- Banner Health reported strong revenues in the first quarter of 2017, but saw operating income decline from a year ago, Becker’s Hospital CFO reported.
- While revenues hit $1.95 billion, up 1% from $1.93 billion in Q1 2016, expenses rose 3% to $1.88 billion. That shook out to a 36% drop in operating income — to $68 million versus $106.5 million in the previous year’s first quarter.
- The hospital chain attributed the loss to costs associated with its Academic Medicine Division and poor performance by insurance operations. Banner’s Academic Medicine Division, which comprises three medical centers and three physician practices, experienced a net operating loss of $23.8 million in the 2017 first quarter, compared with $16.6 million a year earlier.
Many hospitals are struggling to meet costs and stay afloat in today’s changing healthcare environment. With the shift to value-based care, more patients are being treated in outpatient and alternative care settings and hospitals are incentivized to reduce length of stay and readmissions.
According to a report last year in Health Affairs, the majority of health systems in the U.S. lose money on patient services. While times are tough for for-profits and nonprofit hospitals alike, community nonprofits are there to serve the community and can feel especially pinched when outpatient and ambulatory care outpaces inpatient care. Hospitals in states with Medicaid expansion have also seen revenues shrink because fewer patients are privately insured.
Uncertainty about the future of the Affordable Care Act has triggered new efforts by health systems to rein in spending, including finding ways to cut labor costs. A Dobson DaVanzo analysis from December found that ACA repeal without an immediate replacement could cost hospitals $165.8 billion in federal payments through 2026. The analysis during a time when popular GOP rhetoric leaned toward repealing the ACA and kicking the replacement plan down to a different date. Since then, House Republicans have passed the American Health Care Act.
The Congressional Budget Office recently estimated the AHCA could result in 23 million individuals losing coverage over 10 years. This would affect the number of people coming into hospitals to receive care.
The Senate is in the process of crafting its own ACA bill.
Earlier this month, Banner Health completed a major restructuring that included eliminating 500 jobs, including one at the C-suite level. The Phoenix-based system hopes to save another $64 million this year through a voluntary worker termination program.