2011 Financial Performance
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The Sutter Health network of doctors, hospitals and other health care service providers announced its financial performance for 2011. Sutter Health’s combined 2011 systemwide income from the day-to-day operations of its hospitals, care centers and other services was $697 million, compared to $685 million in 2010. Sutter Health also posted a loss of $14 million in investment income and changes in net unrealized gains and losses from investments classified as trading in 2011, compared to a gain of $236 million in 2010. Total income for 2011 was $634 million, compared to $878 million in 2010. The system’s total 2011 operating revenues were $9.1 billion, compared to $8.8 billion in 2010.
Sutter Health’s 2011 operating performance includes $69 million of net supplemental payments associated with California’s temporary program to obtain federal matching dollars to partially offset underpayments in previous years for the care of Medi-Cal patients. Operating expenses do not include interest and depreciation associated with $1.5 billion of facility assets under construction. Operating Sutter’s new technologically-advanced, seismically-compliant hospitals will add over $300 million in annual interest and depreciation expenses to the cost structure.
California’s Seismic Regulation
With more critical (SPC 1) seismic building obligations than any other California health care organization, Sutter Health continued capital spending on five major earthquake safety-related hospital replacement projects in Santa Rosa, Burlingame (completed in 2011), Oakland, Castro Valley and Sacramento. Total costs associated with these projects will exceed $2.5 billion. After securing entitlements, Sutter Health expects to invest another $1.8 billion on hospital projects in San Francisco.
“Sutter Health’s ongoing commitments to Northern California communities require us to sustain strong financial performance,” said Sutter Health President and CEO Pat Fry. “We’re making significant investments in facilities to comply with California’s earthquake safety regulations and in bringing lifesaving technology to our doctors’ offices and hospitals. With California’s economy still struggling, we’re also serving growing numbers of people unable to pay for their health care,” Fry added.
Caring for the Underserved
During 2011, Sutter provided record levels of care and services for the poor and underserved and other benefits for the broader community. Sutter Health’s 2011 commitment to community benefit was a record $756 million ($751 million in 2010). This amount includes traditional charity care, unreimbursed costs of providing care to Medi-Cal patients, as well as investments in medical research, health education and community-based public benefit programs such as school-based clinics and prenatal care for low-income patients. Sutter Health hospitals cared for 22 percent of all Medi-Cal patients discharged in 2010 from the counties served by Sutter (per OSHPD; 2011 Medi-Cal data not yet available).
Sutter Health’s commitment to delivering charity care to patients continued to grow, reaching an all-time high average of more than $2.7 million each week in 2011. Sutter Health’s traditional charity care contribution increased from $121 million in 2010 to a record $140 million in 2011.
Sutter Health invested $898 million in capital in 2011 and expects to invest $5.4 billion in capital over the next five years (2012-2016). Much of Sutter’s current and upcoming investment supports advances in patient care technology. For example, Sutter Health continues to invest in replacing paper-based patient records with a more costly, sophisticated electronic health record (EHR) that enhances patient care, linking doctors, hospitals and patients throughout Northern California. Sutter has to date installed the EHR in its physician medical foundations and at six acute care hospitals. More than 600,000 Sutter Health patients have registered to access their personal health records online. Implementing and accelerating the EHR at Sutter’s remaining affiliated hospitals will cost approximately a half-billion dollars.
“At the same time the needs of our communities are growing, meeting our financial goals is becoming more difficult,” Fry added. “Federal and state governments, employers and other plan sponsors are all looking for ways to reduce the amount of money they pay for health care.” The government will cover costs associated with federal health care reform in part by paying health care providers less. Federal Medicare payments, which have already begun to decline, will continue to drop. Sutter Health estimates that Medicare reimbursement to its provider organizations will decline by nearly $2 billion over the current decade.
|Change in net unrealized gains/losses from investments classified as trading|
|Less income attributable to noncontrolling interests|
|Income attributable to Sutter Health|
updated March 23, 2012
About Sutter Health
Serving patients and their families in more than 100 Northern California cities and towns, Sutter Health doctors, not-for-profit hospitals and other health care service providers share resources and 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 Association. Sutter-affiliated hospitals are regional leaders in cardiac care, women’s and children’s services, cancer care, orthopedics and advanced patient safety technology.