Sidibe v. Sutter Health

Background

This certified class action challenged Sutter Health’s alleged anticompetitive contracting practices. The plaintiffs—four people who paid for health insurance and two companies that paid for employee health insurance—asserted claims under Section 1 of the federal Sherman Act, Section 2 of the Sherman Act, California’s Cartwright Act, and California’s Unfair Competition Law.

The plaintiffs alleged that Sutter used market power in seven Northern California markets where it was the only or dominant hospital—the “Tying Markets”—to require health plans to include Sutter inpatient services in four other markets where Sutter faced competition—the “Tied Markets.” According to the plaintiffs, Sutter’s systemwide contracts included high rates for out-of-network services, restrictions on changing Sutter hospitals’ network status or placing them in less-preferred tiers, and confidentiality provisions concerning price and quality. The plaintiffs alleged that these provisions prevented insurers from steering enrollees toward lower-priced hospitals and contributed to higher premiums.

Sutter moved for summary judgment, which asks the court to rule without a trial when no genuine dispute of material fact exists and the moving party is entitled to judgment as a matter of law. Sutter argued that its contracts did not unlawfully condition access to one service on purchasing another, that volume discounts were not anticompetitive, that the plaintiffs lacked evidence supporting the Sherman Act Section 2 claims, and that the plaintiffs had not shown class-wide damages for 2008 through 2010.

Analysis

The court had previously granted the plaintiffs’ unopposed motion for partial summary judgment on the “distinct products” element of their tying claims. It held that inpatient hospital services at Sutter’s tying hospitals and inpatient hospital services at Sutter’s tied hospitals were distinct products under the Sherman and Cartwright Acts.

The court denied summary judgment on the Sherman Act Section 1 tying claims and the related Cartwright Act claims. It found disputes about whether Sutter’s systemwide contracts merely set prices or instead forced health plans to accept higher prices in the Tied Markets. The court also identified evidence concerning the 95-percent nonparticipating-provider rates, limits on tiering and changes to network status, Sutter’s responses to insurers’ efforts to create lower-cost networks, and the insurers’ objections to and eventual acceptance of the provisions. Those factual disputes prevented judgment without a trial.

The court likewise denied summary judgment on the Sherman Act Section 1 and Cartwright Act course-of-conduct claims. Those claims relied on the same systemwide contracts and terms involving nonparticipating-provider rates, tiering restrictions, and confidentiality. The court concluded that the factual disputes identified in its tying-claim analysis also prevented summary judgment on these claims.

The court granted summary judgment on the Sherman Act Section 2 monopolization and attempted-monopolization claims. For the monopolization claim, the court held that the plaintiffs had not produced evidence creating a genuine factual dispute about whether Sutter willfully acquired or maintained monopoly power. The court noted that the plaintiffs had not produced such evidence for six of the seven Tying Markets. Although the court found material disputes about whether Sutter had monopoly power in some markets, that issue did not overcome the lack of evidence concerning willful maintenance of that power.

For attempted monopolization, the court held that the plaintiffs had not produced evidence showing a dangerous probability that Sutter would achieve monopoly power in the Tied Markets. The court said that higher prices alone did not establish that probability and that the plaintiffs’ evidence did not show Sutter’s position in those markets over time. The court also noted that market-share evidence showed no increase or a decrease in some markets. The court rejected summary judgment on certain market-share grounds because relevant-market definitions generally present jury questions, but it still granted summary judgment on the attempted-monopolization claim for lack of evidence of a dangerous probability of monopolization.

The court granted summary judgment for Sutter on the claims covering 2008 through 2010 because the plaintiffs had not provided competent evidence from which a jury could estimate damages, meaning they had not established injury for that period.

Disposition

The court denied summary judgment on the Sherman Act Section 1 and Cartwright Act claims. It granted summary judgment on the Sherman Act Section 2 claims and the 2008–2010 claims. The Unfair Competition Law claim survived to the extent that the underlying claims survived. Judge Laurel Beeler stated that the order disposed of Sutter’s motion.