Banner Health officials state that financial deficits in the Tucson market will be counterbalanced by upcoming developments, including the renovation and expansion of a local facility. The Phoenix-based nonprofit reported that its Tucson operations lost $89 million in 2016 and anticipates a $45 million loss for the current year. The organization employs approximately 6,000 individuals in the Tucson region.
To address these deficits, the company has launched the Tucson Performance Improvement Plan, which targets breaking even by 2018. This local initiative coincides with broader system-wide cost-cutting measures. Banner is restructuring corporate services to reduce expenses by $65 million this year and has engaged consultants from McKinsey & Co. to identify additional efficiency opportunities.
Jim Hammond, publisher of The Hertel Report, an Arizona healthcare newsletter, noted that large healthcare organizations must adapt to changing conditions. He cited uncertainty surrounding the Affordable Care Act and federal payment reforms as factors driving financial re-evaluations across the industry. Banner officials have expressed concern that potential changes to Medicaid and the repeal of the ACA could impact future revenue streams.
Prior to the implementation of the ACA, between 12 percent and 16 percent of Banner patients were uninsured. That figure has since dropped to approximately 6 percent. Currently, about 31 percent of patients at Banner’s two Tucson hospitals are covered by Medicaid.
The average hospital operating margin in Arizona for the first 11 months of 2016 was 3.7 percent, according to the Arizona Healthcare and Hospital Association.
Banner Health owns or manages 28 acute-care hospitals across six states. In Tucson, the company operates Banner-University Medical Center Tucson and Banner-University Medical Center South through a lease with Pima County. The company acquired the University of Arizona Health Network in 2015, a move that contributed to a dip in operating margins that year.
