In the early 1990s, North Santa Cruz County residents were served exclusively by a religious-sponsored hospital. Patients, physicians and reproductive rights advocates began to look for another hospital alternative. The Santa Cruz Medical Clinic, a multispecialty medical group now known as the Palo Alto Medical Foundation Santa Cruz, approached Sutter Health with an idea to build a unique hospital where only inpatient/outpatient surgery services and maternity services would be offered. Sutter Health, a not-for-profit Northern California healthcare system, listened to this idea.

Using patient feedback from its many other hospitals and input from the Santa Cruz Medical Clinic physicians, a patient-friendly environment with state-of-the-art facilities and medical equipment was created for Santa Cruz County residents. A joint project of Sutter Health and Santa Cruz Medical Clinic, Sutter Maternity & Surgery Center was completed and opened to patients in March 1996. The hospital has 28 licensed beds and is fully accredited by The Joint Commission.

In order to ensure this new hospital was responsive to community medical needs, a local Board of Directors was appointed. Nursing and other support personnel were hired and the Sutter Maternity & Surgery “caring culture” evolved. Since its opening, Sutter Maternity & Surgery Center has received international acclaim for its facility design and innovative clinical programs. In 1996, Sutter Maternity & Surgery won a national design award from Modern Healthcare magazine for what judges described as a "welcome departure from institutionalized-based care."

Sutter Maternity & Surgery has consistently been in the top quartile of the nation in patient satisfaction.