Phoenix-based Banner Health, a 33-hospital system, reported an operating income of $180 million (4.4% margin) in the first quarter of 2026, up from a $142 million operating gain (3.6% margin) in the same period last year, according to financial documents published May 26.
Eight things to know
1. Banner posted total operating revenue of $4.1 billion in the first quarter, up 4.9% year over year. Arizona’s state directed Medicaid payment program accounted for $99 million of the $190 million gain. Operating expenses increased 4% to $3.9 billion.
2. The health system reported a net income of $250 million in the quarter, compared to $218 million in the first quarter of 2025, reflecting stronger operating results and roughly similar investment returns.
3. Inpatient surgical volume increased 1.8% year over year, while hospital outpatient surgeries declined 2.3%. Hospital outpatient registrations and medical group encounters grew 2.3% and 4.0%, respectively. Total admissions fell 0.6%, which Banner attributed to a milder respiratory season.
4. Contract labor costs fell 13.1% year over year, the result of both lower rates and reduced utilization. Supply expense per adjusted admission, however, increased 15.8%, fueled by inflation and higher utilization of oncology drugs and personalized immunotherapy treatments.
5. Banner’s Plans and Networks division earned $6 million in operating income, compared to $10 million in the prior-year period. The division’s full-risk member months declined 31.4% year over year. Most of that decline came from exiting the individual marketplace plan within the Banner|Aetna joint venture at the end of the 2025 plan year. Medicaid plan enrollment also fell, and Medicare Advantage membership declined after Banner modified benefits to limit losses. The division accounted for 17.9% of Banner’s total operating revenue in the first quarter.
6. The insurance division’s results were uneven across its three sub-divisions. Banner|Aetna, the commercial insurance joint venture, drove the division’s overall gain, posting $6 million in operating income after a $7 million operating loss in the first quarter of 2025. The termination of its individual marketplace plan was the primary factor in the turnaround. Banner|Aetna covered roughly 420,000 commercial member lives in Arizona, with fewer than 10% on a full-risk basis.
7. The Banner Medicare Advantage plan, now in its sixth year and covering about 7,000 members, narrowed its operating loss to $3 million from $10 million in 2025 following benefit and pricing changes. The Banner|University Health Plans Medicaid segment posted a $4 million gain, down sharply from $27 million in 2025, as the medical loss ratio worsened to 88.2% from 83.6% and membership fell 11.6% due to Medicaid redetermination.
8. Days cash on hand reached 248, up from 247 at year-end 2025. Long-term debt stood at $3.8 billion and total assets were $21.1 billion as of March 31, 2026.
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