California Judge Orders Partial Summary Judgment to Sutter Health in Antitrust Case

Magistrate Judge Laurel Beeler of the Northern District of California on Tuesday partially granted summary judgment to medical care provider Sutter Health, the defendant in a class-action that began in 2012. The suit claimed that Sutter has engaged in anticompetitive practices through contracts with health plans that allegedly unfairly raise prices for those insured.

The named plaintiffs, including four individuals insured under health plans in network with Sutter hospitals and two companies that paid for health insurance for employees, originally alleged in their complaint that Sutter violated the Sherman Antitrust Act, California’s Cartwright Act, and California’s Unfair Competition Law through controlling certain Northern California inpatient services markets.

“The plaintiffs challenge contract terms — such as high rates for out-of-network Sutter services in the Tied Markets and the inability to change Sutter’s status as a preferred provider without Sutter’s permission — as anticompetitive because the terms allegedly prevented health plans from steering their enrollees away from high-cost Sutter hospitals to lower-priced providers,” the plaintiffs argued. “As a result, the plaintiffs allege, health-plan enrollees (including the plaintiffs) pay higher premiums.”

Moving for summary judgment, the defendant argued that its contracts with health plans did not force any purchase of its services and that it, in fact, gave discounts to the health plans for including Sutter hospitals in their networks, the court explained.

“That in-network status, it contends, justifies the lower rates because health plans incentivize members to choose in-network hospitals by paying most or all in-network expenses (and few or no out-of-network expenses),” the court explained. “Volume discounting, Sutter asserts, is not anticompetitive conduct, and the contract terms protected the benefit of the bargain.”

The defendant also contended that the plaintiffs could not show that it willfully monopolized the markets in question or that a “dangerous probability of monopolization” exists, the court said. Sutter also argued that the plaintiffs did not sufficiently illustrate damages for class members.

The court could find no disputes of material fact — the necessary burden to meet for summary judgment — on the Sherman Act § 2 monopolization claims. However, noting that disputed facts remain in the Sherman Act § 1 and Cartwright Act claims, the judge said these preclude summary judgment.

The plaintiffs are represented by The Mehdi Firm PC, Constantine Cannon LLP, Steyer Lowenthal Boodrookas Alvarez & Smith LLP, Farmer Brownstein Jaeger & Goldstein LLP, Keller Grover LLP, Schneider Wallace Cottrell Konecky Wotkyns LLP, and Crowell & Moring LLP. Sutter is represented by Jones Day, Bartko Zankel Bunzel & Miller, and King & Spalding LLP.