King of Prussia, Pennsylvania-based Universal Health Services is cautiously "optimistic" it is getting close to a deal with the Department of Justice more than three years after it disclosed it was under investigation for billing practices at its behavioral health facilities.
The company has been adding increasing amounts to its reserves for a potential settlement with the government over the civil investigation of its behavioral health care facilities, putting $48 million into the traunch last quarter and a total of $70.4 million for the year so far.
The reserve is reflective of the company's most recent offer to the government, said UHS' Chief Financial Officer Steve Filton.
"The increases to our reserves are coming more frequently and in bigger chunks. We view that as a good thing," Filton said. I think it's reflective of the settlement negotiations with the government are meaningful, the pace of them has picked up and the gap between where our offers and the government demands are has narrowed and we're optimistic or hopeful that means we can reach a resolution to this relatively soon."
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Filton made the comments during a third-quarter earnings call on Friday, as the health system reported an income spike in the third quarter. UHS reported its earnings reached $171.7 million in the third quarter ending Sept. 30, up 21.6% percent compared to earnings of $141.2 million during the same time period 2017.
Net revenues reached $2.65 billion, up 4.2% compared to $2.54 billion during the third quarter of 2017. Among the reasons for the jump in income? UHS pointed to the Tax Cuts and Jobs Act of 2017, which reduced its U.S. federal corporate tax rate from 35% to 21%. As
Axios reported, it's worked out to an estimated $92 million windfall for UHS so far this year.
UHS' acute care hospitals saw admissions increased 1.5% and adjusted patient days increase 4.1% in the third quarter of 2018 compared to the third quarter of 2017. Admissions at UHS' behavioral healthcare facilities increased 4.7% while adjusted patient days increased less than a percent compared to the same quarter in 2017.
The company reported its net cash for the first nine months of the year was $975 million, compared to $879 million during the first nine months of 2017.
UHS narrowed its projections for income for the year to a range of $9.25 to $9.60 per diluted share as compared to the previously provided range of $9.25 to $9.90 per diluted share. But, officials warned in the release, the revised estimated earnings guidance range did not include the unfavorable impact of the reserve established in the government's investigation on its behavioral healthcare facilities.
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Analysts honed in on UHS' behavioral health business, which saw revenue per adjusted admission down 2% in the quarter.
Filton said he believes that drop was a function of a reduced length of stay rather than any sort of rate pressure and pointed to a 2% increase revenue per adjusted patient day and an overall increase in same-store adjusted admissions.
"But unfortunately, a lot of that benefit was mitigated by the length of stay pressure and I think that pressure is largely related to the dynamics that we’ve been discussing for any number of quarters now which is the continued shift of patients from traditional Medicare and Medicaid programs to managed Medicare and Medicaid programs mostly on the Medicaid side."
He said UHS has responded by trying to develop as much non-Medicaid business as possible. "All of our payer groups [are] working hard to have the appropriate clinical documentation and appropriate processes, so that, we are getting that the appropriate length of stay as we’ve clinically justified for all of our patients," he said.