses testified big health insurance companies needed Sutter more than Sutter needed them, which allowed Sutter to force systemwide agreements onto the health plans, emphasizing his argument by pointing out to the jury every contract they saw in evidence during the past month was systemwide.

LeVee disagreed, saying Wednesday, "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."

LeVee also argued Kaiser Permanente dominates Sutter in terms of market power, claiming Kaiser had almost twice the market share of Sutter and witnesses testified both companies see each other as principal competitors.

Plaintiffs' counsel tried to argue Kaiser could not be considered a competitor because Kaiser is a closed network, LeVee said. But in the face of such evidence, the jury should know Kaiser is the elephant in the room and is relevant to the case, he argued.

Referencing Sutter's claim of reduced costs for patients, LeVee asked, "If Sutter had market power ... would it be so laser focused on getting its costs down when it could willy-nilly raise prices?"