Universal Health Services beats on revenue, earnings in Q2, raises 2024 forecast

Universal Health Services (UHS) raised its full-year revenue and earnings guidance buoyed by strong financial performance in the past six months thanks to acute care growth.

The health system outpaced analyst estimates during the second quarter amid revenue and volume improvements across its acute care business.

However, Medicaid redeterminations still hamstrung the systems’ behavioral health services as admissions dropped by 0.4%, according to UHS' second-quarter financial results released Wednesday. The health system also faces labor challenges with filling some behavioral health staffing positions, which limits capacity, Steve Filton, executive vice president and chief financial officer, told investors and analysts during the second-quarter earnings call Thursday morning.

The King of Prussia, Pennsylvania-based for-profit health system reported $289.2 million in net income ($4.26 per diluted share) during the second quarter. That's up 69% from $171.3 million in profit, or $2.42 per diluted share, during the second quarter of 2023.

Net revenues grew 10% to $3.9 billion during the second quarter compared to $3.54 billion during the same quarter a year ago.

UHS' bottom line result beat the Zacks Consensus Estimate by 27.9%, and the top line outpaced the consensus mark by 1.5%.

Net income for the first half of the year was $551 million, or $8.08 per diluted share. Revenue increased by 10.5% to $7.75 billion for the first half of 2024.

UHS employs almost 97,000 people across 27 inpatient acute care hospitals, 333 inpatient behavioral health facilities and other locations in the U.S., the U.K. and Puerto Rico.

Based on results in the first half of the year, UHS increased its 2024 full-year operating results forecast with projected net revenues estimated to be between $15.56 billion and $15.75 billion, That represents an increase of 1% to 0.3% over its original 2024 revenue forecast of $15.41 billion to $15.7 billion.

The adjusted earnings per share forecast is now $15.40 per share to $16.20 per share, a 17% increase from its previous EPS guidance.

UHS also announced a $1 billion increase to its stock repurchasing program authorized by its board. By the end of the second quarter, the health system had bought back 30% of its outstanding shares since 2019, according to a press release. 

In commentary given during Thursday morning’s earnings call, executives said behavioral health utilization was not as good as expected. Behavioral health utilization only grew by 2% in the first quarter, Filton said, and the health system projected the same amount of growth in the rest of 2024. 

“While we've made I think a lot of progress on filling our labor vacancies around the country we still find in very specific markets and geographies that certain labor position sometimes nurses, sometimes therapists and counselors, sometimes nonprofessionals and mental health technicians are difficult to place and can sometimes limit capacity or our ability to admit patients,” Filton told analysts on the call.

He continued saying Medicaid disenrollments, especially in Southern states like Texas, Mississippi, Louisiana and Arkansas, has impacted utilization of UHS’ behavioral health services. Filton said it’s taken time for people, especially adolescents, to get re-enrolled in Medicaid or to get into commercial exchange plans. In commercial plans, though, high cost sharing requirements make getting care difficult. 

“We still believe that that 3% patient day growth target that we embedded in our original 2024 guidance is an achievable target, [but] probably not in terms of full year growth,” Filton said. "We believe that by the end of 2024, we should be growing at that rate and we view that as a sustainable rate of growth going forward."

In the second-quarter 2024 results for the acute care services unit alone, on a same-facility basis, UHS executives highlighted year-over-year increases in adjusted admissions (3.4%), adjusted patient days (1.6%), net revenue per adjusted admission (3.5%) and net revenue per adjusted patient day (5.3%). Same-facility net revenues increased by 6.6% year over year from 2023.

Filton said the amount of premium paid in the second quarter was $61 million, reflecting a 15% to 20% decline from the prior year.

For the quarter, on a same-facility basis, adjusted admissions in behavioral facilities decreased by 0.4%, while adjusted patient days increased 1.4%. Net revenue per adjusted admission increased 11.2%, net revenue per adjusted patient day rose 9.3%% and overall net revenues increased 11% year-over-year.

UHS continues to develop additional inpatient and ambulatory care capacity. The health system currently has 27 operational freestanding emergency departments as well as 12 more, which have been approved and are in various stages of development, Filton said. 

There is ongoing construction on UHS' de novo acute care hospitals consisting of the 150-bed West Henderson Hospital in Las Vegas, which is expected to open late this year; the 136 bed Cedar Hill Regional Medical Center in Washington, D.C., which is expected to open in the spring of 2025; and the 150-bed Alan B. Miller Medical Center in Palm Beach Gardens, Florida, which is expected to open in the spring of 2026.

The health system also recently opened the 128-bed River Vista Behavioral Hospital in Madera, California, and it is developing the the Southridge Behavioral Hospital in West Michigan, which is a joint venture with Trinity Health Michigan.