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Sacramento-based Sutter Health reports jump in patient care income, boosting operating profit

Sacramento-based Sutter Health reported that patient visits returned to levels seen before the COVID-19 pandemic in 2022, and this increase, along with a cost-cutting initiative last year, propelled the company to a yearly gain of $278 million in operating income.

It was nearly a 40% increase over the $199 million that the company netted from its patient services businesses in 2021.

“Our operating financial performance has put Sutter in a position to reinvest more within the system, which can help support even higher quality, equitable healthcare for patients throughout California,” said Warner Thomas, chief executive officer for Sutter Health. He joined the system in the fall of 2022 after a nationwide search.

Although operating income showed continued recovery, the company reported an overall loss on its balance sheet of $249 million as the value of investments it still holds plummeted by $578 million. These paper losses weighed heavily on the company’s bottom line during this period, but since they have not been sold, Sutter might well recover some of their value in the future.

The company also noted that its affiliate, Sutter Bay Hospitals, had completed its separation from Samuel Merritt University. The college had sought independence when Sarah Krevans was still Sutter’s CEO. Sutter wrote down a loss of $208 million on the removal of Samuel Merritt’s assets from its balance sheet.

Sutter said that inflationary pressures on wages, supplies and benefits remain a concern, as they are for hospitals around the nation, so the increase in operating income is important to offsetting those continued increases.

Motivated by soaring costs and big operating losses during the COVID-19 lockdown, more than 350 hospitals around California appealed earlier this month to state leaders and the congressional delegation to provide a financial lifeline. They also sought systemic reforms to remedy “the chronic underfunding of the Medi-Cal and Medicare programs, which pay far less than the actual cost of delivering care.”

In its financial report, Sutter stated that the true cost of its care to Medi-Cal patients was $615 million more than what the state paid. The company also noted that it provided $82 million in charity care. These two figures are part of Sutter’s community benefit investments.

Sutter also contributed millions of dollars to community health programs around the north state, including to the Gregory Bunker Care Transitions Center of Excellence, a recuperative center that cares for unhoused residents in Sacramento. In total, Sutter reported spending $899 million on community benefits last year, up 3.1% from 2021.

The company said it also plans to build additional ambulatory care centers around Northern California and will invest in digital technology to more seamlessly integrate care across its system and to make it easier for its patients to access care.

The company also has plans to expand its physician and clinical training programs, academic partnerships and graduate medical education programs to ensure it has a pipeline of talent for its facilities. Sutter, which began training fourth-year medical students at Sutter Roseville Medical Center last year, noted that such programs will also allow the company to continue providing ”innovative, equitable and culturally competent care.”

“We’re writing a new chapter for Sutter Health with a bold strategy to change healthcare in Northern California by making care more accessible to more patients,” Thomas said. “Sutter Health strives to be a place where people most want to work and practice medicine, the place more patients choose to come for high-quality care that is easy to access and navigate, and the place communities know will help solve problems and invest in their health and well-being.”