Sutter Health responsibly manages our resources, including a focus on efficiency and innovation to help control costs and improve affordability. Our integration and emphasis on best practices helps reduce medical complications, unnecessary procedures and hospital visits, which helps to lower cost of care for our patients and employers.
Making healthcare less costly and more convenient requires innovative thinking and tenacity. That is why Sutter Health is combining big and small measures across our system to help drive savings for Sutter and our patients.
Applying best practices across our integrated network helps reduce treatment variations and promotes high-quality care. These efforts saved $30 million in just two years.
Sutter’s careful resource management – consolidating vendors, streamlining services and creating administrative efficiencies – saved $473 million in operating costs over a five-year period.
These are just a few of the hundreds of measures that help drive savings for Sutter Health and our patients.
Learn more about how Sutter is driving affordability across our integrated network.
One of the main underlying cost drivers in the Northern California region is high wages as the region is home to 11 of 12 of the nation’s highest hospital wage index values. Sutter Health proudly provides well-paying jobs with generous benefits so that our employees are compensated for the value they contribute. At Sutter, labor costs represent more than 60% of total operating expenses.
Costs in many areas are steadily increasing, including seismic upgrades, regulatory requirements, facility upgrades and lifesaving technology investments.
As a not-for-profit organization Sutter Health reinvests in the communities we serve. As part of our mission, Sutter Health’s affiliates serve a major portion of Northern California’s vulnerable populations, including those who get care funded by government payers like Medi-Cal and Medicare. Medi-Cal and Medicare patients are often among our most vulnerable and in general, require more care than commercial payors.
Unfortunately, the reimbursement rate does not cover the cost of providing care. Sutter’s commercial market makes up only approximately one-third of the services Sutter provides. The remainder of the services Sutter provides are to patients who are uninsured, or government sponsored pay, which does not cover the cost of the services Sutter has provided to the patient. Therefore, Sutter relies on the commercial revenue to care for all of the patients in the communities we serve.
Over the last 4 years our operating margin has been negative, or in the low single digits.
Sutter Health’s total investment in community benefit in 2019 was $830 million, which is an increase from $734 million in 2018. This amount includes traditional charity care and unreimbursed costs of providing care to Medi-Cal patients, as well as investments in community health programs to address prioritized health needs as identified by regional community health needs assessments.
Four Sutter Health hospitals sustained operating losses in 2018—totaling more than $49 million. Despite these losses, Sutter Health has invested more than $295 million in charity care, unpaid costs of Medi-Cal and community benefit programs in these four hospitals alone over the past 5 years.
(Source: April 1, 2020 S&P report)
• 2017: 1.73%
• 2018: .19%
• 2019: -0.66%
•2020 (to date): -7.4%
Despite external factors that are impacting costs, Sutter Health’s integrated network is working to hold the line on costs.
Sutter Health has held average overall rate increases to health plans to less than 3% annually since 2014, despite actual expenses for labor, facilities and technology increasing by an average of 6% each year.
U.S. government statistics show average costs for care at Sutter are 7% lower than comparable Northern California hospitals and 17% lower than peer physician groups nationally.
1. The Dartmouth Institute for Health Policy and Clinical Practice; The Dartmouth Atlas Data; Medicare spending per decedent during the last two years of life https://atlasdata.dartmouth.edu/static/eol_chronic_illness
2. 2016 CMS Quality and Resource Use Reports for Sutter Health Foundations in Northern California.