People of the State of California v. Sutter Health: A New Antitrust Approach?

People of the State of California v. Sutter Health: A New Antitrust Approach?

By Phillip E. Stephan

In March 2018, Attorney General Xavier Becerra brought a civil antitrust action on behalf of the People of the State of California, targeting Sutter Health with allegations that Sutter’s behavior had, in the words of the Attorney General, reached “a point where you’re starting to show signs of a bully.” Relying on several studies, Mr. Becerra alleges a vast difference in healthcare premiums in Northern California versus Southern California, ultimately arguing that “[m]uch of the increased cost of healthcare in Northern California is attributable to Sutter and its anticompetitive practices which it has imposed as a result of its market power.” Mr. Becerra’s case is not the only action addressing Sutter’s practices, as a case was also initiated in 2014 by self-funded union trusts and employers, entities that pay for the healthcare of their workers. Typically, the charge of antitrust enforcement is borne by the U.S. Department of Justice or the Federal Trade Commission.

These cases will directly address the issue of the impact of acquisitions of physician groups – acquisitions which typically don’t face competitive scrutiny, but which may have a tremendous impact on the ability of a healthcare provider to charge certain prices and achieve market power as consumers surely assess the quality of their potential healthcare providers. California’s Sutter Health case has been called “a landmark case” by Jaime King, a law professor at U.C. Hastings College of the Law. Professor King’s biography notes that her research “examines some of the most complex challenges facing the U.S. healthcare system,” focusing on the drivers of healthcare costs with a special interest in market consolidation and efforts to improve transparency in healthcare pricing.

Sutter Health will face a court trial over these accusations and vigorously denies the accusations. The burgeoning cost of healthcare has been alleged to be the product of increasing consolidation. The trial might arguably be a microcosm of a larger national discussion regarding the costs of healthcare, the impact on customers, and the impact on competition in the healthcare system.

*This article appeared in the October 2019, San Diego County Bar Association Business & Corporate Articles Section.

Phillip Stephan is an associate at Neil Dymott. He is experienced in litigation and business transactions with entrepreneurs and established companies. 

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