Banner Health is already getting a revenue boost from Arizona's new Medicaid rate enhancement program that took effect in October, the health system's finance chief said Monday.
Phoenix-based Banner posted $311 million in operating income on $10.4 billion in revenue in 2020, a 3% operating margin, including federal stimulus grants. Without the grants, Banner would have operated at a slight loss in 2020. Not-for-profit Banner posted a 2.1% operating margin in 2019, when it made $200.4 million on $9.4 billion in revenue.
Like its peers, Banner—which operates 32 hospitals in six states—got help from the federal government last year in the form of stimulus grants to help offset a steep decline in elective procedure volume stemming from the COVID-19 pandemic. Banner recognized $316 million worth of federal stimulus grants in 2020. The health system treated roughly half of all COVID-19 patients in Arizona, Laraway said.
A new federal match program in Arizona that brings Medicaid reimbursement roughly in line with Medicare reimbursement took effect Oct. 1, 2020. Dennis Laraway, Banner's chief financial officer, said on an investor call Monday that the long-term deal relies on a self-assessed fee on hospitals to trigger the three-to-one federal match.
Laraway said Banner expects to draw about $300 million annually through the enhanced federal match, which is about one-third of the state's total net benefit from the program. Banner treats between 40% and 50% of the state's Medicaid population, he said.
"That's a great advantage to support the safety net and the payer mix that we operate here in some of these markets," Laraway said. "Having Medicaid paid on par with Medicare-level prices is quite an advantage to our health system."
