Sutter Health settles anesthesiology billing lawsuit for $46M

California hospital operator Sutter Health has agreed to settle a four-year-old whistleblower lawsuit filed by an auditor over the way it billed for anesthesiology services, the San Francisco Business Times reported.

Sutter will pay $46 million to settle the litigation, with $26 million going to the auditing firm Rockvilel Recovery Associates and its attorneys, and another $20 million going into California's General Fund. The 28-hospital system also agreed to bill for anesthesiology services at a flat rate, as opposed to the hourly rate many hospitals in Golden State currently use.

Auditing firm Rockville Recovery Associates filed the suit in 2009, claiming that Sutter was essentially double-charging for anesthesiology administration, as those costs were already accounted for when Sutter charged patients for general surgery services. The California Department of Insurance joined the suit in 2011.

Sutter did not admit any wrongdoing and insisted in numerous statements that it broke no laws. Its billing practice "was, and still is, consistent with federal and state laws and regulations," Sutter Chief Executive Officer Patrick Fry told the Business Times.

But Sutter Vice President of Communications Bill Gleeson noted in a statement that "we made a tough decision--based on the best interests of our charitable assets--that the certainty and closure of a settlement was preferable to the significant human and financial resources associated with a lengthy trial."

The publication last March of a lengthy Time magazine article by journalist Steven Brill documenting widepsread hospital practices that encourage price opacity may have played a role in the settlement. California Insurance Commissioner Dave Jones referred to the article in a statement.

"This settlement represents a groundbreaking step in opening up hospital billing to public scrutiny," Jones said. "This new transparency should lead to lower prices and point the way to similar billing reforms for all types of hospital services."

To learn more:
- read the San Francisco Business Times article
- read the Sutter Health statement
- read the California Department of Insurance statement