A David versus Goliath story of one pediatrician who took on the big insurance companies…and won!

I researched the case, expecting to find extensive media coverage touting this David versus Goliath story, but was shocked when the internet turned up very little. There were just a few short articles in either local papers or obscure legal journals. The questions came quickly: Why would a busy pediatrician take on that legal battle? What had he hoped to accomplish? Why was the media not more interested? I couldn’t wait to find out more.

How it All Started

I called Dr. Sutter at his home in Clifton, New Jersey. Given the size and scope of the legal materials, I was worried I hadn’t wrapped my head around it all. After introductions, I asked him to walk me through the story from the beginning and summarize the events. He sighed and paused. Not because he was reluctant to talk, but how could he be expected to summarize 20, or 40, or 60 years of his life? He thought for a few moments and launched into the story, his tone changing from exasperation to enjoyment, perhaps a bit of pride as he began to reminisce.

Dr. Sutter attended medical school at Far Eastern University in the Philippines and interned at New Jersey Medical School finishing in 1982. Nearly two decades into practice, he was working at an inner-city New Jersey hospital job with at-risk youth. He also ran a solo private practice on the side. He was responsible for billing at both jobs and found it overly complex and frustrating. Dr. Sutter was busy and successful, but not completely satisfied. He had always been interested in understanding the process of providing healthcare. He paid attention to business practices, medical results, and ethics. He noticed small things and contemplated their significance in the bigger picture. He learned from mistakes and sought improvement. He wanted to be better, he wanted his systems to be better, and he wanted the whole industry to be better.

Do Physicians Have Rights, Too?

At the suggestion of his employer, Dr. Sutter took a course in hospital finance from New York Medical College. He found the master’s studies fulfilling. He enjoyed learning about business practices and contemplating medical ethics. He soon noticed that while patients’ rights were a focus and discussed at length, physicians’ rights were rarely addressed–if at all. His interest in physicians’ rights grew. One course at a time and more than ten years later, he earned his master’s degree in health policy and management in 2002.

The late ’90s, when Dr. Sutter decided to go back to school, also marked the beginning of Medicaid managed care in New Jersey. According to Dr. Sutter: “Billing for hospital services posed unique challenges that outpatient providers did not encounter.” He was armed with unique knowledge from his years in both outpatient and hospital settings along with his progressing master’s studies. He was also armed with technology. “I consider technology a critical part of practice and have always tried to stay current and informed on the topic.” Dr. Sutter was an early adopter of electronic billing, having installed his first system in the early ’80s. He configured it to generate template letters and automatic appeals to questionable insurance reimbursements or denials–progressive technology at the time.

From One Doctor’s Claims to the Big Picture

Soon, Dr. Sutter had years’ worth of billing records, payments and appeals electronically catalogued and stored. He analyzed the data and discovered some disturbing patterns. One insurer, Oxford Health, only responded to one out of 10 appeals. The other nine elicited no response: no denial, no acceptance, nothing. In addition, the tiny percentage of appeals that were reviewed took an extremely long time to process, sometimes more than a year. Payments took even longer. The money in question was not a huge amount on an individual basis. Dr. Sutter calculated that the claims added up to about 10 percent of his total billing. Not huge, but enough to matter to a guy like him who worked two jobs and took night classes.

After considering what he was being short-changed, he started thinking about the bigger picture and ran some numbers. He considered the hundreds of other New Jersey pediatricians as well as other primary care doctors in the Oxford network–about 20,000 at the time. He realized that these billing “problems” could add up to tens of millions, maybe even hundreds of millions of dollars if this were occurring with other specialists and in other states. To Dr. Sutter, this looked like systematic fraud, perpetrated by some of the world’s most powerful corporations. For him, these underpayments were quickly becoming much more than personal. This was about physicians’ rights, and it was exactly what he’d been preparing for.

Radio Silence

He started by writing repeated letters to New Jersey’s then-governor, Christie Whitman. Repeated letters were met with repeated silence. He spread the word, informing his employer, colleagues, and friends. Dr. Sutter said their reactions were typically of two types: “Why bother? You’re going to get yourself in trouble,” or, “Go get ’em, but leave my name out of it.”

He searched for legal counsel and found it impossible. “The New Jersey law firms I contacted invariably cited conflict of interest,” he said. “They represented physicians generally, but they were covered medically by the very HMO I wanted to sue. They sided with Oxford.” He appealed to the New Jersey State Medical Society. After a year of back-and-forth, they informed him that they, just like the attorneys, had no interest in kicking the hornets’ nest. Dr. Sutter’s voice was not going unnoticed, however. “Many physician leaders in New Jersey told me in no uncertain terms that I should back off,” he said.

Most pediatricians in Dr. Sutter’s situation would likely have let the fight go at this point. All the powerful forces were against him: the insurers of course, the legal community, and, most surprisingly, the medical community. It wasn’t a large amount of money to him personally and the time costs were massive. Plus, the chances of winning were minute. The insurers had huge legal teams and big budgets on their side while Dr. Sutter couldn’t find a single attorney to represent him. Despite the odds, he wasn’t willing to let it go.

A Comrade Joins the Battle

A few things encouraged him along the way. While he made his discoveries in New Jersey, a similar case was working through the the courts in Florida, successfully becoming a certified class action. He was also motivated by passage of the Patient Protection Act in 2001. The act was sponsored by Senator John McCain and co-sponsored by John Edwards, Patty Murray, and Ed Kennedy. Dr. Sutter says: “It is one of the most significant bi-partisan bills ever to pass through Congress. It created many healthcare safeguards helping to ensure patients couldn’t be squeezed financially or medically by the increasingly powerful HMOs. It was good for patients’ rights, but notably lacked the same protections for physicians.”

Finally, after a decade of record keeping and several years of grassroots efforts that garnered plenty of interest but no support, Dr. Sutter found an ally willing to join his fight: a young attorney out of Roseland, New Jersey, by the name of Eric Katz. He had an interest in healthcare law and class action and was looking to make a name for himself. Katz was intrigued and after reviewing Dr. Sutter’s meticulous and extensive documentation, he knew there was something there. Something big. They spent a year together lining up their ducks, and in 2002 they filed their case: Sutter v. Oxford.

Oxford denied the claims and cited language in their contract with Dr. Sutter they believed would deny him the ability to sue, especially in terms of class action. They cited an arbitration clause in their contract, and succeeded in forcing an arbitration. Oxford may have expected to lose the arbitration to Sutter and Katz on an individual basis. This would be no big deal to them, maybe a few hundred or few thousand dollars. But, to everyone’s surprise, in 2003 Sutter and Katz won their first big decision. Arbitrator William Barrett decided the contract language did not prohibit class action and he certified it as such. Their case was going to court.

The State Medical Society Wants In

Now that the case had traction Dr. Sutter decided to approach the New Jersey Medical Society once the case had grown, and millions of dollars now at stake. Katz and Sutter needed resources. “At the time, I was getting by on four to five hours a sleep, seven days a week,” said Dr. Sutter.

“I was getting up early to run a clinic program at 7 a.m., then I’d go back to the office, then back to the hospital to check on the clinic, back to office again, and finally home to study and work on the case. I was also driving to Westchester to class twice a week.” Just listening to the schedule felt exhausting. “I don’t know how I did it,” he said laughing. “Lots of coffee.”

As he expected, the state medical society sang a different tune this time. They wanted to get involved, but with one important stipulation: They wanted to take over the case and they didn’t want Eric Katz. Katz had been working the case on a contingency basis for a couple of years at that point and hadn’t made a dime. Dr. Sutter’s loyalty to his first ally prevailed and he declined the offer from the medical society. Sutter and Katz would continue the fight on their own.

The next four years were filled with thousands of more hours of discovery work. Oxford became part of United Healthcare and obtaining documentation from them proved extremely difficult. The frustration of acquiring documents was compounded by the insurer’s repeated appeals. They argued that the arbitrator, William Barrett, had overstepped his authority by certifying the case as class action, even though United had been the ones to force the issue.

Katz and Sutter remained determined and focused: the annoying itch on the back of the HMO. Looking back, Dr. Sutter said he was surprised by how much time and energy was spent on the arbitration process. In many ways, it was more painful than the courts. They fought through it and won every appeal.

A Landmark Decision

Finally, in 2007, the Superior Court in Essex County was prepared to decide their fate. Would the years of dogged determination and personal sacrifice pay off for the underdogs, or would the court bow to big money, big insurance and their big legal team, as is so often the case? Dr. Sutter and Katz held their breath, and in a landmark decision, Judge Stephen Bernstein approved a massive settlement in their favor.

The monumental decision for Dr. Sutter, Katz, and physicians across the state of New Jersey would ripple across the nation as other HMOs feared of being similarly exposed. Insurers would be forced to amend their systematic bullying tactics toward physicians.

A Very Short Celebration

Dr. Sutter and Katz were overjoyed with their victory. Celebration was, however, short-lived. United Healthcare had deep pockets and no intention of giving up. They appealed and appealed, and the decision continued to be upheld as Sutter v. Oxford progressed through the system. Ultimately, the case worked its way to the very top: Dr. Sutter, Katz, and their initially hopeless cause was going to be heard by the U.S. Supreme Court. In March of 2013, they appeared to argue their case before the court. Sutter described the scene: “On our side it was Katz, one other attorney, and me. The rest of the courtroom was filled to the brim with teams of attorneys representing the HMO.” They presented their evidence and once again awaited their fate.

On June 10, 2013 Justice Kagan delivered the opinion. Justice Alito concurred. The decision was unanimous. Dr. Sutter and Katz had beaten the odds once again. The fight was finally over. Payment terms were specified and payouts were made. Eric Katz finally got paid (although with 14 years of legal work and hundreds of thousands of pages of documents, Dr. Sutter says Katz is lucky if he broke even). More importantly, he had cemented his name in the world of class action.

I asked Sutter how much he personally was reimbursed. “A few hundred dollars. Same as everyone else,” he said chuckling to himself. “It was never about the money. It was about physicians’ rights.”

The physicians that he fought for were quick to congratulate him after the battle was won. Those who wanted to be left out now said, “We knew you could do it!” and “We always had your back.”

Dr. Sutter’s 20-year battle didn’t make him rich. It also hasn’t done much for him professionally, he said. In fact, it may have hurt his career in some ways as many saw him as a dissenter. He was also nearing retirement when the Supreme Court finally ruled on the case.

Satisfaction is its Own Reward

I wondered if he had regrets. “Not about the legal case,” he said. “I accomplished what I set out to do. The satisfaction is something I can’t describe. I learned a great deal about the legal system and the healthcare system. I realized that you don’t have to just take what is given to you. Be aware of what is in your contract. Physicians have legal rights just like patients. Patients have been using the legal system for their advantage for years, and as physicians we can do the same.”

Dr. Sutter has always been focused on the big picture, and it’s what got him through the decades-long legal battle with Oxford and a number of other smaller legal battles he won over the years. “I hope this case has enlightened the medical community to the possibilities,” he said. “There are a lot of things you can do without incurring legal fees, including small claims and special claims courts.” He also advises pediatricians to keep good documentation. Indeed, extensive documentation was the holy grail of his legal victories.

Dr. Sutter also sees a need for improvement in education. “In medical school and even during residency, there is nothing taught about healthcare law,” he said. “There’s not enough emphasis on medical ethics and not enough emphasis on practice management. I’ve attempted to implement elective courses in practice management for pediatric residents and it’s gained no traction. Everyone is worried about malpractice and they’re not paying enough attention to practice economics.”

After hearing Dr. Sutter’s incredible story and considering his wide perspective and array of knowledge, I started to think of him as a doctor superhero. “I’m guessing you get lots of requests to do interviews and presentations,” I said. “Thank you for taking the time to share your insights with me.”

“That’s not the case at all,” he said. “You’re one of only a few. In fact, I have faculty positions at two local medical schools and I’ve never been asked to speak.”

I could hear the disappointment in his voice. The frustrations he endured with the legal system were difficult, but not unexpected. The lack of support from the medical community was. The disinterest and unwillingness of his colleagues to organize and work together was perhaps the hardest thing of all for Dr. Sutter. And, now that the legal battles are won, organizing physicians to work together has become a focus for him.

“I don’t believe most pediatricians understand the benefits of working together as a group. They see each other as competitors. I think we are all on the same team,” he said. “Organization and communication make us more capable of competing in the marketplace for better payment terms. It helps us all when we share information. It reduces costs, avoids redundancy, and improves quality.”

Before hanging up the phone and beginning to process such an incredible story, I was compelled to ask one last question: “If Hollywood decides to make a movie about your life, who would play your character?”

He found it a bit absurd and initially laughed it off, but I pressed and he settled on Sean Connery. He’s a big fan. After a little more thought, he decided a better option might be Tom Hanks, and I agree. He seems more fit to play the life of John Ivan Sutter: pediatrician, activist, and champion of physician’s rights.