Sutter Health accused of overcharging
By Rebecca Vesely, STAFF WRITER, Oakland Tribune
Article Last Updated: Thursday, July 01, 2004 - 3:43:15 AM PST

An uninsured Berkeley man is the lead plaintiff in a class-action lawsuit filed Wednesday against Sutter Health that alleges the hospital system overcharges the uninsured.

The suit contends that nonprofit Sutter Health, with hospitals across Northern California, has breached its obligation to provide charitable care to the uninsured -- a condition of its tax-exempt status.

The complaint also alleges that Sutter Health aggressively pursues uninsured patients to collect fees, such as taking legal action that results in garnished wages and bankruptcies.

Duane Darr, 48, the lead

plaintiff, was taken by ambulance to Alta Bates Summit Medical Center in Berkeley on May 17 after slipping at a local grocery store.

Over several hours, Darr had blood tests, a hip X-ray and an electrocardiogram. He was also given a prescription. He was released from the hospital the same day and did not need follow-up treatment. He was billed $4,599.10 for the care he received, the lawsuit says.

"The hospital charges ... represent excessive and unreasonable rates, and violate Sutter's obligations to operate as a charitable institution," the lawsuit states. The suit was filed in federal court in San Francisco.

Bill Gleeson, spokesman for Sacramento-based Sutter Health, said the lawsuit has "glaring errors in fact."

The suit alleges Sutter Health engages in "discriminatory pricing practices" against the uninsured by requiring them to pay top dollar for treatment.

These gross prices are listed on spreadsheets called chargemasters, and are typically used as a starting point in negotiations over fees in much the same way the sticker price of a car is the initial bargaining point at an auto dealership.

The chargemaster prices are typically negotiated downward to reasonable reimbursement rates for private insurers and public programs such as Medi-Cal and Medicare, according to the suit.

Not so for uninsured patients of Sutter hospitals, who are billed the full sticker price, which can be 80 percent higher than the industry standard, according to the suit.

"That's just completely false," Gleeson said. "Sutter's prices are, on average, right in line with other prices."

In June, CalPERS, the largest health care purchaser in the state, approved a plan to drop Sutter hospitals from its Blue Shield HMO, citing inflated hospital costs.

The suit also alleges that Sutter spent only 0.6 percent of 2002 revenues on charity care. The state average for private hospital charity care is 1 percent. Gleeson said Sutter's contributions to community health clinics are not included in that figure, and he also pointed to the hospital's charity care policy that provides discounts to patients who earn less than 400 percent of the federal poverty level for a family of four.

In 2003, Sutter reported total patient service revenues of $4.5 billion and profits of $465 million.

The class-action suit against Sutter is the 19th filed nationwide since June 17 against nonprofit hospitals and hospital systems in 12 states for overcharging the uninsured. It is the first such suit filed in California against a nonprofit hospital system.

Kelly Dermody, a partner at San Francisco law firm Lieff, Cabraser, Heimann and Bernstein, which brought the suit, said there are as many as "tens of thousands" of patients who have been subject to unfair charges and collection practices by Sutter Health.

"Over the past few years, many of these hospitals have been much more aggressive in collections process, and now folks are finding lawyers," Dermody said.

Sutter Health hospitals in the Bay Area include Alta Bates Summit, Eden Medical Center in Castro Valley, Mills-Peninsula in Burlingame, California Pacific Medical Center in San Francisco and Sutter Tracy.

Service Employees Union International 250, representing hospital workers, this spring issued a report outlining unfair pricing and collection practices. The union is in a contract dispute with Alta Bates Summit Medical Center and Eden Medical Center, and is seeking a master contract with all Sutter hospitals.

Also in May, the San Francisco Board of Supervisors unanimously voted to condemn Sutter's charity care business practices.

Contact Rebecca Vesely at rvesely@angnewspapers.com.