Banner Health earns $263 million, closes on University of Arizona Health acquisition

Photo of Banner Health in Phoenix, AZ from Facebook

Phoenix-based Banner Health had what you’d call a banner year in 2014, closing on its purchase of University of Arizona Health Network and pulling in more than $5.4 billion in revenue, the healthcare provider announced this week.

The 24-hospital Banner system posted an operating income of $263 million on the  $5.4 billion in revenue last year, up from $5.1 billion in revenue and $254 million in surplus in 2013, according to the organization's latest financial statement. Banner finished 2014 with $8.8 billion in total assets, up from $8.2 billion in 2013, and it’s likely to keep growing next year.

This past February Banner completed the acquisition of the University of Arizona Health Network. The takeover cost $677.8 million, financed with a $700 million taxable, variable-interest loan, and will also yeild $500 million in promised capital improvements.

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While data on admissions and patient care was not released, Banner’s financial statement showed that its payer mix improved, with self-pay patients falling from 8.6 percent to 5 percent of patient revenue, while Medicaid grew from 9 percent to 11.5 percent. Medicare accounted for 22.3 percent of patient revenue in 2014, up from 21.2 percent in 2013, even as the health system jumped into Medicare's Pioneer Accountable Care Organization program with uncertain results.

Banner Health continued its contract as a Pioneer ACO, which was first awarded in 2012. The Pioneer ACO is a shared savings, shared risk model, where providers are responsible for increases in medical cost over certain benchmarks.

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In 2014, Banner was paid $9 million as its share of the 2013 plan year savings; the year before it earned $12 million. But, auditor Ernst & Young wrote that the health system "was not certain that they had met all of the compliance and quality measures to record the risk share savings prior to receiving the settlement." The health system has also "not recorded a risk share receivable for the 2014 plan year in the accompanying consolidated financial statements as BHN is not yet able to determine whether compliance with the quality and administrative measures have been achieved."

Nonetheless, Banner is among the more ambitious nonprofit health systems pursuing ACO contracts with payers like Aetna and Blue Cross Blue Shield of Arizona.

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Last fall, Aetna and Banner Health Network pointed to positive results from their multi-year accountable care collaboration: $5 million in shared savings and a 5 percent reduction in average medical costs last year for group and individuals members in Aetna’s fully insured Whole Health plan. Among notable outcomes last year were improvements in blood sugar control for diabetics, a 9 percent reduction in avoidable inpatient hospital admissions and a 9 percent reduction in radiological utilization. Banner also has a joint venture in Medicare Advantage with BCBS of Arizona, partnering with the insurer to sell Medicare plans in a market with as many as 500,000 eligible seniors.

Twitter: @AnthonyBrino