Sutter Settles Billing Suit For $46 Million
Sutter Health has agreed to settle a long-running lawsuit stemming from the way the Sacramento-based hospital operator bills for anesthesiology services.
Under the terms of the settlement, announced earlier this week by the California Department of Insurance, Sutter will pay $46 million to settle allegations that first surfaced four years ago that it had been charging patients for anesthesiology services already been baked into its basic operating room charges.
Rockville Recovery Associates, the healthcare auditing firm that filed the original whistleblower suit against Sutter, will split $26 million with its attorneys. Another $20 million will go into California's general fund.
Sutter came under pressure to settle the matter in 2011, when California Insurance Commissioner Dave Jones – long a self-styled champion of consumer rights – joined Rockville in the suit.
"This settlement represents a groundbreaking step in opening up hospital billing to public scrutiny," Jones said in a statement.
The matter had been scheduled to go to trial in Sacramento Superior Court later this month. However, a lengthy article by journalist Steven Brill that appeared in Time magazine last March about the often opaque billing practices by hospitals garnered nationwide attention and no doubt made it more challenging for Sutter to seat an unbiased jury. Jones' office went so far as to refer to the article in its statement.
“We made a tough decision—based on the best interests of our charitable assets—that the
certainty and closure of a settlement was preferable to the significant human and financial resources associated with a lengthy trial,” said Sutter vice president of communications Bill Gleeson.
According to Jones' office, Sutter will now have to disclose on its company website every component of its anesthesia billing practices, as well as its costs. And it will have to charge a flat rate for billing purposes, as opposed to the hourly rate it customarily charged.
"Patients, insurers and the public will now be able to compare Sutter's costs to what it charges for anesthesia. They will see any mark-ups. I commend Sutter for agreeing to these reforms and this settlement. This new transparency should lead to lower prices and point the way to similar billing reforms for all types of hospital services," Jones said.
Sutter did not admit any wrongdoing. Indeed, officials with the system, which operates 28 hospitals throughout Northern California, insisted after the settlement was announced that it did nothing wrong.
“We followed the law, as well as hospital industry practice,” said Sutter spokesperson Karen Garner, who added that about 90% of California's hospitals bill for anesthesiology in the same manner.The settlement also extends to Marin General Hospital in Millbrae. It had been under Sutter management until 2010. Two interrelated firms that provide claims processing services on Sutter's behalf, MultiPlan and Private Health Care Systems, also agreed to pay $925,000 for their alleged role in tamping down objections to anesthesia billing from outside payers.
The California Hospital Association, which had filed an amicus brief supporting Sutter in the lawsuit, expressed similar sentiments. It noted Sutter's new billing protocol would be a deviation from the industry standard.
