Introduction
People of California v. Sutter Health is an example of a recent court case regarding a regulatory problem related to institutional healthcare in the United States. The California Attorney General’s office filed this lawsuit in 2018 (Scarcella, 2022). Sutter Health, one of the major hospital systems in Northern California, was accused of engaging in anticompetitive conduct that increased healthcare prices for patients and payers. In particular, the state attorney general said that Sutter utilized its market dominance to compel health plans and employers to adhere to contract conditions that included increased service fees and restricted them from referring patients to lower-cost providers. The State petitioned the court to compel Sutter to alter its business operations and sought monetary sanctions and reparations. Sutter refuted the charges and maintained that its actions were lawful and enhanced patient care quality and coordination (Scarcella, 2022). The verdict was rendered in 2022, with the jury siding with Sutter Health and awarding $411 million in damages (Scarcella, 2022). Therefore, this paper analyzes this case in line with its overarching regulatory issue.
Definition of Law Involved and Reason for Creation
On the one hand, the Sherman Antitrust Act of 1890 pertains to the regulatory problem of anti-competition in the healthcare business. The Sherman Antitrust Act is a federal statute that outlaws monopolies and monopoly attempts. Additionally, it aims to discourage other anticompetitive corporate activities. In reaction to the increasing concentration of economic power in the hands of a few massive firms in the late 19th century, notably in sectors such as railways and oil, the legislation was enacted in 1890 (CFI Team, 2023). The purpose of the Act was to safeguard consumers and small companies by encouraging fair competition and free markets, preventing trusts and monopolies from controlling pricing, and restricting customer options. In the healthcare industry, the Federal Trade Commission and Department of Justice have utilized the Sherman Act to investigate and challenge mergers and acquisitions that would create or strengthen a dominant market position, as well as contracts and other agreements that prevent competition among providers (CFI Team, 2023). The statute also had a part in California v. Sutter Health, which is based on the State’s anticompetitive accusations.
Similarly, the California Health and Safety Code sections 1280-1294.6, sometimes known as the California Corporate Practice of Medicine Prohibition, pertain to the regulatory problem (CPMP). The CPMP was established to ban corporations, partnerships, and limited liability firms, which doctors do not control, from influencing or interfering with the professional judgment of physicians (Cicka, 2019). The legislation was intended to safeguard the health and safety of patients by prohibiting non-physician-owned organizations from financially pressuring doctors to offer unnecessary treatments and procedures or restrict access to care to increase profits. It forbids non-physician-owned organizations from hiring doctors, compensating them for referrals or other services, or regulating their professional judgments in any other way. In addition, the legislation prevents doctors from becoming employees or partners of non-physician-owned enterprises or enabling these organizations to interfere with their medical judgment.
Impact
Various impacts are evident from the case in line with the regulatory issue. Primarily, anti-competition rules in the healthcare business may cut consumer healthcare costs. Besides, it helps keep prices low for people and families. Competition between healthcare providers and enterprises also boosts treatment and technology innovation. However, strict rules might limit consumer access to treatment by making it difficult for providers to expand their practice and create additional locations (Strumann et al., 2022). Furthermore, the issue may hinder small and new enterprises from entering the market, limiting competition and innovation. These laws may cost healthcare providers and corporations to enact and manage, leading to a lack of competition and reducing market efficiency.
Conclusion
California v. Sutter Health demonstrates the significance of resolving anticompetitive regulatory concerns in the healthcare business. It shows how state and federal regulations may be used to maintain fair competition and prevent monopolies from manipulating pricing and restricting customer options. This case also highlights the need for continued regulatory scrutiny in healthcare to maintain fair competition, safeguard patients, and avoid anticompetitive conduct.
References
CFI Team. (2023). Sherman Antitrust Act. Corporate Finance Institute. Web.
Cicka, M. P. (2019). Addressing the prohibition on the corporate practice of Medicine. HomeCare Magazine. Web.
Scarcella, M. (2022). Jury finds for Sutter Health in California antitrust trial. Reuters. Web.
Strumann, C., Geissler, A., Busse, R., & Pross, C. (2022). Can competition improve hospital quality of care? A difference-in-differences approach to evaluate the effect of increasing quality transparency on hospital quality. The European Journal of Health Economics, 23(7), 1229–1242. Web.