April 11, 2008

The Sutter Health network of doctors, hospitals and other health care service providers announced its financial performance for 2007. Sutter Health’s combined 2007 systemwide income from the day-to-day operations of its hospitals, care centers and other services was $471 million, compared to *$452 million in 2006. Sutter Health also benefited from $152 million of investment income and changes in net unrealized gains and losses from investments classified as trading in 2007, compared to $171 million in 2006. Total income for 2007 was $623 million, which was the same as Sutter’s 2006 income after a *reclassification. The system’s total 2007 revenues were $7.7 billion, compared to $7.1 billion in revenues in 2006.

As a not-for-profit health care organization, Sutter Health reinvests its earnings into programs, services, technology and facilities in the communities it serves. Sutter’s 2007 earnings have positioned the system to move forward with record multi-billion-dollar capital commitments, continued investment in lifesaving technologies and increased funding of charity care to improve community access to quality health care services. In 2007, Sutter Health’s capital investments totaled $979 million, up from $805 million in 2006.

During 2007, Sutter increased its investment in providing care and services for the poor and underserved and benefits for the broader community. Sutter Health’s 2007 community benefit investment of **$492 million (compared to $483 million in 2006) includes the cost of providing charity care, the unpaid costs of participating in Medi-Cal, and investments in medical research, health education and community-based public benefit programs such as school-based clinics and prenatal care for patients. As a result of an expanded charity care policy implemented throughout the Sutter Health system in early 2004, Sutter’s commitment to providing charity care has grown to well over $1 million per week. Sutter Health’s traditional charity care contribution increased from $73 million in 2006 to a record $78 million in 2007.

Sutter Health’s current level of income from operations will enable the not-for-profit system to continue making record-setting capital investments in order to meet California’s seismic safety regulations. Sutter Health estimates its total capital expenditures from 2008 through 2017 (including information technology) will exceed $10 billion.

	2007	2006
Operating Revenues	$7,651	$7,123
Operating Expenses	7,180	6,671
Operating Income	471	452
Investment Income	169	135
Change in net unrealized gains/losses from investments classified as trading	(17)	36
Income	$623	$623
CapitalInvestment	$979	$805

Sutter Health is investing over $660 million for a large medical campus replacement and development project under way in midtown Sacramento, $600 million for a replacement hospital for Mills-Peninsula Health Services in Burlingame, $540 million for a new medical campus in San Carlos and $300 million for a replacement hospital in Castro Valley. In addition, Sutter Health is investing more than a quarter-billion dollars in new physician care centers in Stanislaus, San Joaquin, Santa Clara, Santa Cruz and Sacramento Counties. Sutter Health also announced that it will spend over $900 million to implement a systemwide electronic health record linking its affiliated physicians and hospitals.

"It is fortunate that our system continues to achieve a level of financial health that allows us to meet California’s seismic regulations and to keep pace in a technology-rich environment where new-but-costly lifesaving advances are becoming available for patients," said Sutter Health President and CEO Pat Fry. "The need to make substantial capital investments around our network has never been greater. Health care organizations that are struggling financially cannot meet community health care needs," he said.

*2006 income has been reclassified per industry practice related to investment classifications.

**In 2006, Sutter Health stopped reporting the unpaid costs of treating Medicare patients as community benefit. Sutter Health made this change to be in alignment with voluntary national community benefit reporting standards.