The long-running federal antitrust lawsuit against Sutter Health is getting a second wind after attorneys filed a notice of appeal Tuesday seeking to revive the case.
The lawsuit appeared doomed in March when a San Francisco jury unanimously sided with the California health system at the conclusion of a monthlong trial. The verdict cleared Sutter of allegations that it engaged in anticompetitive business practices that drove up health care costs in Northern California by more than $400 million.
Matthew Cantor, lead counsel for the plaintiffs in the case, Sidibe v. Sutter Health, said the trial outcome would have been different had the judge given the jury accurate instructions and not prevented his team from presenting key evidence.
“We believe at the end of the day that we will continue to prosecute this case to the fullest on behalf of the 3 million employers and individuals who paid premiums that were overcharged as a result of Sutter’s conduct,” he said.
The plaintiffs filed their notice of appeal on Tuesday afternoon. Sutter did not immediately comment on the appeal.
The case was filed in 2012 by small businesses and individuals that buy health insurance, either for their workers or themselves. They claim they were forced to pay more over the years because of Sutter’s conduct, which included requirements that health plans contract with all 24 of its hospitals, even if they only needed a few in their networks.
While Tuesday’s notice does not give a legal explanation for the appeal — that comes later — Cantor said in an interview that the appeal hinges in part on the assertion that the judge who oversaw the trial, Laurel Beeler of the U.S. District Court in the Northern District of California, provided the jury with what he said were inaccurate instructions.
One alleged error concerns how the relevant market was defined. Beeler’s jury instructions directed the jury to consider whether a customer would have other options if Sutter raised its prices. The directions didn’t say whether that customer was a health plan or an individual.
“She didn’t give the jury guidance on who was the relevant purchaser or consumer on the issue of market definition, and that is a key issue in this case,” Cantor said.
Cantor said the U.S. Supreme Court has held that in health care antitrust cases, the relevant customers are health insurers, not patients. This point quickly became key during the trial because Sutter’s arguments centered largely on another Northern California health care giant, Kaiser Permanente. Sutter’s attorneys claimed that Sutter did not dominate its markets because of Kaiser’s presence in them.
For health insurers, however, Kaiser was never an alternative, Cantor said. Kaiser is an integrated system that provides both health insurance and health care services to its plan members. Because of that, Cantor and his team said, contracting with Kaiser was never an option if Sutter raised prices.
More than 30 health care economists appeared to agree with that assertion in a November 2021 filing in support of the Federal Trade Commission’s lawsuit to stop the merger between two New Jersey health care providers.
They wrote that hospital prices are determined by bargaining between hospitals and health insurers. Because enrollees’ out-of-pocket costs for care at in-network hospitals tends to be much lower than at out-of-network hospitals, a hospital’s ability to attract patients is strongly influenced by whether the hospital is included in insurers’ networks, the economists wrote. Likewise, because insurance enrollees value the ability to get care at hospitals with limited out-of-pocket cost, the insurers’ ability to attract enrollees is strongly influenced by the number and quality of hospitals in the insurers’ provider network.
“If a hospital is extremely desirable to patients in a given area, for instance, an insurer may find it difficult to profitably sell an insurance plan in that area without the hospital in-network,” the filing said. “In such a circumstance, the hospital will have greater bargaining leverage when negotiating with insurers, and therefore will generally be able to attain a higher price.”
Cantor said his appeal will also argue that California law directs juries to consider whether there was an anticompetitive purpose to the conduct discussed during the trial, and that Beeler erred by omitting that point from the instructions.
Cantor also claims Beeler should not have prevented plaintiffs from presenting evidence during the trial prior to 2006, which includes a time period during which Sutter allegedly began a process of system-wide contracting so that it could increase prices.
“That was key evidence that the judge prevented us from putting before the jury,” he said.
Nonprofit Sutter Health paid $575 million to settle a similar case in California, UFCW & Employers Benefit Trust v. Sutter Health. As part of that settlement, which was finalized in 2021, the health system has to abide by a number of rules. Among them: It can’t force insurers to include all its hospitals and clinics in their networks.