Tuesday, April 09, 2019

Sutter Health reports its first annual financial loss in 23 years

Sacramento’s Sutter Health reports its first annual financial loss in 23 years

Sacramento-based Sutter Health reported Thursday that it had posted a year-end financial loss of $198 million for 2018, a precipitous decline from 2017 when the nonprofit hospital giant generated income of $893 million.

This is the first time Sutter has reported a loss since its merger with San Francisco’s California Healthcare System in 1995.

Sutter’s operating revenue and expenses remained relatively stable, company leaders said, but the company did not enjoy the same lift from its stock market investments in 2018 as it did the prior year.

Income from investments and unrealized stock gains was $651 million in 2017, but the market plunged in 2018. Sutter’s portfolio logged a loss of $267 million.

Also in 2017, Sutter received a payment of $432 million from the state of California to help defray the losses it incurs from serving Medi-Cal patients. In 2018, the Sutter payout was $272 million.

The loss comes as Sutter faces two high-profile lawsuits – one by the U.S. Justice Department over Medicare charges and another by the California Justice Department over antitrust issues. The company said it would share how much it has spent on legal fees on its Form 990 filing with the Internal Revenue Service in the fall.

“Legal inquiries are a common component of operations for health care systems, “ said Sutter Health spokesperson Lisa Page. “We receive and respond to investigations and requests from regulatory agencies. While we look forward to the conclusion of current legal matters, legal fees will continue to be an expense as an ordinary course of business.”

Sutter’s operating revenue grew by $253 million to nearly $12.7 billion. Its operating expenses increased by $378 million, and its income from operations dropped by 38 percent to $201 million in 2018.

The company made capital investments of $924 million in 2018, the same amount it spent the year before. Last year’s major capital expenditures went toward ensuring that California Pacific Medical Center meets 2030 seismic regulations, and that work is now complete in San Francisco.

The California Pacific Medical Center’s Van Ness Campus opened on March 2 of this year, and the CPMC Mission Bernal Campus, at Valencia and Cesar Chavez, opened Aug. 25, 2018.

Sutter paid particular attention to the environmental impact of the Mission Bernal hospital, which has 120 licensed beds. Roughly 50,000 gallons of rainwater can be captured there for irrigation and to dissipate heat from the HVAC system on the building’s rooftop cooling towers. It also has a pedestrian plaza with permeable landscape that will drain some 360,000 gallons of storm water annually away from the storm and sewer system.

The $2.1 billion Van Ness Campus has 274 licensed beds and five living-roof gardens. The 1 million-square-foot building also incorporates water-saving features and direct natural sunlight that lowers energy costs. It is the first structure in North America to incorporate viscous wall dampers that are designed to absorb strong tremors during an earthquake. The technology, used extensively around Japan, helps to reduce overall stress on buildings.

Last year, company officials noted, Sutter Health put roughly $734 million toward addressing the needs of communities it serves. That’s an increase from $612 million in 2017. The figures include traditional charity care, the unreimbursed costs of providing care to Medi-Cal patients, investments in health education and public benefit programs such as community clinics and prenatal care for those with low income.

Sutter CEO Sarah Krevans said: “Patients and families count on us to deliver high-quality care, and we are committed to serving them and all those who call Northern California home. Thanks to our integrated network, we continue to make care more accessible and more equitable. We focused efforts on better connecting patients to the right care service, at the right time and in the right place.”

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