Health & Medicine

Sutter among nation’s most profitable hospitals, study finds

The newly built Anderson Lucchetti Women's and Children's Center on the Sutter Medical campus, a glossy new facility whose ribbon was cut on Saturday, June 20, 2015, in Sacramento, Calif.
The newly built Anderson Lucchetti Women's and Children's Center on the Sutter Medical campus, a glossy new facility whose ribbon was cut on Saturday, June 20, 2015, in Sacramento, Calif. Andrew Seng

Sacramento’s Sutter Medical Center ranked No. 2 in the nation for highest profits from patient care, according to a study of 2,993 acute care hospitals released this week in the journal Health Affairs.

The report, which only covers 2013, lists Sutter, a not-for-profit hospital, with a total patient care services profit of $271.9 million that year.

With a newly renovated medical campus in midtown Sacramento, Sutter ranked behind only Gundersen Lutheran Medical Center in La Crosse, Wis., on the list. It landed one spot above Stanford Hospital and Clinics in Palo Alto, also a not-for-profit facility.

In an emailed response, a Sutter official called the results “fundamentally flawed.”

“Our initial analysis suggests that the authors missed $240 million of expenses, which significantly overstated Sutter Medical Center, Sacramento’s actual earnings,” said James Conforti, president of Sutter Health Valley Area. He said at least two other hospitals on the study’s Top 10 list – Norton Hospital in Louisville, Ky., and Gundersen – had publicly identified similar inaccuracies since the study was released Monday.

“The study appears to be fundamentally flawed,” Conforti said. “Our ranking would have been much different had the authors accurately calculated expenses,” including human resources, accounting, payroll and purchasing.

Using Medicare cost reports and other data, the report looked at per patient “adjusted discharge,” which eliminated such revenue sources as investments, charitable contributions and even gift shop sales. Overall, the 3,000 hospitals recorded a loss of $82 in per-patient adjusted discharge. Sutter’s per-patient profit was $2,244.

Ge Bai, study co-author and an assistant professor of accounting at Washington and Lee University in Lexington, Va., said the study helps identify common characteristics of the most profitable hospitals. “We’re looking at the core business of hospitals, which is patient care. It’s more relevant. If you look at all the other factors, you’re comparing apples and oranges.”

She added, “Policymakers may want to consider whether nonprofit hospitals should be required to invest their profits in additional services or lower their prices to justify their tax-exempt status.”

In 2015, Sutter’s profits plunged by nearly 80 percent to $81 million. Sutter reported it lost $142 million in investments and trading transactions in 2015, compared with a $39 million gain in 2014.

Claudia Buck: 916-321-1968, @Claudia_Buck

  Comments