Hospitals have been financially propping up medical schools, but now it’s squeezing their bottom lines

Before Banner Health agreed to shore up a pair of financially struggling medical schools, leaders framed such partnerships as a “must” for Arizona.

It’s come with a hefty price tag. Financial statements show the Phoenix-based health system has dedicated roughly $2 billion to the schools and a faculty medical group it bought as part of the deal, which closed in 2015. Meanwhile, Banner’s operating margin has slipped from 5% before the deal to 1%.

Health systems nationwide are in similar situations. They see a lot of benefit from partnering with medical schools, it’s just that the value is harder to capture in numbers. The prestige of an academic affiliation draws patients and the promise of breakthrough cures. The doctors they’re training will one day save lives.

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