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- 1. 2200 River PlazaDrive Sacramento, CA 95833 June 9, 2015 The following information for Sutter Health and Affiliates (the “Presentation”) will be shared by Sutter Health’s President and Chief Operating Officer, Sarah Krevans, along with Jeff Sprague, Senior Vice President and Chief Financial Officer of Sutter Health, and Don Wreden, M.D., Senior Vice President, Patient Experience of Sutter Health at the Citi Non-Profit Health Care Investor Conference on June 11 and 12, 2015, in New York City. The filing of this information does not constitute or imply any representation (i) that all of the information provided herein is material to investors, (ii) regarding any other financial, operating or other information about Sutter Health, the Obligated Group Members or any related bonds (the “Bonds”), (iii) that no changes, circumstances or events have occurred since the end of the fiscal year to which this information relates, or any other date specified with respect to any of the information contained in the following, or that no other information exists, which may have a bearing on the security for the Bonds, or an investor’s decision to buy, sell, or hold the Bonds or (iv) that Sutter Health is obligated to, or plans to, update or revise the information that is presented. The information has been obtained from sources which are believed to be reliable, but such information is not guaranteed as to accuracy or completeness. No statement in the following information should be construed as a prediction or representation about future financial performance of Sutter Health or any Obligated Group Member. Should you have questions, please contact the Sutter Health Finance support staff at (916) 286-6557. {00678639 v.1}
- 2. Sixteenth Annual Not-for-Profit HealthCare Investor Conference Sutter Health June, 2015 Unless otherwise noted, the financial information related to fiscal year 2014 contained in this presentation has been obtained from Sutter Health Audited Financial Statements
- 3. Certain statements inthis presentation constitute “forward-looking statements.” Such statements generally are identifiable by the terminology used, such as “plan,” “expect,” “estimate,” “budget” or other similar words. The achievement of certain results or other expectations contained in such forward- looking statements involve known and unknown risks, uncertainties and other factors, some of which are beyond Sutter Health’s control, that may cause actual results, performance or achievements described to be materially different from any future results, performance or achievements expressed or implied by such forward- looking statements. You are cautioned not to place undue reliance on forward- looking statements that reflect management's view only as of the date of this presentation or as of such earlier date as indicated. All forward-looking statements included in this presentation and all subsequent forward-looking statements attributable to Sutter Health or persons acting on Sutter Health’s behalf are expressly qualified in their entirety by these cautionary statements. The information contained in this presentation speaks only as of the date stated, or if no date is stated, as of the date of this presentation. Sutter Health is not under any obligations and does not intend to issue any updates or revisions to those forward-looking statements if, or when, its expectations or events, conditions or circumstances on which such statements are based occur or fail to occur, except as required by law. 2 Caution regarding forward-looking statements
- 4. Sarah Krevans President &Chief Operating Officer Sutter Health
- 5. Sutter is nationallysignificant Broad Reach Largest contiguous not-for-profit health system in the US Diverse Patients 100+ languages Serving some of the richest and poorest areas in the nation National Health Impact 1 in 100 Americans receives care at Sutter Economic Contributor Among the largest US employers Community impact $3M of charity care provided every week
- 6. Sutter Health systemsnapshot (2014) 5 Bay Area Operating Unit Valley Area Operating Unit Physicians (members of Sutter Medical Network) 5,000 Network and affiliate employees 49,381 Licensed acute care beds 4,321 2014 by Numbers Births 35,463 Discharges 190,054 Outpatient visits 11,121,733 Operations of most Sutter Health affiliates recently consolidated from five regions into two distinct Northern California geographic operating units. It is anticipated that the legal consolidation of these Sutter Health affiliates will be complete by Fiscal Year ending 2017 Sutter Health Facts at a Glance *Not shown on map: - Sutter Coast Hospital (Crescent City, CA) - Kahi Mohala Behavioral Health Hospital (Ewa Beach, HI)
- 7. Confidential6 $(100) $- $100 $200 $300 $400 $500 $600 2012 2013 2014 Strong2014 Financial Performance
- 8. Business Segments • AcuteHospital – Focusing on high quality, affordable care • Medical Foundations – Focusing on growth, affordable care • Other Providers Growing Rapidly – Sutter Care at Home – Ambulatory Surgery Center Joint Ventures – System Lab • Additional Diversification Investments 7 Confidential
- 9. One Sutter Focus oncontinued operational excellence Focus on the market, and enhance our presence Focus on the holistic patient experience Focus on the future – innovation and growth
- 10.
- 11. 10 Support Function Transformation ProjectSummary Confidential
- 12. Confidential Support Function Transformation TwelveMonths Ending December 2014 11 2014 Planned 2014 Actual 2014 Variance
- 13.
- 14. R S Hospital Ambulatory Surgery Center R Sutter Rehabilitation Institute Care Center ValleyArea Snapshot (2014) 12 Counties Population: 4.4M Square Miles: 13,800 Med Group Physicians: 1,040 Independent Physicians: 864 Foundation Patient Visits: 5.4M Employees: 17k Acute Facilities: 11 ASCs: 13 Licensed Beds: 1,855+ Inpatient Discharges: 87k Care Centers: 107 Gross Patient Rev: $11,737M Net Operating Rev: $3,819M Operating Expense: $3,559M Operating Income: $260M EBITDA: $457M Operations of most Sutter Health affiliates recently consolidated from five regions into two distinct Northern California geographic operating units. It is anticipated that the legal consolidation of these Sutter Health affiliates will be complete by Fiscal Year ending 2017
- 15. Bay Area Snaphot(2014) Counties: 8 Population: 7.2M Square Miles: 5,781 Med Group Physicians: 1,921 Independent Physicians: 1,704 Foundation Patient Visits: 5.5M Employees: 19,927 Acute Facilities: 16 ASCs: 16 Licensed Beds: 2,250+ Inpatient Discharges: 101K Care Centers: 147 Gross Patient Rev: $14,920M Net Operating Rev: $5,856M Operating Expense: $5,497M Operating Income: $359M EBITDA: $751M S Bay Area Hospital Ambulatory Surgery Center Care Center Outreach Center Operations of most Sutter Health affiliates recently consolidated from five regions into two distinct Northern California geographic operating units. It is anticipated that the legal consolidation of these Sutter Health affiliates will be complete by Fiscal Year ending 2017
- 16. 15 One Sutter TeamSuccess Confidential
- 17. End of Life Complex Case Management AcuteCase Management Chronic Disease Management Wellness Management 16
- 18. …Celebrating AIM (Advanced IllnessManagement) Within 90 days of entering the program, AIM patients experience: 56% reduction in hospital stays 19% reduction in ER visits 59% reduction in time spent in ICU
- 19. Jeff Sprague Sr. VicePresident and Chief Financial Officer Sutter Health
- 20. Revenue Diversification 19 2013 2014 Confidential Hospital Inpatient 39% Hospital Outpatient 20% Medical Foundations 28% JointVentures 2% SPS 1% Home Health 2% Investment Income 3% RetirementPlans 5% Hospital Inpatient 40% Hospital Outpatient 21% Medical Foundations 32% Joint Ventures 3% SPS 2% Home Health 2% Investment Income 0% RetirementPlans 0% Medical Foundations, Joint Ventures and Sutter Physician Services represent 37% of revenues in 2014, up from 31% in the previous year
- 21. Cash Flow Diversification 20 20132014 Confidential ($100) $0 $100 $200 $300 $400 $500 $600 $700 $800 $900 $1,000 Hospitals Medical Foundations Surgicenters Health Plan Other Ops Investment Income Retirement Plans Diversified portfolio of non correlated assets supports expectation of a steady source of cash flow to continue to invest in transformation, EHR and retirement plans
- 22. 21 Liquidity Remains Strong Confidential 0 20 40 60 80 100 120 140 160 180 200 220 $0 $500 $1,000 $1,500 $2,000 $2,500 $3,000 $3,500 $4,000 $4,500 $5,000 $5,500 20052006 2007 2008 2009 2010 2011 2012 2013 2014 TotalDaysCashonHand TotalCash&InvestmentsinMillions Total Liquidity Cash & Investments Days Cash on Hand Source: Audited Financial Statements 2005 - 2010 adjusted to reflect FASB ASU No. 2011-07, Healthcare Entities Topic 954
- 23. 22 Growth in NetAssets Reflects Our Low Risk Profile Confidential 0 35 70 105 140 175 210 245 280 315 350 $0 $1,000 $2,000 $3,000 $4,000 $5,000 $6,000 $7,000 $8,000 $9,000 $10,000 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 DaysNetAssets NetAssetsinMillions Net Asset Net Assets Days Net Assets Source: Audited Financial Statements 2005 - 2010 adjusted to reflect FASB ASU No. 2011-07, Healthcare Entities Topic 954
- 24. 23 Hospital Replacements UnderWay Using Integrated Lean Project Delivery Method Sacramento San Francisco Van Ness Geary San Francisco St. Luke’s
- 25. $0 $150 $300 $450 $600 $750 $900 $1,050 $1,200 $1,350 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 $inMillions Capital Investment Forecast Additionsto PP&E Routine Discretionary IT Regulatory 24 Sufficient Sources of Capital On Hand to Complete SB1953 Mandate Long term thinking. Flexibility forward Future Flexibility Confidential --------------- Projection ----------------
- 26. 0.0% 1.5% 3.0% 4.5% 6.0% 7.5% 9.0% 10.5% 12.0% 13.5% 15.0% 2005 2006 20072008 2009 2010 2011 2012 2013 2014 Operating Cash Flow Margin Source: Audited Financial Statements 2005 - 2010 adjusted to reflect FASB ASU No. 2011-07, Healthcare Entities Topic 954 25 Impact on operating cash flow margin -2.1% in 2013 from cost of investments that must be expensed due to GAAP Confidential Transformation Investments and Strong Operations are Favorably Impacting Operating Cash Flows * *
- 27. 0.0% 1.2% 2.4% 3.6% 4.8% 6.0% 7.2% 8.4% 9.6% 10.8% 2005 2006 20072008 2009 2010 2011 2012 2013 2014 Net Income Margin Source: Audited Financial Statements 2005 - 2010 adjusted to reflect FASB ASU No. 2011-07, Healthcare Entities Topic 954 26 Even during periods of financial market distress (2008) and heavy transformation investment (2013) net margins still exceeded 2% Confidential Impact on operating cash flow margin -2.1% in 2013 from cost of investments that must be expensed due to GAAP *
- 28. 27 Affordability* Confidential $- $2,000 $4,000 $6,000 $8,000 $10,000 $12,000 $14,000 - 50,000 100,000 150,000 200,000 250,000 300,000 2011 2012 20132014 Discharges Net Revenueper CMI Adjusted Discharge 3 year = -2.7% 3 year = 0.1% *Small revenue increase per discharge translates to lower cost increase to payers
- 29. 28 Affordability* Confidential $- $2,000 $4,000 $6,000 $8,000 $10,000 $12,000 2011 2012 20132014 Cost per CMI and WI Adjusted Discharge 3 year = 0.5% *Small revenue increase per discharge is a result of low increase in underlying costs
- 30. Medical Foundation Transparencyand Affordability 29 Confidential • Website posting-Consumer Facing Basket of Service ~200 services – anticipate posting January 2016 • Patient Interactive Tool Self service web application allowing patients with My Health Online to determine the total allowed amount and patient responsibility (anticipate implementation in early 2016)
- 31. 30 Balance Sheet StrikeZone Continued focus on a rational capital plan that matches the performance from operations is having the desired outcome on our balance sheet Confidential 22% 24% 26% 28% 30% 32% 34% 36% 38% 40% 42% 130 145 160 175 190 205 220 235 250 265 280 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 UnrestrictedSystemDebtLeverage TotalDaysCash Total Days Cash and System Debt Leverage Total Days Cash Unrestricted System Debt Leverage
- 32. 31 Permanent Capital Base NoPuttable Debt, No Swaps Confidential $0 $1,250 $2,500 $3,750 $5,000 $6,250 $7,500 $8,750 $10,000 $11,250 $12,500 $13,750 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 inMillions Capital (Long Term Debt + Net Assets) Net Assets Fixed Debt Variable Debt Line of Credit Source: Audited Financial Statements
- 33. A strong pensionplan is highly valued by employees 32 Keeping the Pension Plan Fully Funded Keeps the Cost Manageable $0 $100 $200 $300 $400 $500 $600 600 800 1,000 1,200 1,400 1,600 1,800 2,000 2,200 S&P500 Major Funding inDown Markets Biasto Buy Low Produces Stronger Returns Funding S&P500
- 34. 2014 Highlights $ inMillions • Profit & Loss – Operating income $419 – Income attributable to Sutter $402 • Infrastructure Investments – Capital expenditures $983 – Healthcare diversification investments $55 – Operations investments • Balance Sheet – Net assets $8.0 billion – Cash and investments $4.9 billion – 198 total days on hand (170 days unrestricted) 33
- 35. Don Wreden, M.D. SeniorVice President, Patient Experience Sutter Health
- 36. 0% 2% 4% 6% 8% 10% 12% 14% 16% 18% 20% Elective Delivery< 39Weeks: Sutter Health System Sys P90 P50 OB Care: Elective Delivery < 39 Weeks Better Benchmark is based on Leapfrog Group 2011 U.S. Goal and 2010 P50. Target = 5.0% Threshold = 9.0%
- 37. Sepsis Mortality ReductionInitiative 36 UCL LCL CL Rolling 12 month sepsis mortality rate
- 38. ICU IV Liberation ImprovementProcess Interprofessional Team Development eICU Telemedicine data collection Interprofessional Rounding A- Awake B-Breathing C-Coordination D-Delirium E-Exercise F-Family Results
- 39. ICU Liberation Improving PatientOutcomes • ICU acquired delirium • ICU and hospital length of stay • 1.11 ventilator day reduction • ICU and 6-month mortality post discharge
- 40. Variation Reduction: Doctorsagree to avoid ordering labs as “Repeat Daily” 39 47% 35% September 2014: 40 doctors meet and review differences Impact in one hospital: 2,964 blood draws avoided $95,000 saved
- 41. How did SutterHospitals perform compared to other hospitals nationally? Source: http://www.hospitalsafetyscore.org/media/file/ExplanationofSafetyScoreGrades_April2015.pdf and www.hospitalsafetyscore.org 0% 10% 20% 30% 40% 50% 60% 70% A B C D F Percent of All Hospitals Percent of Sutter Hospitals Better Worse
- 42. End of Life Complex Case Management AcuteCase Management Chronic Disease Management Wellness Management 41
- 43.