Gold in Them Thar Ills

Sutter Health, tapped by supes to run Community Hospital, mines big bucks in health care, but is it at patients’ expense?

By Bruce Robinson

“It’s been a very good place to work, very high quality of care. Sutter has been an excellent umbrella organization over Novato, up to now,” says E, a registered nurse at Novato Community Hospital for the past five years who prefers her name not be used. But, she adds, “Sutter’s undergone a very significant change in management over the last few years.

“I see big, major destructive changes in the wind.”

Sutter Health, the Sacramento-based heath maintenance organization that is negotiating a lease agreement to assume operation of the county-run Community Hospital in Santa Rosa, is a rapidly growing non-profit organization that is one of the largest health-care companies in the state. A merger with California Healthcare Systems, a major Bay Area hospital owner, took effect this week. That makes the resulting new company, to be called Sutter/CHS, the second largest in Northern California, after Kaiser.

The new combined corporation owns 23 hospitals with 4,900 beds, employs 26,000 people, has doctors’ offices in more than 100 communities, and has assets worth $2.4 billion, according to Sutter/CHS communications director Bill Gleeson.

But the company also has a sizable cadre of critics who charge that Sutter is skimping on patient care to boost its corporate cash flow.

The profits from health care are going into the corporations and not health care. This is a national pattern and you can see it in your local hospital,” says Linda Remy, a policy analyst for the University of California at San Francisco who is active in the Marin Safe Healthcare Coalition. “Sutter has been out in the country working all this stuff out. Now that they’ve learned how to do their real estate manipulations out there, they’re coming into the city and are just creaming off the money, unimaginable hundreds of millions of dollars.

“These people are paying themselves hundreds of thousands of dollars a year in salaries and then cutting nurses.”

Cutbacks in nursing have been a source of ongoing controversy at Marin General Hospital, a former public facility that became part of California Healthcare Systems in 1985. Last spring the directors of Marin General announced that “they were going to drastically cut registered nurses, and they did,” says Dr. William Rothman, who is among the leaders of a Marin petition drive to reverse the hospital’s 11-year affiliation.

“Everyone recognizes that since more hospital procedures are being done outpatient, there do not have to be as many nurses employed in the hospital,” he elaborates, “but what they cut was the ratio of registered nurses to patients.”

That is an important distinction, he continues, “because with managed care, as soon as your eyes are open after the operation, they throw you out of the hospital. The average patient today is sicker than the average patient five years ago. Therefore the need for highly skilled nurses should dictate the ratio of RNs to patients should be increased.”

A few months after the nursing cutbacks, the plans to merge CHS and Sutter were announced, and while the transaction did not require the participation of the largely toothless board of trustees at Marin General, they were asked to approve a pair of “side agreements” of which Rothman is highly critical. One allows the hospital to join what is called the “obligated group,” a consortium of Sutter/CHS hospitals that share joint indebtedness. While that allows Sutter to borrow money at lower rates, it also means that local hospitals “become obligated for the debts of other facilities over which you have no control,” Rothman objects.

Sutter’s hospital in Roseville “just issued bonds for remodeling. If they can’t repay those bonds, then they go to the obligated group, which is Sutter, and they decide where the money should come from,” he adds. “Sutter could decide, ‘Well, let’s cut nursing care some more and take the money from Marin General. Or anywhere.’ “

A second fiscal arrangement that Rothman questions is called “excess cash transfer,” under which “everything over two weeks’ operating expenses is automatically transferred to Sutter. The problem is that the two-week cushion can be changed arbitrarily by Sutter. It could be two minutes, it could be two months,” Rothman says. Again, the local hospital and its board are left with no meaningful financial authority, he claims.

Both fiscal mechanisms are expected to be employed at Community Hospital after Sutter takes over, says Sutter’s Gleeson. The excess cash transfer is “a policy which has served our organization well over the years,” he adds. “If Sutter did not have this ability to move cash within the system, these types of partnerships would not be possible.”

However, neither practice is being discussed as part of the ongoing negotiations between Sutter and Sonoma County. “There are certain profit margins the county would share in, and if they are in excess of that, we’re not dictating what [Sutter can] do with their money,” says Colleen Murphy, the Sonoma County project manager for William M. Mercer Inc., the consultant hired by the county to negotiate the lease agreement.

“The county is making sure that the hospital remains a separate reporting entity, so we can monitor its financial and operating activities for the purpose of our health-care access agreement. We don’t want to micromanage what they are doing.”

Nor will the local hospital trustees have much meaningful input. Although the size and membership of the new board is yet to be determined, Gleeson explains they will primarily be “responsible for assessing community needs and ensuring that their organization meets those needs.”

Linda Remy is concerned about the independence of that board, even with its limited authority. The pattern in Marin and elsewhere, she notes, is that the boards are filled with doctors whose practices are tied to the hospital they hope to help govern.

“How can they vote against anything the corporation wants when their livelihood and everybody who works for them depends on them going along?” she asks. “This really is a pattern, where everybody is incredibly conflicted. As consumers, we don’t have anybody looking out for us.

“We have all the foxes in there and they are ravaging the chicken coop.”

Rothman points to Quentin Cook as a prime example. Cook was the attorney for the Marin General Hospital District in the early ’80s, and in that role helped pave the way for the hospital to link with California Healthcare.

“Two weeks before the lease was finalized, he resigned as the hospital district’s attorney, and shortly after the lease was finalized he went to work for California Healthcare Systems,” Rothman says. Cook, who was CEO of the company at the time of the merger, is now the second-ranking executive in the new combined corporation.

Sandra DeBello, professor of nursing at Sonoma State University and a member of the Community Hospital board of directors, is trying to be upbeat about the new deal with Sutter. “I do not see it as a necessary evil or a bad thing to be affiliating with a system,” she says. “I am positive that without affiliation, Community would not be here by the end of the year. I am not a happy camper about health care being a commodity. But I also recognize that if I want health-care services in my community, I have to hook up with a provider that will make that possible.”

Still, she has some philosophic misgivings. “We’ve got a major problem. We’ve got economics and health-care insurers in the driver’s seat for health-care decisions,” DeBello laments. “Who does this health-care system serve? It does not serve the patients. It does not serve the providers, who are pulling out their hair trying to get the services their clients need.

“So who does it serve?”

From the Jan. 11-17, 1996 issue of the Sonoma Independent

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