Updated on Oct. 26 with executives' earnings call commentaries.
Universal Health Services (UHS) saw its revenues rise but its profits dip during the third quarter of 2022, the acute and behavioral hospital operator reported Tuesday afternoon.
Net income attributable to UHS was $182.8 million ($2.50 per diluted share) for the quarter, down 16% from the $218.4 million ($2.60 per diluted share) of 2021’s same quarter.
Net revenues grew 5.7% year over year to $3.34 billion but were countered by a 7.7% increase in operating expenses ($3.06 billion).
“There was insufficient revenue growth to offset the accelerated rate of wage increases and other inflationary pressures,” President and CEO Marc Miller told investors during a Wednesday morning earnings call.
The King of Prussia, Pennsylvania-based company said its operations continue to be impacted by COVID-19 and staffing shortages and noted that “certain facilities, particularly within our behavioral healthcare segment … have been unable to fill all vacant positions and, consequently, have been required to limit patient volumes” due to the labor crunch.
Still, the impact of those roadblocks has lessened in Q3 and continues to decline, Miller said.
UHS cut its premium pay from $170 million in 2022’s second quarter to $81 million, he said, while COVID-diagnosed patient volumes that had comprised 16% of UHS’ total admissions during the previous year’s third quarter declined to 6% of total admissions. Both of those trends have allowed UHS to reduce admission caps among its behavioral care facilities, Miller said.
Although it’s still too early for the company to release its projections for 2023, executives said they are confident that the relieving labor and COVID pressures—in addition to initiatives around aggressive recruitment, retention and cost-cutting—should allow UHS to land within its existing projections for the remainder of the calendar year.
“We feel like as long as the trends that we saw in Q3 continue to a reasonable degree in Q4, someplace in the lower half of guidance should be very achievable,” Miller said.
Within its acute care business unit, UHS said its adjusted admissions increased by 1.9% and its adjusted patient days decreased by 5% year over year on a same-facility basis. The same facilities saw their net revenue per adjusted admission fall by 2.5% from last year’s third quarter, though net revenue per adjusted patient day and same-facility acute care net revenues grew by 4.5% and 0.9%, respectively.
Chief Financial Officer Steve Filton noted that the acute care length of stay reduction was “directly related” to the decline in COVID-19 admissions and that “further reductions in length of stay are possible, and are actually one of the most, if not the most, significant opportunity we have to be more efficient and control costs.”
UHS’ behavioral care facilities saw, on a same-facility basis, adjusted admissions rise by 4% and adjusted patient days grow by 3.3% over last year’s third quarter. The company saw increases across the segment’s net revenue per adjusted admission (4.2%), net revenue per adjusted patient day (5%) and overall net revenues (8.4%) year over year on a same-facility basis.
The executives also acknowledged that both business segments’ revenues were impacted by the ongoing shift from inpatient to outpatient care.
“It's just a continuation of a trend that's been in place for some time," Filton said. “And I think our business strategy and both of our businesses take that into account, and we're very cognizant of that.”
Year-to-date net income attributable to UHS was $500.8 million ($6.71 per diluted share), down 33% from the $752.5 million ($8.83 per diluted share) reported during the first nine months of 2021. Year-to-date net revenues have increased 6.3% year over year to $9.95 billion while operating expenses grew 10.7% to $9.21 billion.
UHS operates 28 acute care hospitals, 331 behavioral health facilities, 41 outpatient facilities and ambulatory care sites. It reported $12.6 billion in annual revenues in 2021.