April 10, 2010

The Sutter Health network of doctors, hospitals and other health care service providers announced its financial performance for 2009. Sutter Health’s combined 2009 systemwide income from the day-to-day operations of its hospitals, care centers and other services was $453 million (operating margin of 5.2 percent), compared to $461 million in 2008 (operating margin of 5.6 percent). Sutter Health also posted a gain of $244 million in investment income and changes in net unrealized gains and losses from investments classified as trading in 2009, compared to a loss of $274 million in 2008. Total income for 2009 was $697 million, compared to $187 million in 2008. The system’s total 2009 operating revenues were $8.8 billion, compared to $8.3 billion in 2008.

As a not-for-profit health care organization, Sutter Health reinvests its earnings into programs, services, technology and facilities in the communities it serves. The system invested $830 million in capital projects in 2009. Major activities included construction of replacement hospitals in Burlingame, Castro Valley and Sacramento, new outpatient facilities in Stanislaus and San Joaquin counties and installation of an electronic health record at Mills-Peninsula Health Services in Burlingame and in physician care centers around the greater Bay Area. Design and entitlement processes for seismic-replacement hospital facilities in Oakland and San Francisco are moving forward, as are approvals to build a new replacement hospital in Santa Rosa. Sutter Health plans to increase its capital spending in 2010 to approximately $1 billion.

During 2009, Sutter provided record levels of care and services for the poor and underserved and benefits for the broader community. Sutter Health’s 2009 commitment to community benefit was a record $667 million, compared to $597 million in 2008. This amount includes the cost of providing charity care, the unpaid costs of participating in Medi-Cal, and investments in medical research, health education and community-based public benefit programs such as school-based clinics and prenatal care for patients.

Sutter Health’s commitment to providing charity care has continued to grow, reaching an average of more than $2 million each week in 2009. Sutter Health’s traditional charity care contribution increased from $96 million in 2008 to an all-time high of $108 million in 2009.

“Given the economic challenges of 2009, Sutter Health was fortunate to have essentially maintained its operating performance from the previous year while achieving record levels of clinical quality,” said Sutter Health President and CEO Pat Fry. “The market recovery in 2009, combined with our prudent investment strategies, resulted in a sizable gain from investments. However, the 2009 gain didn’t completely offset the investment-related losses of 2008,” Fry added.

Sutter Health’s financial performance enabled the organization to jump-start certain capital projects that might otherwise have been delayed, according to Fry. For example, Sutter Health announced in March that it plans to invest $400 million over the next five years to complete the installation of an electronic health record at its Northern California hospitals.

Fry added that Sutter Health ended the year with a fully funded pension plan for employees.

Sutter Health 2009 Financial Performance

Dollars in millions	2009	2008
Operating Revenues	8,772	8,270
Operating Expenses	8,319	7,809
Operating Income	453	461
Investment Income	11	11
Change in net unrealized gains/losses	233	(285)
From investments classified as trading
Income	697	187
Capital Investment	830	1,027

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