Sutter Health expands HMO plan into Sonoma county

Image of Santa Rosa Regional Hospital from Facebook.

Sutter Health, Northern California’s second-largest health system, is expanding its Sutter Health Plus HMO to Sonoma county, growing its service area from Greater Sacramento and parts of the Central Valley.

The Sutter Health Plus plan could offer a way for the $9 billion nonprofit health system to compete with Kaiser Permanente and reduce dependence on commercial payers like Blue Shield of California.

Sutter Health and Blue Shield recently agreed to extend their contract for two years, after talks almost fell apart amid the insurer’s allegations that Sutter’s 23 hospitals and 5,000 physicians consistently demanded reimbursement 20 to 30 percent higher than all other regional hospitals.

Sutter leaders disputed those numbers and argued that Blue Shield was demanding unreasonable cuts. The new contract’s two-year span could be enough time for Sutter Health Plus to attract thousands of new members.

“Today’s consumers demand more value for their healthcare dollars,” said Steve Nolte, CEO of Sutter Health Plus and a former executive at UnitedHealth Group’s Optum, in a statement. “Sutter Health Plus enables the Sutter Health network to develop closer, more direct partnerships with employers and patients, make high-quality care more affordable and improve the health of communities.”

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Sutter Health Plus was first licensed as an HMO in January 2014, and has had a mixed start with its 12,000 members. It lost about $13 million in the first three quarters and backed away from selling in the state insurance exchange, Covered California.

But the health plan may still sell exchange plans for the next year and has already booked some key clients among small and large employers, including city and county government workers in Sacramento.

Sacramento city workers can choose among health plans from Kaiser Permanente, Western Health Advantage or Sutter. Before last year, workers who wanted to use Sutter providers could do so through a Health Net plan, but now Sutter’s HMO has effectively bypassed for-profit Health Net as an intermediary.

In Sonoma county, which has a population of 495,000, Sutter may have a fertile market to test its health plan and leverage its brand as a prestigious provider, flanked by the Palo Alto Medical Foundation doctors group and hospitals like the academic Pacific Medical Center in San Francisco.

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In Santa Rosa, the heart of Sonoma, Sutter Health recently opened a new $292 million hospital and medical office, and some patients find the idea of a Sutter-focused health plan attractive.

“If the insurance is as good as the doctors are, then I’d love to switch, have it all in one system,” one 42-year-old breast cancer survivor Sutter’s North Bay Health Plaza told the Santa Rosa Press Democrat. “My husband was thinking about switching to Kaiser, but I said no.”

Twitter: @AnthonyBrino