The Sutter Health Equity Cash Transfer Policy at a Glance
What is Equity Cash Transfer and how does it work?
The Equity Cash Transfer Policy is a part of Sutter Health’s capital finance strategy which is based on the concept of an Obligated Group. The Obligated Group is a contractual relationship that binds together all of Sutter Health’s affiliates (with the exception of philanthropic foundations) under a single common balance sheet, working together to provide services in the many communities served by our network.
The purpose of the Equity Cash Transfer Policy is to enable Sutter Health to take the greatest advantage of available capital resources for the benefit of the communities we serve, as well as our system and our affiliated entities.
In Sutter Health, like so many other organizations, each affiliate retains enough cash on hand to meet expenses. Those funds are used to cover salaries, benefits, supplies, and other expenses. This assures that our affiliates can manage operations with no disruption in service.
If affiliates have additional cash on hand after expenses – and there’s certainly no guarantee of that in today’s challenging environment – that additional cash is pooled with all other affiliates in a central account at Sutter Health. When we pool cash, it is called “Equity Transfer.” (Funds received from donors are excluded from equity transfers and stay dedicated to the affiliate.)
Why does Sutter Health have an equity transfer policy?
Sutter Health operates much like a family that supports each other in good times and bad. In good times, affiliates share a portion of their revenue in excess of expenses in order to help strengthen the network. In times of need, affiliates can count on the Sutter network to help ensure their services continue to be available to the local communities. Without this safety net, some Sutter affiliates would not have been able to maintain their services in lean times. Others would not have been able to remain open at all, thereby leaving their communities without needed health care services.
What are the specific benefits of equity cash transfer?
- ffiliates have access to a large reserve in times of financial difficulties.
- All affiliates, even those that are challenged financially, have access to capital for new facilities and technology.
- We get better interest rates when we borrow large sums of money for capital improvements.
- We earn more interest than we would with smaller accounts.
Our network invests whatever earnings it generates collectively. This ensures maximum return on our investments and allows us to borrow much-needed capital for equipment and facility improvements. In 2008, we invested more than $1 billion in capital improvements and a half-billion dollars to fully-fund the Sutter Health Retirement Plan.
Oversight and review
Our financial activities are overseen and governed by the Finance and Planning Committee of the Sutter Health Board of Directors whose members represent the communities we serve. The Sutter Health Board is ultimately accountable to its affiliates for the success of the system’s decisions.
The California Attorney General reviewed the Equity Cash Transfer Policy in connection with its formal review of Sutter Health’s affiliation with St. Luke’s Hospital in San Francisco, consented to the proposed affiliation and registered no objection to the policy. Similarly, in accordance with Internal Revenue Service reporting provisions, equity transfers are disclosed on the IRS Form 990 Information Return (and posted on the Sutter Health Web site). The IRS has reviewed the Equity Cash Transfer Policy in connection with its audit activities, and likewise had no objection to the policy.
About the transition of Marin General Hospital to the Marin Healthcare District in June 2010
Sutter Health will be returning to the District a debt-free, high-quality hospital whose value we have substantially increased, along with millions of dollars in cash, accounts receivable and other assets, all in strict accordance with the precise terms of a court-sanctioned Settlement Agreement. All exact details are contained in the agreement which was approved by all the parties and presented by the District during its public hearings.
July 24, 2009