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FOR IMMEDIATE RELEASE:
March 30, 2007
CONTACT:
Melanie Myers
510-541-2558
mmyers@seiu-uhw.org

California Agency Requires Sutter Health to Pass Through Savings from Tax-Exempt Bonds

Unprecedented step forces hospital chain to utilize savings to lower costs. 

Sacramento – After more than three months of deliberation, the California Health Facilities Financing Authority (CHFFA) voted to require Sutter Health to contribute $8.5 million to clinics and rural hospitals before approving its $958 million bond application. 

The decision sends a clear message to Sutter Health and other nonprofit hospital borrowers that they must take seriously their obligations to hold down the cost of care for California consumers.

“Sutter is a cost driver in California, and we welcome CHFFA’s efforts to ensure that consumers really do benefit from this bond by requiring Sutter to make additional contributions to clinics and rural hospitals,” said John Borsos, Administrative Vice President of SEIU United Healthcare Workers - West.  “We remain committed to working with CHFFA to develop clear guidelines ensuring a greater return of the benefit of tax-exempt financing to the consumers who bear the brunt of the rising cost of healthcare in California every day.”

This unprecedented action marks the first time a state bonding authority has directed a hospital borrower to make specific financial commitments that guarantee some of the savings received from the issuance of tax-exempt debt are passed on to consumers.  

CHFFA’s decision follows a December vote by its board to delay Sutter Health’s bond issuance pending consideration of requirements in state law that savings realized through tax-exempt CHFFA financing be passed on to consumers.  Although CHFFA requires nonprofit bond applicants to describe how they will fulfill this mandate, there are no clear rules and guidelines to ensure compliance. Some nonprofit hospital systems appear to have used the tax-exempt funding to achieve market dominance and charge prices far higher than competitors.

Several earlier studies have documented that Sutter Health hospitals charge disproportionately high prices for healthcare, despite the requirement that they use tax-exempt CHFFA bond debt to hold down prices. In 2004, a Blue Shield analysis determined that Sutter Health hospitals charge prices 80 percent higher than the statewide average.  This study prompted the California Public Employees’ Retirement System (CalPERS) to eliminate 12 Sutter hospitals from their network.

Sutter is one of the most profitable systems in California, earning $870 million in profits during the most recent two years.  State data shows some Sutter hospitals had profit margins as high as 20 percent.

 

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SEIU United Healthcare Workers-West, with more than 140,000 members, is the largest and most powerful healthcare union in the Western U.S. We represent every type of healthcare worker, including nursing, professional, technical and service classifications. Our mission is to achieve high quality healthcare for all.