California Insurance Commissioner Announces Settlement with Sutter Hospitals Over False Claims Allegations


Insurance Commissioner Dave Jones announced yesterday that Sutter Health, which operates over 20 hospitals in northern California, agreed to pay $46 million and change its billing and disclosure of anesthesia charges and services to its patients, insurers and other payers. These changes require Sutter to: (1) stop billing for anesthesia in the operating room on a chronometric basis and instead charge on a fully disclosed flat-fee basis; (2) describe every component of its anesthesia billing; (3) post on its website and provide to insurers and the commissioner the cost to each Sutter hospital of its anesthesia services, updated annually; and (4) clarify the relationship between its master schedule of charges (known as chargemasters in the health care industry) and the bills that consumers and insurers receive.

The settlement resolves a qui tam lawsuit brought by a billing auditor alleging that Sutter’s billing practices violated California’s Insurance Fraud’s Prevention Act (IFPA), California Insurance Code section 1871 et seq., which prohibits the preparation and/or submission of false claims for payment to insurers. Specifically, the relator alleged that Sutter included false and misleading charges in its surgery bills. The relator also alleged IFPA violations against MultiPlan, Inc. and Private Healthcare Systems, Inc. ("PHCS"), whose provider contracts with Sutter allegedly unduly restricted payers' ability to challenge Sutter's charges. The commissioner intervened in the lawsuit in April 2011. The settlement proceeds will be divided between the relator and the state of California. In addition, MultiPlan and PHCS agreed to pay $925,000 and to continue to provide notification to payers about their audit rights.  The commissioner’s press release discussing the settlement is available here.


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