Sutter to Pay $46 Million to Settle California Anesthesia Lawsuit

One of California’s largest hospital systems has agreed to pay $46 million and reveal its profit margins on anesthesia services in order to settle a lawsuit with the state insurance commissioner over inflated hospital bills. It was alleged that its method for billing for anesthesia services was false and misleading.

Sutter Health’s decision to settle the suit came just as the trial was scheduled to start. The agreement stems from a lawsuit, which was originally filed in 2009. In addition to paying the fine, Sutter has agreed to make historic changes to its billing procedures. Those changes include billing for anesthesia on a flat-fee basis, rather than on time and more clearly disclosing its anesthesia charges and services to its patients, insurers and other payers.

An auditing firm filed the 2009 whistle-blower lawsuit in Sacramento Superior Court after concluding that Sutter’s two dozen hospitals in Northern California were regularly submitting false or misleading bills for anesthesia.

The auditing firm, Rockville Recovery Associates, said Sutter hospitals were charging patients for services provided by employees who were not actually present for the procedures by adding a billing code, “37x Anesthesia,” on top of operating-room charges. Rockville also said Sutter officials negotiated contract terms that prevented payers from analyzing and contesting such charges.

Hospital officials testified in pretrial depositions that they had three to four anesthesia technicians to cover as many as 15 anesthetizing locations, and that the workers didn’t keep track of how much time they spent with each patient. Sutter employees also testified that they knew “37x” codes were intended only for when hospital staff was present, and that the code was not used in other contexts when staff was not present.

Sacramento-based Sutter Health officials claimed that the chain had followed the appropriate billing regulations and protocols.

As part of the settlement, healthcare-network consulting firm MultiPlan, Inc. and Private Health Care Systems, Inc. (PHCS) is paying $925,000 to settle allegations that the audit policy it negotiated with Sutter prevented payers from challenging the inflated anesthesia bills. Sutter and MultiPlan/PHCS did not admit wrongdoing.

For more information contact one of our Gacovino Lake attorneys at 1-800-246-HURT (4878).

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