Sutter Health's ongoing legal battle with a grocery worker health plan turned a new leaf this week after a San Francisco County Superior Court judge ruled the health giant had intentionally destroyed documents "knowing that the evidence was relevant to antitrust issues."
The claim at the center of the lawsuit alleges Sutter Health's practices violate antitrust and unfair competition laws. The suit claims Sutter is monopolizing hospitals and inflating prices. Sutter's non-profit network is based in Sacramento and has 24 hospitals, 35 surgery centers and more than 5,000 physicians in its network. It reported nearly $12 billion in revenue last year and income of $554 million. Sutter is a dominant health care provider in both the Sacramento and San Francisco markets.
Here are 5 things to know about the Sutter Health lawsuit:
1. In 2014, United Food and Commercial Workers (UFCW) & Employers Benefit Trust filed the lawsuit against Sutter Health. The lawsuit claims, Sutter Health used its market dominance to enter into agreements with companies that provide self-funded health plans, forcing them to enter clauses which insulated the health giant from competition, according to the lead plaintiffs’ lawyer, Richard Grossman. Companies and unions with self-funded health plans pay hospitals and health offices directly, instead of going through insurance companies.
One of the clauses -- known as "all-or-nothing" terms -- prohibits health plans from excluding Sutter Health as an option in areas where there are better quality health providers, therefore preventing insurers from offering narrow networks with only Sutter's competitors, Grossman told ABC10. Another clause is the use of anti-tiering. In a tiered system, lower-cost, high-quality providers are in a top tier, and higher-cost and lower-quality providers are in a low tier, with out-of pocket costs being lower to consumers for the use of higher tier providers. Anti-tiering removes the option for patients to choose a better option from competitors in a top tier. Grossman also said Sutter Health uses price secrecy, or a "gag clause", and prohibits insurers from disclosing health care prices. This prevents patients from shopping around for a better-priced, better quality health plan.
Sutter Health denies the lawsuit's allegations.
"We continue to maintain that the substantive allegations underlying this lawsuit are false and without merit." said Karen Garner, spokesperson for Sutter Health.
She added that there are 15 major hospital systems and 142 hospitals in Northern California and said, "Health insurance corporations are the ones that have real market power-- with just four companies representing 90 percent of California's health insurance market."
2. The lawsuit was certified a class action in August, 2017, according to Grossman. Grossman now represents all self-funded health plans in Northern California. He said, the group hopes to recover "hundreds of millions or even billions of dollars" in overcharges by Sutter and wants the court to put a stop to the health system's anti-competition practices. The trial for the case is set for June of 2019.
3. In 2014, shortly after the lawsuit was filed, Sutter filed a motion in court to arbitrate the case and prevent any public legal disputes, claiming an arbitration clause in the union trust agreement applied to the lawsuit. The motion was denied. However, in 2015, Sutter filed an appeal to the arbitration motion ruling which was also denied in a state appeals court in San Francisco in early 2016. According to Grossman, Sutter was "desperate" to keep the public from finding out about their practices.
4. After the lawsuit obtained discovery, the plaintiffs' legal team was able to take depositions, sworn statements from Sutter Heath executives and look into evidence from parties involved. It's the responsibility of all parties to present all documents pertaining to the case. In this week's ruling, Judge Curtis E.A. Karnow found Sutter Health intentionally destroyed 192 boxes of documents containing evidence relating to the lawsuit.
The judge said in 2015, Melissa Brendt who is Sutter’s chief contracting officer in the managed-care department and Sutter lawyer, Daniela Almeida, authorized Brendt’s executive assistant to destroy 10 years worth of managed-care documents going back to 1995. The documents weren't scheduled to be destroyed until 2035.
The court documents state, "Sutter has not explained them [circumstances of the document destruction] except to argue it was all a mistake." Even though the judge said Brendt personally selected the boxes to be destroyed.
The judge also cited an email marked "confidential" from the executive assistant, Sina Santagata, where she wrote, "I’ve pushed the button... if someone is in need of a box between 3/15/95 & 11/23/05... I’m running and hiding... ‘Fingers crossed’ that I haven’t authorized something the FTC will hunt me down for.”
The Federal Trade Commission (FTC) enforces antitrust laws in health care to prevent hospitals, drugmakers and others in the industry from engaging in illegal anti-competitive behavior.
The court documents state, Santagata said the FTC reference was a "joke" and she was being sarcastic.
"This is despicable conduct," Grossman said of the documents destruction. "I've never heard of this happening in litigation before,"
ABC10 reached out to Sutter for comment on the recent court rulings and received a statement from Garner:
“We regret that as part of a routine archiving process, we failed to preserve some boxes of decades-old hard-copy documents that UFCW’s attorneys seek now in discovery. Sutter disclosed the situation as soon as we discovered the missing boxes. The archived boxes in question included printouts of contract proposals, letters and other papers that were between 10 and 20 years old and had been in a warehouse for more than 10 years. The documents are duplicative across teams, and Sutter is in the process of analyzing back-up tapes to supplement the over five million pages of documents we already produced in the litigation.
If these issues are raised at trial, we are confident that the full record will confirm that the incident was a mistake made as part of a routine destruction of old paper records.”
5. Health costs in Sacramento and San Francisco are up to 40 percent higher than in Southern California, according to Grossman, who cited a study from the University of Southern California.
The study, published last year in the Journal of Health Care Organization, Provision and Financing, found hospital prices at both Sutter Health and Dignity Health-- the two biggest hospital chains in California-- were 25 percent higher than other hospitals around the state. Researchers claimed the market giants, which are especially dominant in Sacramento and San Francisco, used their market power to drive up the prices, making the average patient admission at both chains nearly $4,000 more expensive.
Grossman said, Southern California has a healthier market competition than Northern California, where Sutter and Dignity Health are king.
"This case is very important where there is a dominant provider like there is in Northern California," Grossman said.