Sutter Health Fraudulent Anesthesia Billing Lawsuit

Result: $46 million settlement

Year: 2013

In a case that received widespread media coverage, Lieff Cabraser represented whistleblower Rockville Recovery Associates in a qui tam suit for civil penalties under the California Insurance Frauds Prevention Act (“IFPA”), Cal. Insurance Code § 1871.7, against Sutter Health, one of California’s largest healthcare providers, and obtained the largest penalty ever imposed under the statute. The IFPA is designed to prevent fraud against insurers and, by extension, their policyholders by imposing civil penalties payable to the State for false claims submitted to private insurers.

The complaint alleged that the 26 Sutter hospitals throughout California submitted false, fraudulent, or misleading charges for anesthesia services (separate from the anesthesiologist’s fees) during operating room procedures that were already covered in the operating room bill.

After Lieff Cabraser defeated Sutter Health’s demurrer and motion to compel arbitration, California Insurance Commissioner Dave Jones intervened in the litigation in May 2011. Lieff Cabraser attorneys continued to serve as lead counsel and litigated the case for over two more years. In all, plaintiffs defeated no less than 10 dispositive motions, as well as three writ petitions to the Court of Appeals. Because the IFPA was a largely untested statute, just about every aspect of the statute had to be litigated. One important ruling, critical to future litigants, was that the IFPA requires a trial by jury.

The parties reached a $46 million settlement that was announced in November 2013, shortly before trial was scheduled to commence. This is the largest award ever under the IFPA, and per the statute, will fund additional anti-fraud efforts by the State.

In addition, Sutter Health agreed to a comprehensive series of billing and transparency reforms, which California Insurance Commissioner Dave Jones called “a groundbreaking step in opening up hospital billing to public scrutiny.” On the date the settlement was announced, the California Hospital Association recognized its significance by issuing a press release stating that the settlement “compels industry-wide review of anesthesia billing.”

Defendant Multiplan, Inc., a large leased network Preferred Provider Organization, separately paid a $925,000 civil penalty for its role in enabling Sutter’s alleged false billing scheme.

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