Sacramento’s Sutter Health rebounds financially in 2021, logging $199M in operating income
Sacramento-based Sutter Health reported $199 million in income from operations for 2021, rebounding from an operating loss of $321 million in the prior year.
“We’re making significant progress on our path to recovery, but we continue to face strong financial and inflationary headwinds,” said James Conforti, Sutter’s interim chief executive officer. “We must stay focused on efforts that help our integrated network reduce costs and streamline our operations as these are integral to our affordability and to serving our communities well into the future.”
The health care giant logged total income of $1.14 billion last year, the bulk of which came from an $880 million gain on its investments.
In a statement on the company’s future, Conforti said Sutter would continue to face flat revenues and increased expenses and inflation over the next three years. Like many hospital operators, Sutter incurred a number of expenses as a result of the COVID-19 pandemic, but Conforti said the rising cost of labor and drugs also pose challenges.
Northern California is home to 11 of 12 areas around the nation with the highest hospital wages, Sutter leaders noted in their statement, and the company had to sign costly contracts with staffing agencies for contingency workers when patient loads surged during the pandemic.
Because of the demand in 2021, some agencies were recruiting traveling nurses with offers of $5,000 to $10,000 a week in pay.
While labor accounts for 50% of Sutter’s total operating costs, the company said, rising drugs make up 7% of overall operating expenses.
“Outpatient infusion is one of the fastest growing drug expense areas and now represents 30% of Sutter’s total spend on medications,” Sutter officials noted. “Seven of the top 20 most expensive drugs had cost increases greater than 30% in 2021. Additionally, a single new medication for COVID-19 patients resulted in $12 million in Sutter’s costs in 2021.”
Because of the pandemic, the nonprofit health system is purchasing a great deal more personal protective equipment than it did in 2020 and that equipment rose in price, officials said, noting that expenditures for face masks and other items had risen by 48%.
Sutter officials began a cost-cutting initiative last year, cutting staff in service areas that had historically low volume, reducing its real estate footprint by transitioning many support staff to work from home, and redeploying some staff to service areas where demand was greater.
This story was originally published April 28, 2022 at 5:00 AM.
