Could lawsuits against hospital giants lower health care prices?

The consensus is building that the biggest problem in U.S. health care is prices. And now a California lawsuit arrives that focuses on one of the worst offenders.

I’m talking about Sutter Health. Sutter’s nonprofit system includes 24 hospitals, 35 surgery centers, and 32 urgent care clinics. It has more than 5,000 physicians in its network, and it dominates Northern California markets. A new study by the University of California-Berkeley shows that the average inpatient prices in Northern California are 20-30 percent higher than in Southern California, where there is more hospital competition.

The hospital’s prices are described as “punitively high”

Sutter is being charged with a host of illegal practices to stifle competition and bolster their ability to overcharge customers:

  • negotiating “all or nothing” contracts with insurers that exclude competitors
  • barring insurers from sharing price information with patients before treatment
  • preventing insurers from awarding bonuses to physicians who refer patients to high-quality, lower-cost facilities, if the facilities were not one of Sutter’s own
  • setting “punitively high” charges on out-of-network services.

Sound bad? Hang on for a minute. In another ongoing lawsuit against Sutter filed several years ago, a judge ruled last November that Sutter employees destroyed 192 boxes of documents related to the case!

The larger the hospital system, the higher the price

Sutter is a good candidate to become the next poster child for bad hospital behavior. Its behavior demonstrates in spades what happens when a hospital system grows large enough to wield near-monopoly power.

Regulators, despite having denied a few hospital mega-mergers over the past several years, have been unable to slow hospital consolidation, leaving many markets across the country with a system big enough to raise prices at will.  Some experts predict that this lawsuit might prompt a wave of similar suits in markets dominated by one hospital giant.

We can only hope.

Leave a Reply

Your email address will not be published. Required fields are marked *