Dive Brief:
- Universal Health Services delivered first quarter earnings results Wednesday that beat analysts’ estimates on stronger than expected revenue and volume metrics across its behavioral health and acute service lines.
- UHS increased its same facility net revenues for its acute care and behavioral care service lines by 9.6% and 10.4%, respectively, during the first quarter of 2024 compared to the same period last year.
- However, the operator could suffer a “material” financial hit should the operator fail to lower a March $535 million judgment against a subsidiary, UHS disclosed in its earnings report. The for-profit health system is currently appealing the judgment in post-trial motions, said CFO Steve Filton during the earnings call.
Dive Insight:
The King of Prussia, Pennsylvania-based health system reported a net income of $261.8 million for the first quarter of 2024, up from $163.1 million last year, on a net revenue of $3.8 billion, compared to $3.5 billion last year.
While UHS’ competitors, including HCA Healthcare and Tenet Healthcare, have bet heavily on outpatient services in recent quarters, UHS derived the majority of its patient revenue from inpatient services during the first quarter. Inpatient revenue accounted for 60.7% of acute patient revenue and 90.8% of behavioral care revenue during the first quarter.
UHS executives told investors there was room for further revenue growth, citing opportunities to improve operating margins, stabilizing payer relations and expected benefits from increased Medicaid supplemental payments.
“[We] still haven't necessarily returned to pre-pandemic levels. So we still think there is a decent amount of runway there for continued acute care volume growth, as well as behavioral volume growth,” said Filton.
While expenses rose year over year by 8.3%, Filton said they were becoming “better controlled” due to productivity initiatives. Wage inflation, in particular, has come down relative to last year.
Physician fees, which dragged the for-profit healthcare industry throughout the back half of 2023, however, remained an outlier. While Filton expected physician fees to stabilize in 2024, he said they grew between 12% to 13% in the first quarter.
Still, UHS received some relief from what executives characterized as stabilizing levels of denial activity and patient status changes from payers, as well as increased Medicaid reimbursements.
The reimbursements are “helping to compensate for several years of inadequate reimbursement levels that have failed to keep up with the costs we had to incur to properly care for our patients,” said CEO Marc Miller.
Capital expenditure is expected to run the gamut in 2024, from doubling down on high-acuity inpatient services — where UHS executives say they “don’t have as much competition” — to expanding UHS’ freestanding emergency services portfolio. At year-end, Miller says it will have approximately 30 facilities open nationwide.
UHS did not update its 2024 guidance following the earnings, however, executives said it may in the second quarter if earnings continue on this trajectory.
