- Phoenix-based Banner Health reported $4.2 billion in revenues for the first six months of 2018, up 5.9% from about $4 million in same period last year.
- The nonprofit system, with 28 hospitals and specialty facilities across five western states and Nebraska, attributed the revenue spurt to growth in patient revenue and premium revenues from its insurance plans, according to unaudited consolidated financial statements released by Banner. Revenue from medical insurance premiums climbed to $703 million, from $570 million in the first half of 2017.
- Undermining those gains, however, were higher expenses — up 8.9% to $4.1 billion in H1 2018 versus $3.8 billion last year.
The result is a 33.3% year-over-year drop in operating income from $190.7 million last year to $127.3 million this year.
Among factors weighing Banner down was a 7.7% increase in physician and professional fees — to $98 million from $91 million. After accounting for nonoperating income, Banner finished the half with net income of $198.2 million, a 48.8% decline from $386.8 million in the first six months of 2017.
During the half, Banner and Select Medical launched outpatient operations for BHSM Rehabilitation, a joint venture announced in December to own and operate the companies' inpatient and outpatient rehab services. Banner anticipates investing $61.4 million in the construction of three new inpatient rehabilitation hospitals and expansion of the outpatient business, the financial documents note.
Hospitals nationwide are feeling the squeeze from rising labor costs, and the situation is not expected to improve with the ongoing physician and nursing shortages. In a recent Navigant analysis, 78% of healthcare leaders said they expect their organization's labor budget to increase over the next 12 months. And of those, nearly one in five expect a 5% or greater uptick in labor spend.
Total employment compensation rose 2.3% in 2016 and 2% more last year, according to the Bureau of Labor Statistics' Employment Cost Index.
Other hospitals are also seeing higher expenses offset strong revenue growth. Kaiser Permanente's net income dropped 21% during the first six months of 2018, despite a 10% jump in revenue to nearly $40 billion. The California-based system has weathered labor protests in recent months around plans to lay off pharmacy warehouse workers and relocate call center jobs.