Banner Health, the 24-hospital, Phoenix-based system that recently completed its acquisition of the University of Arizona Health Network, reported a higher operating surplus for 2014 as its payer mix improved and revenue grew 5.9%.
However, it also saw higher expenses almost across the board. Its operating margin dipped slightly to 4.9% for the year ended Dec. 31, down from 5% in 2013.
Banner reported an operating surplus of $263.3 million on $5.4 billion in revenue for full-year 2014 compared with a 2013 operating surplus of $254.1 million on $5.1 billion in revenue.
The system did not disclose statistics on patient volume in the earnings report. However, it did note that Medicaid grew to represent 11.5% of its patient service revenue, up from 9.1% in 2013. Revenue from self-pay patients represented just 5% of the total, down from 8.6% the prior year, while the share from commercial insurers remained steady. Nineteen of its hospitals are in Medicaid expansion states.
In what has become a familiar story, the system also took a hit on its investments in 2014 and its unrestricted net assets declined to $241.2 million for the year compared with the $843.1 million bottom line it reported for 2013.
Banner closed its acquisition of UAHN last month, paying $677.8 million, which included paying off the academic medical center's debt. It also agreed to spend $500 million on capital improvements to expand and renovate the Tucson-based medical center.
Banner is financing the acquisition with a $700 million taxable bank loan from which matures next February and carries a variable interest rate.
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