As hospitals and health systems brace for mounting reimbursement pressures, rising costs and further industry consolidation, Phoenix-based Banner Health is pursuing a growth strategy built on diversification, financial discipline and a greater share of the healthcare dollar.
For Staci Dickerson, executive vice president and CFO of Banner Health, the next chapter of healthcare growth will not be defined simply by how many hospitals a system operates or how much revenue it generates. Instead, success will depend on how effectively organizations expand their capabilities, align care delivery with insurance coverage and position themselves for long-term financial sustainability.
“Growth for its own sake is not a strategy for success,” Ms. Dickerson told Becker’s. “Scale needs to serve a very clear purpose, either strong strategic alignment, meaningful synergies or thoughtful diversification.”
Banner’s own evolution reflects that approach.
“We began as a regional hospital-focused system, then deliberately diversified by building high-performing medical groups engaged in value-based care, expanding our ambulatory network, moving into other geographies and, finally, putting the insurance arm around all of that,” she said. “Each of our growth strategies has served those purposes. How does it align strategically? How does it provide synergies? And how does it support where we’re trying to go from a diversification perspective?”
That philosophy is guiding Banner as it expands its outpatient network, grows value-based care and insurance operations and prepares for mounting financial pressures in 2027.
New Medicaid work requirements take effect, federal restrictions on Medicaid funding mechanisms tighten and the expiration of enhanced ACA subsidies continues to drive coverage losses. The resulting shift toward uninsured and self-pay patients is expected to increase uncompensated care, bad debt and revenue cycle challenges, while affordability pressures could further reduce profitable elective procedures.
Banner enters this period from a position of relative financial strength. The 33-hospital system reported $431.2 million in operating income in the first half of 2026, a 5.1% margin, compared with $251.2 million and a 3.2% margin during the same period last year. The system posted $444 million in operating income (2.8% margin) for the year ending Dec. 31, 2025, up from $362 million (2.3% margin) the previous year.
“We’re always evaluating growth opportunities,” Ms. Dickerson said. “We know we can’t just cut our way to financial sustainability.”
Why Banner is betting on outpatient growth
Banner’s strategy rests on three forms of diversification: expanding its care delivery capabilities, entering or strengthening different geographic markets and increasing revenue generated through its insurance operations.
The system operates everything from rural critical access hospitals to large academic medical centers, alongside a growing network of ambulatory facilities and health insurance products.
One of its biggest areas of investment is ASCs as care continues to accelerate from inpatient to lower cost outpatient settings and closer to patients’ homes. Banner entered into a joint venture partnership with Phoenix-based Atlas Healthcare Partner in 2018 to build and operate a network of ASCs in Arizona, Colorado and Wyoming.
Atlas CEO Aric Burke told Becker’s in August that its Banner market had expanded from eight surgery centers to 31 over about eight years through acquisitions, new developments and facility conversions.
Ms. Dickerson said the partnership has allowed Banner to build procedural capacity across nearly all its markets, positioning the system for the continued migration of surgeries away from traditional hospitals.
“For a health system like Banner that has both the care and coverage model, we’re focused on the cost of care,” she said. “So we want to make sure we’re providing care at the right level of care that’s the lowest cost but best site of service. ASCs certainly achieve that goal.
“Also, as health systems continue to be under financial pressure with H.R. 1, it’s very costly to invest in acute care facilities, operating room expansion, and the like. So it definitely is a more economic model in terms of the ability to grow faster at less cost, and it’s a great option for patients as well.”
However, outpatient expansion is just one piece of Banner’s broader strategy. The system is also evaluating geographic opportunities as consolidation accelerates across the industry.
Hospital M&A rebounded this year, with 22 announced transactions in the first quarter and 18 in the second, according to Kaufman Hall.
Ms. Dickerson expects more consolidation as financial pressures make it increasingly difficult for smaller health systems and standalone hospitals to remain independent.
“It’s going to become more and more difficult for standalone hospitals or smaller health systems to be able to withstand some of the changes that are coming if they stand as is,” she said.
Banner remains open to opportunities, but Ms. Dickerson emphasized that any deal must deliver meaningful strategic or financial benefits rather than simply expanding the system’s footprint.
While the health system does not have any acquisitions currently in the works, it is planning to sell Banner Lassen Medical Center in Susanville, Calif., to Brentwood, Tenn.-based Quorum Health.
The Medicare Advantage equation
Another distinguishing feature of Banner’s strategy is its emphasis on growing premium-based revenue.
Just under 20% of Banner’s total revenue comes from insurance premiums, according to Ms. Dickerson. Increasing that share is a central component of its long-term financial strategy.
“We’re really focused on increasing premium revenue, which we believe provides the greatest flexibility from a financing structure to care for patients in the right way,” she said. “By having the dollar at the top, we can decide how best to care for and invest in the health and wellness of our members, and really do what’s right for them to reduce the overall cost of healthcare. That is absolutely core to us, and I think it’s what really differentiates us.”
Through its health plan, Banner receives per-member, per-month premiums, giving the system greater flexibility to invest in preventive care, wellness programs and incentives that improve patient outcomes. As the insurer and the care provider, Banner has the ability to collect premium revenue — “the whole dollar” — and avoids administrative burdens and battling commercial payers for payment on care it has provided. By integrating insurance with care delivery, it can also use data to anticipate patient needs, coordinate services and ensure members receive the right care in the most appropriate setting.
“We can invest in prevention, wellness, population health. We can reduce chronic conditions, ER visits and avoidable utilization, and that lowers the pressure on the cost of care while keeping the focus on where it belongs on the member’s health and well-being,” Ms. Dickerson said.
She believes the model gives Banner an advantage in Medicare Advantage, even as the program faces growing scrutiny over denials, administrative burden and reimbursement.
Ms. Dickerson acknowledged that Banner’s own Medicare Advantage plan remains unprofitable on the insurance side, largely because its relatively small membership base has not achieved the scale needed to absorb administrative costs.
But she argued that assessing the insurance business independently misses the benefits of an integrated model. Banner’s care delivery operations also lose money on Medicare Advantage, she said, but perform better with its own insurance products than with other Medicare Advantage plans.
“When you put the two together, we do perform better,” she said.
That distinction is becoming increasingly important as health systems reassess their Medicare Advantage relationships. Becker’s has reported on nearly 100 hospitals and health systems over the last three years that have dropped Medicare Advantage contracts, with providers frequently citing excessive administrative burden, payment delays and coverage denials.
Banner continues to contract with other Medicare Advantage insurers but is prepared to terminate agreements when significant issues cannot be resolved collaboratively.
“We continue to advocate for fair, sustainable terms that don’t create unnecessary barriers for patients or administrative burden for our care teams, and our preference is to resolve concerns collaboratively,” Ms. Dickerson said. “But if an insurer is unwilling to address significant issues, we will consider all appropriate options, including contract termination. We’re really looking at it from both sides..”
Despite the growing friction between providers and payers, she remains optimistic about the program’s future, though she believes changes will be necessary.
“There’s going to need to be behavior changes as well as policy changes around it to make it sustainable into the future,” she said.
Preparing for the 2027 financial squeeze
Banner’s growth strategy is unfolding as health systems prepare for significant reimbursement and coverage disruptions in 2027.
Medicaid funding reductions, eligibility changes and the expiration of enhanced ACA premium tax credits are creating new uncertainty around payer mix, patient volumes and hospital revenue.
Banner is already seeing the effects of affordability pressures. Ms. Dickerson told Becker’s that patients with individual exchange coverage represented about 3% of its payer mix but accounted for 35% of its decline in elective surgery volumes. Elective procedures among that population fell 33%, compared with 4% across all payers.
To prepare for the financial challenges ahead, Banner maintains a rolling five-year financial plan — updated annually — that allows leadership to identify emerging pressures and make investment decisions before they become urgent.
“We plan across a five-year horizon, so we can act early, stay aligned with our long-term strategy and avoid short-term reactions that could really limit our options later,” Ms. Dickerson said. “We are a high reliability organization, and our commitment to that is foundational to our financial performance. So, every day we’re focusing on delivering the highest levels of quality, safety, and operational efficiency. That all helps drive stronger financial performance.”
