Becker's Hospital Review

21 CFO / FINANCE 8 things to know about Sutter Health's legal battles over prices By Kelly Gooch A n antitrust lawsuit against Sacramento, Calif.-based Sutter Health over prices could have a national effect, according to a Kaiser Health News report published by the LA Times. Here are eight things to know: 1. California Attorney General Xavier Becerra filed the lawsuit against Sutter earlier this spring following a yearslong investigation. e lawsuit alleges, among other things, that Sutter used its market power to control prices by keeping health insurers from providing more low-cost health plan options to patients and setting excessively high out-of-network prices. e lawsuit also alleges the health system impeded cost transpar- ency by restricting publication of provider cost information. 2. While the case involves Sutter, it could have a national effect with oth- er systems if California wins, according to Ge Bai, PhD, an assistant pro- fessor at Baltimore-based Johns Hopkins University who has researched U.S. hospital prices. He told KHN: "A major court ruling in California could be a deterrent to other hospital systems. We're getting to a tipping point where the nation cannot afford these out-of-control prices." 3. In addition to the lawsuit filed by Mr. Becerra, employers and consumers have also sued Sutter, accusing the 24-hospital nonprofit health system of anticompetitive behavior and charging inflated pric- es, according to the report. Both cases are ongoing in courts. 4. In California, there is also proposed legislation that would prohibit large health systems from using certain contracting practices, accord- ing to the report. 5. Sutter, for its part, is fighting back against Mr. Becerra's allegations. e health system denies anticompetitive behavior and alleges in court papers that Mr. Becerra's allegations are a "sweeping and unprecedent- ed effort to intrude into private contracting," according to KHN. e American Hospital Association and its California counterpart are backing Sutter. 6. Overall, Mr. Becerra hopes to force Sutter to negotiate reimburse- ments separately for each of its hospitals and tighten rules on sharing details of the negotiations across Sutter facilities, according to the report. 7. e lawsuits against Sutter come as the system reported $12 billion in annual revenue. In the past, Sutter has faced accusations from phy- sicians and consumers of trying to maximize revenue by eliminating hospital beds and critical services in rural areas, according to the re- port. However, Sutter said Northern California patients have a wide range of provider options and that it has kept its average health plan rate increases to less than 3 percent each year for the last six years, reported KHN. 8. According to the report, a San Francisco superior court judge is al- lowing Mr. Becerra's case to be consolidated with a separate class-ac- tion suit against Sutter — led by a health plan covering unionized gro- cery workers. A trial in the grocery workers' lawsuit is scheduled for next year. n Vanderbilt University Medical Center points to Epic rollout for 60% drop in operating income By Ayla Ellison N ashville, Tenn.-based Vanderbilt University Medical Center saw revenues increase in the first nine months of fiscal year 2018, but the hospital ended the period with lower operating in- come. Here are four things to know about the hospital's most recent financial results: 1. VUMC reported revenues of $3.04 billion in the nine months ended March 31, up from revenues of $2.85 billion in the same period of the year prior, according to recently released bondholder documents. The hos- pital said the financial boost was primarily attributable to higher net patient service revenue, which climbed 5 percent year over year. 2. The hospital's operating expenses increased 9 per- cent year over year to nearly $3 billion in the first nine months of the current fiscal year. The hospital's ex- penses related to salaries, wages and benefits, as well as drug and supplies costs, increased year over year. 3. "The increase in salaries, wages and benefits is pri- marily due to increased staffing to meet additional demand associated with higher net patient service revenue, research contracts, and training costs for staff related to our EMR system implementation," VUMC said. Higher consulting and management fees related to the Epic EMR implementation also caused the hos- pital's expenses to rise. 4. VUMC ended the first nine months of fiscal year 2018 with operating income of $44.4 million, down 60 percent from $110 million in the same period a year earlier. The decline was largely attributable to higher expenses related to the rollout of the new EMR system. The hospital said it had planned for future operating income reductions due to the implementation. "We successfully completed our EMR implementation in November and we anticipate the new system will yield future efficiencies," VUMC said. "However, in the year of implementation, increased operating expenses related to implementation caused a reduction in oper- ating income. The EMR implementation put pressure on clinical volumes in the post-live period. Although we have achieved net patient services revenue in ex- cess of our budget, the implementation has muted volumes." n

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