This article investigates the workings of Sutter Health Corporation, a multibillion dollar California healthcare company which has transitioned from its former role as manager of community owned hospitals, to its new role as controlling entity of multi-hospital corporations. Why is this important? Because Sutter now charges 60% more than the statewide average for healthcare. If you have health insurance of any kind, or you have ever been treated at a Sutter facility, Sutter Health’s pricing power impacts you. The following is my experience with Sutter Health, as a former employee of Sutter Coast Hospital (“SCH”), a locally owned community hospital for which Sutter Health is the manager.
It’s been just about a year since the online report of Sutter’s self-funded $170,000 “independent” Strategic Options Study on the future of SCH. Sutter muted the telephone lines so participants could not hear each other’s questions during the internet presentation. “The Study” was followed by an extensive radio and newspaper advertising campaign. Ironically, after two years of Sutter executives denying they were considering downsizing the hospital to a Critical Access facility, the Sutter funded “Study” reported the best option was to convert to Critical Access Hospital. That means more money for Sutter Health–triple the amount which SCH is now able to charge to Medicare. Go figure.
The highlights of our local on-going hospital controversy:
2011: the hospital Board deliberately excluded our community from its decision to “Regionalize” SCH (transfer hospital ownership to a SF Bay Area corporation controlled by Sutter Health). Community outcry forced Sutter to hold up the transfer of ownership.
2012: County Board of Supervisors requested the hospital Board release its meeting minutes and financial data. Sutter refused. Today, Sutter continues to refuse.
2012: The Del Norte Triplicate prints the following quote: “Meanwhile, another local doctor serving on the hospital’s Board of Directors has called regionalization “a merger that may save the hospital” from financial ruin and closure.”
2013: The headline article in the Curry Coastal Pilot reads: “CEO: Sutter Coast Hospital losing money.”
2013: Hospital Interim CEO announced Critical Access designation is “not being discussed.” (Note that later in 2013, the hospital Board voted to downsize the hospital to a Critical Access facility).
2014: According to members of a City/County/Healthcare District committee, Sutter Health’s Regional CEO claims Sutter Coast Hospital turned profitable in 2014. Really? The Critical Access application has not been approved yet! I thought the hospital needed to Regionalize and downsize in order to stay afloat. Now we learn that’s not true!
As an employee of Sutter for over 16 years, I watched Sutter morph from manager of three local community hospitals striving to become the “employer of choice” in Sacramento to a powerful, monied, extremely successful business machine. While they frequently speak of their “not-for- profit mission,” Sutter’s actions seem more about enhancing profits. Ask Pat Fry, Sutter President and CEO — it was Sutter’s “enhancing profits mission” that made his 53% wage increase possible in 2012!
Sutter’s list of attorneys, executives and consultants are proven capable to ensure whatever Mother Sutter wants, Mother Sutter gets. If Sutter was a private, for-profit corporation, we’d all be impressed. BUT, Sutter Health and SCH are not-for-profit corporations. Their income is based on billions in tax exempt bonds and tax-free operations. According to the IRS tax code, Sutter is required to operate for tax-exempt (charitable) purposes, not to the benefit of any individual. It would seem Mr. Fry’s salary increase, from $2.3 million to $6.4 million between 2007 and 2012, may be inconsistent with a charitable, tax-exempt purpose.
Last month, Sutter Health announced a new corporate structure plan that will collapse five existing Regional corporations into two Divisional corporations in 2015. Here’s a quote from Sutter about the new structure: “Within this new design, we emphasize the total patient experience; how we present externally facing products to our customers; innovation, data and analytics; and a stronger discipline in driving change across our Sutter Health network.” Who knows what that means? I don’t. Perhaps it’s “Sutter Speak” for “we plan to have even greater monopoly power across our network.”
Sutter still holds closed Board meetings, refuses to release meeting notes or financial data, spends hundreds of thousands of tax-exempt dollars on self-funded “independent” studies and advertising campaigns, charges 60% more than average, pays its executives millions, makes conflicting statements, operated SCH in violation of California law, and pays no taxes to the communities it serves.
So what do you think? Is a not-for-profit acting like a for-profit? I think it is. But even more distressing is that our hospital Board continues to discount or acknowledge questions and concerns from over 4,000 area residents . . . friends, neighbors and patients of SCH.
It’s time to end Sutter’s secrecy and restore fair market prices to Sutter’s facilities. If you would like to join this effort, please write me at firstname.lastname@example.org
If you would like to join our city and county leaders, which have already asked the California Attorney General to investigate Sutter Health, please ask the Attorney General to investigate Sutter by writing to:
The Honorable Kamala Harris
Office of the Attorney General, Antitrust Division
300 So. Spring St., Los Angeles, CA 90013
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