Moving into 2025, Sacramento, Calif.-based Sutter Health is focusing on deploying growth and integration strategies to tackle financial challenges, as well as on boosting workforce connections, Mark Sevco, senior vice president and COO, told Becker's.
Mr. Sevco discussed these strategies in detail and why they are important to the future of the 22-hospital health system.
Editor's note: Responses are lightly edited for length and clarity.
Question: What do you expect to be the biggest financial challenge facing health systems in 2025, and how are you preparing to address it?
Mark Sevco: In healthcare, there's compression with how we're reimbursed, balanced with inflationary measures that are higher than [the] reimbursement coming through. What that does [is it] compresses operating margin and the cash flow, so you don't have the ability to do as much. Sutter Health is focusing on creating a more affordable health system and trying to lower our cost structure to be able to address those issues. So reimbursement is not quite what it could be or should be, and then what we have is inflation for wages, product inflation and utility inflation.
To be able to grow top-line revenue, to utilize our existing resources and assets, we're focused on providing enhanced access. So much so, actually, this year, we grew top-line revenue by $2 billion by enhancing our availability, scheduling appointments, opening up and improving capacity management.
Related to operational excellence, Sutter Health is recruiting leaders in the field to focus on how we can hardwire best practices. And integrating here at Sutter Health is a big effort. We call it "One Sutter," and integration is driving savings to our organization, allowing us to do more savings as it relates to what we can see by reducing length of stay, by enhancing capacity management throughput in imaging, emergency department and operating rooms.
It's about reducing unnecessary care and utilization. And so, we're standing up a great structure to do that. We're setting up a clinically integrated network. And it's more creating an accountable care organization where we're putting physicians together with insurers and with our own health system — our own health plan that we're standing up, Sutter Health Plan — to really align shared incentives and move toward risk in a way that's thoughtful and purposeful.
Q: Given the current economic climate, how are you prioritizing capital investments for 2025? In what specific areas do you see the highest ROI?
MS: We're looking to invest in inpatient, outpatient, post-acute and sometimes through mergers and acquisitions, [and] digital transformation. We prioritize these efforts based on community needs. But sometimes there are must-haves. For example, seismic compliance is something that we're committed to doing, and that entails us making sure that we're carving out our capital to address seismic compliance with our hospitals, and we're on a pathway to do that.
In the outpatient space, we're making significant moves and allocating more capital than ever to the ambulatory front. We have well over $1 billion in ambulatory projects right now. Twenty-seven ambulatory projects across Northern California are being constructed right now. Nineteen will be open in 2025. Many of them will have imaging centers and ASCs.
We're looking to double our footprint as well with our urgent-care platform. We have about 30 urgent care sites. We're looking to build 25 additional sites over the next 18 months. And so, these are things that we have organized around creating a more affordable health system, knowing that ambulatory and outpatient care is a big need, and we're positioning ourselves for that.
The digital platform as well, in terms of what we're doing to utilize the mobile device and how to schedule appointments online, and leveraging all the tools that we have with Epic. We have significant dollars invested in that.
It's not all based on which efforts have the highest return on investment. We certainly look at that, but we also look at need. There's a balance of programs that we're investing in: behavioral health, senior clinics, physician practices and primary care. And a lot of those don't necessarily have the best ROI, but we believe that we're a full-service, integrated delivery system that needs to provide care from A to Z.
We always have to balance the investments that we make based on maybe an investment bias, but also based on qualitative feedback. What's our mission, and what's our commitment to the communities, and how are we making those inbounds?
What has the highest ROI? That would probably be the ancillaries, imaging and ASC. But we, again, keep that balance with our mission.
Q: How is your M&A strategy evolving to support your organization's long-term goals, and how do you determine which acquisitions will add the most value to your health system both operationally and culturally?
MS: Sutter Health has a mission to focus on patients first and people always. And that's our simple mission statement. The vision is to provide the most integrated, connected system in the nation. We believe that, from that perspective, mergers and acquisitions are important for us to be able to simplify, standardize and scale our growth. But it's a strategic decision, meaning that we don't just look for M&A to grow. We're actually looking for organizations that we can help lift up and enhance and provide value in [their] communities. Potentially, that could be an urgent care center, it could be an imaging center, it could be a hospital, it could be a network of hospitals.
And we are continuing to look for partners of similar growth mindset and similar values, mission and vision that we have at Sutter Health. So you always look for a partner to create a win-win scenario — to add value. Add[ing] value is: how can we help that new partner enhance access? How do you help them provide enhanced quality scores, patient experience scores? How can we help them, through our integration efforts, to be more innovative and provide operational excellence?
And so, in healthcare, you see a lot of mergers and acquisitions because some look for partners to be able to accelerate some of these results. And we believe at Sutter, we're looking for partners that are interested in that. But there's a due diligence process, and where it makes sense, we're planning to move forward, and a lot of M&A activity is moving into the future of 2025 and 2026.
Q: What specific strategies will your health system deploy in the coming year to improve employee retention, particularly in critical front-line roles?
MS: We are a large organization, but we want to feel small. And so it's all about relationships with our physicians and our employees. And how we connect with them. It's about trust, making sure that we're listening, providing the right resources for them to do their job, that we're living the values and compassion in our approach. And we're certainly of not only growth mindset, but we want individuals to feel they can grow within the organization. So how do we do that? And we are lifting up diversity, equity and inclusion across the organization. We're looking to create a workforce that reflects the communities we serve.
We're looking to triple the graduate medical education to address the physician shortage here at Sutter Health. So we have 300 residents and fellows, and by the time that we reach 2030, it will be over 1,000. We're going to do a lot of that through scholarship programs, connecting with schools, and new partnerships across the continuum — not only on the physician front, but how do we develop pipelines for nursing? And how do we create mentorship programs for nurses to round while they're in school at our facilities? And how do we actually create programs to connect them with us?
And, student loan repayment programs — we're looking at certainly on the physician side and many other areas where we have shortages.
Q: How are strategic partnerships with community organizations and other healthcare institutions shaping your efforts to address key challenges within your health system and drive long-term success?
MS: Community partnerships are critical to our success. Certainly, we have a focus on healthcare, and healthcare is our driving force. But there are so many things that are connected with healthcare in community partnerships that we look to enhance. Workforce, for example, in a community housing partnership. So when we're developing and building a hospital that might be new or a replacement, we'll be meeting with the local officials, and sometimes we talk about how we can enhance housing around the hospital.
Health disparities is a significant one, as we're looking to advance our academic and clinical research — looking at how we connect with communities to address health disparities where they exist. Health disparities would be an example where one community might have a higher incident rate for infant mortality than another, or cancer or cardiovascular disease. And we're looking to identify those opportunities to reduce those health disparities, and we are doing that and making great progress.
Economic development would be another. We're certainly a big healthcare provider, and so where we can actually help with jobs and other types of things, these are things that connect us to the community. We look to listen to the community by way of groups that we get together with and learn about the needs of that community.