Ques­tions loom over Sut­ter Health’s com­mu­nity ben­e­fit spend­ing

Modern Healthcare - - Margin Vs Mission - By Tara Ban­now

EVER SINCE JESSE ARREGUÍN learned Sut­ter Health was con­sid­er­ing clos­ing its Berke­ley hos­pi­tal ahead of a 2030 dead­line to meet Cal­i­for­nia’s seis­mic stan­dards, the city’s mayor has led a cam­paign to save the hos­pi­tal.

The or­deal has raised a big­ger ques­tion in Arreguín’s mind: Is it time to re­think whether the mas­sive, not-for-profit health sys­tem de­serves its tax-ex­empt sta­tus? He asked Sut­ter for spe­cific in­for­ma­tion on its com­mu­nity ben­e­fit spend­ing in Berke­ley, but said nei­ther he nor the city coun­cil has got­ten an an­swer.

“We want to bet­ter un­der­stand, ‘What com­mu­nity ben­e­fits are they pro­vid­ing?’” Arreguín said. “‘How do they ben­e­fit the peo­ple of Berke­ley?’ and, ‘Is the level of com­mu­nity ben­e­fit com­men­su­rate to their tax-ex­empt sta­tus?’”

There’s no deny­ing the wide­spread, tan­gi­ble ef­fects Sut­ter’s health im­prove­ment work has on the com­mu­ni­ties it serves. The 24-hos­pi­tal Sacra­mento, Calif.-based health sys­tem funds respite fa­cil­i­ties for home­less pa­tients dis­charged from hos­pi­tals. It sup­ports free clin­ics, health ed­u­ca­tion pro­grams and food banks.

But Sut­ter’s quest to grow its po­si­tion in North­ern Cal­i­for­nia’s con­sol­i­dated mar­ket and cut costs has ig­nited bit­ter dis­putes in some ar­eas, where con­cerns about trans­parency, prices and gover­nance have prompted elected of­fi­cials like Arreguín and oth­ers to ques­tion whether the not-for-profit health sys­tem spends enough on com­mu­nity ben­e­fits to jus­tify its tax-ex­empt sta­tus.

It’s vir­tu­ally im­pos­si­ble to learn how Sut­ter ar­rives at the com­mu­nity ben­e­fit spend­ing fig­ures it re­ports each year, a sit­u­a­tion that un­der­scores how piece­meal and full of holes the com­mu­nity ben­e­fit re­port­ing process is over­all. It also lets all not-for-prof­its veil their ac­tual spend­ing.

A Sut­ter spokes­woman de­clined to break down its spend­ing on broader com­mu­nity ben­e­fits—health ser­vices, screen­ings, free clin­ics, train­ing health pro­fes­sion­als and

We want to bet­ter un­der­stand, ‘What com­mu­nity ben­e­fits are

they pro­vid­ing?’ ‘How do they ben­e­fit the peo­ple of Berke­ley?’ and, ‘Is the level of com­mu­nity ben­e­fit com­men­su­rate to their tax-ex­empt sta­tus?’ ” Jesse Arreguín Mayor Berke­ley, Calif.

re­search—be­yond the $124 mil­lion Sut­ter re­ported hav­ing spent last year. The health sys­tem files roughly 30 dif­fer­ent 990 tax forms—the doc­u­ments where it re­ports such spend­ing to the fed­eral gov­ern­ment—but adding up the com­mu­nity ben­e­fit ex­penses from the tax forms does not equal the num­bers in its an­nual re­ports.

Of Sut­ter’s to­tal $612 mil­lion in com­mu­nity ben­e­fit in 2017, $334 mil­lion was a non­cash ex­pense, the es­ti­mated cost of un­re­im­bursed care through Med­i­caid, and just $65 mil­lion was at­trib­uted to the cost of char­ity care.

Know­ing Sut­ter

Years of work­ing for Sut­ter, in­clud­ing a stint as a hos­pi­tal di­rec­tor, have taught Dr. Greg Dun­can, chief of surgery at Sut­ter Coast Hos­pi­tal in Cres­cent City, not to ac­cept the health sys­tem’s num­bers at face value.

“The first thing we have to know is whether the num­bers are ac­cu­rate, and with Sut­ter we don’t know that,” he said .

Pol­i­cy­mak­ers, re­searchers and ad­vo­cates have in re­cent years em­pha­sized what they say is hos­pi­tals’ in­creas­ingly vi­tal role in im­prov­ing the broader health of the pop­u­la­tions they serve, a role that ex­tends be­yond pro­vid­ing health­care ser­vices to hous­ing, nu­tri­tious food and ed­u­ca­tion. The amounts Sut­ter re­ports hav­ing spent on such ini­tia­tives has fallen slightly as a ra­tio of ex­penses in the past two years, even as it says it has saved hun­dreds of mil­lions of dol­lars dur­ing that time on un­re­im­bursed Med­i­caid care.

“It just begs the ques­tion: If you’re not spend­ing it on the com­mu­nity, what are you spend­ing it on?” said An­thony Galace, health eq­uity di­rec­tor for the Green­lin­ing In­sti­tute, an Oak­land, Calif.-based not-for-profit or­ga­ni­za­tion ded­i­cated to racial and eco­nomic jus­tice.

Still, in Lake County, which has the worst over­all health out­comes in the state, ac­cord­ing to County Health Rank­ings, health ad­vo­cates say Sut­ter has in re­cent years taken a more ac­tive role in as­sess­ing the is­sues and help­ing where needed. “You can usu­ally count on Sut­ter for some sort of sup­port,” said Lisa Mor­row, ex­ec­u­tive di­rec­tor of the Lake Fam­ily Re­source Cen­ter, a not-for-profit or­ga­ni­za­tion that pro­vides a va­ri­ety of health and so­cial ser­vices.

Patty Bruder, ex­ec­u­tive di­rec­tor of North Coast Op­por­tu­ni­ties, a not-for-profit group that ad­vo­cates for low-in­come and dis­ad­van­taged in­di­vid­u­als in Lake County and be­yond, said Sut­ter has taken an ac­tive role in work­ing with home­less in­di­vid­u­als and high health­care users.

“We’ve worked with the hos­pi­tal some, but we’re learn­ing to work a whole lot closer,” she said. “That’s been one of the real ben­e­fits of some of the changes in our health­care sys­tem: They have nudged hos­pi­tals to see that a health­ier com­mu­nity is good for all of us, rather than just mak­ing sure you have pa­tients.”

Ques­tions over trans­parency

Sut­ter’s rep­u­ta­tion in some com­mu­ni­ties has been clouded by a per­ceived lack of trans­parency as it con­sol­i­dates gover­nance across hos­pi­tals and con­tem­plates clos­ing fa­cil­i­ties to avoid costly up­grades. And the health sys­tem has spent more than a decade fight­ing law­suits al­leg­ing it over­charges for ser­vices. Cal­i­for­nia At­tor­ney Gen­eral Xavier Be­cerra sued Sut­ter in March al­leg­ing its “all or noth­ing” ap­proach to con­tract­ing with in­sur­ers is an­ti­com­pet­i­tive and drives up prices.

In Cres­cent City, elected of­fi­cials and res­i­dents have sparred with Sut­ter for years over what they say are ex­or­bi­tant charges at Sut­ter Coast Hos­pi­tal rel­a­tive to nearby hos­pi­tals. To that end, the lo­cal health­care dis­trict board has been try­ing un­suc­cess­fully for months to hold reg­u­lar meet­ings with the hos­pi­tal’s board. The dis­trict board also hasn’t got­ten fi­nan­cial data it re­quested from Sut­ter.

“They haven’t been co­op­er­a­tive at all,” said Dun­can, who also serves as chair of the Del Norte Health­care Dis­trict, one of 79 dis­tricts es­tab­lished by vot­ers in the state to meet lo­cal health needs. “So my feel­ing is, if they’re go­ing to op­er­ate in that closed en­vi­ron­ment, then they should be held to a tax­a­tion like ev­ery other pri­vate busi­ness would be.”

A Sut­ter spokes­woman said there were sys­tem rep­re­sen­ta­tives at ev­ery dis­trict board meet­ing and that the two groups are in reg­u­lar com­mu­ni­ca­tion.

Dun­can said Cres­cent City’s trou­ble with Sut­ter re­ally started back in 2013 when the sys­tem tried to con­vert Sut­ter Coast Hos­pi­tal into a crit­i­cal-ac­cess hos­pi­tal, a move that would have bumped up its Medi­care rev­enue, but cut its bed count from

49 to 25. Com­mu­nity mem­bers protested the change, which Dun­can said would have re­sulted in more than 250 ad­di­tional pa­tients be­ing trans­ferred each year, and Sut­ter backed down.

Sut­ter's re­ported $612 mil­lion in over­all com­mu­nity ben­e­fits in 2017 was 5.1% of its ex­penses, which is on par with what some re­search has found to be av­er­age spend­ing among not-for-profit health sys­tems.

Even as Sut­ter's re­ported un­re­im­bursed Med­i­caid care plum­meted by 113% from 2015 to 2017, the health sys­tem's spend­ing ra­tio on broader com­mu­nity ben­e­fits de­clined slightly from 1.2% of ex­penses in 2015, to 1% in 2017.

Mean­while, the $124 mil­lion Sut­ter spent on broader com­mu­nity ben­e­fits last year was dwarfed by the health sys­tem's net in­come: $958 mil­lion.

The Ser­vice Em­ploy­ees In­ter­na­tional Union's Cal­i­for­nia chap­ter stud­ies hos­pi­tals' com­mu­nity ben­e­fit spend­ing statewide, and of­fi­cials there have also no­ticed a lack of dis­clo­sure by Sut­ter. That's un­like other health sys­tems, which hap­pily send de­tailed lists of ac­tiv­i­ties, right down to loan­ing their com­mu­nity room to an Al­co­holics Anony­mous meet­ing, said David Miller, SEIU-UHW's re­search di­rec­tor.

“Kaiser Per­ma­nente and Dig­nity Health (which also serve the area), they throw a phone book at you,” he said. “It gets to a real gran­u­lar level.”

A Sut­ter spokes­woman said the sys­tem is com­mit­ted to trans­parency and in­vited SEIU to ac­cess au­dited fi­nan­cials and other sup­port­ing doc­u­ments.

The Green­lin­ing In­sti­tute has worked closely with Kaiser Per­ma­nente to help it bet­ter un­der­stand health needs in its com­mu­ni­ties. Sut­ter hasn't shown in­ter­est in hav­ing those con­ver­sa­tions, de­spite re­peated at­tempts at com­mu­ni­ca­tion, Galace said. “For a health sys­tem to be non­re­spon­sive to those ques­tions is, I think, con­cern­ing, and it's in­cred­i­bly frus­trat­ing,” he said.

A Sut­ter spokes­woman said the sys­tem has worked with Green­lin­ing to host com­mu­nity fo­cus groups to en­sure res­i­dents' voices are in­cluded in a col­lab­o­ra­tive needs as­sess­ment process.

Shuf­fling the hos­pi­tal deck

The news that Sut­ter was con­sid­er­ing clos­ing its Berke­ley hos­pi­tal came as a shock to lo­cals, es­pe­cially since the health sys­tem had pledged to keep Alta Bates Sum­mit Med­i­cal Cen­ter's Berke­ley cam­pus open fol­low­ing its 1999 merger.

When Sut­ter's Alta Bates cam­pus in Oak­land merged with the hos­pi­tal in Berke­ley, Sut­ter as­suaged lo­cals' fears that it would ul­ti­mately close the Berke­ley hos­pi­tal by promis­ing to not only keep it open, but spend $450 mil­lion on cap­i­tal im­prove­ments over 10 years, he said. It's un­clear whether that hap­pened, Arreguín said.

“Un­for­tu­nately, it's a his­tory of bro­ken prom­ises,” he said. “This merger hap­pened with the un­der­stand­ing that we'd keep this hos­pi­tal in op­er­a­tion. But sadly, there's very lit­tle legally that we can do to stop it at the present time.”

An­other unan­swered ques­tion is whether Sut­ter will con­tinue its com­mu­nity ben­e­fit pro­gram­ming in Berke­ley if the hos­pi­tal closes, Galace said. Sut­ter hasn't yet de­cided the Berke­ley hos­pi­tal's fate, a spokes­woman said.

Although the amount Sut­ter spends on com­mu­nity ben­e­fit in the San Fran­cisco Bay Area is un­clear, the health sys­tem's long-stand­ing health im­prove­ment pro­grams are deeply rooted, in­clud­ing the Eth­nic Health In­sti­tute within Sut­ter's Sa­muel Merritt Univer­sity. It's an out­reach group that of­fers free health ser­vices for the area's African-Amer­i­can, Asian-Amer­i­can and Latino com­mu­ni­ties with a spe­cific fo­cus on hy­per­ten­sion, asthma, di­a­betes and can­cer.

Sut­ter also part­ners with a San Fran­cisco-based not-for­profit or­ga­ni­za­tion called Op­er­a­tion Ac­cess, which con­nects low-in­come pa­tients who get pri­mary care from com­mu­nity clin­ics with free sur­gi­cal and spe­cialty ser­vices from providers like Sut­ter. Over the past 12 months, Sut­ter pro­vided 458 peo­ple with do­nated care through its Op­er­a­tion Ac­cess part­ner­ship, said Ja­son Beers, the or­ga­ni­za­tion's CEO. Sut­ter pro­vides about 35% of the care that's do­nated through the pro­gram, he said. Sut­ter records those ser­vices as char­ity care.

“Sut­ter Health has been an ex­cel­lent part­ner in terms of com­pletely do­nat­ing the care,” Beers said.

Holly Harper, di­rec­tor of ex­ter­nal af­fairs for Sut­ter's Val­ley Area, said Sut­ter's com­mu­nity ben­e­fit spend­ing is driven by in­for­ma­tion gleaned dur­ing its com­mu­nity health needs as­sess­ments, which the Af­ford­able Care Act re­quires not-for­profit hos­pi­tals to per­form ev­ery three years. Sut­ter gath­ers in­put from fo­cus groups made up of com­mu­nity mem­bers in the ar­eas it serves, she said.

“We in­vest so that peo­ple can help make a dif­fer­ence,” she said. “We don't do ev­ery­thing. Other part­ners do won­der­ful things, so we part­ner strate­gi­cally to make sure we're im­pact­ing com­mu­nity health in lots of ways, not just within the walls of a hos­pi­tal.”

A mu­tu­ally ben­e­fi­cial part­ner­ship

Providers who treat hos­pi­tal­ized home­less pa­tients are often leery of dis­charg­ing them back to the streets. Re­al­iz­ing the need, Sacra­mento-based com­mu­nity health cen­ter op­er­a­tor Wel­lS­pace Health in 2005 be­gan pro­vid­ing tem­po­rary respite, med­i­cal care and case man­age­ment for those pa­tients.

“We’re do­ing ev­ery­thing we can dur­ing that time of re­cu­per­a­tion to get them en­gaged and back into the com­mu­nity and try­ing to get them housed ver­sus them be­ing in a hos­pi­tal,” Wel­lS­pace CEO Jonathan Por­teus said.

Cur­rently, Wel­lS­pace op­er­ates two such units, one funded en­tirely by Sut­ter. The other is sup­ported by a group of health sys­tems, in­clud­ing Sut­ter, Kaiser Per­ma­nente, Dig­nity Health and the UC Davis Med­i­cal Cen­ter.

Pa­tients stay in the pro­gram an av­er­age of 19 days re­cov­er­ing and re­ceiv­ing fol­low-up med­i­cal care from a team of nurses who treat wounds, sep­sis, car­diopul­monary is­sues and other con­di­tions. In the mean­time, Wel­lS­pace’s team con­nects them with pri­mary care, ad­dic­tion treat­ment ser­vices and hous­ing vouch­ers.

In some cases, not-for-profit health sys­tems’ com­mu­nity ben­e­fit pro­grams in turn ben­e­fit the sys­tems them­selves. That ap­pears to be the case with the Wel­lS­pace re­la­tion­ship.

Be­fore Wel­lS­pace’s respite pro­gram, hos­pi­tals were at much higher risk of costly read­mis­sion penal­ties on those pa­tients, Por­teus said. Wel­lS­pace also runs a net­work of health cen­ters strate­gi­cally lo­cated near hos­pi­tals, in­clud­ing Sut­ter’s. As a fed­er­ally qual­i­fied com­mu­nity health cen­ter, its main fo­cus is pro­vid­ing pri­mary and spe­cialty care to un­der­served pa­tients, es­pe­cially those on Med­i­caid.

Be­fore Wel­lS­pace, Por­teus said the hos­pi­tals took on a “mas­sively un­fair pro­por­tion” of pri­mary-care Med­i­caid pa­tients.

Last year, Sut­ter an­nounced 10,000 of its Med­i­caid pa­tients in Placer and Sacra­mento coun­ties would trans­fer to Wel­lS­pace and an­other com­mu­nity health cen­ter for their pri­mary care. At the time, a Sut­ter of­fi­cial told the Sacra­mento Bee that the health cen­ters were bet­ter equipped to han­dle ser­vices like be­hav­ioral health and den­tal care.

A pri­or­ity area high­lighted in Placer County’s cur­rent com­mu­nity health im­prove­ment plan is in­creas­ing the num­ber of pri­mary-care providers who ac­cept Med­i­caid pa­tients. Dr. Robert Old­ham, Placer County’s pub­lic health of­fi­cer, said while com­mu­nity health cen­ters typ­i­cally end up tak­ing most of those pa­tients, it would be good to see Sut­ter take on more, too.

“They’re try­ing to keep peo­ple out of the emer­gency room, im­prove their hos­pi­tal read­mis­sion rates, etc., so yes, much of their mis­sion is sup­port­ing Wel­lS­pace and oth­ers be­cause it ben­e­fits the com­mu­nity,” he said. “But I think it’s prob­a­bly fair to say it ben­e­fits their mis­sion as well.”

Fur­ther, Old­ham said, Sut­ter is an in­te­grated net­work of hos­pi­tals and physi­cians. Hav­ing Med­i­caid pa­tients re­ceive both pri­mary, spe­cialty and hos­pi­tal care through a sin­gle provider “re­ally ben­e­fits those pa­tients,” he said. Old­ham him­self is among the pa­tients who re­ceive pri­mary care at a com­mu­nity health cen­ter, which can make get­ting spe­cialty care else­where com­pli­cated.

“It takes a lit­tle bit more care co­or­di­na­tion to bridge that gap,” he said. ●


Dr. David El­li­son, of Sut­ter’s Palo Alto Med­i­cal Foun­da­tion, with Jose, a pa­tient who re­ceived treat­ment through the Op­er­a­tion Ac­cess pro­gram.

A formerly home­less Wel­lS­pace pa­tient sits with a staff mem­ber. Wel­lS­pace was able to place the pa­tient in an as­sisted-liv­ing fa­cil­ity.

A former pa­tient of Wel­lS­pace’s respite care pro­gram for home­less in­di­vid­u­als stands in­side his tiny house, which he pur­chased with the help of Wel­lS­pace case man­agers. Sut­ter Health pro­vides fi­nan­cial sup­port for Wel­lS­pace’s pro­grams.

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