Sutter Health didn’t make quite as much money in first quarter 2023 as it did a year ago
Sacramento’s Sutter Health reported that the rising costs of labor and supplies eroded some of its financial gains in the first quarter of this year, so its operating profit of $89 million fell short of the $95 million the company brought in a year ago.
Although there was a decline in operating profits, the company saw revenue from patient services increase 7.9% as patient traffic picks up. Hospitals around the nation have said their admissions dropped amid the COVID-19 pandemic as people put off seeking care, either because they wanted to leave space for patients in acute distress or because they were concerned about the risk of exposure to someone who had COVID-19.
In an interview with The Bee as the quarter closed, Sutter Chief Executive Officer Warner Thomas said that Sutter is in a really good financial position but that he and other health care industry leaders around the nation are concerned that low Medicare payments will challenge ongoing financial sustainability. Roughly 11,000 people age into Medicare daily, he said.
“Every day that we see a patient move from say commercial insurance into Medicare, it causes a payment reduction for hospitals and physicians across America, not just here in California and Northern California. It happens across America,” Thomas said. “Medicare has for years not paid hospitals enough that they could break even.”
In the first quarter, Sutter reported revenue of $903 millions from Medicare, $308 million from Medi-Cal and $1.94 billion from commercial insurers. In the comparable period of 2022, the company received payments of $850 million, $294 million and $1.78 billion in the respective categories.
While operating profit narrowed, the health care system saw the paper value of the investments it holds soar by $82 million. In the year-earlier period, Sutter’s investment portfolio had plummeted by $166 million amid a stock market sell-off. The company also wrote off a loss of $208 million a year ago, the result of giving Samuel Merritt University the independence it had sought.
With the gains on investments and other income, Sutter Health posted overall income of $198 million, up from a loss of $184 million in the comparable period. The company would have to sell its investments, though, to realize any income. The operating budget, on the other hand, shows available cash for daily business functions.
The revenue included a payment of $128 million from the Federal Emergency Management Agency, which has distributed funds to many hospitals to reimburse them for expenditures they made amid the COVID-19 pandemic.
Sutter shared its financials in a report to bondholders. The company also noted that it will be negotiating new labor contracts this year with 17 of the 61 collective bargaining units representing thousands of its employees. Consequently, Sutter leaders said, they have made contingency plans in the event of strikes.
