Sutter Health, a 25-hospital system in Sacramento, Calif., is on stronger financial ground this year as it continues to diversify its revenue streams and treats additional paying patients.
The system reported this week that it nearly doubled its operating margin in the first quarter of the year as admissions increased and more patients had insurance.
Like all hospitals in California, Sutter also benefited from the return of the state's provider fee program. The program, which was on hold last year while waiting for CMS to approve its extension, provides additional payments to hospitals that treat low-income Medi-Cal patients.
Sutter reported an operating surplus of $101 million (PDF) on nearly $2.7 billion in revenue for the period ended March 31. In the prior-year period, its operating surplus was $47 million on $2.4 billion in revenue. Its operating margin increased to 3.8% from 2%.
The system also disclosed that it entered into a $3 million settlement in May with the U.S. Justice Department to resolve an investigation into whether it followed the appropriate guidelines when using implantable cardioverter defibrillators in Medicare patients. The investigation covered the period from October 2003 to June 2010.
Sutter also received notice last February that the government is investigating certain undisclosed financial arrangements with physicians, dating back to January 2006. That investigation remains ongoing.
At an investor conference last month, Sutter said it is seeing greater revenue from its medical foundations, home-care services and ambulatory surgery center joint ventures, which are diversifying its revenue mix (PDF). About 37% of its 2014 revenue came from its medical foundations, physician services and joint ventures, up from 31% the previous year.
In its hospitals, however, first-quarter admissions were essentially flat year over year, while emergency department visits jumped 13.4%. Outpatient revenue made up 37.1% of the total, up from 36% in the first quarter of 2014.
Sutter is planning to spend about $4.6 billion through the end of 2019 on capital projects, including making sure that its facilities are compliant with California's earthquake building codes. More than half of its hospitals are either compliant or are eligible for extensions dating to 2030, the system said in its earnings report. Three hospitals are currently in the construction phase, and another $2 billion will be spent bringing them into compliance.