SAN FRANCISCO (CN) — Lawyers for 3 million Californians and their employers have depicted Sutter Health, Northern California’s largest hospital system, of strong-arming health insurers to accept unfair contract terms in a landmark antitrust trial currently unfolding in San Francisco federal court.
Sutter Health pushed back on those accusations Monday, with chief contracting officer Melissa Brendt testifying the health plans gave as good as they got during tough yearly negotiations over whether to include Sutter hospitals in their networks.
“We absolutely have a ton of back and forth. I've seen times when we've had 24 proposals back and forth. I can't think of a single proposal where we weren't negotiating prices until the bitter end,” Brendt testified.
She said that as the largest health insurers in California, Anthem Blue Cross and Blue Shield wield significant power in these negotiations.
"Anthem has $2 billion of our revenue. Without Anthem it would be difficult to survive. So obviously those negotiations are tougher,” Brendt said. “Blue Shield is the next largest. They’re big and they push back hard on everything they want.”
What they want, she said, are lower rates. “They get the largest discounts because they can drive the largest volume of patients to us,” she said.
Brendt testified that when its contract with Blue Shield lapsed in 2015, the health plan began sending Covered California patients notice that they would have to find new doctors.
As head of Sutter’s contracting team, Brendt said she worried about losing the Blue Shield contact, which “would devastate our ability to provide patient care in all the communities that we serve."
Sutter also fought for years to be included in the health plan for the California Public Employees' Retirement System (CalPERS), which is run by Blue Shield. She said Sutter was included for a time but no longer participates because Blue Shield demands such deep discounts.
“When we did ask a few times if we could get back in, but the discounts they were seeking to get back into the CalPERS product for Blue Shield were significant. We couldn't afford to work for that price point and sustain our mission."
Though not plaintiffs in the case, health insurers Anthem Blue Cross, Aetna, Health Net, Blue Shield and United Healthcare have all complained that Sutter’s contracts make it impossible for them to exclude Sutter from networks to lower costs, or at least move them into tiered health plans without Sutter’s consent. They are also prevented from using incentives to steer patients away from Sutter’s higher-cost hospitals.
The landmark antitrust case is being led by two small businesses and four people who claim they paid inflated health insurance premiums because Sutter Health forced insurers to accept anticompetitive “all or nothing” tying contracts. These systemwide contracts required them to accept all of Sutter’s hospitals in their networks, even in competitive markets where they could have otherwise chosen to work with cheaper care providers.
Brendt, whose testimony consumed all of Monday’s trial time, defended those contract provisions as a way to curb surprise bills for patients.
"It's us who hear from the patient about ‘why am I paying all this extra money,’” she said.
This became all the more concerning with the passage of the Affordable Care Act, when health insurers began offering more narrow networks to cut costs. Brendt said Sutter wanted to keep their hospitals and doctors in the same tier to avoid confusing patients. She said Sutter’s contracts didn’t prohibit tiering or narrow networks, but required that health plans notify them well in advance of such changes.
“The health plans hadn't done a great job of educating patients and their websites and provider directories were wrong,” Brendt said. “We experienced this with our Anthem product. Our physicians didn't participate and a lot of patients chose Anthem versus Blue Shield because they thought our doctors were in the network and we have many calls from patients who were angry with us because they thought they could still use us because they thought we were in network. A lot of patients were being billed for out-of-network cost shares and we were getting a lot of complaints about that.”