Northern California health and hospital system Sutter Health has agreed to pay $228 million to end a 13-year long court fight over a class action antitrust lawsuit accusing the health care company of allegedly using their market dominance to jack up rates charged to employer health plans administered through major health insurers, allegedly resulting in higher premiums for employers and their workers.
Lawyers who instigated and led the long legal battle could be in line to take more than $75 million from the deal, or one-third of the settlement funds, plus an additional $20 million to cover their purported litigation costs, according to a settlement document filed in San Francisco federal court.
After additional settlement adminstration costs, about $115 million would then be divided up among members of the plaintiffs' class.
The settlement document estimates the plaintiffs' class could include as many as 3 million claimants, including residents and employers in most of northern California and the Bay Area who "paid premiums for a fully-insured health insurance policy from Blue Shield, Anthem Blue Cross, Aetna, Health Net or United Healthcare from January 1, 2011, through March 8, 2021."
This would include those who purchased "individual health insurance policies ... from the Health Plans," as well as people who paid for health insurance coverage "provided to them as a benefit from an employer or other group purchaser" located in certain California markets.
The settlement document said funds would be divided among eligible claimants based on a formula involving "the number of claims and the volume of commerce represented in those claims."
The settlement comes about nearly two months after the parties agreed to put on hold a second trial in the lawsuit that began in 2012.
Attorney Azra Z. Mehdi, of the San Francisco-based Mehdi Firm, filed the original complaint. He was later joined by attorneys Matthew L. Cantor, Jean Kim and Rosa M. Morales, of the firm of Constantine Cannon LLP, of New York.
Named plaintiffs in the action include Djeneba Sidibe, of Marin County, and formerly of Alameda and San Mateo counties; Jerry Jankowski, of San Francisco County; Susan Hansen, of San Francisco County; David Herman, of San Francisco County; Caroline Stewart, of San Fransico County; Johnson Pool & Spa, of Windsor; and Optimum Graphics, of San Anselmo.
Sacramento-based Sutter Health operates 24 hospitals and dozens of other health care clinics and offices across the San Francisco Bay Area, Sacramento and more than 100 communities in northern California.
The lawsuit accuses Sutter Health of allegedly using its strong market position to force a large health insurers - including Aetna, Anthem Blue Cross, Blue Shield of California, Health Net and United Healthcare - to agree to so-called "tying arrangements."
Under such alleged "all-or-nothing" arrangements, Sutter essentially has forced the insurers, who by law must provide in-network coverage in certain so-called hospital service areas (HSAs), to include in-network coverage in certain other HSAs dominated by Sutter.
The lawsuit asserts this has resulted in substantially higher premiums charged to insured customers, including individuals and employers.
The plaintiffs asserted Sutter should pay $411 million for the alleged violations.
The lawsuit claims these practices violated federal and California state antitrust laws.
The case went to trial in San Francisco federal court in 2022. A jury at that time delivered a verdict in favor of Sutter, appearing to end the case.
In that verdict, the jury simply found Sutter did not force the health plans "to agree to contracts that had terms that prevented the plans from steering patients to lower-cost non-Sutter hospitals within the plan network."
That verdict, however, was reversed in October 2024. In a 2-1 decision, a three-judge panel of the U.S. Ninth Circuit Court of Appeals decided the jury verdict was not valid because it was based on "legal error" by the judge presiding over the trial.
Specifically, the two-judge majority - both appointees of former President Joe Biden - said they believed the judge abused her discretion by excluding any evidence beyond the five years preceding the filing of the lawsuit, which would have been outside the statute of limitations for class actions, and by not applying enough weight to plaintiffs' desire to have the jury consider the "anticompetitive purpose" of the alleged arrangements between Sutter and the health insurers.
A dissenting judge, who had been appointed in 2019 by President Donald Trump during his first term in office, blasted the majority decision for all but rewriting the rules under which such antitrust trials can be conducted.
He said the majority had based its "anticompetitive purpose" findings on the "shakiest of legal foundations," without any justification under any U.S. Supreme Court ruling regarding antitrust law.
He asserted the decision will now serve as precedent that trial lawyers will use to restrict judges from limiting the ability of plaintiffs to bury juries under "every piece of evidence from the inception of time" in pursuit of potentially massive payouts.
Following the appellate ruling, the case returned to federal district court, where a new trial was scheduled for early March.
In the meantime, however, the parties said they entered settlement talks, and ultimately hammered out a deal.
The settlement was presented to the court on April 25.
The parties issued a joint statement concerning the settlement, saying:
"The settlement resolves strongly disputed claims involving alleged conduct spanning from the late 1990s to 2020. These claims were brought by plaintiffs on behalf of themselves and a certified class who paid premiums for fully insured health insurance policies from five insurance companies. The parties agree this settlement is what’s best for the parties, for patients and for the class, and the prospect of additional litigation is not in anyone’s interest. There is no admission of liability, and the settlement is subject to court approval."
U.S. District Judge Laurel Beeler has not yet approved the settlement.
Sutter Health was represented in the action by attorneys Craig E. Stewart, David C. Kiernan, Matthew J. Silveira, Jeffrey A. LeVee, of the firm of Jones Day, of San Francisco and Los Angeles; and Robert H. Bunzel, Oliver Q. Dunlap and Patrick M. Ryan, of Bartko LLP, of San Francisco.
Plaintiffs have been represented by attorneys Matthew L. Cantor, Jean Kim, James J. Kovacs and J. Wyatt Fore, of Constantine Cannon LLP, of New York and Washington, D.C.; Azra Z. Mehdi, of The Mehdi Firm PC, of San Francisco; David C. Brownstein and David M. Goldstein, of Farmer Brownstein Jaeger Goldstein Klein & Siegel LLP, of San Francisco; Allan Steyer, D. Scott Macrae, and Suneel Jain, of Steyer Lowenthal Boodrookas Alvarez & Smith LLP, of San Francisco; and Jill Manning, of Pearson Simon & Warshaw LLP, of San Francisco.