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Health Giant Sutter Destroys Evidence in Crucial Antitrust Case over High Prices

Kaiser Health News | Chad Terhune | Nov. 17, 2017

Sutter Health intentionally destroyed 192 boxes of documents that employers and labor unions were seeking in a lawsuit that accuses the giant Northern California health system of abusing its market power and charging inflated prices, according to a state judge.

In a ruling this week, San Francisco County Superior Court Judge Curtis E.A. Karnow said Sutter destroyed documents “knowing that the evidence was relevant to antitrust issues. … There is no good explanation for the specific and unusual destruction here.”

Karnow cited an internal email by a Sutter employee who said she was “running and hiding” after ordering the records destroyed in 2015. “The most generous interpretation to Sutter is that it was grossly reckless,” the judge wrote in his 12-page ruling.

This Kaiser Health News story can be republished for free (details).

Sutter, which has 24 hospitals and nearly $12 billion in annual revenue, said the destruction was a regrettable mistake.

Employers and policymakers across the country are closely watching this legal fight amid growing concern about the financial implications of industry consolidation. Large health systems are gaining market clout and the ability to raise prices by acquiring more hospitals, outpatient surgery centers and physician offices.

“It’s stunning what Sutter did to cover up incriminating documents in this case,” said Richard Grossman, the lead plaintiffs’ lawyer representing a class of more than 1,500 employer-funded health plans.

In April 2014, a grocery workers’ health plan sued Sutter and alleged it was violating antitrust and unfair competition laws. The plaintiffs began requesting documents related to contracting practices, such as “gag clauses” that prevent patients from seeing negotiated rates and choosing a cheaper provider and “all-or-nothing” terms that require every facility in a health system to be included in insurance networks.

Sutter disputes the more here.

California healthcare providers call off vertical merger amid rising scrutiny

Modern Healthcare | Alex Kacik  | May 12, 2017

Santa Barbara, Calif.-based healthcare providers Cottage Health and Sansum Clinic called off their proposed merger after fighting regulatoryconcerns for years, signaling regulators' increasingly critical stance on vertical integrations. 

The nonprofit healthcare providers announced their plans to merge in 2013, aiming to join Cottage Health's three-hospital system with Sansum's 23 ambulatory clinics and the only medical foundation in the region. 

Cottage, which operates the only hospitals in south Santa Barbara County and the Santa Ynez Valley, sold off an ambulatory surgery center to alleviate the Federal Trade Commission's concerns over the deal. But it was evidently not enough. 

"While we are disappointed that we are unable to move forward with a formal affiliation after years of working with the FTC toward this goal, together we are committed to ongoing collaborations and partnerships to improve the health of our community," Cottage Health president and CEO Ron Werft and Sansum Clinic CEO and chief medical officer Dr. Kurt Ransohoff said in a statement. 

The systems' executives said they could better control costs by consolidating administrative services and integrating care, translating to lower healthcare costs overall. Critics were concerned that the merger would increase the clout of the providers in an already concentrated market and lead to higher healthcare costs. 

A handful of other mergers, including the one proposed by Advocate Health Care and NorthShore University HealthSystem in the Chicago area, have been recently challenged by antitrust regulators who say consolidation has led to higher healthcare costs and lower quality of care.
Earlier this month, a federal court approved the divestiture of Saltzer Medical Group from Idaho-based St. Luke's Health System. The merger of the nonprofit providers, initially approved in 2012, combined the six-hospital St. Luke's with the 44-physician Saltzer Medical. 

The FTC filed a complaint in 2013 that claimed it would've left the combined provider with about 60% market share of primary care physicians in Nampa, Idaho, the state's second largest city. 

"The combination of St. Luke's and Saltzer would have given the merged hospital system the market power to demand higher rates for healthcare services, ultimately leading to higher costs for both employers and consumers," then-FTC chairwoman Edith Ramirez said in a Jan. 2014 statement.

One of the most important recent trends in U.S. healthcare is hospital acquisition of physician practices, according to a 2015 Northwestern University study.

The Northwestern-led study found that physician prices increase nearly 14% post-integration and about a quarter of the increase can be attributed to the exploitation of contracting provisions that allow billing of services at generally higher hospital rates.

Vertical acquisitions can deliver good outcomes at an effective cost, but they can also lead to more "inappropriate referrals" and increased bargaining power, which could all drive up cost, research shows.

"The more important question is how the FTC should address certain vertical acquisitions and other troublesome conduct by current monopolists," Duke University law professor Barak Richman said in a Q&A with the Association of Health Care Journalists. "This is important because the current policy challenge is not just how to stop additional mergers, but also how to police the monopolies that past merger waves created. Antitrust law is less suited to deal with these challenges."

Without effective competition, hospitals can secure higher price concessions in their negotiations with insurers, according to a white paper by the Center for Health Policy at the Brookings Institution and Carnegie Mellon University's Heinz College published last month. Hospitals with fewer than four local competitors are estimated to have prices nearly 16% higher on average—a difference of nearly $2,000 per admission, researchers found.

Prices across the U.S. healthcare industry are high and vary in seemingly incoherent ways, yet quality of care is uneven while the industry lacks the innovation seen in other sectors of the economy, researchers said. 

"The dearth of competition in our healthcare markets is the key reason for this dysfunction," the paper reads.

CA Doctors' Voice Heard on Capitol Hill

AID Executive Director Marni Jameson Carey met with U.S. Senator Dianne Feinstein's aides Pete Curran and Megan Thompson in March to discuss the four-key health-care moves that would not only be good for California's doctors, but that would also greatly reduce health-care costs and improve access. AID’s message: Stop consolidation, increase transparency on health-care costs, eliminate facility fees, and stop nonprofit hospitals from abusing their tax-exempt status. These four moves would save hundreds of billions of dollars nationwide, and be healthy for independent doctors.

Long Beach hospitals lay off 130 employees amid financial challenges

Becker's Hospital Review | Kelly Gooch | January 27, 2017 

Long Beach (Calif.) Memorial and its two sister hospitals in Long Beach laid off 130 employees, or less than 3 percent of staffing, according to a hospital statement.

The hospitals attributed the layoffs to financial challenges brought on by today's healthcare environment.

"Like many hospitals in California and nationwide, we are experiencing much higher costs, decreasing reimbursement and increasing numbers of government-sponsored patients. Although the decision to rebalance a workforce is never an easy one, managing our resources prudently will allow us to be well positioned to serve our community into the future," John Bishop, CEO of Long Beach Memorial, Miller Children’s & Women’s Hospital and Community Hospital Long Beach, said in a statement.

Mr. Bishop said affected employees, who primarily work in nonclinical roles, are being offered career transition services and the opportunity to apply for open positions within the organization.

California Leadership

Thomas LaGrelius, MD

National News......

In one new Oklahoma City surgical center prices are 1/6 to 1/10 the amount charged by hospitals. Everyone pays the same price for the same procedure. Total charges are often less “than the deductibles on the Obamacare plans.” Patients are not asked: “What insurance do you have?” Real life evidence that “legitimate” pricing is the cure for a sick healthcare system. Please share and help to more here.

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