Sutter Medical Center of Santa Rosa Submits Plan to County of Sonoma for New Hospital
SANTA ROSA, Calif., November 20, 2008 - Sutter Medical Center of Santa Rosa (SMCSR) has announced that it submitted a new Business Plan to the County of Sonoma to build a modern 70 bed acute care hospital at the Wells Fargo Center for the Arts site (Wells Fargo). This new Business Plan was submitted to replace the outdated and economically infeasible 2004 Health Care Access Business Plan.
Over the last two years, SMCSR evaluated numerous options to meet the Health Care Access Agreement (HCAA) and state earthquake requirements. SMCSR determined that building a right sized hospital on the Wells Fargo site was the preferred option. This new Business Plan provides for a 70-bed acute care hospital to be owned and operated by SMCSR. The new hospital will enable SMCSR to provide services required under the HCAA through 2021 and provide for SMCSR to continue delivering quality health care in Sonoma County.
SMCSR will relocate inpatient acute care services that currently are provided at the Chanate campus and covered under the HCAA, including obstetrics, nursery care including a level III neonatal intensive care, medical and surgical, intensive care, emergency services, supporting ancillary services, and a full range of women’s reproductive health services. SMCSR anticipates building the new hospital as part of a larger medical campus at the Wells Fargo site which would include a privately financed and owned medical office building and a 28 bed Physicians Medical Center to make the campus more economically viable. The Physicians Medical Center is expected to be a partnership among local physicians, Sutter Medical Foundation North Bay and Sutter Health providing surgical and cardiology services.
“The New SMCSR facility is the appropriate size for current and future patient needs. SMCSR operates today with an Average Daily Census [the average number of patients in the hospital daily] 43 percent lower than in 2002. For the last six month period ending with October 2008, SMCSR had an Average Daily Census of 65 patients. In the first 15 days of November 2008 the Average Daily Census declined to 59 patients. Simply put, we have significantly less patients today and anticipate continued decreased patient demand in the future. In spite of an aging population with increased health care needs, the need for inpatient beds is decreasing due to the adoption of new technology, as well as the use of minimally invasive surgical technologies, which allow many procedures to be performed on an outpatient basis or with a shorter hospitalization,” said Robin Hagenstad, SMCSR Chief Nursing Officer.
SMCSR and other hospitals in our community have been struggling to find solutions to deal with the financial challenges made more difficult by rising health care costs, low hospital admissions, rising construction costs and state earthquake safety mandates. SMCSR alone lost over $108 million since 2001. With reduced Medi-Cal benefits from the State of California, Kaiser’s market dominance, and rising costs of construction, SMCSR will continue to struggle financially in Sonoma County. The Medi-Cal payment cuts implemented in July and October are expected to result in a $10 million annual reduction to SMCSR’s Medi-Cal revenue.
The shifts in Sonoma County’s health care community were escalating in 2003, but were not fully realized at the time SMCSR made its assumptions in drafting the 2004 Business Plan. The 2004 Business Plan anticipated building a larger hospital at the Wells Fargo Center for the Arts site. In 2001, the occupancy rate at SMCSR was 66 percent which was close to the national average. In 2004, the occupancy rate had decreased by five percent to 61 percent. By the end of 2006, the occupancy rate had declined 21 percent from 2001 levels to a dismal 45 percent. The decreased patient volume trend at SMCSR has continued. Patient volume during the first ten months of 2008 was 30 percent lower than during the same months in 2006.
By the end of 2006, it was clear the future model SMCSR had planned in the 2004 Business Plan was not financially viable. SMCSR entered into discussions with Santa Rosa Memorial Hospital (Memorial) for Memorial’s purchase of SMCSR inpatient services in late 2006. After SMCSR and Memorial ended negotiations in early 2008, SMCSR began investigating options such as retrofitting the Chanate campus or resizing the new hospital for the Wells Fargo site to a smaller hospital that matches the significantly lower patient demand. SMCSR determined that a smaller hospital to meet the needs of a smaller patient population was the preferred option to meet SMCSR’s obligations under the HCAA.
“One of the biggest factors crippling the financial sustainability of Sonoma County’s hospitals is that there are simply too many beds in Sonoma County and not enough population growth to change that dynamic. The excess bed capacity problem in Sonoma County has worsened with the additions by Memorial and Kaiser totaling approximately 120 new beds. The excess capacity of hospital beds and low patient volumes are key factors causing a financial challenge for SMCSR and other community hospitals to deal with rising inpatient costs,” explained Mike Cohill, SMCSR CEO.
Currently, five of the seven hospitals in Sonoma County have occupancy levels below 56 percent which is well below state and national averages. Hospitals need to operate at a high level of occupancy, closer to 65 to 80 percent, in order to pay for necessary fixed costs such as staffing and medical supplies. These fixed costs are required to be in place well before a patient arrives at a hospital and must be carried so that a hospital stands ready for patients. If occupancy rates are low, these costs are still incurred.
“It is important that SMCSR builds a hospital that is sized appropriately to patient demand so that we don’t worsen the current problem of an over-bedded heath care community” said Cohill. “SMCSR will make a $176 million investment in this community and move current operations from the aged Chanate campus to a modern medical center at the Wells Fargo site.”
The New SMCSR hospital could open as early as the fall of 2012.
About Sutter Health
Serving patients and their families in more than 100 Northern California cities and towns, Sutter Health doctors, hospitals and other health care service providers join resources and share expertise to advance health care quality and access. The Sutter Medical Network includes many of California’s top-performing, highest quality physician organizations as measured annually by the Integrated Healthcare Organization. Sutter-affiliated hospitals are regional leaders in cardiac care, women’s and children’s services, cancer care, orthopedics and advanced patient safety technology. For more information about the not-for-profit Sutter Health family, please visit www.sutterhealth.org.
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