Sutter Health posts $49M operating loss in Q1 after rough 2020

Sutter Health Building
Sutter Health's patient service revenue for the first quarter of 2020 increased slightly as the pandemic continues to impact operations. (Sutter Health)

Sutter Health posted a $49 million operating loss for the first quarter of the year, which was a major improvement on the $236 million it posted the same quarter in 2020.

The Northern California-based hospital system’s total operating revenues, though, did increase $255 million to $3.4 billion for the quarter compared to the same period last year thanks to a major recovery from the pandemic.

"The additional expenses over the past year, combined with the ongoing unpredictability in patient volumes, has continued to significantly impact Sutter’s financial situation and pre-pandemic declining operating margins," Sutter said in a release. "That is why Sutter is taking important actions to address and close its financial gap."

Overall, Sutter’s earnings before interest, expense, taxes, depreciation and amortization for the first quarter increased by 13% to $169 million compared to the same period the year before.

Sutter was buoyed in the quarter by an increase in investment gains compared to the first quarter of 2020.

“The impact of the COVID-19 pandemic resulted in one of the worst equity market events in financial history during the first quarter of 2020,” the system’s earnings report said. “Investment income for the three months ended March 31, 2021, was $150 [million] compared to investment loss of $29 [million] for the same period in 2020.”

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Patient service revenues also increased to $2.8 billion for the quarter compared to $2.7 billion for 2020.

Sutter has made a forecast to break even by the end of 2021 and "believes it is achievable," a release on the earnings said.

The latest operating loss comes after Sutter Health posted a $321 million operating loss for 2020. The decline in revenue caused the system to trigger a major review of its operations and finances that could include seeing fewer patients.

"Going forward, we are evaluating every aspect of our integrated model of care and developing a multi-year plan to become self-sustaining in our operation so that we can continue to best serve our patients and communities," said Sutter Chief Financial Officer Brian Dean in a statement.

The 24-hospital system also reached a $575 million settlement with the state in 2019 to settle allegations of price fixing. Sutter tried but failed last summer to delay court proceedings linked to the settlement because of the financial issues that arose due to the pandemic.

The court did grant preliminary approval of the settlement March 9, and several more hearings are on the horizon, according to Sutter’s earnings report.