SUTTER HEALTH: System Saved from Red Ink by 1998 Investments
Despite a 7% rise in overall revenues, Sacramento-based Sutter Health lost $7.8 million last year on patient care operations, managing to pull itself out of the red only with the help of extracurricular investments. The Sacramento Business Journal reports that the 26-hospital, 5,000-doctor system's net income plummeted 36%, from $60 million to $38.6 million, yielding profit margins of 1.3% -- down almost 50% from 1997's 2.3% and far short of its 5% long-term goal. Spending on charity care and health- related public service rose to $208.1 million from $201.9 million in 1997. Sutter officials intimated that the not-for-profit system has "cut most of what it can" from its operating budget, and hinted that a rise in payer premiums is the only thing now that can help.
Beast of Burden
In addition to lower payments from insurers and Medicare, among the major strains on Sutter last year was the cost of accelerated write-offs for computer systems "deemed likely to crash" due to the Y2K bug and $2 million in losses at Omni Healthcare, the Sacramento-based HMO in which Sutter owns a majority stake. But help may be on the way: Sutter hopes to add Oakland's Summit Medical Center to its "growing empire" in 1999, hopefully bringing equity (as well as more debt) into the system.
Things Could Be Worse
Sutter's chief rival, Mercy Healthcare Sacramento, reportedly is hemorrhaging $1.7 million a month on patient care. It, too, has been helped by investments: Supplemental income of $11.4 million has reduced the system's overall loss on operations from $15.3 million to a net loss of $3.9 million since last July. But both rivals have a wary eye on their other big competitor in the area, Kaiser Permanente. The Sacramento Business Journal reports that the "financial turnaround" at Kaiser so far this year could harm Sutter and Mercy: As Kaiser cuts overflow referrals to neighboring hospitals, the stream of cash it was paying Mercy and Sutter for caring for Kaiser patients will progress toward an end (Robertson, 5/10).