When Hospitals Merge to Save Money, Patients Often Pay More

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Sutter’s operating income surges 806% in first half of 2018


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Sacramento, Calif.-based Sutter Health saw revenues and operating income increase in the six months ended June 30, according to recently released unaudited financial documents.

Here are four things to know:

1. The health system reported operating revenues of $6.3 billion in the first six months of 2018, up 6.5 percent from revenues of $5.9 billion in the same period a year earlier. Sutter said the increase was primarily attributable to higher patient service revenues and premium revenues, which climbed 5.3 percent and 11.3 percent year over year, respectively.

2. Sutter’s operating expenses climbed 4.3 percent year over year to $6.1 billion in the six months ended June 30.

3. Sutter ended the first half of 2018 with operating income of $145 million, up 806 percent from $16 million in the same period of 2017. The health system’s operating margin increased from 0.3 percent in the first half of 2017 to 2.3 percent in the first six months of 2018.

4. After factoring in investment income, which declined due to a drop in value of certain securities and debt extinguishment, Sutter’s net income was $174 million in the first six months of this year, compared to $350 million in the same period a year earlier.



California city anticipates 1,200 jobs spurred by Kaiser, Adventist and Sutter expansions


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The city of Roseville, Calif., anticipates a job boom as healthcare giants Kaiser Permanente, Adventist Health and Sutter Health expand in the area, reports The Sacramento Bee.

The area is expected to see about 1,200 more jobs over several years resulting from the projects.

“We are expecting a significant, 11 percent job growth over the next five years, and these expansions play into that,” Laura Matteoli, the city’s acting economic development director, told the publication.

Roseville, Calif.-based Adventist Health’s plans involve consolidation. According to the report, the system will consolidate its corporate headquarters and other buildings into one 275,000-square-foot building, projected to cost $100 million and slated to open in January. Human resources, IT and strategy departments will be housed in the building. Adventist Health also is building a clinic for its workers in Roseville, vice president of talent strategy Doris Tetz Carpenter told The Sacramento Bee.

Oakland, Calif.-based Kaiser Permanente’s plans in Roseville involve replacing its 90,000-square-foot Riverside Medical Offices with one 210,000-square-foot building that will offer outpatient services, spokesperson Edwin Garcia said.

At Sacramento, Calif.-based Sutter Health, hospital officials are expanding the system’s Roseville hospital’s emergency and intensive care unit, the report states. The 97,000-square-foot building addition is slated for completion in 2020.



California attorney general sues Sutter Health for anticompetitive practices



California’s attorney general has filed a lawsuit against Sutter Health, the largest system in the northern part of the state, claiming the organization’s anticompetitive practices have driven up healthcare prices throughout the region

The charges in the lawsuit (PDF) are “not new to Sutter,” AG Xavier Becerra said at a press conference Friday afternoon. The filing follows a statewide investigation into healthcare costs that revealed wide price disparities between the northern and southern parts of the state.

“Sutter Health is throwing its weight around in the healthcare market, engaging in illegal, anticompetitive pricing that hurts California families,” Becerra said in an announcement. “Big business should not be able to throttle competition at the expense of patients.”

Sutter was able to jack up prices for care at its facilities in several ways, according to the lawsuit:

  • Forcing insurance companies to negotiate with it in an “all-or-nothing” systemwide fashion
  • Blocking payers from offering patients low-cost health plan options
  • Charging extremely high rates for out-of-network visits
  • Limiting price transparency

Karen Garner, a spokesperson for Sutter, said in a statement emailed to FierceHealthcare that the system is “aware that a complaint was filed, but we have not seen it at this time, so we cannot comment on specific claims.”

Garner said that data from the state’s Office of Statewide Health Planning and Development show lower prices at Sutter Health facilities compared to other providers operating in Northern California. Sutter has also kept rate increases for its health plan in “low single digits since 2012,” she said.

“It’s also important to note that healthy competition and choice exists across Northern California,” Garner said. “There are 15 major hospital systems and 142 hospitals in Northern California, including Kaiser Permanente, Dignity, Adventist, Tenet, UC and more. And health plans can elect to include or exclude parts of the Sutter Health system from their networks, and health plans have been doing so for many years.”

Multiple California employers and labor unions have taken action against the health system for anticompetitive practices prior to the AG’s involvement. Sutter came under fire late last year after it was revealed that in 2015 it destroyed 192 boxes of documents that these entities sought as evidence, which the system said was a regrettable mistake.

A California judge said there was “no good reason” for Sutter to have destroyed the documents and said the “most generous interpretation” was that the system was “grossly reckless.”

The AG’s lawsuit also alleges that in addition to driving up healthcare costs in Northern California, Sutter’s actions enriched its executives, and fueled acquisitions that led to further consolidation and funding for its own health plan.

Becerra’s office was spurred to act, according to the announcement, following the release earlier this week of a report from the University of California that detailed how much consolidation has impacted healthcare costs in the state, with northern regions especially affected.

The average cost for an inpatient stay in Northern California was $223,278, compared to an average of $131,586 in the southern regions, according to the report (PDF).

Kathleen Foote, senior assistant attorney general in California who heads the antitrust unit, said at the press conference that taking action against Sutter’s practices should lead to increased competition that benefits both price and care quality.

A video of the full press conference is embedded below:



State of California files suit against Sutter Health over antitrust allegations


Sutter Medical Center in Sacramento

The State of California on Friday filed an antitrust suit against Sutter Health, accusing the Sacramento-based health system of practices that have driven up the cost of care in Northern California.

Sutter is accused of preventing insurance companies from negotiating with the health system on anything but an all-or-nothing basis, which requires insurers to contract with the entire health system, and not just parts of it. The lawsuit also alleges the health system has prevented insurance companies from offering low-cost health plan options and set excessively high out-of-network rates, while restricting the publication of provider cost information for patients’ review.

A Los Angeles Times analysis of medical care costs, which is referenced in the lawsuit, found that hospitals in Northern California’s six most populous counties collect about 56 percent more revenue per patient per day from insurance companies and patients compared to hospitals in Southern California’s six largest counties.

At a news conference this morning, Attorney General Xavier Becerra said the investigation has been in the works for about six years, prompted by complaints from patients and employers about high medical care costs in Northern California.

“It’s time to hold health care corporations accountable,” Becerra said at the news conference. “If we do nothing, it will continue to happen.”

The state attorney general’s office said in a statement that the “excess profits” Sutter took in from its allegedly illegal conduct was put toward “waves of acquisitions, extreme levels of executive compensation and financing its own insurance arm.”

“Much of the increased cost of health care in Northern California is attributable to Sutter and its anticompetitive contractual practices which it has imposed as a result of its market power,” the complaint against Sutter states. “Specifically, Sutter embarked on an intentional, and successful, strategy of 
securing market power in certain local markets in Northern California.”

The lawsuit seeks to enjoin Sutter from continuing its allegedly illegal contracting practices, including all-or-nothing contract negotiations and so-called price-secrecy terms. The lawsuit also seeks to “restore competition” by requiring Sutter to stagger its negotiations between its providers of inpatient services, outpatient services and affiliated physician groups that refer patients to non-Sutter hospitals.

The lawsuit also seeks to stop Sutter from transferring money earned by its health care providers to finance its health plan, Sutter Health Plus.

“We are aware that a complaint was filed, but we have not seen it at this time, so we cannot comment on specific claims,” said Karen Garner, a spokeswoman for Sutter, in an emailed statement. “It’s important to note that publicly available data (from the OSHPD) show that on average, total charges for an inpatient stay in a Sutter hospital are lower than what other Northern CA hospitals charge.” The OSHPD is the Office of Statewide Health Planning and Development.


Alta Bates emergency center will close, but Sutter Health says not as soon as people think


People exit and enter Alta Bates Medical Center in Berkeley, Calif., on Friday, Feb. 2, 2018. Legislators, city officials and health care professionals will continue their public campaign against the closure of emergency care services at Alta Bates Medical Center, even as its parent organization, Sutter Health, insists it will keep the center open for the next decade, dispelling what it says is misinformation that has circulated about the hospital closing in 2019. (Ray Chavez/Bay Area News Group)

BERKELEY — Hospital services at Alta Bates Medical Center’s Berkeley campus will end, but not as soon as people think, company officials said this week.

In an ongoing debate over the future of emergency services at the campus, legislators, city officials and health care professionals will continue their public campaign against the closure while the hospital’s parent organization Sutter Health insists it will keep the campus open for at least a decade.

Nurses and local leaders will gather for a community forum Saturday on the Ed Roberts campus, calling on Sutter Health to keep Alta Bates open as a full hospital with inpatient and emergency care. Sutter Health, citing a California law that requires hospitals to complete seismic upgrades by 2030, announced in 2016 its plans to move inpatient care and emergency services from the Alta Bates site in Berkeley to an expanded, retrofitted Oakland campus.

This week, Sutter Health released a statement saying the emergency room and inpatient hospital services provided at the Alta Bates campus will remain in Berkeley until they are available in full at the Summit Medical Center campus in Oakland, which could take up to 10 years to build.

The memo was intended to clarify what Sutter Health leaders say is misinformation about the timing of the Alta Bates closure. While many people thought the hospital’s emergency care and inpatient services could close as early as 2019, the organization said this week it will be a decade before that happens.

“The memo is intended to highlight our commitment to community and do this gradually,” said Alta Bates Summit CEO Chuck Prosper by phone on Friday. “The last thing we want to do is create a shock.”

But for many health care workers and community advocates, the memo was not reassuring. They do not want the hospital and emergency room to close at all.

“Even in its own statement, Sutter admitted its plan is not to retain Alta Bates as a full service acute care hospital, and that it fully intends to force patients from Berkeley to Vallejo along the densely populated I-80 corridor to travel even farther to Oakland, further delaying life-saving emergency treatment,” said an email message from organizers from the California Nurses Association and Save Alta Bates Hospital campaign about Saturday’s public forum.

Sutter Health plans to enlarge its Oakland campus with a second building and will build urgent care clinics and outpatient services in Berkeley either at its Alta Bates campus on Ashby Avenue or the Herrick campus on Dwight Way.

Rochelle Pardue-Okimoto, a registered nurse at Alta Bates and El Cerrito’s mayor pro tem, said she’s concerned about the impact on care across hospitals in the area if Alta Bates’ acute care services close. She said her colleagues at hospitals around the East Bay have already seen busier emergency rooms following the closure in 2016 of Doctors Medical Center in San Pablo after years of financial loss. That hospital recorded about 33,000 visits per year, and its closure has left the area between Vallejo and Berkeley with only one hospital — Kaiser Permanente in Richmond.

“If you concentrate all the emergency care in Oakland, it’s just too many people,” Pardue-Okimoto said. “There will be increased wait times.”

According to the most recent data available online from the Office of Statewide Health Planning and Development, the Alta Bates campus had 45,336 emergency room visits in 2016.

When asked on Friday about how Sutter Health plans to ensure that people throughout the area can access emergency care, Prosper said he believes that offering more robust outpatient services could help cut down on the number of emergency room visits.

“We believe today that people come to the emergency room often not needing emergency care,” he said. “Some people come for primary care or other services because they do not have other access to medical care.”

He could not specify what percentage of emergency visits include people seeking non-emergency care, but said Sutter Health is interested in finding more information about that as it plans for the future. He also said that the movement of people who seek care is more “fluid” than people might believe, noting that people already “are routinely leaving Berkeley” to go to hospitals in Oakland or elsewhere.

Sutter Health officials have said they have no choice but to eventually close the acute care services at Alta Bates, as almost all of the Berkeley campus cannot be retrofitted to meet new state seismic standards for inpatient hospital care, and rebuilding would be too expensive.

Berkeley Mayor Jesse Arreguin, who started a task force to discuss the potential impacts of closing Alta Bates said there has been a lack of transparency around the closure of the hospital that makes it difficult to work with Sutter Health on future planning. While Sutter Health executives have said the buildings are not seismically safe, city officials do not know, for example, how much it would cost to retrofit or rebuild them.

“I believe Sutter needs to either save the hospital or sell it,” Arreguin said in an interview Friday. “We cannot make the East Bay a hospital desert.”

He said city officials have met with other hospital operators to discuss options for building another hospital with acute care services. But short of that happening, he hopes Sutter Health will work with the city to develop a plan.

“While it’s reasurring that Sutter said they were not closing next year, they did say they were going to close in 10 years,” Arreguin said. “We are still concerned with Sutter’s plans to close the hospital (at all), which they reaffirmed.”


Sutter will shift 10,000 Anthem Medi-Cal enrollees to community health centers


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In Sacramento and Placer counties, roughly 10,000 adult Medi-Cal enrollees with Anthem Blue Cross are learning this summer that Sutter’s primary-care doctors will no longer see them.

Instead, those patients are being shifted to primary-care doctors at community health centers such as Sacramento’s WellSpace Health or Auburn’s Chapa-De Indian Health, said Dr. Ken Ashley, the medical director for primary care at Sutter Medical Group. He said the change in providers will allow the patients to access more services.

“Some of the things that the (community health centers) can provide with the funding that they are receiving are things that sometimes we struggle to find for our Medi-Cal patients, things like optometry and dental, behavioral medicine,” Ashley said. “I feel like these patients are finally going to receive things I could not provide as their primary-care doctor. I’m OK with our partners helping to take care of these patients.”

Sutter, Dignity Health, UC Davis and other providers have all contributed funding and expertise to expand the network of community health centers, more formally known as federally qualified health centers.

The so-called FQHC’s have long been the primary-care delivery network for uninsured, low-income people across the country, but Sacramento did not have a strong network of the centers until the Affordable Care Act set aside funding to help them grow to meet the needs of an expanding Medicaid population.

That flood of new patients has swamped many primary-care providers and has made it harder for all patients to get appointments through commercial providers, Ashley said. Meanwhile, in meetings with the leaders of local FQHC’s, he and other leaders were hearing how those organizations had expanded services, lengthened hours and had capacity for more patients.

About a year ago at one of the meetings, Ashley said, all the attendees began to feel that, if they could shift Anthem’s adult Medi-Cal enrollees, they would improve the health of the primary-care delivery system for a broad set of customers.

“We’ve been having a difficult time getting all our patients in at the time they would like, where they would like,” Ashley said. “This is one more step to try to help allow the rest of the community to help us take care of all these patients.”

Jonathan Porteus, the CEO of Wellspace Health, also leads the Central Valley Health Network, a group of health centers up and down the Central Valley that manage almost 3 million visits a year. He said that Anthem began earlier this year investigating whether the FQHC’s truly had the capacity to absorb the adult Medi-Cal patients served through Sutter.

“We were notified – we being the federally qualified health centers – that this change was coming and that there was a keen interest to make sure that it was smooth, that people would not be left without access,” Porteus said. “The wisdom of Sutter and others has been to help our region have a network of federally qualified health centers, a true blanket of care for the first time ever. This is one of the early tests.”

Porteus said he knows that people have questions about whether the quality of care at his centers is on par with what they would receive from primary-care doctors. He said he welcomes those questions because they give him an opportunity to tell the WellSpace story.

“The Joint Commission, which is the accrediting body that accredits hospitals and shuts them down if they don’t think they’re good enough, has accredited us to be a patient-centered medical home, has accredited all our behavioral health,” Porteus said. “This is a standard many of our commercial colleagues in this community don’t have. If you went into some of these primary-care practices and asked them if they had Joint Commission accreditation for ambulatory care, they will tell you ‘no.’”

There will unquestionably be upheaval in this process for both doctors and patients, Ashley said.

Sutter’s pediatricians will continue to provide primary-care to Medi-Cal-enrolled children covered by Anthem Blue , and the insurer’s Medi-Cal enrollees also still will be able to access Sutter specialists. Sutter primary-care doctors will continue to see anyone on Regular Medi-Cal recipients whose medical providers are paid directly by the government.