Svend Ryge, treasurer for Sutter Health
“With our not-for-profit mission, vision and values as a foundation, Sutter
Health holds a deep commitment to innovation, transformation and
affordability so that healthcare of tomorrow is always better than today.
The cost of issuance of $9.1 million is quite moderate at 0.66 percent of the
total issuance amount of about $1.4 billion for the two bond issues. To put it
in perspective, the interest cost savings on the refinancing component of the
bond issue is $9.9 million in the first year alone and about $80.7 million in
net present value terms over the life of the bonds. The cost of issuance is
recouped within those savings, and there is no measurable impact to health
care prices.
Sutter Health’s California Pacific Medical Center (CPMC) in San Francisco is
investing in the community’s health and replacing two of its campuses with
state-of-the-art facilities to meet California’s state seismic safety
requirements for hospitals, known as the Hospital Seismic Safety Laws.
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CPMC’s Mission Bernal campus: on schedule and set to open August
2018.
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CPMC’s Van Ness and Geary campus: on schedule and set to open
March 2019.
We also continue to innovate safe, high-quality care delivery outside of
hospital and clinic walls to meet consumer needs for convenience, flexibility
and efficiency—from telemedicine-aided specialist consultations and walk-in
care clinics—all with an eye toward helping reduce health care costs, too.”
Sutter has worked with much of the (banks, advisers and law firms) over an
extended period. We believe the experience these firms have in working with
Sutter and with each other yields significant benefits in terms of efficiency
and quality of the bond issuance process. We validate the underwriters’ fees
against publicly available data to ensure that we are receiving competitive
rates.”
This is a standard practice for virtually all integrated not-for-profit health
systems. The bond financing allows health systems to spread out the impact
of large capital expenditures so that construction and equipment acquisition
projects can be carried out without impacting health care costs. Sutter
routinely borrows about one-third of the cost of its capital projects, financing
the remainder out of current earnings. This practice puts us at the median
for health care systems at our rating level of AA-/Aa3/A+ (S&P, Moody’s,
Fitch ratings respectively). Our approach has helped us move ahead of
schedule for meeting the 2020 deadline for seismic requirements.”