In the News

How a Hospital System Grew to Gain Market Power and Drove Up California Health Care Costs

60 Minutes

December 13, 2020

Sutter Health is in the midst of a lawsuit for business practices that drove up health care prices for Californians

The coronavirus pandemic has unleashed more than a flood of disease in this country. It’s also expected to accelerate a wave of hospital mergers and acquisitions – with big hospitals buying up smaller ones. This consolidation, economists say, is one of the main reasons the cost of health care in this country is going through the roof.

There’s a lawsuit over this in COVID-ravaged California, with the state attorney general claiming that Sutter Health, a hospital chain based in Sacramento, got so big it had essentially become a monopoly.

On the eve of the trial, Sutter tentatively agreed to a settlement that’s awaiting a judge’s approval. But this is, even at this stage, a landmark case because it pulled back the curtain on what has rarely been seen or so thoroughly documented before: how and why hospital prices have been skyrocketing.

Sutter is a sprawling health care system that’s the largest and most dominant provider in Northern California.

Xavier Becerra: They’re like the bully on the block. They were able to bully everyone else to conform; it was my way or the highway.

The state’s attorney general, Xavier Becerra, filed a civil lawsuit against Sutter in 2018. We interviewed him before the pandemic and before he was nominated for secretary of Health and Human Services.

Xavier Becerra: They were gobbling up hospitals. They were gobbling up physicians through these physician practices. They were just munching away, getting bigger and bigger.

Till they amassed a conglomerate of 24 hospitals, 12,000 physicians, and a string of cancer, cardiac and other health care centers.

Xavier Becerra: Sutter got big enough that it could use its market power to dominate, to dictate. It was abusing of its power.

The suit accuses Sutter of embarking on “…an intentional, and successful, strategy…” of cornering much of the market in Northern California, and then jacking up prices — for example, on the price of delivering a baby.

To accesses the complete story, watch the 60 Minutes broadcast.