Sutter bleeds St. Luke’s

Pub date September 18, 2007
WriterG.W. Schulz


Dr. Bonita Palmer has worked at the embattled St. Luke’s Hospital on the southwest corner of César Chávez and Valencia for 17 years.

Before a packed room of union organizers and religious leaders Sept. 12 at St. Mary’s Cathedral near Japantown, she gave a brief speech about her experiences at the beloved but financially troubled hospital.

"St. Luke’s has been struggling to stay afloat for many years," Palmer told the audience. "Under managed care, reimbursements are down, the numbers of uninsured patients are up, and the growing gap between income and cost of care stresses the health of working people."

Money woes at St. Luke’s are no secret. Its parent company, California Pacific Medical Center, an otherwise lucrative group of San Francisco hospitals owned by Sacramento’s Sutter Health, describes the losses at St. Luke’s as anywhere from $20 million to $30 million annually.

Patient advocates and unions representing St. Luke’s workers have long feared closure of the hospital and its badly needed acute-care services, which thousands of residents — the city’s poorest among them, living nearby in the SoMa, Mission, and Bayview–Hunters Point neighborhoods — often visit when they can’t get expensive medical treatment elsewhere.

The hospital continually faces cuts executed by the CPMC, from its downgraded neonatal nursery to the subacute unit, where, Palmer says, patients who require nonemergency but highly specialized care from professionals are being turned away. "Sutter scrapped its plan for a much-needed upgrade to our emergency room even as we continue to receive the overflow of patients from" San Francisco General Hospital, she said.

Staffers learned most recently that outpatient physical therapy, which had already been trimmed, will be done away with completely, while the hospital’s 36-bed inpatient psychiatric unit and outpatient clinic have already been closed. A woman in the audience confessed afterward that she was nearly brought to tears by Palmer’s tale.

The decisions only worsened Sutter’s reputation across Northern California for dwelling on its bottom line and further enraged the United Healthcare Workers–West union, which represents thousands of Sutter workers and with which the company has regularly battled for a decade.

St. Luke’s contains one of the most active emergency rooms in the city, and aside from General Hospital a mile or so away on Potrero Avenue, it serves more patients benefiting from Medi-Cal and Sutter’s version of charity care services than just about any other facility.

The CPMC, which fully merged with St. Luke’s in January, promises the hospital will be a part of the company’s future. But the CPMC also comes closer every day to beginning construction of a new $1.7 billion hospital on Cathedral Hill, closer to the city’s wealthiest neighborhoods. And critics worry that CPMC’s new bid proves not only where its priorities are but also that once-independent St. Luke’s — opened in 1871 by an Episcopal minister — will suffer death by a thousand cuts.

Sup. Tom Ammiano, who’s closely observed the fate of St. Luke’s for years, says the CPMC is slowly amputating one of the few hospitals left in the southern portion of San Francisco while paying lip service to nonprofit health outreach.

"They lie without guile," he said. "Waterboarding would be more enjoyable than dealing with these people."

Sutter initially took over St. Luke’s in 2001 as part of a settlement agreement after the hospital sued Sutter in 1999, alleging state antitrust violations in Sutter’s brokering of an exclusive contract with the Bay Area’s largest network of doctors. St. Luke’s officials claimed the contract stripped wealthier patients away from the hospital, which hurt its bottom line.

The settlement required Sutter to bankroll St. Luke’s with a series of subsidies — and included a promise of up to $20 million for needed retrofit work that doesn’t appear to have been done — while allowing the hospital to remain somewhat independent. The terms expired last year, and St. Luke’s has since been completely folded into the family of San Francisco hospitals known as the CPMC, which includes the Davies Campus, nestled between the Castro neighborhood and the Lower Haight, the Pacific Campus on Buchanan Street, and the California Campus in the opulent Pacific Heights area.

While St. Luke’s can’t complete a fiscal-year cycle without coming up short of cash, the CPMC as a subsidiary of Sutter Health earns tens of millions of dollars in net income annually, much of which is sent to Sutter’s home office in Sacramento. In 2003, for instance, the CPMC transferred $118 million in net income — the money remaining after expenses are covered, which any other business would call profit — out of the city. Other ailing Sutter-owned hospitals around the state receive inflows of money from Sacramento, such as a Santa Rosa medical center that got $16 million in 2003, according to documents Sutter must provide to the state.

"In good times, affiliates share a portion of their revenue in excess of their expenses to help strengthen the network through this shared balance-sheet approach," Sutter spokesperson Karen Garner told us. "And in times of need, our affiliates can count on the network to help ensure that those services can continue to be available to their local communities."

But Sutter has announced that it plans to close part of the money-losing Sutter Medical Center of Santa Rosa, which faces high seismic retrofit costs, fueling concerns that something similar will happen at St. Luke’s. Sutter also last year moved to sever ties with Marin General Hospital and wash its hands of a costly needed retrofit there. An acute-care facility in San Leandro that loses money may soon be closed as well, as locals there learned just this month when a Sutter employee leaked the news to the San Leandro Times.

"CPMC plans to stop serving unprofitable areas, ignoring their obligation to the community," Helen York Jones, a union steward of CPMC employees, said at a July rally outside St. Luke’s. "How can they be entrusted with a large share of the area’s health care system?"

For a supposedly nonprofit chain of hospitals, Sutter Health is very profitable, having one of its best years in 2006. Its net income from operations amounted to more than $500 million, an increase of 33 percent from the previous year, which its execs attributed to the company’s outsize investments. Sutter controls more than two dozen medical centers throughout California and one located in Hawaii.

The company’s mammoth $2 billion investment portfolio brought the company $159 million in returns last year. Sutter’s CPMC subsidiary also benefited from more than $50 million in local, state, and federal tax breaks during 2005, according to figures maintained by the San Francisco Department of Public Health.

Meanwhile, Sutter has announced plans to spend $1.1 billion fully replacing facilities in Sacramento and San Mateo. In fact, the company broke records in June when it acquired state-backed bond financing of $958 million — which essentially amounts to a low-interest, tax-free loan — which it intends to use for seismic retrofit projects at several of its hospitals across the state.

But according to state records, the company doesn’t intend to use any of the loan money for retrofitting the St. Luke’s campus, part of which the state has concluded poses "a significant risk of collapse and a danger to the public after a strong earthquake," according to state structural ratings. State law gives hospitals until 2013 to meet strict seismic standards or shut down.

"Sutter wants to use money to fuel their corporate expenses in markets that are making money or have the potential to make money," Sal Roselli, president of the United Healthcare Workers–<\d>West, said.

Roselli believes the CPMC wants to close the emergency room at St. Luke’s and more or less turn the hospital into a clinic, perhaps once the Cathedral Hill location is completed; Sutter, he said, promises to maintain community services during its hospital takeovers but often backslides on those promises within months.

CPMC spokesperson Kevin McCormack doesn’t outright deny the possibility that St. Luke’s will someday see vastly fewer ER patients.

"St. Luke’s is still going to be a vital part of anything we do in terms of providing health care in San Francisco," McCormack said. "We intend to strengthen its role — not just to keep it going, but to make it better. Because right now what happens is that a lot of people don’t have access to preventative care, so they end up using the emergency room when they have a problem with, say, diabetes or asthma."

But Ammiano remains skeptical.

"If we allow this to happen and if we can’t find alternatives," he said of the cuts at St. Luke’s, "it’s really going to not just tear a hole in the fabric of that neighborhood but also the whole southeast section."