Sutter Health Announces 2002 Financial Performance
Northern California Health Care Network Reaches Income Goal for First Time Since 1990; $3.5 Billion in Capital Improvement Projects Get Green Light
SACRAMENTO, Calif., April 25, 2003 - A $3.5 billion plan to build, replace and improve much of Northern California's health care infrastructure is getting the green light this month after the not-for-profit Sutter Health network of hospitals and physicians announced that it achieved its five-percent operating income goal for 2002. Sutter Health has not posted a five-percent bottom line since 1990.
The network announced this week that systemwide income from the day-to-day operations of its hospitals, care centers and other services was $265 million in 2002, compared to $51 million in 2001. Sutter Health posted an additional $19 million in investment income, bringing total operating income (including investment income) to $284 million, compared to $99 million in 2001. Sutter Health posted total revenues of $4.9 billion in 2002, compared to $4.2 billion in 2001.
As a not-for-profit, community-based organization, Sutter Health reinvests any earnings it achieves into the preservation and improvement of local health care services. During 2002, Sutter spent a record $466 million on services for the poor and underserved and on benefits for the broader community, up from $417 million in 2001. This investment includes charity care, the unpaid costs of participating in public programs including MediCal and Medicare, and investments in medical research, health education and community-based public benefit programs such as school-based clinics and prenatal care services.
"A number of short- and long-term strategies came together for us in 2002 that enabled our network to finally reach its combined financial goal," explained Sutter Health President and CEO Van R. Johnson. "We served more patients, we substantially reduced losses, and we worked more closely together to make our processes more streamlined and efficient."
In the East Bay, for example, a substantial turnaround at Sutter Health's Oakland and Berkeley facilities turned a multi-million-dollar loss in 2001 to a slight gain in 2002. In addition, the Sutter network achieved a ten-day reduction in accounts receivable and reported success in achieving clearer contracting language with HMOs that reduced disputes and helped the network collect what it was actually owed. At the same time, Sutter continued to focus on eliminating wide variances in reimbursement between the many health plans it contracts with.
By reaching its combined goal in 2002, Sutter is able to continue its community commitment and move forward on a multi-billion-dollar capital improvement plan to build, replace and improve hospitals, outpatient clinics and physician care centers throughout its Northern California network. According to the Standard and Poor's credit rating agency, Sutter Health will need to sustain its current level of cash flow in order to fund its capital program over the next ten years without a reduction in credit quality.
"Hospitals and doctors offices are on the front lines in our nation's health care system, and when patients need us, they expect and deserve the best," said Johnson. "Achieving our income goal means that we'll be there with the most modern facilities and up-to-date technology."
Sutter Health's improving financial performance is consistent with national trends, according to industry analyses. A report issued last month by Solucient, an Evanston, Illinois-based health care information firm (Modern Healthcare, 3/3/03), found the overall operating margin of 900 hospitals surveyed was 5.8 percent for the first half of 2002, up two percentage points from 2000 levels.
Sutter Health is one of California's leading not-for-profit networks of community-based health care providers, delivering high-quality care in more than 100 Northern California communities. Sutter Health is the regional leader in infant deliveries, neonatology, orthopedics and pediatrics services.
Sutter Health supports more than two dozen locally-governed acute care hospitals as well as physician organizations; medical research facilities; region-wide home health, hospice and occupational health networks; and long-term care centers.