The State of California v. Azar

MANAGED CARE: Sutter Health v. District Council #16 Northern California Health and Welfare Trust Fund (Court of Appeal, First Appellate District, Division 2, A148326) CMA filed an amicus brief in support of Sutter Health Systems to enforce Health & Safety Code section 1375.7 requiring that all material provisions of a provider’s contract with a health plan be enforced against any third party that accesses the provider’s services by leasing the health plans’ provider network. 


In 2003, CMA sponsored a bill to address the problem with “silent PPOs” where health plans give third parties access to their provider networks and the discounted rates offered by contracted providers. In this case, District Council #16 sued Sutter alleging unfair business practices that it claimed resulted in overcharging for certain services. Sutter’s provider contract with Anthem Blue Cross of California includes a provision that requires disputes to be submitted to private arbitration. Sutter sought to enforce this arbitration clause in the provider contract by invoking section 1375.7, against District Council #16, a third party payor that accessed Sutter’s discounted rates through Anthem’s network. 

The trial court refused to apply section 1375.7 and Sutter appealed the decision. CMA’s brief explained the problems of silent PPOs and provided a broader context to understand the remedies enacted by the Legislature to protect providers against silent PPO abuses. CMA’s brief also argued that the trial court’s narrow interpretation of section 1375.7 would result in providers no longer being able to depend on contracts that they negotiate with health plans, would bring back the silent PPO problem, and weaken provider networks and patient access to health care.


The case is currently pending before the U.S. Ninth Circuit court of Appeals.

CMA Staff: Lisa Matsubara



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