Health Network Denies Claims of Major Overbilling

By Darrell Smith SACRAMENTO — Sutter Health routinely charged insurers for anesthesia services that never were performed and double-billed for services that were performed, the state’s insurance commissioner alleged Wednesday in joining a lawsuit against the Sacramento-based health network.

 “We believe the amount of the fraudulent charges is in the hundreds of millions of dollars, if not more,” Insurance Commissioner Dave Jones said.

Sutter Health released a statement flatly denying the allegations, saying it plans to “vigorously defend this matter,” and that the health network “is committed to compliant billing and charging practices.” Sutter has hospitals in the Sacramento area, Bay Area and Central Valley, including Memorial Medical Center of Modesto, Memorial Hospital of Los Banos and Sutter Tracy Community Hospital.

The insurance commissioner claims that the misconduct occurred at Sutter hospitals and surgical facilities throughout Northern California. Modesto-based Sutter Gould Medical Foundation is one of the numerous Sutter affiliates named as defendants in the complaint. Facilities operated by Sutter Gould include a surgery center in Stockton and the Briggsmore Specialty Clinic in Modesto.

The motion, known as a complaint in intervention, seeks damages including “profits unlawfully acquired” by Sutter and co-defendant Multiplan Inc. — an intermediary between health insurers and hospitals — as well as penalties under sections of the state’s Insurance Code.

With the complaint, the commissioner joins a 2009 lawsuit filed by health care auditor Rockville Recovery Associates Ltd. Rockville investigated billing practices at Sutter and other health systems at the request of Guardian Life Insurance of America.

False billing for anesthesia- related services was rampant in Sutter’s system, the commissioner’s motion claims. Payors included the state’s largest health plans, such as Aetna, Anthem Blue Cross and Blue Shield of California, and large employers, including Union Pacific Railroad.

Sutter charges as much as $5,000 for anesthesia services when it is entitled to no more than $250, according to the motion.

“These charges so far exceed actual costs that it is clear defendants are actually double-billing for costs captured in the anesthesiologist’s bill … or are simply billing for services not actually provided,” the commissioner’s complaint reads.

In the statement from Sutter, officials said the prices reflect the costs of complying with the state’s earthquake retrofit requirements, improving technology and caring for increasing numbers of patients who are unable to pay. “Our contracts with health insurance plans are thoroughly negotiated with these sophisticated companies,” the statement reads. “Since these rates are negotiated, they cannot be fairly characterized as false after the fact.”

The statement said plaintiffs in the lawsuit “have produced nothing to suggest that any bills submitted by any Sutter hospitals were false or fraudulent.”

In 2006, Sutter Health agreed to provide discounts and refunds to uninsured patients it was accused of overcharging, stemming from a 2004 class-action lawsuit.

According to the insurance commissioner’s motion, Sutter and intermediary Multiplan put provisions into its contracts preventing insurers from refusing to pay bills even if the insurers thought they were being wrongly charged.

But, according to the complaint, officials at Guardian Life were suspicious enough to call on Rockville, which investigated billings from Sutter Health and other health care providers for anesthesia services from 2002 to 2008.