Hospital system postpones construction, IT projects, citing bad economy.

Sutter Health is putting billions of dollars of hospital construction and information-technology projects on hold, thanks to concerns about the economy, pricey bond markets and Wall Street losses.

The Sacramento-based health system is immediately putting the brakes on any constructions projects that haven’t broken ground, and will be moving forward only on design, planning and entitlement work until further notice.

In the Bay Area, design and planning will continue on California Pacific Medical Center’s $1.7 billion Cathedral Hill campus, Alta Bates Summit’s $350 million, 11-story inpatient tower in Oakland and Eden Medical Center’s $300 million rebuild in Castro Valley. But there are no guarantees that construction will begin once the planning phase is completed, which is estimated for 18 to 24 months.

The plans for a new, $550 million hospital in San Carlos have been delayed indefinitely.

In Burlingame, the rebuild of Peninsula Medical Center — which is nearing completion — will not be affected by Sutter’s construction freeze. Nor will it be affected by the delays in installation of Epic Systems’ electronic medical records software, which were recently announced.

But other Sutter hospitals won’t be so lucky.

Estimated costs for the EMR installation have doubled from the $500 million quote 18 months ago to nearly $1 billion, due in part to the sliding financial markets. As such, installations will continue at Mills-Peninsula Health Services, but no additional hospital installations are slated for 2009 — or possibly much longer.

Sutter Chief Information Officer Jon Manis stressed that installing the EMR software is still a top priority for the health system, and that it is merely adjusting to the sour economy.

“It’s just a function of not being able to implement as quickly as we’d like,” Manis explained.

The Epic system has already been installed at Palo Alto Medical Foundation and at Sutter medical foundations in the East Bay, Sacramento, Central Valley and Sonoma areas that combine to treat about 1 million patients annually. And installations will continue at a handful of Sutter’s affiliated medical foundations, including the Physician Foundation at California Pacific Medical Center, the Sutter Regional Medical Foundation in Solano County and parts of the Sutter North Medical Foundation.

According to a April 2009 report in the San Francisco Business Times, Sutter has $800 million less to spend on capital projects this year than originally anticipated, due in large part to the $500 million cash infusion it made to its pension fund, which — along with other investments — took some serious hits on Wall Street over the last year.

And lagging inpatient volume at several of its hospitals has not helped matters.

In Sacramento, Sutter Medical Center is laying off 53 employees, reducing the work hours of 11 others and implementing a variety of other measures in an attempt to save $12 million at the facility this year, in response to a drop in patient volume. The cuts affect both Sutter General Hospital in midtown Sacramento and Sutter Memorial in east Sacramento.

Sutter’s actions are “a sign of the times,” said Scott Seamons, regional vice president for the Hospital Council of Northern and Central California. “It’s not just starting and it’s not ending. We’re right in the middle of it.”

But despite the slowdown, Sutter is still slated to spend $1 billion on capital projects throughout the state this year on ongoing construction and Epic installation projects, including those at Peninsula.

- By Rebekah Stone

Rebekah Stone is the editor of the Healthcare Journal.