Strong Financial Health Allows Sutter Health to Continue to Provide New Medical Facilities
SACRAMENTO, Calif., April 13, 2007 - The Sutter Health network of doctors, hospitals and other health care service providers announced that its 2006 financial performance has positioned the not-for-profit organization to move forward this year with record, multi-billion-dollar capital commitments, continued investment in lifesaving technologies and increased funding of charity care to improve community access to quality health care services.
Sutter Health's combined 2006 systemwide income from the day-to-day operations of its hospitals, care centers and other services was $428 million, compared to $334 million in 2005. Sutter Health achieved an additional $159 million in investment income, bringing total net income to $587 million, compared to net income of $442 million in 2005.
In 2006, Sutter Health's capital investments totaled $805 million. The system's total 2006 revenues were $7.3 billion, compared to $6.6 billion in revenues in 2005.
During 2006, Sutter increased its investment in providing care and services for the poor and underserved and benefits for the broader community. Sutter Health's 2006 community benefit investment of *$483 million includes the cost of providing charity care, the unpaid costs of participating in Medi-Cal, and investments in medical research, health education and community-based public benefit programs such as school-based clinics and prenatal care services. As a result of an expanded charity care policy implemented throughout the Sutter Health system in early 2004, Sutter's commitment to providing charity care has likewise continued to grow. Sutter Health's traditional charity care contribution increased by 24% from last year, from $59 million in 2005 to a record $73 million in 2006.
Sutter Health leaders said while the system's earnings margin has averaged just 4% over ten years, Sutter's more recent trend of improved earnings will enable the not-for-profit system to make planned record-setting capital commitments this year, despite runaway inflation that has driven up construction costs by an estimated 60% in just three years.
Sutter Health is investing $600 million for a large medical campus replacement and development project in midtown Sacramento, and $1.7 billion for a new hospital in downtown San Francisco. Sutter Health is also marketing $751 million in bonds this month to finance construction of a half-billion-dollar replacement hospital for Mills-Peninsula Health Services in San Mateo, a $69 million patient care project at Sutter Roseville Medical Center, and other improvements and state-mandated seismic retrofits to Sutter facilities in Northern California. Additional capital commitments are likely to be announced later this year. Sutter Health estimates its total capital expenditures from 2001 through 2013 (including information technology) will exceed $11 billion.
"Strong and sustained financial health is critical, especially given that construction costs are climbing at an unprecedented rate," said Sutter Health President and CEO Pat Fry. "A healthy balance sheet makes it easier for us to borrow the funds we will need, keep up with construction cost inflation and meet our communities' needs for quality, accessible health care facilities." Fry said that Sutter will see interest, depreciation and other expenses increase dramatically as new capital projects are completed and begin serving patients. "It is also gratifying that we are maintaining our financial health and balancing our investments while holding the line on costs for our health care consumers," Fry added.
In February, the health care network announced that is investing an additional $300 million to implement an electronic health record (EHR) for its hospitals and physician organizations. Sutter Health's EHR investment has grown to $450 million. In addition, Sutter Health completed the installation of its electronic intensive care unit efforts, with 359 Sutter-affiliated hospital beds now being monitored using this life-saving support system.
*In 2006 Sutter Health stopped reporting the unpaid costs of treating Medicare patients as community benefit. Sutter Health made this change to be in alignment with new, voluntary national community benefit reporting standards. Sutter Health's comparable community benefit investment in 2005 was $479 million.