Here are a few points about the giant Sutter Health hospital chain that cannot be denied.

First, the completion of the landmark reached in December with the California Atty. General Xavier Becerra will hit him in the wallet, difficult, because the deal includes a $ 575 million financial penalty among other expensive features.

Second, the coronavirus crisis has destroyed Sutter’s bottom line – as do many hospitals and other health service chains.

Sutter is now trying to exploit the second point to damage the first. He has asked the judge who oversees the settlement to postpone the final approval of the agreement, hinting strongly that he wanted to rewrite the agreed key elements.

Becerra has answered, basically: There are no dice. “The plaintiff will not renegotiate the settlement agreement,” Deputy Atty. General Emilio Varanini told the San Francisco High Court Judge Anne-Christine Massullo at the May 29 hearing.

That is encouraging. The truth is that, although Sutter has no doubt caused a deep financial hit from coronavirus – he said interim financial statements lost nearly $ 1.1 billion in the first three months of this year due to revenue of $ 3.2 billion, and an additional operating loss of $ 360 million during April.

That said, the chain is still sitting in pants-full of money; as of December 30, he said in a financial statement, he had $ 6 billion in cash and liquid investments.

Sutter’s bad mouth provides an ideal opportunity to examine how coronaviruses have affected the finances of our leading hospital company.

This also allows us to review the antipompetitive behavior allegedly carried out by Sutter, which Becerra suggested underlies a huge hoard of money. Here is our bottom line: Becerra must not succumb to the settlement provisions, and Judge Massullo must approve it as stated.

Let’s start with the antitrust case.

Lawsuit 2018 Becerra alleged that Sutter Health, which consists of 24 hospitals and 34 operations centers in Northern California, had exploited its size for years
extract “price rises illegally” from insurance companies, entrepreneurs and patients. The lawsuit was built based on cases filed earlier by the Food and Commercial Workers Union.

Among the practices challenged, Becerra pointed to an “all or nothing” rule that Sutter began to apply in his contract with the health plan in 2002. Under this rule, Sutter would not allow any hospital to be excluded by the health plan. from their tissues, or even lowered to a lower level which allows patients to choose them at higher co-pays.

This poses a dilemma for payers, because many Sutter hospitals are “must-have” institutions for insurance companies or their clients, whether because they are highly valued by patients because of their reputation, or the only hospitals that are suitable in certain geographical areas.

But these restrictions prevent insurance companies or employers from directing patients to low-cost hospitals, either by placing high-cost institutions outside the network or charging higher additional fees.

Sutter said that insurance companies are free to remove their hospitals from their network on request. But the insurance company testified that Sutter put the conditions of the sentence as an exception so that the insurance company had no practical choice. The lawsuit further alleges that the chain imposed arbitration and confidentiality requirements in its contract which effectively maintained its confidentiality.

The whole arrangement, Becerra alleged, was a huge pricing scheme that “hurt the general economy of Northern California and thus the state.” The price of hospitalization at Sutter Health homes is as much as 70% higher than in the much more competitive Southern California area, he said.

That conclusion is supported by academic research and a finding by the Federal Trade Commission. Sutter may not be the only hospital provider in the region, but it does signal that other service providers are aiming for him. “These people set the price of an umbrella, and everyone floats,” Glenn Melnick, a health expert at USC, told me after Becerra filed a lawsuit.

Like expensive Becerra settlement was announced December 20 appeared for Sutter Health, it was something that was mutually beneficial. Becerra rightly described it as “historic,” given the magnitude of Sutter’s sentence and his agreement to stop the anti-competitive practices he suspected.

On the other hand, Sutter did not have to admit the accusation. That avoids the trial, where further details of his behavior may have been publicly displayed and that limits liability that may have grown to billions for only $ 575 million.

But the pandemic era came, Sutter has revealed what we call settler remorse.

The settlement agreement still requires the approval of Judge Massullo. The hospital company has asked it to postpone its almost unlimited trial and final decision – as much as 30 days after Governor Gavin Newsom declared an end to the pandemic emergency in California.

Spokesman Sutter Amy Thoma Tan said that the chain “did not object to any aspect of the settlement.” Instead, he told me by email, Sutter “asked to delay initial approval given the extreme disruption to the health care industry caused by COVID-19 and COVID-19’s potential to materially influence certain settlement requirements.”

Tan pointed me to “a very expensive and challenging effort” to adjust its operations to the post-coronavirus reality “which will significantly impact us in the coming years.”

All that is true, as far as it goes. But this is not the whole story.

Although Sutter has not explicitly proposed to cancel part of the settlement, he said June 12 court filing that “the financial and operational impacts of the pandemic can … lead to impractical or material impacts” of the agreement.

This includes limiting increases in off-network costs, which “may be too low to cover an unprecedented and unexpected increase in spending to respond to COVID-19.”

Sutter produced statistics showing that outpatient surgery cases dropped 73% in the period from March 17 to April 30, compared to six weeks before March 17. Emergency room visits dropped by 43%, bed days by 23% and clinical visits 60%.

Because the service produced a lot of Sutter’s bread and butter, the chain said it had been forced to close some facilities and reduce working hours for some non-emergency services, which resulted in the reassignment or reduction of hours for more than 5,000 employees.

Becerra’s office does not buy the argument that these conditions guarantee revision of the agreement. In their brief explanation of why Massullo must proceed and agreeing to the agreement, Varanini and Richard Grossman, a lawyer for trade unions, observed that while the COVID-19 crisis had changed the healthcare landscape, it had not changed “the need for commercial insurance companies and Sutter to negotiate agreements” or change “antitrust concerns that the basis “that motivates a lawsuit.

If the long-term conditions finally show that some of the conditions are too strict, it can be taken based on the provisions that allow for a revised settlement – later. Meanwhile, any delay allows Sutter to continue the behavior that allegedly raised prices in the first place.

As for Sutter’s financial suffering, his claim is worth observing.

To begin, there is no guarantee that the reduction in health care requests cited by Sutter will last long. The company recognizes that many of the reductions in business result from residential stay orders or health problems that keep patients from visiting hospitals and clinics for elective surgery or non-emergency care.

The end of the crisis might bring about a revival of these visits. Sutter has helped a lot in directing the crisis. He received more than $ 200 million in federal aid pandemic funds until mid-May, as well as a $ 1 billion federal advance in Medicare to deal with the pandemic hump.

The latter must be repaid, but the government has indicated that it will give hospitals up to one year to do so.

As for the $ 1.1 billion loss, around $ 500 million consisted of unrealized losses caused by a fall in the investment market earlier this year. But the market has returned strongly since its lowest point in late March – the Standard & Poor’s 500 index has gained 40% since the slump, and on Tuesday showed a loss for the year of less than 4%.

In such circumstances, Sutter Health does not have a business including investment losses in all of its financial claims.

Judge Massullo has set July 9 for a hearing about Sutter’s request to delay approval of the settlement. He may choose to do so because holding further hearings in the settlement itself may be complicated by ongoing emergencies.

But one would hope that he would carefully consider Sutter’s argument that the world had changed so drastically and permanently that parts of the agreement needed to be abolished – or whether it used the crisis as an excuse to break the agreement signed by only six people. last month.