California late last week announced a settlement with Sutter Health for $575 million to settle claims of anti-competitive behavior brought by the state attorney general as well as a class-action group that included employers and unions.

The deal, which California Attorney General Xavier Becerra called a “game changer for restoring competition,” also mandates that the largest hospital system in Northern California make significant changes in its operations and practices and saddles Sutter with a compliance monitor for at least 10 years to ensure those changes are made.

The plaintiffs argued Sutter’s position of dominance and practice of bundling products and services resulted in higher prices for patients and insurers.

“When one healthcare provider can dominate the market, those who shoulder the cost of care—patients, employers, insurers—are the biggest losers,” Becerra said in a statement announcing the deal. “Sutter has agreed to pay over half a billion dollars to compensate those who challenged its billing practices. It must operate with more transparency. It must stop practices that drive patients into more expensive health services and products. …

“This first-in-the-nation comprehensive settlement should send a clear message to the markets: if you’re looking to consolidate for any reason other than efficiency that delivers better quality for a lower price, think again. The California Department of Justice is prepared to protect consumers and competition, especially when it comes to healthcare.”

In addition to the $575 million payout to plaintiffs and the compliance monitor, Sutter will also be required to:

  • Limit what it charges patients for out-of-network services;
  • Give insurers and insured parties access to pricing and cost information;
  • Stop what the AG’s office called “all-or-nothing contracting deals,” thus “allowing insurers, employers and self-funded payers to include some but not necessarily all of Sutter’s hospitals, clinics, or other commercial products in their plans’ network;” and
  • Stop bundling its services and products, which California alleged “forced insurers, employers, and self-funded payers to purchase for their plan offerings more services or products from Sutter than were needed.”

The parties reached an agreement to settle the suits in October, just before the case was set to go to trial. The settlement, which includes no admission of wrongdoing by Sutter, must be approved by the court. A hearing is set for Feb. 25, 2020.

Sutter was in the news earlier this year after it agreed to pay $30.5 million in a lawsuit filed by a former compliance officer alleging fraud and kickbacks, though the company did not admit liability and pointed out there was no finding the company violated anti-kickback laws.

In April, it paid $30 million for submitting inaccurate information about the health status of beneficiaries enrolled in Medicare Advantage Plans, which resulted in the plans and providers being overpaid, according to the Justice Department.