Universal Health Services has followed in the wake of other outperforming for-profit health systems during the second quarter of 2021, reporting $325 million in profits and a 17.1% year-over-year increase in net revenues as patients returned to its hospitals and behavioral health services.
But while the strong performance allowed UHS to increase its forecast for the remainder of 2021—it now predicts net revenues for the year will fall between $12.12 billion and $12.36 billion—executives warned investors that continued acceleration of recent COVID-19 case trends could take a bite out of its sunny forecast.
“During the past four to six weeks, many of our hospitals have experienced significant surges in the number of COVID patients and it is not evident that this surge has yet reached its peak,” Steve Filton, executive vice president and chief financial officer, said during an investor call. “Given the uncertain impact of this most recent surge on non-COVID volumes and on labor shortages, we based our guidance for the second half of the year primarily on our original internal forecast.”
At UHS hospitals, COVID-19 cases have ranged from comprising roughly 20% of patients during the winter peak to single-digit percentages as the pandemic cooled in the spring, executives said.
Today, the company is seeing about 11% or 12% of its patients receiving care for COVID-19, which they said was about on par with summer 2020’s second wave. The surging disease is having an impact on both the company’s acute care and behavioral health businesses within hard-hit geographies, most notably Florida, Texas, Missouri and Nevada.
However, this time around the executives said they’re not too worried about issues like shortages in personal protective equipment or a major decline in elective surgeries. Rather, the “single biggest issue” is the strain COVID-19 adds to an already tight labor market through nurse and clinician burnout, quarantined staff, recruitment competition within the behavioral health market and other related consequences, executives said.
“In May, June, July, we were setting internal records for how many people we were hiring at all levels as a result of some very focused activity on our part to increase our recruitment activity,” Filton said. “We’re also focusing a great deal on increasing retention rates for those people we do hire, but again, [we] express some level of caution and concern with the rise in COVID volumes in the last month or so, only because every other time we’ve seen an increase in COVID patients it does create exacerbated pressure on those labor issues.”
King of Prussia, Pennsylvania-based UHS owns and operates 26 hospitals and employs approximately 89,000 people. It reported $11.6 billion in 2020 revenues, which was up 1.6% from the previous year’s $11.4 billion despite the pandemic.
For the second quarter of 2021 ended on June 30, UHS’ $325 million net income represented a 29% increase from the $251.9 million reported during the second quarter of 2020.
Year-over-year net revenues grew from $2.7 billion to $3.2 billion for the three-month period of each year and from $5.6 billion to $6.2 billion for the first halves.
UHS also noted that it has returned all $189 million that it received this year back to the government using its cash reserves.
"Therefore, our results of operations for the three- and six-month periods ended June 30, 2021 include no impact from the receipt of those funds,” it wrote in the earnings announcement.
Among UHS’ acute care hospitals, revenues, adjusted admissions and adjusted patient days for the quarter were up 18.5%, 26.4% and 21.6%, respectively, compared to the prior year’s quarter.
UHS behavioral health hospitals’ revenues and volumes were also higher, albeit to a lesser degree. Here, revenue jumped 13.7% year-over-year while adjusted admissions and adjusted patient days rose 14.1% and 7.4%.
“For most of the second quarter we experienced the continued decline in the number of COVID-19 patients being treated in our hospitals and a corresponding recovery in the number of non-COVID patients,” Filton said. “As a result, most of our key volume metrics, including acute and behavioral patient days, emergency room visits and surgical cases, grew to levels approaching those that we were tracking before the pandemic began. This robust recovery in volumes exceeded the pace of our original forecast and drove the favorable operating results even in the face of continuing labor pressures in both of our business segments.”
Net revenue for both of these service groups included $218 million of recognized government stimulus funding from the CARES Act and other programs, the system noted. About $157 million of this net revenue was attributable to UHS’ acute care services, while about $61 million went to its behavioral healthcare services.
The for-profit's board announced alongside the earnings that it has authorized a $1 billion increase to its stock repurchase program, bumping it up from $2.7 billion to $3.7 billion since 2014.
Filton said that the company is always on the lookout for favorable expansion opportunities, but that promising merger and acquisition targets so far have been few and far between. Rather, he said that the company has been hard-pressed to find external opportunities that are more compelling than the favorable rates at which it can repurchase its stock.
UHS is currently sitting on $199 million in cash and cash equivalents and $996 million of aggregate available borrowing capacity.
The system noted that it has added just $119 million to its cash on hand as a result of its operating activities, down from $1.45 billion during the year prior. The system attributed the majority of that decline, about $695 million, to Medicare accelerated payments made during the first quarter.
UHS’ results from the quarter keep up the rising profits and volumes trend reported last week by HCA and Tenet Healthcare. The former outlined a nearly 20% year-over-year increase in admissions and a $1.4 billion profit for the quarter, while the latter touted a 13.7% gain in hospital admissions and a 36% increase in net income to $120 million.