Sutter Health financial report reveals ‘a really good quarter,’ UCSF researcher says
Sacramento-based Sutter Health reported income of $636 million for its second quarter ending June 30, far exceeding the $220 million it made in the same period last year but also dwarfing the $134 million it earned for the whole of 2020.
In a news release, Sutter Health leaders said: “Despite the improvement, Sutter Health’s balance sheet remains vulnerable and, as such, we continue to stay the course on our plan to stabilize our system’s financial health to help ensure fiscal resiliency and sustainability going forward.”
Joanne Spetz, director of the Philip R. Lee Health Policy Institute at the University of California, San Francisco, said: “They had a really good quarter.”
The company managed to keep about 3 cents in operating income for every dollar it earned in operating revenue, she said, and that is close to the 4 cents that California hospitals averaged in 2019, the most recent year for which the state has records.
Sutter gets only a small portion of its operating revenue, $407 million, from premiums from its health maintenance organization, Spetz said. The lion’s share, $3.02 billion, comes from patient services revenue.
These quarterly results are all the more amazing because many people lost their jobs and, along with them, their employer-sponsored health coverage amid the pandemic, Spetz said, so they had to go on Medi-Cal.
This government-run insurance often doesn’t pay enough to cover provider costs, Spetz explained, so there were questions about how hospital providers would fare as demand for their services returned to normal.
However, patient services revenue at Sutter soared 40% from the $2.16 billion it reported in the second quarter of 2020, Spetz noted, even as the company reined in growth in operational expenses to 4.7%.
Sutter implemented a sweeping financial review of its operations as a result of the financial challenges it faced amid the COVID-19 pandemic, and it has shuttered some programs, reduced its real estate footprint and cut back its workforce. This process is ongoing.
The company also noted in its news release that, as part of federal initiatives to assist health care providers, it received prepayments from the U.S. Centers for Medicare & Medicaid Services and deferred some payroll taxes. The company will have to pay both at a cost of approximately $1 billion.
Sutter attributed its second-quarter earnings gains primarily to windfalls from investments — $251 million in investment income and a $270 million increase in the value of investments the company continued to hold.
The company has reported much smaller second-quarter income in the prior four years: $220 million in 2020, $113 million in 2019, $51 million in 2018 and $94 million in 2017.
In the financial report, Sutter officials noted that they continue to face challenges posed by the COVID-19 pandemic and by lawsuits from a number of different parties. It has expanded in-house testing capabilities as well as capacity for hospital beds, telehealth consultations and remote work while also ensuring all medical staff are kept aware of the latest in best practices.
“Upon rollout of multiple COVID-19 vaccines in late 2020, the Sutter Health system moved to procure additional necessary supplies and administer vaccines to its patients as quickly and efficiently as possible,” the report stated. “These efforts have occurred amid evolving and sometimes conflicting guidance from federal, state and local authorities, economic uncertainties, and severe climate and weather events, including recent wildfires.”
For the first and second quarter combined, Sutter reported income of $825 million, compared with a loss of $857 million for the year-earlier period. The company recognized federal assistance of $59 million in the most recent six months as part of the Coronavirus Aid, Relief, and Economic Security (CARES) Act.
In total, Sutter received $850 million in CARES funds, but it had put the bulk of the funds to work in the latter half of 2020.
This story was originally published August 19, 2021 at 2:37 PM.
