Myth Busting Sutter Health

Sutter Health is a tax exempt public charity. The tax code requires Sutter to operate solely for community benefit. Indeed, for decades Sutter Health served to manage community owned hospitals which were governed by community Boards of Directors. In 2010, Sutter Health's role changed when it implemented a statewide merger effort to transfer ownership of the community hospitals into large multi-hospital corporations. Now, Sutter Health controls two massive "Divisions" containing nearly 40 hospitals and surgery centers. The result? Sutter Health's monopoly allows it to charge up to 60% more than market rates for healthcare. Sutter executive salaries more than doubled during its merger.

Who pays Sutter's executives? You do. Whether in the form of higher health insurance premiums, lower wages (as more employer dollars are used for employee health insurance), or direct payment of Sutter's inflated charges for care, everyone in California is impacted by Sutter Health's monopoly.

Today, only one Sutter hospital in California remains locally owned — Sutter Coast Hospital ("SCH") in Crescent City. This article tells the story of how our town fought off Sutter's attempts to transfer hospital ownership outside of our community. We debunked Sutter's false claims, one by one, until Sutter agreed to leave us out of its two "Divisions." We know Sutter Health will be back, but for now, SCH is locally owned and governed.

Sutter employed four tactics in its takeover attempt:

Threats to close the hospital if the local hospital Board did not comply with Sutter's corporate plans. For years, Sutter executives claimed SCH needed to transfer ownership to Sutter's regional corporation, and to downsize to a Critical Access facility (which would allow SCH to triple its charges to Medicare), in order to survive. Sutter's threat to close the region's only hospital nearly worked. In 2011, the Sutter Coast Hospital Board (which contains three highly compensated Sutter employees) voted to transfer hospital ownership to Sutter's multi-hospital corporation. But protests from every elected body and thousands of residents, and talk of eminent domain against Sutter by the Del Norte Healthcare District, forced Sutter to put the merger on hold.

False claims of financial losses. Former Sutter Coast CEO Linda Horn stated 2008 was the last year Sutter Coast was profitable. Sutter's paid consultants (the Camden Group) predicted heavy losses from 2014 to 2018 unless the hospital converted to Critical Access. Now we know the truth: Sutter's claims were all myths.

IRS filings confirm Sutter Coast made over $7 million in profits combined in years 2009 and 2010. That's on top of many millions in profits from 1985 through 2008. Sutter's predictions of losses from 2014 to 2018 are also proving false. According to current hospital CEO Mitch Hanna, Sutter Coast generated a "healthy profit" in 2014. How healthy? $10.8 million in 2014, with similar profits predicted for 2015, when Mr. Hanna's annual salary was $840,000. So, without downsizing to Critical Access, Sutter Coast's profits and Mr. Hanna's salary both appear quite "healthy."

But what of the health of our community? In 2014, Sutter Coast transferred 872 patients out of our county for medical care.5 Sutter Coast outsourced local hospital jobs to Sutter's regional service center, cut hospital staff, and has become a revolving door for physicians leaving the county.

Secret meetings. Sutter claim: "We act openly and truthfully in everything we do." Here are some facts: Sutter only released "select information" from its self-funded "independent" hospital study. Sutter muted the telephone lines during its internet-only public presentation of the study, so audience members could not hear questions from other participants. Sutter holds closed Board rooms, dismissed a dissenting Director from the Board room, and censured our local hospital Chief of Staff for allegedly releasing Board meeting minutes, while providing no evidence to support the allegation.

Broken promises. Sutter, a public benefit company, has hosted no public meetings during their four your conflict with the community. During a Town Hall meeting on February 17, 2015, Sutter Coast CEO Mitch Hanna, unable to answer many questions from the audience, stated he would return within 30 days to discuss hospital finances. Ten months later, Mr. Hanna has failed to appear. Sutter Health executives also ignored official record requests from our city and county leaders.

Sutter's tax exemption means our county, state and federal governments cannot collect hundreds of millions in yearly tax revenues which "for profit" companies must pay. Does Sutter deserves its tax exempt privilege and above market charges for health care? You be the judge.

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Sutter's violations of California law are too numerous to detail here. If you would like to help address Sutter's misconduct and its impact on California healthcare costs, please join our city and county leaders, who have already asked Attorney General Kamala Harris to investigate Sutter Health, by writing to:

The Honorable Kamala Harris
Attorney General of California
1300 "I" St. Sacramento, CA 95814-2919

(916) 445-9555

(Bill Gray is an attorney residing in Crescent City.)