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Sutter Health’s big tax break by Foon Rhee
fo o nr @ ne wsr e v ie w.c o m
Photo by Foon Rhee
a nonprofit and eligible for tax exemptions on property used for hospital, charitable, religious or scientific purposes. In Sacramento County, Sutter Health and its affiliates own buildings, land and Sutter Medical Center in property with an assessed tax Midtown has an assessed value value of an estimated $1.15 of $504 million, but $462 million billion, according to numbers is exempt from property taxes. from the county Assessor’s Office through a public records request. Of that, a Sutter Health has a lot at stake in a little more than $380 million, groundbreaking antitrust lawsuit that appears or one-third, is taxable. So Sutter’s total property headed to a showdown trial: Its market dominance tax bill was at least $3.8 million in 2018-19, but its in Northern California, its financial future, its exemption was worth at least $7.7 million. reputation. Asked for a comment on the tax break, Sutter What isn’t in any immediate jeopardy—its Health instead sent a long list of its good works nonprofit status that allows the Sacramento-based in the Sacramento Valley and a statement that health care giant to avoid paying millions of dollars its “deep commitment to the community is at the in local property taxes each year. core of Sutter Health’s not-for-profit mission.” It But if the allegations against Sutter Health are says its contributions totaled $3.7 billion in the true, does it really deserve this generous tax break? last five years, including $435 million last year in If it’s guilty, instead of helping patients and serving unreimbursed care for Medi-Cal patients. the community, it’s price gouging the sick and Sutter Health, which operates in 18 other increasing health care costs for everyone. counties, is the largest hospital system in Northern California Attorney General Xavier Becerra California with 24 hospitals, 8,200 doctors and sued Sutter Health in March 2018, declaring that 48,000 employees. Because of its prominence, the he wants to restore competition in the health care industry’s increasing consolidation and the red-hot market. In December, the U.S. Justice Department politics of health care, this lawsuit is getting a lot of joined the suit, alleging that Sutter filed false claims attention. that led to inflated Medicare payments. In April, It alleges that Sutter imposes “gag clauses” on Sutter agreed to pay $30 million to resolve separate prices, charges “punitively high” rates on out-ofallegations of overcharging Medicare patients network care and requires “all-or-nothing” contracts without admitting any wrongdoing. that force insurers to use its facilities. Studies have The antitrust lawsuit is set for trial on Aug. 12. shown that hospital prices are significantly higher The next big hearing is scheduled for Friday, on in Northern California than in Southern California, Sutter Health’s motion to dismiss the unreasonable where there is more competition. restraint of trade allegations. On March 14, a San Sutter Health says it “will continue to vigorously Francisco Superior Court judge denied Sutter’s defend against ... the false claims.” It says there is motion to eliminate the claims of price tampering plenty of competition and says it is providing highand combination to monopolize. quality care while saving patients money. In 2017, Sutter reported net income of $893 The courts will judge if Sutter is breaking the million on $12.4 billion in revenue. For 2018, it rules. But a guilty verdict alone wouldn’t automatireported $12.7 billion in operating revenue, but cally affect its tax exemption, Sacramento County’s a $198 million net loss due to poor investment assessor says. returns. Despite all that cash, Sutter Health is legally That’s the law, but it doesn’t seem quite right. Ω 4 | sn&r | 06.06.19