California Attorney General Xavier Becerra testifies in Washington in September. Photo: Diego M. Radzinschi/ ALM

The largest health care system in Northern California has agreed to pay $575 million to settle claims that it used its market power to artificially inflate health care prices in the Bay Area and the Sacramento Valley, Attorney General Xavier Becerra said Friday.

Sutter Health will make the payment to employers, unions and others covered under the class action and to attorneys working on the case. The Sacramento-based health care company will also limit what it charges for out-of-network services, increase price transparency and cooperate with a court-appointed monitor over the next decade, according to terms of the settlement filed in San Francisco Superior Court.

"This first-in-the-nation comprehensive settlement should send a clear message to the markets: if you're looking to consolidate for any reason other than efficiency that delivers better quality for a lower price, think again," Becerra said in a prepared statement.

Becerra was joined in the suit by the United Food and Compmercial Workers International Union, the Employers Benefit Trust and individual plaintiffs. In addition to the attorney general's office, the plaintiffs were represented by lawyers from firms including Pillsbury & Coleman; Farella Braun + Martel; Cohen Milstein Sellers & Toll; Kellogg Hansen Todd Figel & Frederick; and McCracken, Stemerman & Holsberry.

Becerra and the class counsel will ask for up to one-third of the monetary portion of the settlement for attorneys' fees and costs, according to the filing. The attorney general's office will additionally seek up to $11.2 million to cover litigation costs while the plaintiffs' counsel will ask for $13.8 million.

Lawyers from Keker, Van Nest & Peters; Jones Day; and Bartko, Zankel, Bunzel & Miller joined Sutter Health counsel as the defenders in the litigation.

Sutter Health admitted no wrongdoing in agreeing to the settlement.

"We were able to resolve this matter in a way that enables Sutter Health to maintain our integrated network and ability to provide patients with access to affordable, high-quality care," Sutter senior vice president and general counsel Flo Di Benedetto said in an emailed statement. "Together with the Attorney General, the parties selected an experienced monitor who will oversee the agreement, which specifies parameters for contracting between Sutter Health and insurance companies going forward."

The plaintiffs originally sued Sutter Health in 2014 claiming the company's contract practices artificially inflated prices. The California attorney general filed similar claims against Sutter in 2018.

The case appeared headed to a months-long trial until the two sides announced in October they had reached a deal. The agreement is scheduled to go before San Francisco Superior Court Judge Anne-Christine Massullo on Feb. 25.

Read more:

Sutter Health Settles Antitrust Case With State, Employers on the Eve of 3-Month Trial

In Antitrust Case Against Northern California's Largest Hospital Chain, a False Start