Dive Brief:
- Universal Health Services beat Wall Street expectations for the third quarter on Wednesday on revenue of $3.6 billion, up 6.8% from the same period last year, driven by rising demand for services in its hospitals.
- Adjusted admissions at acute care hospitals increased by 6.8% year over year, and adjusted patient days rose by 3.8%. However, the Medicaid redeterminations process had impacted behavioral care volumes in certain states, UHS CFO Steve Filton told investors on a Thursday morning earnings call.
- Though the report was mostly positive, UHS executives said strained relations with payers, redeterminations and a tight labor market curtailed earnings.
Dive Insight:
The King of Prussia, Pennsylvania-based for-profit hospital operator reported profit of $167 million in the third quarter, down from $182.8 million during the prior-year period. Operating expenses increased 7% compared to the third quarter of 2022, rising to $3.3 billion. Salary and benefit costs rose 6.4% year over year to $1.8 billion.
“Despite what remains a difficult operating environment, our consolidated results continue to track our revised earning guidance as we anticipated. Acute care volumes have continued their recovery trajectory and have gradually begun to resemble the patterns we experienced before the pandemic,” said Mark Miller, UHS president, on a Thursday morning call with investors.
While operating volumes rose — with patients notably continuing to exhibit preferences for outpatient services — demand may have been stronger absent the redeterminations process, Filton said. In April, states could begin removing Medicaid beneficiaries from their rolls after eligibility checks resumed post-pandemic.
The CFO said he was “guesstimating” the exact impact of the redeterminations process on patient volumes. However, he told investors that in markets like Texas where “at least a million people” were removed from rolls, UHS noticed a decline in patient volumes. Although some patients have have been removed for administrative reasons, it may take “a little bit of time” for beneficiaries to be reenrolled, Filton said.
UHS leadership also reported strained relations with payers. The implementation of the No Surprises Act, which went into effect last year, has soured relations with between payers and providers, according to Miller. The law — which aims to protect consumers from high medical bills resulting from disputes between providers and payers — has been the source of multiple lawsuits and regulatory changes.
“We recognize the need to counter the increasingly aggressive behavior on the part of our payers, and seek appropriate price increases to offset the impact of inflation on our cost structure, and to seek further contractual protections to ensure we are properly reimbursed for the level of care provided to our patients,” Miller said.
Physician expenses and staffing costs were also an area of concern. Last quarter, executives reported the run cost for physician expenses was twice the $55 million UHS had initially budgeted. This quarter, costs remained elevated running at 7.6% of operating expenses. Historically, they run around 6%, Miller said.
“The staffing issue is a continuing issue,” Filton said. “We remain constrained in some markets and some facilities by lack of staff — that could be nurses, it could be therapists, it could be mental health technicians. Generally, we continue to improve our recruitment and retention metrics.”
