Sutter Health Wants To Delay A Settlement Payment Due To COVID-19, But Experts Say Large Health Systems Have Plenty Of Reserves

California’s attorney general is waiting for Sutter Health to pay $575 million to the state.

The hospital system owes a settlement payment after coming to a tentative agreement on an antitrust suit in December. Xavier Becerra, the state’s top attorney, accused Sutter of price-gouging patients, over-paying executives and hiding information about the cost of care.

Sutter denied wrongdoing in the case. And recently, they asked to delay the scheduled date for finalizing the settlement, citing COVID-19-related revenue loss. Payment is due 10 days after the terms of the settlement are finalized. 

“Adjusting our entire integrated network to respond to COVID-19 has been an incredibly costly and difficult endeavor that will significantly impact us for years to come,” a statement issued by Sutter reads.

But Becerra opposed Sutter’s motion, and a San Francisco Superior Court judge tentatively denied their request last week, garnering approval from advocacy groups.

Some health experts say hospital giants such as Sutter have more than enough cash on reserve to handle the revenue loss that’s resulted from preparing for a COVID-19 surge, and that the pandemic should not be used to justify avoiding payments or raising consumer prices.

The terms of the settlement require Sutter to follow certain practices to restore competition in California’s healthcare markets, such as increasing price transparency and ending “all or nothing” contracting deals, which require a company to work with every hospital in a provider's system or none of them.

Until the agreement is finalized, University of Southern California health economist Glenn Melnick says Sutter can continue business as usual. 

“Basically they’re saying ‘we want to use the losses to justify keeping our market power to charge above-market prices’, and that to me doesn’t seem to be in the best interest of consumers,” he said.  

UC Berkeley health care experts have been looking at how much of a blow the COVID-19 pandemic will actually deal to hospital budgets, especially in the state’s largest hospital systems. 

They looked at how many days of cash and investment securities California’s 11 largest hospital systems have on hand for financial downturns. Sutter Health has 150 days of cushion, according to the report, while Adventist Health has the most at 579 days. 

The authors suggested the federal government should distribute CARES aid more equitably, with more funding for hospitals that treat a high number of Medi-Cal patients and less for those that take mostly privately insured patients. 

But Sutter says the study inaccurately represents their financial situation.

“While we are fortunate to have reserves, we cannot respond to the COVID-19 pandemic based on our reserves alone which is why we are grateful to receive funds from the CARES Act,” Sutter’s statement reads. 

The California Hospital Association is also taking issue with the study. President Carmela Coyle said the dollars included in the “days cash on hand” totals are often already needed for paying off debts. 

“The suggestion that days cash on hand and investments are liquid assets available for hospitals to use to provide care is terribly misleading,” she said. 

Coyle also noted that hospitals need the federal aid to prepare for future surges of COVID-19 patients. The organization estimates California hospitals will lose $15 billion in revenue in 2020.

But California hospital system Kaiser Permanente says it declined all but $12 million of the $500 million in CARES funding it was eligible for, and instead turned to cost-saving measures such as pausing hiring and cutting discretionary expenses. 

“As a result, we have been able to withstand the financial hardship posed by the pandemic to date,” reads a statement from the system.

Melnick, the USC health finance researcher, said COVID-19’s effect on hospital budgets could eventually trickle down to consumers, but large health systems should be taking measures to shield patients from that blow. 

“If it turns out that all hospitals, because of these losses, need to raise their prices next year, then that’s a market-level response,” he said. “Sutter should be required to play in that same game under the same rules.”

A bill proposed in the legislature could give California’s attorney general more oversight of anti-competitive practices in the health care system.

Editor's Note: Sutter Health is a major donor to CapRadio.