Universal Health Services (UHS) beat estimates for the fourth quarter and is forecasting higher, though still "conservative," full-year earnings for 2024.
The King of Prussia, Pennsylvania-based for-profit health system reported $216.4 million net income ($3.16 per diluted share) during the fourth quarter, an improvement over last year’s $174.8 million ($2.43 per diluted share) and $0.25 higher than the consensus estimate, according to numbers released after market close on Tuesday.
Net revenues for the quarter rose 7.4% year over year to $3.70 billion, which was also above the consensus estimate of $3.66 billion.
For the full year 2023, UHS notched $717.8 million of net income ($10.23 per diluted share), up from last year’s $675.6 million ($9.14 per diluted share). Net revenues across the acute and behavioral care hospital operator’s business rose 6.6% year-over-year to $14.28 billion.
In commentary given during Wednesday morning's earnings call, executives said the company continues to see "strong" demand across its business but that yearlong headwinds including elevated expenses, payer pressure and capacity issues made their mark on Q4 and full-year margins.
CEO Marc Miller noted that premium pay within the acute care hospital segment was roughly on par with the previous quarter at $67 million, though still down from the peak of $153 million in early 2022. Wage growth across both sides of the business is holding steady at about 4% to 5% annually, executives said, and physician fee expenses are still elevated from the past year's disruption.
Many of these pressures are expected to hold, but not substantially worsen, in the coming year, they said. A 2024 forecast released late Tuesday projects 12-month net revenues between $15.41 billion and $15.71 billion and earnings per diluted share between $13 and $14.
Executives said the company is hedging its bets with the 2024 preview. The roughly 5% to 6% of expected growth is "split pretty evenly between price and volume," with the former being an optimistic goal and the latter a bit of an undersell, Chief Financial Officer Steve Filton said.
He also pointed to the volatility introduced by last year's physician fee spikes that, even when the industry realized were imminent, came at a scale that caught hospitals off guard.
"Even when we're aware of issues, etc, the last couple of years, have created a little bit more volatility than we're accustomed to," Filton said on the call. "So I think, where we were trying to account for some of that [with] what I view as a fairly cautious approach to guidance."
Those fees and other labor expenses aren't currently expected to skyrocket beyond inflation again during the coming year, executives said.
On the upside, UHS expects it will continue to regain behavioral volumes as it plugs some (but not all) of its staffing holes and builds capacity. A bump in low-acuity acute care hospital volumes that resulted from pandemic-deferred care is also appearing to stabilize and is expected to improve case mix in 2024, they added, while a year of elevated pressure from payers is finally starting to subside.
“We saw for much of 2023, payers being more aggressive as their medical loss ratios were rising in a variety of ways, including denials and patient status changes, which would include recapping patients from inpatient to observation,” Filton said. "I don't think we changed our billing practices during the [fourth] quarter, but ... we're starting to anniversary some of that more aggressive behavior of the payers."
In the Q4 2024 results for the acute care services unit alone, on a same-facility basis, UHS executives highlighted year-over-year increases in adjusted admissions (5.6%), adjusted patient days (4.3%), net revenue per adjusted admission (3.7%) and net revenue per adjusted patient day (5%) for the fourth quarter. Same-facility net revenues increased by 9.7% over the final quarter of 2022.
The system also logged same-facility, year-over-year increases across the full calendar year across adjusted admissions (7.6%), adjusted patient days (4.7%) and total net revenues (7.6%). Net revenue per adjusted admission declined by 0.6%, though net revenue per adjusted patient day was up 2.2%.
Volume gains within the behavioral health segment were slimmer, though revenue increases stayed steady. For the quarter, on a same-facility basis, adjusted admissions rose 1.4%, adjusted patient days increased 1.1%, net revenue per adjusted admission increased 5.8%, net revenue per adjusted patient day rose 6.1% and overall net revenues increased 7.2% year-over-year.
For the full year, behavioral facilities boosted adjusted admissions by 3.2%, adjusted patient days by 2.1%, net revenue per adjusted admission by 4.7%, net revenue per adjusted patient day by 5.9% and overall net revenues by 8%.
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.