Universal Health Services reports third-quarter net income of $55.6 million, or $.57 per diluted share

Universal Health Services, Inc. (NYSE: UHS) announced today that its reported net income attributable to UHS was $55.6 million, or $.57 per diluted share, during the third quarter of 2010 as compared to $51.1 million, or $.52 per diluted share, during the comparable prior year quarter. Net revenues increased 2.2% to $1.32 billion during the third quarter of 2010 as compared to $1.30 billion during the third quarter of 2009. Neutralizing the impact of the $17 million reduction to our net revenues and provision for doubtful accounts during the third quarter of 2010, as discussed below in Acute Care Services - Three-month periods, our net revenues increased 3.5% during the third quarter of 2010 as compared to the comparable prior year quarter.

After adjusting the reported results for the third quarter of 2010 to neutralize the impact of the below-mentioned adjustments (no such adjustments were applicable to the third quarter of 2009), our adjusted net income attributable to UHS was $53.7 million, or $.55 per diluted share.

As indicated on the attached Schedules of Non-GAAP Supplemental Consolidated Statements of Income Information ("Supplemental Schedules"), included in our net income attributable to UHS during the three-month period ended September 30, 2010, was net income of $1.9 million, or $.02 per diluted share, consisting of: (i) the unfavorable after-tax impact of $2.5 million, or $.02 per diluted share, resulting from the recording of transaction fees incurred in connection with our previously announced agreement to acquire Psychiatric Solutions, Inc. ("PSI"), offset by; (ii) a favorable discrete tax item $4.3 million, or $.04 per diluted share, related to the estimated non-deductible portion of the previously disclosed South Texas Health System settlement with the government.

Consolidated Results of Operations - Nine-month periods ended September 30, 2010 and 2009:

During the nine-month period ended September 30, 2010, our reported net income attributable to UHS was $193.0 million, or $1.96 per diluted share, as compared to $199.5 million, or $2.02 per diluted share, during the comparable prior year period. Net revenues increased 2.5% to $4.01 billion during the first nine months of 2010 as compared to $3.91 billion during the first nine months of 2009.

After adjusting the reported results for nine-month periods ended September 30, 2010 and 2009 to neutralize the impact of the below-mentioned adjustments, our adjusted net income attributable to UHS was $192.2 million, or $1.96 per diluted share, during the first nine months of 2010 as compared to $189.7 million, or $1.92 per diluted share, during the first nine months of 2009.

As indicated on the Supplemental Schedules, included in our net income attributable to UHS during the nine-month period ended September 30, 2010, were the following which, on a net aggregate basis, had no impact on our earnings per diluted share: (i) a favorable after-tax adjustment of $10.2 million, or $.10 per diluted share, resulting from a reduction to our professional and general liability self-insurance reserves relating to years prior to 2010 based upon a reserve analysis; (ii) a favorable discrete tax item $4.3 million, or $.04 per diluted share, as mentioned above, offset by; (iii) the unfavorable after-tax impact of $13.7 million, or $.14 per diluted share, resulting from the recording of transaction fees incurred in connection with our agreement to acquire PSI.

As indicated on the attached Supplemental Schedules, included in our net income attributable to UHS during the nine-month periods ended September 30, 2009, was net income of $9.8 million, or $.10 per diluted share, consisting of: (i) a favorable after-tax adjustment of $14.1 million, or $.14 per diluted share, resulting from a reduction to our professional and general liability self-insurance reserves relating to years prior to 2009 based upon a reserve analysis, partially offset by; (ii) an unfavorable discrete tax item of $4.3 million, or $.04 per diluted share, related to the South Texas Health System settlement.

Acute Care Services - Three-month periods ended September 30, 2010 and 2009:

At our acute care hospitals owned during both periods ("same facility basis"), adjusted admissions (adjusted for outpatient activity) increased 1.6% while adjusted patient days increased 1.5% during the third quarter of 2010, as compared to the third quarter of 2009. Net revenues at these facilities increased 1.9% during the third quarter of 2010 as compared to the comparable quarter of the prior year. At these facilities, net revenue per adjusted admission during the third quarter of 2010 increased 0.3% while net revenue per adjusted patient day increased 0.4% as compared to the comparable quarter of the prior year. On a same facility basis, excluding the items mentioned above and as included on the Supplemental Schedules, the operating margin at our acute care hospitals decreased to 12.9% during the third quarter of 2010 as compared to 13.1% during the third quarter of 2009.

We provide care to patients who meet certain financial or economic criteria without charge or at amounts substantially less than our established rates. Because we do not pursue collection of amounts determined to qualify as charity care, they are not reported in net revenues or in accounts receivable, net. Our acute care hospitals provided charity care and uninsured discounts, based on charges at established rates, amounting to $214 million and $169 million during the three-month periods ended September 30, 2010 and 2009, respectively. During the third quarter of 2010, we began classifying the charges associated with certain patients who met specific financial or economic criteria as charity care rather than as provision for doubtful accounts. Although this change in classification did not have any impact our net income attributable to UHS, it reduced our net revenues (by increasing the above-mentioned charity and uninsured discounts) and reduced our provision for doubtful accounts by approximately $17 million during the third quarter of 2010.

Acute Care Services - Nine-month periods ended September 30, 2010 and 2009:

During the nine-month period ended September 30, 2010, on a same facility basis, adjusted admissions increased 1.8% while adjusted patient days increased 0.8% over the comparable prior year period. Net revenues at these facilities increased 2.4% during the first nine months of 2010 as compared to the comparable period of the prior year. At these facilities, net revenue per adjusted admission increased 0.6% while net revenue per adjusted patient day increased 1.6% during the nine-month period ended September 30, 2010 as compared to the comparable period of the prior year. On a same facility basis, excluding the items mentioned above and as included on the Supplemental Schedules, the operating margin at our acute care hospitals decreased to 14.4% during the first nine months of 2010 as compared to 15.8% during the comparable period of the prior year.

Our acute care hospitals provided charity care and uninsured discounts, based on charges at established rates, amounting to $580 million and $509 million during the nine-month periods ended September 30, 2010 and 2009, respectively.

Behavioral Health Care Services - Three-month periods ended September 30, 2010 and 2009:

At our behavioral health care facilities, on a same facility basis, adjusted admissions increased 3.1% and adjusted patient days increased 0.8% during the third quarter of 2010 as compared to the third quarter of 2009. Net revenues at these facilities increased 5.7% during the third quarter of 2010 as compared to the comparable quarter in the prior year. At these facilities, net revenue per adjusted admission during the third quarter of 2010 increased 2.6% while net revenue per adjusted patient day increased 4.9% as compared to the comparable prior year quarter. On a same facility basis, excluding the items mentioned above and as included on the Supplemental Schedules, the operating margin at our behavioral health care facilities increased to 25.9% during the third quarter of 2010 as compared to 24.7% during the third quarter of 2009.

"The continued strength of our behavioral health business reinforces our enthusiasm for the previously announced acquisition of Psychiatric Solutions, Inc.", said Alan B. Miller, Chief Executive Officer. "We are eager to complete the transaction in November and begin the integration of PSI's patients, employees and facilities into our company."

Behavioral Health Care Services - Nine-month periods ended September 30, 2010 and 2009:

During the nine-month period ended September 30, 2010, on a same facility basis, adjusted admissions increased 3.9% and adjusted patient days increased 2.2% as compared to the comparable period of 2009. Net revenues at these facilities increased 6.0% during the first nine months of 2010 as compared to the comparable prior year period. At these facilities, net revenue per adjusted admission increased 1.8% while net revenue per adjusted patient day increased 3.4% during the first nine months of 2010 over the comparable prior year period. On a same facility basis, excluding the items mentioned above and as included on the Supplemental Schedules, the operating margin at our behavioral health care facilities increased to 26.6% during the first nine months of 2010 as compared to 25.1% during the comparable period of 2009.

2010 Revised Full Year Guidance:

Based upon the operating trends and financial results experienced during the first nine months of 2010, and subject to certain assumptions, provisions and adjustments, including those as set forth below in General Information, Forward-Looking Statements and Risk Factors and Non-GAAP Financial Measures, we are decreasing the upper end of our estimated range of earnings per diluted share attributable to UHS for the year ended December 31, 2010. Our revised full year guidance for 2010 is $2.45 to $2.55 per diluted share from the previously provided range of $2.45 to $2.65 per diluted share.

This guidance range excludes the impact of our acquisition of PSI and the items as indicated on the attached Supplemental Schedules for the nine-month period ended September 30, 2010. The range also excludes the impact of other items, if applicable, that may occur during the fourth quarter of 2010 that are nonrecurring or non-operational in nature and other amounts that may be reflected in our 2010 financial statements that relate to prior periods.

Conference Call Information:

We will hold a conference call for investors and analysts at 9:00 a.m. eastern time on October 28, 2010. The dial-in number is 1-877-648-7971. A digital recording of the conference call will be available two hours after the completion of the conference call on October 28, 2010 and will continue through midnight on November 11, 2010. The recording can be accessed by calling 1-800-642-1687 and entering the conference ID number 16881355. A live broadcast of the call will be available on our web site at www.uhsinc.com. The webcast will be available through Thompson StreetEvents Network at www.earnings.com or www.streetevents.com, a password-protected event management site for institutional investors.

General Information, Forward-Looking Statements and Risk Factors and Non-GAAP Financial Measures:

Universal Health Services, Inc. ("UHS") is one of the nation's largest hospital companies operating, through its subsidiaries, acute care hospitals, behavioral healthcare facilities and ambulatory centers located throughout the United States and Puerto Rico. UHS acts as the advisor to Universal Health Realty Income Trust, a real estate investment trust (NYSE: UHT). For additional information on the Company, visit our web site: http://www.uhsinc.com.

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