Sutter Health to issue $500 million in bonds to fund hospital upgrades

Sutter Health, the 25-hospital, Sacramento, Calif.-based system, is issuing $500 million in bonds to help finance the construction of three replacement hospitals.

The bonds are expected to price next week. The proceeds will allow Sutter to reimburse itself for prior capital expenditures.

Sutter is building two hospitals in San Francisco: one at the corner of Van Ness Avenue and Geary Boulevard, which will have 274 beds and 765,000 square feet, and another adjacent to the current site of St. Luke's Hospital, which will have 120 beds and 237,000 square feet. Both are expected to be completed in 2019.

In 2014 the system opened Sutter Santa Rosa (Calif.) Regional Hospital, an 84-bed replacement hospital with 193,260 square feet.

Sutter's most recent earnings reports showed that its expenses have risen rapidly on higher compensation, supply and drug costs. It also has been realigning the organization into two regional operating units, down from five, and transitioning its hospitals to a single electronic health-record platform from Epic Systems Corp.

Other investments include a health plan and care management initiatives.

Fitch Ratings assigned an AA- rating to the bonds, noting that it views the system's investments favorably.

The San Francisco hospitals are the last facilities that Sutter must upgrade in order to meet California's seismic requirements. The groundbreaking represents the culmination of a 10-year negotiation with the city, Fitch noted in its rating report. The project is expected to cost about $2.6 billion.

Sutter anticipates spending about $4 billion on capital projects over the next three years, and could issue more debt in that time period, Fitch said.

Beth Kutscher

Beth Kutscher is based in Mountain View, Calif., and covers healthcare innovation and digital health. Before joining Modern Healthcare in 2012, she was a content editor and healthcare reporter for the New York-based Mergermarket Group. She previously was news and online editor for Pharmaceutical Executive and deputy news editor and healthcare reporter for PRWeek. She has a bachelor's degree in English from Cornell University.

  Follow on Twitter



Loading Comments Loading comments...