ARI SHAPIRO, HOST:
Hospitals are merging into huge chains, and now some networks are so dominant in their regions that they can hike prices and force patients to waive the right to sue over billing and other disputes. That's happened in the San Francisco Bay Area.
Companies say one network there, Sutter Health, is using arbitration in a way that could force the companies to pay higher costs for employees' health care. From member station KQED, April Dembosky reports.
APRIL DEMBOSKY, BYLINE: Jennifer Chaloemtiarana is a lawyer for a tech company in San Francisco. She was sitting at her desk last spring when the company's benefits manager came in holding a letter.
JENNIFER CHALOEMTIARANA: He paused when he got it 'cause he thought it was a little unusual and walked it over to the legal department, which is how it ended up in my hands.
DEMBOSKY: The letter says that if the company has any disputes with Sutter Health, where a lot of its employees get care, it has to agree to arbitrate them. It can't sue. This is strange because the company doesn't actually have a direct relationship with Sutter. Everything goes through its insurance company which basically functions like the middleman. Still, if Chaloemtiarana's company, Castlight Health, doesn't sign the agreement, its employees will lose their discounted in-network rates for Sutter services.
CHALOEMTIARANA: So Castlight is faced with two choices, and I think in both choices, Castlight and our employees lose.
DEMBOSKY: Chaloemtiarana says even Sutter Health's discounted prices are high. Signing the agreement means Castlight can never challenge these prices in open court. And she says that only gives Sutter the power to raise prices more in the future. That hurts Castlight and its employees.
CHALOEMTIARANA: We want them over the long term to have choices in high-quality, low-cost providers.
DEMBOSKY: Dozens of other companies in northern California have received this letter. Chaloemtiarana says she's heard from many of them who don't know what to do.
CHALOEMTIARANA: Everyone's struggling with it. Nobody has signed it happily and thought that it was fine.
DEMBOSKY: The reason Sutter health is doing this is because it is right now being sued over its prices by a trust for grocery workers. That trust's attorney, Richard Grossman, is alleging that Sutter uses unfair business practices to reduce competition.
RICHARD GROSSMAN: And therefore they're free to raise prices without limit, and they have.
DEMBOSKY: Sutter Health denies these claims. It tried to get the grocery workers' trust to settle them in private arbitration. Sutter argued the arbitration agreement it had with the trust's insurer also applied to the trust itself. Grossman argued it didn't.
GROSSMAN: My client had never agreed to arbitration, had never seen a contract that included an arbitration clause. And so we opposed that. The judge agreed with us and said, Sutter, you cannot force them into arbitration.
DEMBOSKY: Grossman says that's why Sutter Health is now trying to get other companies like Castlight to agree to arbitration provisions. Remember; if they don't, their employees will have to pay higher out of network rates at Sutter hospitals and doctors' offices.
GROSSMAN: They want to force any disputes into confidential arbitration so their misdeeds cannot be exposed in a public courtroom as is our constitutional right.
DEMBOSKY: Bill Gleeson, Sutter Health's vice president of communications, says companies like Castlight, quote, "can't accept deep discounts and make up their own rules." Gleeson says Sutter's goal here is transparency.
BILL GLEESON: We've taken a very proactive, very transparent approach to making sure that the health plans provide these important clients of theirs with all the key terms of their agreements, and that includes rates.
DEMBOSKY: Jennifer Chaloemtiarana says she's going to try to negotiate, but she's not at all sure how things will turn out. For NPR News, I'm April Dembosky in San Francisco.
NPR transcripts are created on a rush deadline by Verb8tm, Inc., an NPR contractor, and produced using a proprietary transcription process developed with NPR. This text may not be in its final form and may be updated or revised in the future. Accuracy and availability may vary. The authoritative record of NPR’s programming is the audio record.