Sutter Health announced Monday it's postponing the release of its third quarter financial results until the court allows it to share the terms of a recently announced settlement agreement in a high-profile antitrust lawsuit.
The not-for-profit health system last month reached a tentative settlement in a class action lawsuit in San Francisco Superior Court alleging anticompetitive contracting practices. In the notice on Monday, Sutter said it is bound by court-ordered confidentiality requirements and will delay the financial disclosure until the court allows it to share the terms of the settlement. Sutter wrote that it doesn't expect final approval on the settlement until summer 2020.
"While Sutter Health maintains its contracting practices were, and remain, in compliance with industry standards, it also believes the Settlement avoids a protracted trial and years of appeals, which would not be in the best interest of its patients," the Sacramento, Calif.-based system wrote in its notice.
A court hearing on a motion for preliminary approval of the settlement is scheduled for Feb. 25, 2020. Sutter spokeswoman Amy Thoma Tan wrote in an email that the health system will only continue to delay its financial disclosures until the terms of the settlement become public, which is at the discretion of the judge overseeing the case, Anne-Christine Massullo.
Sutter wrote in the statement there can be no assurance that the court will approve the settlement or that a final resolution won't have a material adverse effect on Sutter's future financial position or operating results.
"This says the settlement is material from a financial perspective," said Bill Horton, a partner with Jones Walker and co-chair of its healthcare industry team.
Publicly-traded companies would get in trouble with the U.S. Securities and Exchange Commission and likely sued by shareholders for not reporting regularly scheduled financial results, but that's not the case for a not-for-profit organization like Sutter, Horton said. That said, Sutter does have continuing disclosure agreements with bondholders, Horton said.
"If they don't disclose the amount, then the financial statements are materially misleading and therefore they're just not going to put the disclosure out there," Horton said. "I understand why they're doing it. They're sort of in between a rock and a hard place."
A spokesman for the San Francisco Superior Court, where the case is being litigated, did not immediately return a request for comment.
The class action lawsuit involves about 1,500 self-funded health plans. The plaintiffs allege that Sutter used its significant market power in Northern California to enforce all-or-nothing contracts with health insurers that drove up healthcare prices in the region. California's Attorney General filed a similar lawsuit last year that was combined with the original case.
Sutter drew almost $400 million in net income in the first quarter of 2019, which ended March 31, compared with $86 million in the prior-year period, according to Modern Healthcare's financial database. The health system collected $3.3 billion in revenue in the quarter, up 6% year-over-year.