The return of patients who deferred care during the pandemic fueled a jump in acute care volumes for King of Prussia, Pennsylvania-based Universal Health Services, executives told investors Wednesday morning.
The for-profit acute and behavioral health hospital operator reported a $171.3 million net gain ($2.42 per diluted share) for the second quarter of 2023, up slightly from the $164.1 million it had logged this time in 2022.
UHS said that its second-quarter net revenues rose 6.8% year over year to nearly $3.55 billion. Operating expenses rose 5.8% year over year to $3.27 billion for the quarter.
The numbers mark an important quarter for the company, as it is the first in some time since the pandemic began that UHS has been able to make an "apples-to-apples comparison of two low COVID volume quarters," President and CEO Marc Miller said on Wednesday's earnings call.
"We're generally pleased with our second quarter results, as both of our business segments continue to transition into a post-pandemic world," he said. "As we anticipated acute care volumes have continued their recovery trajectory and gradually become to resemble the patterns we experienced before the pandemic."
That acute care business growth presented as a 7.7% year-over-year increase in adjusted admissions for the second quarter and a 6.9% increase in adjusted patient days, both on a same-facility basis. The company saw a "very robust" 9.7% year-over-year revenue increase in same-facility net revenues.
The revenue bump came even as the volume growth "was skewed somewhat to lower acuity procedures," Chief Financial Officer Steve Filton told investors Wednesday during the earnings call. Overall surgical volumes rose about 5% year over year, for instance, though that was split into 1% inpatient surgical growth and 8% outpatient (and often lower acuity) surgical growth.
"This is sort of an intuitive result," Filton said. "Almost by definition, if people had emergency healthcare needs during the pandemic, those were attended to. But the things that were deferred were more elective, more discretionary procedures both surgical and medical. I think that's the dynamic you're seeing in terms of very high volumes, but somewhat more muted acuity."
Premium pay for the quarter was $75 million, "reflecting approximately a 10% to 12% decline from the amount in the previous several quarters," Filton said. The decline would have been steeper were it not for the jump in acute volumes, he added.
Filton acknowledged that some of the growth can be tied to the post-pandemic recovery of specific markets where UHS is highly concentrated, such as Nevada, catching up with others such as Florida and Texas where competitors HCA Healthcare and Tenet Healthcare are more established.
However, the scale of UHS' acute numbers likely heralds good news from other systems across the country that have yet to report their second-quarter results.
"To have the sort of acute care performance we had—particularly the top line and EBITA growth at 16%—that's got to be pretty broad-based," Filton said. "It really can't be, you know, specifically one single market."
Filton said that the company expects acute volumes to moderate somewhat going forward, though that would be paired with a rise in acuity.
Among the company’s behavioral health facilities, same-facility-adjusted admissions rose 3.3% and adjusted patient days increased 1.5% compared to the second quarter of 2022. Same-facility net revenues jumped 7.8% year-over-year as net revenue per adjusted admission rose 4.4% and net revenue per adjusted patient day grew by 6.2%.
The executives said that the volumes among residential treatment centers were a hair below their expectations, but attributed the stumble to "a handful of facilities" facing workforce and regulatory issues that the company expects to resolve. Their expectations for the behavior health segment going forward were generally optimistic, particularly as the labor market continues to settle.
Based on these performances and other operating trends, UHS increased the lower end of its guidance range for 2023.
The revised forecast for net revenues now ranges from $14.13 billion to $14.33 billion, adjusted EBITDA (net of non-controlling interests) ranges from $1.70 billion to $1.76 billion, and adjusted earnings per share (diluted) range from $9.85 per share to $10.50 per share.
Executives said they declined to increase the upper end of the guidance due to detrimental changes in a Nevada supplemental payment program as well as the unknown impact Medicaid redeterminations will bring.
The company’s profit for the quarter included an $8.1 million unrealized after-tax loss tied to a decline in market value of “certain equity securities.” Removing that yielded an adjusted net income of $179.4 million attributable to UHS.
Across the first half of 2023, UHS has now reported $334.4 million net income ($4.70 per diluted share) up from H1 2022’s $318 million and a 6% year-over-year revenue increase to $7.02 billion.
The numbers come less than a week after the company’s board voted in favor of a $0.20 per share cash dividend, to be paid out to shareholders on Sept. 15.
As of June 30, UHS reported $946 million of aggregate available borrowing capacity. Net cash provided by operating activities was $654 million across six months, up from the prior first half’s $478 million.
UHS spans 27 acute care hospitals, 331 inpatient behavioral health facilities, 42 outpatient facilities and other services. It reported about $13.4 billion in revenues across 2022 and employs about 93,800 people.
Editor's note: This story has been updated with comments from Universal Health Services' second-quarter 2023 earnings call.