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Becker’s Healthcare Podcast
Driving Growth, Access, and Financial Sustainability at Sutter Health Silicon Valley
00:23:18
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- [00:02]
A
This is where healthcare leadership comes together. Becker's 16th annual meeting brings more than 3,500 hospital and health system executives and nearly 800 speakers to Chicago, April 13th through the 16th. This year's event includes keynote conversations with Dallas Cowboys legend Troy Aikman and former President George W. Bush. For the agenda and event details, visit Beckershospitalreview.com and click on the Events tab in the upper right. We're looking forward to hosting you in Chicago.
- [00:32]
B
This is Laura Dardo with the Becker's Healthcare Podcast. I'm thrilled today to be joined by Luke Rockenbach, who is the Chief Financial Officer of the Silicon Valley division for Sutter Health. Luke, it's a pleasure to have you on the podcast today.
- [00:44]
A
It's a pleasure to be here, Laura. Thanks for having me.
- [00:46]
B
Absolutely. Now, I'm excited for our conversation because I know, you know, you're on top of all of the big trends in the healthcare space today. And so I'm excited to learn more about how you're thinking on the future at Sutter Health and what's ahead. But before we dive in, can you tell us a little bit more about yourself and background?
- [01:04]
A
Yeah, sure. Thank you for the opportunity. I've worked in health care over 25 years, mostly all in different finance, FP and A roles. Right now, I have the honor and privilege of serving as the CFO at Sutter Health in the greater Silicon Valley division. You know, Sutter is a really interesting organization, relatively new CEO in Warner Thomas has been here about three years and really has, has been promoting growth as a number one, number one goal, which is different from a lot of health systems that are really focused on, on hunkering down, getting efficiency and cost cutting. Growth really helps with, with that, that broader strategy. And because we have such great clinicians, serving more, more members and, and more patients is, you know, always a, a fantastic goal. Just so that the, the listeners have context. Sutter has 27 acute care hospitals, 55,000 employees. It's a relatively large health system, mostly all based right in the San Francisco, Sacramento geography. And then in the Silicon Valley division, we have two of those acute hospitals. We just announced a third new hospital that we're building that will go live in 2031. We have one of the largest medical foundations in the country with the Palo Alto Medical foundation, which has 2,000 clinicians. And, you know, we've got, we boast, you know, expertise across, you know, almost every single specialty there is. Our little division does about 5 billion in net revenue. We have 10,000 employees and like I said, 2,000, 2,000 providers. And I also want to, wanted to just share, you know, there's a ton of affluence in Silicon Valley and that brings with it, you know, I think, a huge responsibility to provide value back to this sutter organization so it can take care of patients in communities that don't have the same level of affluence. You know, we're also kind of, kind of balancing a number of challenges and demands like super high cost of living, very sophisticated patient population, and then overall in the entire market, access. I think we've talked about this in prior conversations, but access to care is a huge issue, which is why our investments and our capital investment in this area so is so important.
- [03:28]
B
Got it. That makes a lot of sense. And you know, especially when you think about how access continues to evolve and change. I can imagine it's a moving target, but something that is, you know, an important problem to continue to solve and continue to grow and innovate around. Now, when you think about the last year or so, what was the most important initiative you led, what did you do and what were the results?
- [03:49]
A
I think that there's a couple of themes that we worked on really hard in, in 2025. First one was creating a balance between the, the strategy and the discipline. For example, because the Silicon Valley is growing so much, it's been, it's grown 10% year over year for the last three years, which is, which is incredible, incredible kind of market capture and growth. It's required that we also balance that with a dynamic approach to productivity and staff labor management. So early on, the operations leadership and I, we anchored on just a very simple concept of the total cost of labor as a percent of our net revenue. Knowing that our net revenue would grow, knowing that our payer mix might change, knowing that we had to remain flexible and adaptable. So putting that discipline and that strategic structure in place, you know, early in, in 2025 allowed for us to be flexible as we kind of made decisions and pivoted throughout, throughout the year. Results were great. We expanded our margin by over, over a point kind of doing that, doing that, that process. We're doubling down in 2026 with a very similar, similar approach to our productivity. Also our, there's a layer of capacity utilization, whether that's in the operating room utilization, whether that's ensuring that our MRI scheduling is on point or our CAT scan scheduling is what it needs to be looking for white space in the clinician schedules. All those things feed into use of our space use of our use of our labor, you know, all the most important, important assets, assets to us. So that was, that was 2025 from a kind of structural and efficiency measurement. You know, we also deployed and just take it in an entirely different direction. 10% of our business is, is capitated care, value based care. Where these members have asked us to manage their career and we get paid a flat amount every month for doing so. What we saw kind of exiting 2024 and entering 2025 is while we had the membership and while we had fantastic clinicians and in parts, a very integrated clinical delivery network, we were not being proactive in running the value based care business with the intention that it needed. So we stood up a set of work streams. One was to get proactive and to look at our sickest patients, our highest utilizers of care and figure out what they needed in their care model so that they could either get healthy or get the palliative care they needed or whatever the right next steps for them were. We also knew that we've only got those two hospitals right now in the valley and our patients are spread all throughout. So a lot of them were seeking care in non sutter facilities. And just how those economics work certainly was more expensive for us. So we were able to bring on two RN case managers that are stationed in non sutter hospitals. We've got one in Good Samaritan, we've got one at Stanford, we're working on some of the other partner hospitals that we've got in the area and those, and those nurses are interfacing with patients when they arrive in the ER and helping the clinicians in those facilities either with discharge to home and back to primary care or getting them the resources that they need to get well or working on admits and if the patient needs to be admitted, do they need to be admitted to this non sutter facility or should we keep them in the family, in the clinically integrated family and get them admitted to a sutter facility? So that's been super, super helpful as well. The third thing we did was addressing the site of care for these value based care patients. And the Palo Alto Medical foundation clinicians are phenomenal. And one of the things that they just was not on their radar for a lot of them was where the patient was seeking care, when they would refer a patient to a specialist or a facility. Not always thinking about the value based care component of it and wanting to keep those patients at hand. So the site of care and kind of where we do procedures has been a big focus of that team as well. And the third thing, I guess the fourth thing that we did with this body of work was really begin to act like a payer. If patients are getting care outside of our network, is it the right care? Are we adjudicating those claims appropriately, ensuring that we have the right authorizations so that we can, you know, bend the cost curve? And my colleague on the health plan side called me up this summer and said, hey, how'd you, how'd you bend the cost curve? When none of the other divisions were able to make that move. So we were, we were really excited about our, our small band of, of folks bending the cost curve on our value based care patients. But also, you know, really more importantly than that, we're taking better care of these patients now, getting them the care that they need in the way that they, that they want. So we're really proud of that work as well.
- [09:21]
B
That's amazing to hear and you know, really impressive to see how much change you've been able to put together through operational changes, technology supported, and then really having a team that's been able to make those adjustments so that they can provide better care, stronger care and a better patient experience across the board. I think that's fascinating that, you know, that mindset shift you mentioned begin to act like a pair. How is that, I guess played out with the teams and what does it really look like as you're, you know, rolling out and creating this cultural change?
- [09:55]
A
Well, it's a few different things. You know, you mentioned team. None of this work gets done by any one individual. We've got tremendous people on our administrative team and, you know, helping these patients. Well, alongside with the, with the clinicians you asked about, you know, what does it mean to be, to be a payer when you've got, when you blend both fee for service and value based care in the same building? It's like running two very different businesses in the same clinic sometimes. And it's a challenge to get mindsets kind of in the space where they're thinking about the patients differently. And it's not that we would treat patients differently, it's that the patients that are signed up for these values, value based care programs have specifically asked, please help me manage my care. So we've got to, we've got to kind of do that and getting back to acting like a payer. One of the jobs of a payer is to ensure that the care that's provided is necessary, that the documentation is complete, and only then do they reimburse for the Work done. And what we had to do, we had to look at a few things. One is, well, let's look external. When we've contracted for care outside of Sutter, do we have good marketable rates or do we have an opportunity? How do we leverage the size and scale of Sutter in total to get the best rates with these other payers? So instead of having individual contracts with many of our partner hospitals, we're going to be leveraging a rap network with one of the big six payers in the future, which will bring costs down. It'll also, I think, remove some of the adjudication work that we do internally and put it with an organization that operates at a much greater scale. So kind of leveraging those expertise as well. And then kind of, maybe more simply, it's often an authorization is required to do a procedure or a surgery, whether it's at a Sutter hospital or a non Sutter hospital. And while some of these other places are in network, it's not the most preferred location. You know, we believe that getting work, you know, a Sutter doctor doing work in a Sutter hospital is better than a Sutter doctor doing work in a non Sutter hospital, just from an integration of care perspective. So we've looked really closely at helping the doctors direct care where they think it should be done best. But just kind of creating that awareness, kind of, and leveraging some of those, those payer process tools has been, has been really helpful.
- [12:31]
B
Got it. That makes a lot of sense and is so helpful to understand. I appreciate you going a bit deeper there now looking ahead to 2026, what are some of the big priorities and headwinds that you're focused on?
- [12:42]
A
There are certainly. This is a great, a great question. There are certainly industry headwinds in market headwinds and cost pressures that we can talk through. But I want to take a moment to talk about. I'm a cfo. I have a finance team and I've talked to other CFOs, you know, around the country as well and even within my, you know, our organization. And I think one of the things that finance teams are feeling right now is that the pace of the business has never been faster. The in the need for insights and answers and advice and strategic support has never been more needed. Especially when we're getting new tools and technology like artificial intelligence, whether that's copilot or chat GPT. The finance teams are going to have to adapt over the next couple of years to the pace of the business. We're not going to go back to the, a slower pace of the past, we're going to have to figure out how to meet the needs of the, of the organization, develop those insights, look around the corner. I mean, the job of a finance person is to tell the story of what happened and then to tell the story of what's going to happen. And it's the what's going to happen that will be more and more more prominent. And the challenge in, in 2026, I think, is really spending every single day looking forward, finding insights, working with operations to deploy strategies and tactics so that we continue to, number one, care for patients, two, do it in a, and to do it in a sustainable way that continues to kind of maintain margins so that we can reinvest for our patients, we can reinvest in our, in our facilities with that is kind of the underlying theme of the finance team. I think in our, in our organization, we're going to continue to need to optimize the use of our assets. And I'll just start with maybe our buildings first. Removing white space from clinician schedules, whether it's in, if it's in the hospital, it's ensuring that we've got excellent or utilization. If we're talking about imaging equipment and using those assets, it's about having, you know, a perfect scheduling process so that there's no downtime kind of throughout the day on those machines. Especially when you've got, you know, it takes know, three to four weeks to find, find time for, and to schedule an mri, for example. We've got to be excellent in, in that area. I also think that we've, we've got to really look hard at how we deliver care. You know, we're deploying today some geriatric clinics because those patients have different needs than the rest of the population. We're, we're actively looking to push inpatient surgeries, outpatient and outpatient surgeries to the ambulatory settings so that it's a lower cost for the patient. It also frees up our acute operating rooms to take on kind of the more severe, the more acute cases. We say often that our hospitals today have the lowest acuity that they're ever going to have. Again, as more and more care is delivered in the ambulatory setting or at home, the hospital will continue to be the place where you have the most, the most acute and the most in need patients. So it's incumbent upon us to operate them with a tremendous amount of efficiency. So the finance team plays a huge role in ensuring that success. Looking forward and also kind of creating the structures and the tools to focus on whether it's labor management, space utilization. I think space for me is probably going to be our biggest focus in 2026 because adding additional square footage, particularly in Silicon Valley, where it's very expensive, is not really, is not really in the cards for, for 2026. For us, you know, we made this big investment for 2031 and some of those spaces will come online between now and then. But, you know, we're, we're, we're attempting to skate to where the puck is going, going to be.
- [16:58]
B
I love that that's so critical and such an important thing, especially today, as you mentioned, you know, things are moving so quickly. You can't really take a moment to take a step back or, you know, sl to keep a pace and have to keep looking at that future. And you know, speaking of that, what do you think the hardest thing you'll have to do this year will be?
- [17:18]
A
You ask that question and it's like it's, there's only one thing that's the hardest. I think there probably be a few things that are extremely hard. Maybe I could frame it a little bit differently. One concept I often talk about with operators or with my colleagues is this. I call it the illogical equation of health care economics. So like in most industries, those who consume the least pay the least, and those who consume the most pay the most. Healthcare is completely opposite. Often patients who are in the most need, in the most need of care, they pay the least. And those that, that need very little end up paying the most. At the same time, our revenue is not guaranteed, payment is dependent, depends on providing that care was medically necessary, it was appropriately delivered, it was documented correctly. And then of course, there's often months that go by before reimbursement occurs. So even if we do exactly the right thing and the right billing, everything is perfect. The economics are uncertain. We're also one of the few industries where there is a disconnect on the economic relationship between the provider of the service and the customer. Patients typically engage with a third party payer or government entity like Medicare or Medicaid. That's kind of the first barrier. And in many cases, they don't even have a choice on who the payer is. Their employer makes those choices for them. So the handoffs between the handoffs and the understanding is a recipe for disconnection, complexity, misunderstanding. And as a cfo, my job is to help solve that equation both operationally and for our customers, our patients, by creating the financial framework, the clarity, the transparency to improve access, maintain sustainability, drive margin. So the hardest thing that I have to do, that we have to do is continue to create this transparency in an ever complex world. And, and if I had to break it down I would say that it's, it's, it's having a, a very direct relationship with our customers and our, and our payers so that we get reimbursed for the work that we've already done. We spend a considerable portion of our, of our total expenses that are on, on revenue cycle managed care, payer contracting, on documentation related activities and audits just to ensure that we, we get reimbursed. And it's an area I think that is ripe for improved process whether we're adding technology, leveraging new technology in that space. But that's the hardest thing we have to do because if we don't solve for reimbursement for the work that we've already completed, nothing else is going to make sense.
- [20:19]
B
And that's helpful to understand and really, really critical to keep in mind in the healthcare space especially. It's just fascinating. See that I know the economics of healthcare is so much different than any other industry. So keeping that front and center I can imagine is critical for your teams. Now before we wrap up here, where do you see some of the best opportunities for operational growth?
- [20:40]
A
We've got a ton of urgent cares kind of throughout throughout Sutter and different geographies. Those urgent cares may or may not accept all payer types. And if you happen to be a payer type that isn't accepted at the urgent care, you may seek access in the emergency department. So whether it's you asked about growth and this is kind of where I'm going with that. We want to capture the lives in the communities that we serve. The more lives we capture, number one, we believe we deliver the best health care. That's number one. Number two is if we can continue to improve our scale, we can, we can provide this care at a lower, at a lower price point and therefore that translates into taking care of more, more patients throughout our, our footprint and our geography. That's, that's I think for me number one and the front door, whether that's an on demand virtual care like we stood up this year. Right. And just to put a plug in right now, if you are a already have a Sutter Mychart account and you need a virtual care visit, just go online and schedule it. We've got clinicians, staff 24 hours a day, seven days a week on demand for that. So that, that's huge. So that's a front door urgent care, front door emergency department, when it, when it's the right time for an emergency visit is a front door. So that's capturing that growth. The second way in which we're growing is we're going to add 100, 150 more clinicians in Silicon Valley next year. This last year we added just under 200. A year before that was just. Was about 200. And continuing to bring in primary care and specialty clinicians, help improve access and, you know, reduce the time when you really are in need of care. It reduces that time between when you go to schedule the appointment and when you can actually start getting care. So those are the two ways in which we are like, those are the biggest levers I see for growth. And then of course, once you grow, you've got to either use the buildings and spaces and equipment that you have really efficiently or you've got to add more. So we're doing, we're doing both of those things as well to, to counterbalance and make sure that we can, when we grow, we can serve.
- [22:56]
B
I love that. Luke, thank you so much for joining the podcast today. This has been such a great conversation, so informative, inspiring. I look forward to seeing you at our annual meeting in April. I know you'll be speaking there and truly be able to dig deeper into some of these themes and connect with other leaders too. So thank you.
- [23:12]
A
It's my pleasure, Laura. Thanks for having me.