Phoenix-based Banner Health reported an operating income of $142.4 million (3.6% margin) in the first quarter, up from an $89.3 million operating gain (2.4% margin) in the first quarter of 2024, according to financial documents published May 15.
Eight things to know:
1. Total revenue for the quarter was $3.9 billion, a 5.5% increase over the first quarter of 2024.
2. Contract labor cost decreased 18.1% year over year through a combination of reduced rate and lower utilization. Hospital supply costs as a percentage of patient revenue dropped to 20% from 20.8% in 2024, partially driven by a 1.5% decrease in inpatient surgeries.
3. Volume growth and increases in supplemental Medicaid payments were the primary drivers of Banner’s year-over-year improvement in the first quarter. Total admissions increased 3.7% over the same period in 2024.
4. Hospital outpatient registrations and emergency department registrations experienced year over year growth of 4.7% and 2.5%, respectively. Outpatient surgical volume declined by 0.2% while ambulatory surgery center cases increased 4.5%. Acute length of stay declined 0.2% year-over-year.
5. As of March 31, long-term debt for the health system was $4.2 billion and total assets were $19.4 billion.
6. Banner’s net income in the first quarter was $218 million compared to $358 million in 2024, with stronger operating results in 2025 being offset by weaker investment returns.
7. Banner’s health plan and health network posted $10 million in operating income for the first quarter, an $11 million decline from the same period in 2024. Managed Medicaid plans generated a $27 million gain, offset by a $14 million loss from Medicare Advantage and a $7 million loss from the Banner|Aetna joint venture.
8. Banner’s insurance division revenue fell 14.2% year over year in the first quarter due to a 14.4% drop in full-risk member months, impacted by changes in benefits and pricing, according to the health system. Despite the decline, Banner said it is focused on growing its insurance segment across commercial, Medicare and Medicaid products, which accounted for 21.2% of total revenue in the first quarter of 2025.
