Banner Health has reported $179 million in operating income for the first six months of 2021, reflecting a 3% operating margin and a substantial turnaround from the $109 million it had posted during the COVID-19 pandemic’s opening wave.
The Phoenix-based system, which reports its financials cumulatively, also highlighted a 23% year-over-year total revenue increase to $6 billion for the first half of 2021.
While Banner Health bounced back from the worst of pandemic disruption, its management noted that its early 2021 operations were somewhat disrupted by a surge in cases. However, the system said it has been able to better maintain operations across its care delivery business following the initial wave and that volumes unrelated to COVID-19, including elective procedures, have “gradually recovered toward pre-pandemic levels.”
Still, the secular nonprofit system’s management noted that recent weeks have come with increased COVID-19 activity within its hospitals, “primarily amongst the unvaccinated,” they wrote.
Banner Health credited federal pandemic support programs as a major lifeline to its financials during the pandemic.
The system said it has recognized $103 million in Provider Relief Funds during the first half of 2021 and a total of roughly $466 million in stimulus funds overall. In April, it also began recouping the $654 million in Medicare Accelerated and Advance Payments it received, roughly $587 million of which remained by June 30.
Alongside disruptions related to utilization, these funds helped Banner Health offset rising expenses that have persisted well into the second quarter of this year.
“The surging COVID patient population across Banner’s inpatient and ICU units created significant staffing and cost pressures, as management was forced to redeploy internal labor (from its core business operations) toward the crisis-filled units, and incur significant contract labor (at premium rates) from outside agencies to support patient demand,” management wrote. “Inflated premium labor usage continued throughout the second quarter as significant core labor shortages continued to apply cost pressure.”
Case in point, Banner Health reported a total of more than $5.8 billion in total expenses for the first half of 2021, up substantially from the nearly $4.8 billion it had recorded the previous year.
Its other sources of income, however, helped make up for the difference. For 2021 to date, Banner Health has seen $529.5 million in total income primarily driven by $476.5 million from its investments. Those respective values came in at losses of $359.4 million and $216.2 million the previous year.
The system said it has more than $1.4 billion in cash, cash equivalents and restricted cash on hand.
Banner Health is comprised of 32 Western U.S. hospitals in addition to insurance operations such as its accountable care organization and its commercial insurance joint venture with Aetna. Its full-year earnings for 2020 outlined a 19% drop in year-over-year income from $726.8 million to $586.7 million.