Case 6:21-cv-00984-ADA Document 39-27 Filed 05/02/22 Page 1 of 3
`Case 6:21-cv-00984-ADA Document 39-27 Filed 05/02/22 Page 1 of 3
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`2/24/22, 8:27 AM
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`Sutter's Market Dominance Hiked Premiums $411M, Jury Told - Law360
`Case 6:21-cv-00984-ADA Document 39-27 Filed 05/02/22 Page 2 of 3
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`Sutter's Market Dominance Hiked Premiums $411M,
`Jury Told
`
`By Bonnie Eslinger
`Law360 (February 23, 2022, 10:33 PM EST) -- An economist testifying as an expert witness in a
`federal antitrust class action against Sutter Health said Wednesday that the hospital giant exploited
`its market power over California's top five health insurers, resulting in higher prices that cost millions
`of premium payers about $411 million.
`
`Tasneem Chipty was called to the witness stand by counsel for a 3 million-member certified class of
`individuals and businesses who had purchased health insurance policies since 2011 from Blue Shield,
`Anthem Blue Cross, Aetna, Health Net or United Healthcare. The insurers are not parties to the
`litigation.
`
`The expert, who holds a Ph.D. in economics from the Massachusetts Institute of Technology, said
`Sutter had "interfered with competition" and thus harmed the class members.
`
`In Northern California there are about 11 geographic markets for hospital services, Chipty said, and
`Sutter hospitals are in seven areas where there are few, if any, other choices.
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`That has contributed to the market power the hospital organization has over the five health insurers,
`which account for 90% of all fully insured patients in California, she said.
`
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`The suit claims that Sutter has taken advantage of its dominance to force health insurance
`companies to contract with all the hospitals in their networks, including those in higher-priced
`regions, and would not agree to insurance programs that "steer" some patients to lower-cost
`hospitals, narrow coverage or tier health providers by cost.
`
`Sutter's systemwide contracts with the health insurers are anti-competitive, and its conduct has
`resulted in damages to the class of approximately $411 million, said the economist, who said she has
`also served as an expert witness for the antitrust division of the Department of Justice in health care
`cases.
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`Further, despite Sutter's assertions that its business practices have resulted in a higher quality
`product, Chipty said the evidence she's seen has not shown that the anti-competitive conduct
`involving its contracts is offset by any benefits.
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`That includes provisions in Sutter's contracts against steering, which insurers do to get customers to
`use lower-cost hospital services.
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`"It's my understanding that the anti-steering clauses prohibited health plans from incentivizing
`patients to use other hospitals," Chipty said.
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`Insurers have also complained that Sutter doesn't allow them to put its hospital services in a "tier"
`that would cost more to patients.
`
`Chipty noted that insurers had testified that even when Sutter consented to participate in products
`that had tiering "the other terms of Sutter's contracts interfered with the ability of these products to
`be commercially successful."
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`That included rates Sutter charged insurers if they wanted to exclude some hospitals from their
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`Sutter's Market Dominance Hiked Premiums $411M, Jury Told - Law360
`2/24/22, 8:27 AM
`Case 6:21-cv-00984-ADA Document 39-27 Filed 05/02/22 Page 3 of 3
`networks. Sutter would charge a high "non-participation" rate if one of the insurers' patient members
`landed in the out-of-network hospital for an emergency or other reasons.
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`"My understanding is that Sutter required higher out-of-network prices than those charged by other
`hospitals," Chipty said. "The testimony in this trial is that health plans have described these out of
`network prices as penalties."
`
`As a result, Sutter's price structure means that the lower-cost "narrow" and tiered network products
`insurers want to offer are going to be more expensive or less commercially successful because health
`plans will have to charge higher prices for them, the economist said.
`
`To arrive at her conclusions, the economist said she has spent thousands of hours — at a paid rate of
`$150 per hour — combing through claim records, medical bills, premium data, hospital information,
`memos, emails, documents and other materials.
`
`And work for the plaintiffs on the Sutter case over the last four years done by the firm Chipty is with,
`AlixPartners, and the consultancy it acquired in 2020, Matrix Economics, has run up a tab of $6.5
`million, the economist said.
`
`On Wednesday, jurors also heard from one of the lead plaintiffs in the case, David Herman, a retired
`San Francisco police officer who had spent over three decades in law enforcement.
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`He said that while he paid from $42 to $60 per month for his Blue Shield HMO, he discovered that
`taxpayers paid over $1,200 per month for his insurance coverage.
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`"It's astronomical," Herman said when asked why he agreed to be a class representative. "I would
`like to see the cost of medical insurance come down in Northern California for my adult children and
`their children and my grandchildren."
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`During opening statements on Feb. 10, a lawyer for the plaintiffs told jurors that the health care
`nonprofit had stifled competition and "gouged" millions of individuals and businesses with high prices
`because the class paid the artificially inflated insurance premiums.
`
`Sutter's lawyer told jurors during his opening that his client faces enormous competition in Northern
`California and thus does not hold the market power alleged — and required — for the class action's
`claims to succeed.
`
`On Tuesday, a Blue Shield executive testified that the hospital giant leveraged its dominant market
`position to force the insurer into costly contracts but also conceded that his company worried about
`unhappy clients moving to other insurers if it dumped Sutter.
`
`The trial is scheduled to continue on Thursday.
`
`The plaintiffs are represented by David Brownstein and David Goldstein of Farmer Brownstein Jaeger
`Goldstein Klein & Siegel LLP, Matthew L. Cantor and Jean Kim of Constantine Cannon LLP, Jill M.
`Manning of Pearson Simon & Warshaw LLP, Allan Steyer and Suneel Jain of Steyer Lowenthal
`Boodrookas Alvarez & Smith LLP and Azra Z. Mehdi of The Mehdi Firm PC.
`
`Sutter is represented by Robert H. Bunzel and Oliver Q. Dunlap of Bartko Zankel Bunzel & Miller and
`Jeffrey Alan LeVee and David Craig Kiernan of Jones Day.
`
`The case is Sidibe et al. v. Sutter Health, case number 3:12-cv-04854, in the U.S. District Court for
`the Northern District of California.
`
`--Additional reporting by Hannah Albarazi. Editing by Rich Mills.
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`All Content © 2003-2022, Portfolio Media, Inc.
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