Sutter Health, a 24-hospital system based in Sacramento, Calif., has continued to improve its operating performance through the first nine months of the year, cutting expenses to overcome nearly flat revenue growth.
Admissions across Sutter's hospitals continued to decline, decreasing 4.2% in the third quarter. However, the drop was offset by a 2.3% increase in outpatient revenue. Outpatient revenue accounted for 37.1% of total revenue in the third quarter compared with 36.2% in the prior-year period.
Located in a state that expanded Medicaid eligibility to adults up to 138% of the federal poverty level, Sutter reported that its provision for doubtful accounts fell 50% in the first nine months of the year compared with the same period in 2013. Its bad debt and charity-care write-offs also decreased by an undisclosed amount.
Hospitals in California are still awaiting CMS approval for an extension to the state's provider fee program, which levies a tax on hospitals that is then matched with federal dollars and returned to facilities that treat a large number of low-income patients.
Sutter did not book any revenue from the program but also did not incur any expenses associated with the fee.
In total, Sutter booked an operating surplus of $224 million (PDF) on $7.2 billion in revenue during the first nine months of the year compared with an operating deficiency of $18 million also on $7.2 billion in revenue during the prior-year period.
The system cut costs for purchased services and other expenses, while salary and benefits increased a modest 3%.
However, the system's investment portfolio did not perform as well as it did in the first nine months of 2013. Therefore, its total surplus was $228 million in the first nine months of 2014 compared with $198 million in the year-ago period.
Moody's in July lowered Sutter's outlook to negative from stable, citing its poor performance in fiscal 2013, high debt load and anticipated capital spending of $5 billion over the next five years.
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