Sutter Health Reports 17% Decline in Operating Income for FY 2004
Sutter Health on Friday reported that operating income for fiscal year 2004 had decreased by 17% from $389 million on revenue of $5.7 billion in 2003 to $320 million on revenue of $6.3 billion, the Sacramento Bee reports.
Sutter Regional Executive Officer Sarah Krevans attributed the decrease in part to a 91% increase in charity care. Sutter CFO Robert Reed said the hospital chain spent about $155 million on charity care in 2004, compared to $109 million in 2003.
Sutter changed its policy for providing charity care in February after a series of lawsuits alleging that the hospital system overcharged uninsured patients (Rapaport, Sacramento Bee, 4/23). The cost of providing some community benefits, as well as care and services, to low-income residents and other underserved populations reached $814 million in 2004, according to the Contra Costa Times.
Officials said the cost of hiring more nurses to comply with state nurse-to-patient ratio rules and a decrease in revenue from pharmacy benefits also contributed to the decrease in earnings (Silber, Contra Costa Times, 4/23).
Overall, Sutter reported a 5% operating margin, which will allow the company to continue with construction plans, renovations and expansion projects, according to Reed.
Income at Sutter's five hospitals in the Sacramento area, which previously accounted for more than one-third of Sutter's profit, declined by 29% from $109 million in 2003 to $77 million in 2004. Revenue at those hospitals remained constant at $1.3 billion.
Krevans said Sacramento area hospitals wrote off $43 million in charity care in 2004, up from $22 million in 2003.
Standard & Poor's analyst James Cortez said, "The two previous years were really strong, above expectations. Sutter is still consistently hitting the operating margin target they believe they need to hit to support their planned capital projects."
Reed said, "I think the big story in our numbers is that we have been able to maintain fairly stable financial results in a very turbulent market" (Sacramento Bee, 4/23).