Sutter Health Announces 2004 Financial Performance
SACRAMENTO, Calif., April 22 -- Despite substantially increased investments in nursing employment, a net reduction in hospital pharmaceutical revenue and higher depreciation costs, the Sutter Health network of doctors and hospitals achieved its earnings target in 2004.
Sutter posted systemwide income from the day-to-day operations of its hospitals, care centers and other services of $320 million (representing a 5 percent operating margin), down from $389 million in 2003. Sutter Health achieved an additional $108 million in investment income, bringing total 2004 net income (including investment income) to $428 million, an eight percent decline from 2003 total net income of $465 million. Sutter Health's total revenues were $6.3 billion in 2004, compared to $5.7 billion in 2003. Sutter Health's ten-year averaged operating margin is 3 percent.
Sutter Health leaders said the drop in income from 2003 to 2004 was driven by a variety of factors. Sutter spent considerably more in nurse salaries in 2004 in order to meet California's nurse-to-patient staffing regulations. Sutter also put into place a new standardized hospital pharmacy charging formula in early 2004 that resulted in a net decline in inpatient pharmacy revenue of approximately $28 million. In addition, the network saw its depreciation costs climb by $24 million as result of continued capital investments.
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 2004, Sutter assumed a record $814 million in costs related to providing care and services for the poor and underserved and benefits for the broader community, or nearly 14 percent of net patient and capitation revenue. This investment includes charity care, the unpaid costs of participating in public programs including Medi-Cal and Medicare, 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 charity care write-offs grew 42 percent, from $109 million in 2003 to $155 million in 2004.
Sutter Health also continued its aggressive investment in patient-oriented information technology in 2004. Installation of barcoding technology to improve hospital medication delivery safety continued in 2004; barcoding systems were in place at ten Sutter hospitals by the end of the year. In addition, Sutter built a second monitoring center in San Francisco for its electronic intensive care unit initiative in 2004. The system also embarked last year on a systemwide effort to create a paperless electronic health record.
"Given our critical commitments in information technology and capital improvements throughout Northern California, we're pleased to have reached our earnings target for the third consecutive year," said Sutter's President and CEO Van R. Johnson. "Strong financial performance provides us with a source of capital that allows us to meet the health care needs in the communities we serve."
Sutter Health Year 2004 Audited Financials - provided in Adobe PDF format