Latest / Becker’s Healthcare Podcast / Driving Growth, Access, and Financial Sustainability at Sutter Health Silicon Valley

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Driving Growth, Access, and Financial Sustainability at Sutter Health Silicon Valley · Becker’s Healthcare Podcast

0:02
This is where health care leadership comes together.
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upper right. We're looking forward to hosting you
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in Chicago.
0:32
This is Laura Dirdle with the Becker's Healthcare
0:34
podcast. I'm thrilled today to be joined by
0:36
Luke Rockenbach, who is the chief financial officer
0:38
of the Silicon Valley Division for Sutter Health.
0:41
Luke, it's a pleasure to have you on
0:42
the podcast today.
0:43
It's a pleasure to be here, Laura. Thanks
0:45
for having me. Absolutely. Now I I'm excited
0:47
for our conversation because I know,
0:50
you know, you're on top of all of
0:51
the big trends in the health care space
0:53
today. And so I'm excited to learn more
0:55
about how you're thinking on the future at
0:57
Sutter Health and what's ahead. But before we
0:59
dive in, can you tell us a little
1:01
bit more about yourself and and background?
1:04
Yeah. Sure. Thank you for the opportunity.
1:06
I've worked in health care over twenty five
1:08
years,
1:09
mostly all in in different,
1:11
finance FP FPNA roles.
1:14
Right now, I have
1:16
the honor and privilege of serving as the
1:18
CFO,
1:19
at Sutter Health in the in the greater
1:20
Silicon Valley division. You know, Sutter is a
1:23
really interesting organization.
1:25
Relatively new CEO in Warner Thomas has been
1:28
here about three years and really has has
1:31
been promoting
1:32
growth,
1:33
as a number one number one goal, which
1:35
is different from a lot of health systems
1:37
that are really focused on on hunkering down,
1:39
getting efficiency, and cost cutting. Growth really helps
1:42
with with that that broader strategy. And because
1:44
we have such great clinicians,
1:46
serving more more members and and more patients
1:49
is, you know, always a a fantastic goal.
1:52
Just so that the the listeners have context,
1:54
Sutter has 27 acute care hospitals,
1:57
55,000
1:58
employees. It's a relatively large health system,
2:02
mostly all based
2:04
right in the San Francisco, Sacramento,
2:07
geography.
2:08
And then in the Silicon Valley division,
2:11
we have two of those acute hospitals.
2:13
We just announced a third, a third new
2:15
hospital that we're building that will go live
2:17
in 2031.
2:18
We have one of the largest medical foundations
2:20
in the country with
2:23
the Palo Alto Medical Foundation, which has 2,000,
2:25
clinicians.
2:26
And, you know, we've got we would boast,
2:28
you know, expertise
2:30
across, you know, almost every single specialty there
2:32
is.
2:33
Our little division does about 5,000,000,000 in net
2:35
revenue. We have 10,000 employees and, like I
2:38
said, 2,000,
2:39
2,000 providers.
2:41
And I also wanted wanted to just share,
2:44
you know, there's a a ton of affluence
2:46
in Silicon Valley, and and that that brings
2:48
with it, you know, I think, a
2:51
huge responsibility
2:52
to provide
2:54
value back to the Sutter organization so it
2:57
can take care of patients in communities that
2:59
don't have the the same level of of
3:01
affluence.
3:03
You know, we're also kind of kind of
3:04
balancing a number of challenges and demands, like
3:07
super high cost of living,
3:09
very sophisticated patient population,
3:12
and then overall in the entire market access.
3:15
I think we've talked about this in prior
3:17
conversations, but access to care,
3:19
is,
3:21
a huge issue, which is why our investments
3:23
and our capital investment in this area is
3:25
so is so important.
3:27
Got it. That makes a lot of sense
3:29
and, you know, especially when you think about,
3:32
how access continues to evolve and change, I
3:35
can imagine it's a moving target, but something
3:37
that is, you know, an important problem to
3:39
continue to solve and and continue to grow
3:41
and innovate around. Now when you think about
3:43
the last year or so, what was the
3:44
most important initiative you led? What did you
3:46
do, and what were the results?
3:48
I think that there's a couple of themes
3:51
that we worked on really hard in in
3:53
2025.
3:55
First one was creating this, a balance between
3:59
the the strategy and the discipline.
4:02
For example,
4:03
because the Silicon Valley is growing so much,
4:06
it's been it it's grown 10% year over
4:08
year for the last three years,
4:10
which is which is a incredible incredible kind
4:13
of market capture and and growth. It's it's
4:15
required that we also balance that with a
4:19
dynamic approach to, like, pro productivity
4:21
and and and staff,
4:23
labor management.
4:25
So we early on, the operations leadership and
4:28
I, we we anchored on
4:30
just a very simple concept of
4:33
the total cost of labor as a percent
4:35
of our net revenue,
4:36
knowing that our net revenue would grow, knowing
4:38
that our payer mix might change, knowing that
4:40
we had to remain,
4:42
flexible and adaptable.
4:44
So putting in that discipline and that strategic
4:46
structure in place, you know, early in in
4:48
2025
4:50
allowed for us to be flexible as we
4:52
kinda made decisions and pivoted
4:54
throughout throughout the year.
4:56
Results were great. We expanded our margin by
4:59
over over a point, kinda doing that doing
5:02
that that that process.
5:03
We're doubling down,
5:05
in 2026
5:07
with a very similar similar approach
5:10
to our productivity.
5:12
Also, our,
5:14
there's a a layer of of capacity utilization,
5:16
whether that's in the operating room, utilization, whether
5:19
that's
5:20
ensuring that our, MRI scheduling is
5:23
is is on point or our CAT scan,
5:26
scheduling is is what it needs to be,
5:29
looking for white space in the clinician schedules.
5:31
All those things feed into,
5:34
use of our our space, use of our
5:36
use of our labor, you know, all the
5:38
most important important assets assets to us. So
5:40
that was that was 2025
5:43
from a kind of structural
5:45
and efficiency,
5:47
measurement.
5:48
You know, we also,
5:50
deployed and then just take it in a
5:52
entirely different direction.
5:54
10% of our business is is capitated care,
5:56
value based care, where, you know,
5:59
these members have have asked us to to
6:01
manage their care,
6:02
and we get paid a a, you know,
6:04
a flat amount amount every month for doing
6:06
so.
6:07
What we saw
6:09
kinda exiting 2024 and entering 2025
6:12
is while we had the membership and while
6:14
we had fantastic clinicians
6:16
and in parts a very integrated,
6:19
clinical delivery network, We were not being proactive
6:23
in running the value based care business,
6:26
with the intention that it needed.
6:28
So we stood up a,
6:30
a set of work streams. One was,
6:32
to get proactive and to look at our
6:35
our our sickest patients, our highest utilizers of
6:38
care,
6:39
and and figure out what they needed,
6:42
in their care model so that they could
6:43
either get healthy or or get the palliative
6:46
care they needed or whatever the right next
6:47
steps, for them were.
6:49
We also knew that, you know, we've only
6:51
got those two hospitals right now in in
6:53
the valley, and there's our our our our
6:56
patients are spread all throughout.
6:58
So they were they a lot of them
6:59
were seeking care in in non Sutter facilities
7:02
and,
7:03
just how that how those economics work, certainly
7:06
was more expensive for us. So we we
7:08
were able to to bring on two
7:11
RN case managers that are are stationed in
7:13
non Sutter hospitals.
7:15
We've got, one in in Good Samaritan. We've
7:18
got one at Stanford. We're working on some
7:19
of the other,
7:20
partner hospitals that that we've got in in
7:22
the in the area. And those and those
7:25
nurse,
7:26
those nurses
7:27
are interfacing with patients when they arrive in
7:30
the ER and helping the clinicians in in
7:33
those in those facilities either with discharge to
7:35
home and back to primary care or getting
7:38
the them the resources that they
7:40
need to get well or,
7:42
working on admits. And if the patient needs
7:44
to be admitted, do they need to be
7:46
admitted to this non Sutter facility, or should
7:48
we keep them in the family,
7:49
you know, in the clinically integrated family and
7:52
get them admitted to a Sutter facility? So
7:54
that's been super,
7:55
super, helpful as well.
7:58
The third thing we did was addressing the
8:00
site of care
8:01
for these, value based care patients.
8:04
And
8:05
the Palo Alto, medical, foundation clinicians are phenomenal.
8:10
And one of the things that they just
8:12
was not on their radar for for a
8:14
lot of them was where the patient was
8:15
seeking care when they would refer a patient
8:17
to a a specialist or to a facility.
8:20
Not always thinking about the value based care
8:22
component of it and and wanting to keep
8:23
those patients in house. So the site of
8:24
care and kinda where we do procedures is
8:27
has been a big focus of the of
8:28
that team as well.
8:30
And the third thing, the like, I guess,
8:31
the fourth thing that we did with this
8:33
this body of work
8:34
was really begin to act like a payer.
8:36
If if we're if if patients are are
8:38
are getting care outside of our outside of
8:40
our network, is it the right care? Are
8:42
we are we,
8:44
adjudicating those claims appropriately, ensuring we have the
8:46
right authorizations,
8:48
so that we can, you know, bend the
8:49
cost curve? And,
8:51
my colleague on the health plan side called
8:53
me up this summer and said, hey. How'd
8:55
you, how'd you bend the cost curve when
8:57
none of the other divisions were able to
8:59
make that move? So we were we were
9:00
really excited
9:01
about our our small band of of folks
9:04
bending the cost curve on our value based
9:06
care patients. But also, you know, really more
9:08
importantly than that, we're taking better care of
9:11
these patients now, getting them the care that
9:13
they that they need in the way that
9:14
they,
9:15
that they want. So we're really proud of
9:17
of of of of that work as well.
9:20
That's amazing to hear. And, you know, really
9:22
impressive to see how much change you've been
9:24
able to put together through,
9:26
operational changes, technology supported, and then really having
9:30
a team that's been able to make those,
9:33
adjustments so that they can provide better care,
9:35
stronger care, and a better patient experience across
9:37
the board.
9:39
I think that's fascinating that, you know, that
9:41
mindset shift, you mentioned begin to act like
9:43
a payer.
9:45
How is that,
9:46
I guess, played out, with the teams, and
9:48
what does it really look like, as you're,
9:51
you know, rolling out and creating this cultural
9:53
change?
9:55
Well, it's a few different things. You you
9:56
know, you you mentioned team. None of this
9:58
work gets done by any one individual. We've
10:01
got tremendous,
10:02
people on our administrative team and and,
10:05
you know, helping these these patients as well
10:07
as alongside with the, with the clinicians.
10:10
You asked about, you know, what does it
10:11
mean to be to be a payer? When
10:13
when you've got when you blend both fee
10:15
for service and value based care
10:18
in the same building, it's it's like running
10:20
two very different,
10:22
businesses in, you know, in the same clinic
10:24
sometimes.
10:25
And,
10:26
it's an it's it's it's it's a challenge
10:29
to get mindsets
10:31
kind of in the space where they're where
10:33
they're thinking about the patients differently. And and
10:36
and it's not that we would treat patients
10:37
differently. It's that the the patients that have
10:39
signed up for these value value based care
10:41
programs have specifically asked, please help me manage
10:43
my care. So we've gotta we've gotta kinda
10:45
do that. And getting back to acting like
10:47
a payer, one of the jobs of of
10:50
of a payer is to ensure that
10:52
the the care that's provided is is necessary,
10:55
that the documentation
10:56
is is complete, and only then,
10:59
do they reimburse for for the work done.
11:03
And what what we had to do, we
11:05
had to look at a few things. One
11:07
is, well, let's look external. When we've contracted
11:10
for care outside of Sutter, do we have
11:12
good marketable rates, or do we have a
11:14
have an opportunity? How do we leverage the
11:16
size and scale of Sutter in total to,
11:20
to get the best rates for these other
11:22
payers? So we we instead of having individual
11:25
contracts with many of our our partner hospitals,
11:28
you know, we're gonna be leveraging,
11:30
a wrap network with with one of the
11:32
big six payers, in the future, which will
11:35
bring cost down. It'll also, I think, remove
11:37
some of the adjudication work that we do
11:39
internally and put it, with an organization that
11:42
that operates at a much greater scale. So
11:45
kinda leveraging those expertise,
11:47
as well.
11:48
And then kind of maybe more simply, it's
11:51
often an authorization is required to do a
11:54
procedure or a surgery,
11:56
whether it's at a Sutter hospital or a
11:57
non Sutter hospital. And and and while some
12:00
of these other places are are in network,
12:02
it's not the most preferred location. You know,
12:04
we we believe that that getting more you
12:07
know, a Sutter doctor doing work in a
12:09
Sutter hospital is better than a Sutter doctor
12:11
doing work in a non Sutter hospital just
12:13
from a an integration of care, perspective. So
12:16
we've looked really closely at
12:18
helping the doctors direct care where they think
12:21
it should be done best, but just kinda
12:22
creating that awareness,
12:24
kinda through and and leveraging some of those
12:26
those payer process tools has been has been
12:29
really helpful.
12:31
Got it. That makes a lot of sense
12:32
and is, so helpful to understand. I appreciate
12:35
you going a bit deeper there. Now looking
12:37
ahead to 2026, what are some of the
12:38
big priorities and headwinds that you're focused on?
12:42
There are certainly this is a great a
12:44
great question. There are certainly industry headwinds
12:48
and market headwinds
12:49
and cost pressures
12:51
that we can we can talk through.
12:54
But I I wanna take a moment to
12:56
talk about I'm a CFO. I have a
12:58
finance
12:59
team. And I've talked to other CFOs,
13:02
you know, around the country as well and
13:04
even within my, you know, our our organization.
13:07
And I think one of the things that
13:10
finance
13:23
and strategic
13:24
support has never been more needed,
13:27
especially when
13:29
we're we're we're getting new new tools and
13:31
technology like artificial intelligence, whether that's, you know,
13:34
Copilot or or a chat GPT.
13:37
The finance teams are going to have to
13:40
adapt
13:41
over the next
13:42
couple of years
13:44
to the pace of the business. We're not
13:46
we're not going to go back to, you
13:48
know, the a a slower pace of the
13:50
past.
13:51
We're we're going to have to figure out
13:54
how to meet the needs of the of
13:55
the organization,
13:57
develop those insights, look around the corner. I
13:59
mean, the job of a of a finance
14:00
person is to tell the story of what
14:02
happened and then to tell the story of
14:04
what's going to happen. And it's the what's
14:07
going to happen that will be more and
14:08
more more prominent.
14:10
And
14:11
the challenge in in 2026,
14:13
I think, is really spending every single day
14:16
looking forward,
14:17
finding insights,
14:18
working with operations to deploy strategies and tactics,
14:22
so that we continue to,
14:24
number one, care for patients, two, do it
14:26
in a and and two, do it in
14:27
a sustainable way,
14:29
that continues to kinda maintain margins so that
14:32
we can reinvest,
14:34
for our patients. We can reinvest in our
14:36
in our facilities.
14:38
With that as kind of the underlying theme
14:40
of the finance team,
14:42
I think in our in our organization,
14:44
we're gonna continue to need to optimize the
14:47
use of our of our assets. And I'll
14:48
just start with our maybe our buildings first.
14:51
Removing white space from,
14:53
clinician schedules, whether it's in if it's in
14:55
the hospital, it's ensuring that we've got excellent
14:58
OR utilization.
15:00
If we're if we're talking about imaging equipment
15:02
and using those assets, it's about it's about
15:05
having, you know, a perfect scheduling,
15:08
process so that there's no there's no downtime
15:10
kinda throughout the day on those machines,
15:13
especially when you've got you know, it takes,
15:14
you know, three to four weeks to find
15:16
find time for and, to schedule an an
15:18
MRI, for example. We've gotta be excellent
15:21
in in that area.
15:23
I also think that we've we've gotta really
15:26
look hard at
15:27
how we deliver care.
15:29
We're deploying today some geriatric clinics because those
15:33
patients,
15:34
have different needs than the rest of the
15:36
population.
15:37
We're we're actively,
15:39
looking to push,
15:41
inpatient surgeries to outpatient and outpatient surgeries to
15:44
the ambulatory settings so that it's a lower
15:46
cost for the patient. It also frees up
15:48
our our acute,
15:50
operating rooms to take on kind of the
15:52
more the more severe, the more acute cases.
15:55
You know, we we say often that
15:58
our our hospitals
16:00
today have the lowest acuity that they're ever
16:02
going to have again. As as more and
16:04
more care is delivered in the ambulatory setting
16:06
or at home, the hospital will continue to
16:08
be the place where you have the most
16:10
the most acute and the most in need
16:12
patients. So it's incumbent upon us to to
16:15
operate them with a tremendous amount of efficiency.
16:18
So the finance team,
16:20
plays a huge role in ensuring that success,
16:24
and looking forward, and also kinda creating the
16:26
the structures and the tools to focus on
16:29
whether it's, you know, labor management, space utilization.
16:32
I think I think space for me is
16:33
probably gonna be our biggest focus in in
16:36
2026
16:37
because adding additional square footage, particularly in Silicon
16:40
Valley where it's very expensive,
16:42
is not really is not really in the
16:43
cards,
16:44
for for for 2026,
16:46
for us. You know, we're we're made this
16:47
big investment for 2031,
16:49
and some of those spaces will come online
16:51
between now and then. But, you know, we're
16:53
we're we're attempting to skate to where the
16:55
puck is going going to be.
16:57
I love that. That's, so critical and such
16:59
an important thing, especially today as you mentioned.
17:02
You know, things are moving so quickly.
17:04
You can't really take a moment to take
17:06
a step back or,
17:07
you know, slow down. You have to keep
17:09
up pace and have to keep looking at
17:11
that future. And, you know, speaking of that,
17:14
what do you think the hardest thing you'll
17:15
have to do this year will be?
17:18
You asked that question, and it's like it's
17:19
there's only one thing that's the hardest. I
17:21
think there'll probably be a few things that
17:23
are extremely hard.
17:26
Maybe I could frame it
17:28
a little bit differently.
17:30
One concept I often talk about with operators
17:32
or or with my colleagues is this I
17:34
call it the illogical equation of health care
17:36
economics.
17:38
So, like, in most industries, those who consume
17:40
the least pay the least and those who
17:42
consume the most pay the most. Health care
17:44
is completely opposite.
17:46
You You know, often patients who are in
17:48
the most need,
17:49
in the most needed care, they pay the
17:50
least, and
17:52
those that that need very little end up
17:53
paying the most.
17:55
At the same time, our revenue is not
17:57
guaranteed.
17:58
Payment is dependent,
17:59
depends on providing that care was, you know,
18:01
medically necessary. It was appropriate to deliver. It
18:03
was documented correctly.
18:05
And then, of course, there's often months that
18:07
go by before,
18:08
reimbursement occurs.
18:10
So even if we do exactly the right
18:12
thing and the right billing, everything is perfect,
18:14
the economics are uncertain.
18:17
We're also one of the few industries
18:19
where there is a disconnect
18:21
on the economic relationship
18:23
between
18:24
the provider of the service and the customer.
18:27
Patients typically engage with a third party payer
18:29
or a government entity like Medicare or Medicaid,
18:32
as kind of their first barrier. And in
18:34
many cases, they don't even have choice on
18:36
on who their who the payer is. Their
18:37
their their employer
18:39
makes those choices for them.
18:42
So
18:43
the the handoffs
18:45
between
18:46
the hands and and the understanding, you know,
18:48
is is is a recipe for disconnection, comp
18:50
complexity, misunderstanding.
18:52
And as a CFO,
18:54
my job is to help solve that equation
18:57
both operationally and for for our customers, our
19:00
patients,
19:01
by creating the the the financial framework, the
19:04
clarity, the transparency
19:06
to improve access, maintain sustainability,
19:08
drive margin.
19:09
So
19:10
the hardest thing that I have to do,
19:14
that we have to do,
19:15
is
19:16
continue
19:17
to create this transparency
19:19
in an ever,
19:21
complex world.
19:23
And and if I had to break it
19:25
down, I would say that it's it's
19:27
it's having a a a very direct
19:31
relationship
19:32
with our customers and our and our payers
19:35
so that we get reimbursed for the work
19:37
that we've already done.
19:38
We spend,
19:40
a considerable portion of our of our total
19:42
expenses that are on on revenue cycle,
19:46
managed care payer contracting,
19:49
on documentation related,
19:51
activities and audits just to ensure that we
19:53
we get reimbursed.
19:55
And it's an area, I think, that is
19:57
ripe for
19:58
improved,
20:00
process, whether we're adding technology, leveraging,
20:04
leveraging new technology in that space. But that's
20:06
that's the that's the hardest thing we have
20:08
to do because if we don't solve for
20:11
reimbursement
20:12
for the work that we're we've already completed,
20:14
nothing else nothing else is gonna is gonna
20:17
make sense.
20:19
And that's helpful to understand and, you know,
20:21
really, really critical,
20:22
to keep in mind
20:23
in the health care space, especially. It's just
20:26
fascinating to see the I know the economics
20:28
of health care is so much different than
20:30
any other industry. So, keeping that front and
20:32
center, I can imagine, is critical for your
20:34
teams. Now before we wrap up here, where
20:36
do you see some of the best opportunities
20:38
for operational growth?
20:40
We've got a a a ton of urgent
20:42
cares kinda throughout throughout Sutter and different geographies.
20:45
Those urgent cares
20:46
may or may not accept all all payer
20:48
types.
20:49
And if you happen to be a payer
20:51
type that isn't accepted at at the urgent
20:53
care, you may seek access in the in
20:55
the emergency department.
20:57
So
20:58
whether it's
20:59
you asked about growth and and so what
21:01
kind of where I'm going with that.
21:03
We want to capture
21:05
the lives and the communities that we serve.
21:08
The more lives we capture,
21:10
number one, we believe that we deliver the
21:11
best health care. That's number one. Number two
21:14
is
21:15
if we can continue to improve our
21:17
scale, we can we can provide this care
21:19
at a lower at a lower price point,
21:21
and therefore, that translates into taking care of
21:23
more of more patients throughout our our footprint
21:26
and and our geography.
21:29
That's that's, I think, for me, number one.
21:31
And that and and the front door, whether
21:33
that's an on demand virtual care like we
21:35
stood up this year.
21:36
Right? And just to put a plug in
21:38
right now,
21:39
if you are a,
21:40
already have a a Sutter MyChart account,
21:43
and you need,
21:45
a virtual care visit, just go online and
21:47
schedule it. We've got, clinicians staff twenty four
21:50
hours a day, seven days a week, on
21:52
demand for that. So that that's huge. So
21:54
that's a front door. Urgent care is a
21:55
front door. Emergency department, when it when it's
21:58
the right time for an emergency visit,
22:01
is is a front door. So that's capturing
22:03
that growth. The second way in which we're
22:05
growing is we're gonna add
22:07
a hundred, hundred and fifty more,
22:09
clinicians in Silicon Valley, next year. This last
22:12
year, we had just under 200. A year
22:14
before that was just was about 200.
22:16
And and continuing to bring
22:19
in primary care and specialty
22:21
clinicians
22:22
help improve access
22:24
and, you know, reduce the time when when
22:26
you really are in need of care. It
22:29
reduces that time between
22:31
when you go to schedule the appointment and
22:33
we can actually start getting care. So those
22:35
are the two ways in which
22:37
we are like, the those are the biggest
22:39
levers I see for growth.
22:42
And then, of course, once you grow, you've
22:44
gotta either use the buildings and spaces and
22:46
equipment that you have really efficiently or you've
22:48
gotta add more. So we're doing we're doing
22:50
both of those things as well to to
22:51
counterbalance and make sure that we can when
22:53
we grow, we can serve.
22:56
I love that. Luke, thank you so much
22:57
for joining the podcast today. This has been
22:59
such a a great conversation, so informative and
23:01
inspiring. I look forward to seeing you at
23:03
our annual meeting in April. I know you'll
23:05
be speaking there and, truly be able to
23:07
dig deeper into some of these themes and
23:09
and connect with other leaders too. So thank
23:11
you. It's my pleasure, Laura. Thanks for having
23:13
me.