Health Care Costs
With health insurance premiums continuing to rise, economists, the news media and others are sharing wide-ranging points of view about factors contributing to the overall cost of care.
At Sutter Health, we strive to provide patients with the safest, highest quality and most accessible care—while doing our part to make sure our services are affordable. In other words, we commit to providing great value—as opposed to being the least expensive provider of any particular service.
How does one measure value in health care? Is it the cost of a particular hospital service—like a diagnostic procedure? Or is it the total cost of a stay in a hospital where caregivers commit to providing patients with the right care at the right time, often resulting in a shorter and less-costly overall hospital visit? We believe the best value is the least costly way to help you stay healthy and out of the hospital, and to provide safe, time-efficient and cost-effective services should you ever need to be in our hospitals or other facilities.
Of course we also know high-value organizations must offer services at a fair price. Several years ago we recognized that Sutter Health needed to step up to do our part in making quality health care more affordable. We’ve made significant strides by holding our annual overall average price increases for health plans to single digits in the past several years. However, we still have more work to do to reach our affordability goals for patients.
Read on to see how we’re transforming and redesigning care management processes and approaches with an eye toward holding the line on costs while improving care.
- Quality Leadership
- Our Commitments
- Focusing on Affordability
- Questions & Answers About the Cost of Care
- Related Information
Quality Leadership
We deliver comprehensive and personalized care through our integrated delivery network over a broad continuum—including surgery centers, physicians, outpatient care, general and specialty hospital care, and home health and hospice services.
As a result of our integrated approach, we’ve raised the bar even higher on health care quality.
- Sutter Health ranked as California’s leading health system based on quality and patient satisfaction by the Lewin Group, a national health policy research and management consulting firm.
- Five Sutter Health-affiliated and aligned physician groups are rated among the highest performing in the state by the Integrated Healthcare Association.
- Ten Sutter Health hospitals received the prestigious “Certificate of Excellence” from the California Hospital Assessment and Reporting Task Force (CHART) in July 2010. Only 40 California hospitals received this award.
- Sutter hospitals perform in the top 10 percent on national quality indicators measured by the Centers for Medicare and Medicaid Services.
- An independent 2006 study by the respected Dartmouth Medical School Center for the Evaluative Clinical Sciences found that doctors and hospitals in Sutter Health’s Sacramento Sierra Region are among those providing the nation’s most efficient and consistent quality care.
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Our Commitments
Not surprisingly, building a high-quality, integrated regional health care network like ours requires a considerable ongoing investment.
- Sutter Health invested over $6 billion on advanced patient care technology and on facility construction and improvements necessary to meet the needs of our communities and California’s seismic safety requirements.
- To ensure our communities have an adequate supply of doctors close to home, we’ve recruited hundreds of physicians and established conveniently located care centers in scores of cities and towns all over Northern California.
- We created the Sutter Medical Network, in which physicians share a common commitment to provide consistently exceptional and affordable health care—when, where and how patients want to receive it.
- Any comparison of hospital pricing in California must take into consideration the size of the provider’s seismic obligation. A state report shows Sutter Health as the health care provider with the greatest likelihood of meeting California’s seismic regulations on time.
- Sutter Health built or replaced hospital facilities in Crescent City, Roseville, Davis, Sacramento, Jackson, Modesto, Santa Cruz and Novato. Three large hospital construction projects are underway in Castro Valley, Burlingame and Sacramento. Three more (in Oakland, San Francisco and Santa Rosa) are in approval stages.
- Sutter Health partners and contributes to more than 500 community-based organizations to help meet the broader needs of our communities. In 2009, Sutter Health’s total community benefit investment was $667 million.
- In 2009, Sutter Health provided an average of $2 million every week—or $104 million total—in free health care services for patients not able to pay.
- Together, Sutter Health hospitals serve more MediCal patients in our Northern California service area than any other health care provider.
- We have fully funded our employee pension plan to ensure a secure retirement for thousands of employees. This sets us apart from other employers.
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Focusing on Affordability
While quality and access will always be top priorities for Sutter Health, we also continue to implement more efficient ways to deliver our services, conserve our limited resources and spend wisely. Sutter Health’s integrated approach has increased the quality of care provided by our physicians and hospitals and will continue to help make our services more affordable. In 2009 we eliminated over $100 million from our cost structure to help reduce health insurance premium increases. We hope the insurance companies pass these savings along to their members.
Although some people measure the cost of care solely in terms of a single specific service, we believe it’s important to consider a patient’s total cost of care. When doctors and hospitals work together in the same organization, it helps them spend less per patient on the total cost of care by developing best care practices and reducing unnecessary duplication of services, while providing seamless access and treatment for patients.
All across Sutter Health, we’re transforming and redesigning care management processes and approaches to help hold the line on cost and improve patient care. For example:
- Our hospitals are establishing seven-day-a-week (versus traditional Monday-Friday) care management and supportive clinical services to make sure patients don’t have to wait over a weekend for their care. If providing weekend physical therapy will help a patient heal better and faster, and return home sooner (thus avoiding a costly and unnecessary overnight stay), it’s our responsibility to provide that care.
- To prevent unnecessary, risky and costly hospital readmissions, we’re improving post-hospital discharge care to help ensure patients take their medications and have follow-up doctor appointments scheduled before leaving the hospital.
- We developed our own sophisticated analytical software that analyzes physicians’ individual approaches to treating certain medical problems in order to develop doctor-designed best practices that improve outcomes and help keep services affordable.
It’s important to keep in mind that health insurance premiums in California stand at or below the national median; Californians pay less than half what consumers in some other states pay.
We’ve made progress on our affordability goals, and we continue to seek better and more efficient ways to deliver our services, conserve our limited resources and invest wisely in our people, technology and facilities with the goal of continuing to be recognized among the highest quality providers of health care.
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Questions & Answers About the Cost of Care
Some health insurance executives claim and some news media have recently reported that large provider systems like Sutter Health make health care more expensive by demanding higher-than-average reimbursement from insurers. What is Sutter Health’s perspective?
Sutter Health believes its reimbursements from insurers are fair, and reflect the high-quality and readily available health care that our doctors and hospitals provide to patients. Insurers contract with us for services of their own free will. And there’s plenty of competition in Northern California—from Kaiser, Catholic Healthcare West, Adventist Health, John Muir and the UC hospitals, and from many independent hospitals and physicians.
Sutter Health has held annual overall average price increases for commercial health plans to single digits in the past several years. Of course we have no control over whether health plans reflect our single-digit rate increases in what they charge consumers. Recently some health plans announced premium increases in excess of 20 percent—and large profits.
Negotiated prices with insurance companies help fund Sutter Health’s commitments to ensuring our communities have adequate access to physicians, as well as fund our commitments to quality, safety, convenience and free care for the poor. While we continue to focus on meeting our community commitments over the long term, the for-profit health insurance companies focus on short-term profitability goals for their stockholders. For them, that means spending less for patient care, which represents the largest part of their budgets. The U.S. Congress found that the large for-profit insurers paid on average only 74 cents per dollar of premium from individual policies to doctors, hospitals and other providers, keeping the other 26 cents for their costs of administration and profits.
Certain health insurance plans maintain web-based pricing tools for members. Some of these tools post prices that the plans pay doctors and hospitals. Why hasn’t Sutter Health participated in these tools
We want to provide consumers with fair and reliable information that is easily understood. Although several insurance companies have begun providing what they believe to be comparable data on prices between providers, Attorneys General of multiple states have disagreed with the approaches taken. Until they work the bugs out, we prefer not to add our data to the postings.
We strongly believe a patient is best served by talking with a professional who can walk them through their personal health care needs, treatment options/choices and the estimated treatment costs of those options. Staff members at our hospitals and clinics regularly work with patients to answer questions about their estimated costs, and we plan to make estimates of our costs for common procedures available on our web site as soon as we can reliably do so.
Why are health care costs increasing at such a high rate?
The government pays less than the cost of care, so any inflation in health care costs must be borne by those who actually pay a market price. Since government-sponsored patients consume about 50 percent of the care in a typical health system, the cost shifted to everyone else is double what it would otherwise be. For example, if inflation is 4 percent, a health system’s prices have to go up 8 percent to cover the increased costs of caring for government-sponsored patients when the government keeps its payments to doctors and hospitals arbitrarily low. Improvements in technology, drugs, and seismically-safe facilities all tend to drive the cost up faster than in other industries.
Health care providers, especially those like Sutter Health that invest in their communities, have significant financial commitments. For example, we are replacing paper records with electronic systems and replacing hospitals whose per-bed construction costs have more than doubled, from $1 million about a decade ago to over $2.5 million today. The other big cost driver is the success modern medicine has had in saving lives. Health problems that were once untreatable can now be treated, so we’re seeing more and more people living with chronic conditions. We’re glad to play part in saving and extending patients’ lives, and we all need to be mindful that the costs of chronic care continue to be part of the nation’s overall health care bill.
How will health insurance reform impact your costs and affordability goals?
Our affordability imperative becomes even more important given cuts in reimbursement under health care reform. For Sutter-affiliated physicians and hospitals, Medicare cuts will likely total an estimated $124 million each year for the next 10 years – adding up to more than $1 billion in reduced Medicare reimbursement.
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Related Information
Sutter Health 2009 Financials
Sutter Health 2009, Year in Review
Employees dedicated to helping make health care more affordable
Emergency room staffer Ryan Davis, dubbed "The Pen Guy" by his colleagues, had a simple idea that led to thousands of dollars in cost savings.
Louis Luis, a Supply Chain Director for Sutter Health's Central Valley Region, worked to streamline the purchase of artificial joints and cardiac rhythm devices leading to millions of dollars in savings.
Diane Brown used a creative approach to business card design that is expected to reduce purchasing expenses by more than $160,000.
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