Sutter Health continued to see rapid growth in outpatient visits last year, while admissions remained flat. Those trends, along with rising expenses across the board, led to a pinched operating margin for the 25-hospital system.
The Sacramento, Calif.-based hospital group reported an operating surplus (PDF) of $287 million on nearly $11 billion in operating revenue for the year ended Dec. 31. In comparison, it saw an operating surplus of $419 million on $10.2 billion in operating revenue in the previous year.
Its operating margin declined to 2.6% from last year's 4.1%,
Salary and benefit costs increased 8.8% year over year, purchased services were up 11.2% and supply costs grew 11.7%.
Like many of its peers, Sutter Health's business is transforming from inpatient to outpatient care. Sutter's medical foundations added five facilities and 53 physicians. Outpatient visits there increased 5.1%.
At the same time, inpatient admissions at its acute-care hospitals were virtually unchanged year over year, though patient days increased and boosted its average occupancy rate to 58.9% from 2014's 54.2%. Emergency room visits increased 8.8%.
Self-pay write-offs continued to decrease as more people in the state gain insurance coverage.
Sutter did not disclose much information on its 2-year-old insurance plan, Sutter Health Plus, but the subsidiary reported a $28 million loss from operations on $77 million in revenue. The health maintenance organization has 38,000 members in 14 Northern California counties.
The system earlier this year issued about $500 million in new debt to help pay for capital expenditures. Moody's Investors Service rated the bonds Aa3 with a stable outlook, citing Sutter's size and scale in its Northern California markets but also its more modest operating performance and cash balances compared to similarly rated groups.