Sutter Health’s Perspective on Hospital Prices
Economists, the news media and others are sharing wide-ranging points of view about factors contributing to hospital prices.
Here’s our perspective:
We agree that our nation’s current approach to billing and pricing need improvement, and the hospital industry is working together to identify a better method.
We strive to be in the mid-range in our pricing and many factors influence the cost and prices of services provided by our hospitals. In addition to the direct costs associated with providing a particular service, factors include:
- How much free health care we provide to patients without insurance and those unable to pay. In 2012, Sutter Health provided more than $2.9 million in charity care every week on average—or about $153 million total.
- How much care we provide to Medi-Cal patients. Together, Sutter Health hospitals serve more Medi-Cal patients in our Northern California service area than any other health care provider. In 2012, providing care to Medi-Cal patients cost $450 million more than the state paid.
- Investments of about $10 billion between the years 2000 to 2013 to *build and retrofit health care facilities, and to purchase advanced patient care technologies.
- The salaries we pay to employees. Sutter Health also has a fully-funded pension plan—a rarity in today’s environment.
In addition to comparing prices for specific services, it’s important to consider the total cost of a stay in a hospital where caregivers commit to providing patients with the right care at the right time, often resulting in a shorter and less-costly overall hospital visit. An independent study by the Dartmouth Institute for Health Policy and Clinical Practice found doctors and hospitals in Sutter Health are among those providing the nation’s most efficient and consistent quality care.
Several years ago, Sutter Health embarked on a plan to ensure that the high-quality care we deliver would also be more affordable to patients and employers. In 2009, we set a goal to reduce our systemwide cost structure by about 10 percent – or around $850 million. We’re about halfway there after redesigning processes in patient care that hold the line on cost while improving quality and also examining how we can perform business support services more efficiently and cost-effectively.
This focus on affordability becomes even more important given $2 billion in Medicare reimbursement reductions to Sutter Health over the current decade tied to health care reform. California already ranks last in the nation in reimbursement to doctors and hospitals for care provided to Medi-Cal patients. We expect reductions in Medi-Cal payments to continue.
We won’t be satisfied until we’re considered a model for quality, efficiency and affordability.
*Sutter Health has built or rebuilt more than a dozen hospital facilities in Northern California—in Roseville, Davis, Sacramento (2), Jackson, Modesto, Oakland, Burlingame, Castro Valley, Santa Rosa, Santa Cruz, Crescent City and Novato. Our rebuild in San Francisco is getting started soon.