PBGH Responds to AHA’s Statement on the Sutter Health Settlement

The Pacific Business Group on Health (PBGH) is deeply troubled by the misleading statement put out by the American Hospital Association (AHA)   in regard to settlement between Sutter Health System and the Attorney General of California.

Several claims in AHA’s statement on the settlement are dubious at best. The recent settlement will undoubtedly benefit patients and self-insured employers, who have been overcharged by the Sutter Health System for many years. Estimates indicate that Sutter Health overcharged for its services by more than 15 percent; resulting in higher premiums and cost-sharing paid by employers and their employees. For far too long, Sutter used its market power to force insurers and self-insured employers to include all Sutter hospitals in their health plans, regardless of the value and quality of care.

The settlement allows self-insured employers to offer the very best providers to their employees and families. This so-called “cherry-picking” protects patients from inefficient, high-priced, low-quality hospitals by identifying and utilizing the best quality, highest value hospitals. The ability to choose hospitals that provide high-quality, high-value care is exactly what Americans need and deserve.

It is unclear how the AHA thinks the settlement will remove incentives for health plans to work with hospitals to promote value-based care. Increased ability to reward high performing hospitals with additional volume will promote value-based care, not hinder it. Additionally, there is no evidence that the settlement will be detrimental to rural or vulnerable communities. This scare-tactic is frequently used by the hospital industry to fight off legitimate attempts to hold down health care costs.

Finally, the AHA statement is simply wrong when it says that the settlement will “increase the cost of health care.” Sutter will now have to compete fairly with other health systems based on price and quality, which will put pressure on Sutter to improve efficiency and reduce unnecessary and inappropriate services. Employers are ready to pay for high-value care in functional, competitive markets, and this settlement sends a message to the health care industry that employers will not allow anti-competitive practices to weaken markets any longer.