Case Study Analysis of Sutter Health


Sutter Health is one of the leading health care service providers within the state of California, United States. It is made up of a group of community – based healthcare service providers that are registered as not for profit organizations whose operations are based within Northern California in the U.S. The group of not-for profit healthcare service providers has undertaken significant restructuring and innovations that are meant to improve the operational efficiency and productivity of the workforce towards attaining the highest levels of productivity, innovativeness, customer service and dedication to the community. Key amongst these innovations is the introduction of revenue collection enhancement mechanisms that are aimed at maximizing on the revenues that are submitted by self-pay patients. This is as a result of the drawbacks that experienced with the traditional revenue collection systems which led to the service provider having an ineffective revenue collection mechanisms. Key amongst these problems were those issues associated with ineffective performance measures, inadequate information availability from the representatives of the various accounts and the presence of service provision centers that were fragmented. This paper discusses the issues that Sutter Health is facing it terms of its traditional accounting practices that it has so far done away with.

The objectives of this study is to analyze the relevant facts about Sutter Health’s corporate-level position in light of the changes that it has made in its strategy. The paper aims at coming up with the key problems that the healthcare service provider is facing in the healthcare segment. It also seeks to identify the alternative accounting systems that the not-for profit organization had in place I defining and solving its revenue collection problems. This is achieved through analysis of the company’s past experiences, the relevant literature and other useful company information which is critical in discussing the major issues and challenges that the company faced. It also seeks to provide a viable and implementable alternative solution that Sutter Health based on the research about the healthcare service provider and in light of the industry best practices which are aimed at improving Sutter Health’s financial position through improved revenue collection mechanisms.


Background information

The Sutter Health network is comprised of at least 50,000 members of staff who are comprised of highly-committed employees, volunteers and doctors. These individuals are all committed towards the provision of healthcare services to the surrounding Northern California community. The partnership between the community –based health care service providers and the doctors, employees and volunteers has grown over the years to become a service-oriented organization. The organization undertook a change in its corporate level strategy that was aimed at transforming it into an organization that could provide high-value healthcare experience in addition to creating a personalized experience for the patients. In order to attain this mandate, the organization instituted a change in its revenue collection policy which was meant to weed out the inefficiencies that were associated with the traditional system. This is important given that the organization supports a number acute care hospitals which have a positive contribution to the whole California community.

The community-based network has also a number of medical research facilities spread across the state, regional home health centers, occupational and hospice health networks and long-term care stations which require a significant amount of resources. This therefore calls for prudent financial management in order to ensure that the firm’s goals are attained efficiently by minimizing on the losses and maximizing on the revenue growth potential. Being the regional leader in neonatology, pediatrics, deliveries and cancer healthcare services, the firm has a number of self-pay patients that are spread over one hundred communities that are based in Northern California. Key amongst these locations are San Francisco Bay, Greater Sacramento Valley, Santa Cruz and Central Valley. This has seen the network greatly lower the healthcare costs especially with regards to insurance premiums.

Key problems and issues facing Sutter Health

The passage of the Affordable Care Act has positively impacted on the healthcare sector within the United States. The reforms that were brought about by the enactment of the ObamaCare bill also created significant challenges for healthcare service providers especially insurance companies which have had to comply with the new regulations. Due to the importance and significance of the healthcare sector of the U.S, the government has implemented the provisions contained within the Affordable Care Act and this has greatly affected Sutter Health’s long term policy. The healthcare sector is faced with the challenge of huge up front revenues that are collected from the patients. This is caused by the insurance system within the U.S healthcare sector that entails high levels of co-payments and high levels of deductible pay health plans. This creates a significant challenge in collecting revenues for the healthcare providers due to the complexity of the insurance system.

The other key issue is the ineffectiveness of the traditional revenue collection systems in meeting the set revenue targets. As a result of the numerous up-front payments that are made, the traditional systems are not up to date in maintain the accounting records which may lead to a number of errors and frauds. This therefore means that there was a problem of inadequate information that is made available to the organization about the clients. This also created a big data analysis problem given that the accounting officers had to spend more time in collecting and processing customer information that’s focused on the payment details for the customers. The patient services staff software hence lacked the capacity to deliver up to date financial and operational information for effective decision making. More important information such as accounts receivables and cash collections could not be immediately made available thus creating inefficiencies.

The customer service area also suffered given that the customer service agents lacked real time and useful information to serve the clients well. This meant that a lot of consultations were made from the back end staff before advising the patients on their status. The other major issue highlighted is the lack of accountability to the patients by the staff as a result of the absence of empowerment of the patient services staff. The traditional systems were also highly inefficient given that they could not produce a detailed report as and when needed. Benchmarks could not hence be established given that the current financial standing of the organization could not be identified.

The Solutions employed by Sutter Health

The organizations undertook measures meant to reduce the inefficiencies that were associated with the traditional revenue collection system. These measures included the establishment of a new patient services staff charter which provided disseminated accurate, up to date and complete information to customer service agents and managers for decision making purposes. The new system also ensured that there was an effective and stable performance measurement and evaluation tool which integrated all the requisite information about the up-front payments. The organization also moved a number of the back-end staff that were running the traditional system to the front-desk so that they can serve the clients well. The organization also introduced benchmarking so as to ensure that productivity will be attained by ensuring that each member could be accountable to a given patient. Such benchmarks included Cash collection ratios, major payer A/R days, billed A/R days, unbilled A/R days and gross A/R days. 

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The company also increased the responsibility of each patient efficiency staff so as to make them accountable and fully responsible for a given number of accounts that they were managing. This ensure transparency in the manner in which they accounts were being managed in addition to increasing revenue collection potential of the system. The introduction of the front-end revenue collection system was also key in improving the system’s productivity. Training of staff members was also key in increasing their motivation. The putting up of a point of sale terminal improved the payment systems given that most of the self-pay patients could afford the medical bills. This meant that customers could only pay first before receiving treatment at the hospitals. This strategy achieved the intended targets of addressing the issues of diminishing revenues and increased number of self-pay patients. The organization was able to report an increase in revenue from self-pay patients by $78 million in addition to increasing the customer base. Also, it increased accessibility to healthcare services and also increasing the healthcare quality.

The accounting practices California Sutter Health used in defining and solving its collection problems

Sutter Health adopted two major accounting practices to address the major challenge of the increasing number of self-pay patients and low-revenue collection potential of the back end staff. These included the elements of transparency and accountability of the accounting system. This analysis revealed a series of loopholes that existed in their system especially given that the payment potential for the self-pay customers was assured. The organization also adopted the cost reduction measure in order to address the challenge of increasingly diminishing revenues. This was achieved by integrating the revenue collection process and retraining of the existing PFS staff rather than hiring expensive professionals from outside the organization. Sutter Health also leveraged on the accounting practice of efficiency which increased the company’s productivity by utilizing as minimal resources as possible. By analyzing the system’s efficiency, the inefficiencies of the system’s record management components and performance evaluation tools were highlighted.

An alternative solution that Sutter Health could implement in light of the challenges

Based on the shortfalls that were associated with the tradition revenue collection system, the alternative solution to address these challenges is the implementation of a pre-service system. This system is highly effective given that it greatly reduces the patient cycle time by fully integrating the whole revenue collection process.  In order to address the human resource challenges facing the organization, corporate screening is an effective and implementable strategy which entails the examination of staff at all levels. This will weed out the ineffective and inefficient staff especially at the revenue collection centers. This will also enhance the organization’s legal compliance by establishing a system of internal controls which are aimed at reducing the system turnaround time and ensuring that information access is attained.

An informed opinion of the approach used by California Sutter Health based on the concepts from personal research and personal experience

Based on personal experiences and the research conducted on the effectiveness of healthcare payment systems, Sutter Health’s approach to addressing the challenges was highly effective and successful. The organization emphasized on the improvement of autonomy and accountability of the PES staff aimed at improving the revenue collections. Thus, it adopted a cost reduction measure so as to minimize revenue losses. This is in tandem with the international industry best practices given that firms can attain productivity and increasing output levels by increasing profits or reducing the costs. The cost reduction measure was an effective strategy especially given that this improved revenue collections by a staggering $78 million.


Sutter Health has managed to improve its cash flow position and liquidity by effecting the changes that were meant to increase the revenue collections from self-pay patients. The increasing number of these patients necessitated the company to undertake the changes especially given that its point of sale terminals and staff were not operating at an optimal rate. The key areas that resulted in the healthcare service provider not reaching its full potential were highlighted by the absence of accountability and autonomy of the PES staff. The introduction of the new system reverse this trend by increasing access to information in addition to integrating the revenue collection system. This in turn resulted in an increase in productivity, growth potential and financial stability thus making Sutter Health the leading healthcare service provider in California.

Mar 6, 2019 in Economics
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