Universal Health Services Inc. reported third-quarter growth in net income of $171.7 million, a year-over-year increase of nearly 22%, led by revenue growth at the company's acute care and behavioral health facilities.
The King of Prussia, Penn.-based company also booked adjusted net income of $208.8 million for the third quarter, a year-over-year increase of 45.6%.
Universal Health, which owns and operates hospitals and healthcare facilities across the U.S., saw an increase of revenue on a same facility basis for both acute care facilities and behavioral health facilities, CFO Steve Filton said on an Oct. 26 earnings call. The facilities saw year-over-year revenue growth of 6.7% and 2.5%, respectively.
The behavior health division missed the company's estimates of 5% same-store revenue growth. Filton believes the estimate is an attainable long-term goal but said he was uncertain of how fast the company would be able to get there after missing the mark for multiple quarters.
Behavior health facilities for Universal Health saw an increase of 4.7% in admission, but only a slight increase of 0.6% for adjusted patient days. Overall, behavioral health saw a revenue decrease of 1.9% per adjusted admission.
Filton attributed the decrease to a lack of growth in patient day numbers, which is occurring as patients switch from traditional Medicare or Medicaid plans to managed care plans. The plans are still issued through the federal or state government but are managed by private insurers. And those insurers are managing treatment utilization and patient stay more aggressively, according to Filton. The company expects more migration to these managed care plans and is uncertain of the total impact that will have in the future, he added.
"Obviously, there's not much we can do about that overall shift of patients," Filton said. "What we are doing … is trying to develop as much non-Medicaid business as we can."
Despite the "length of stay pressure," Filton said more than 50% of the company's Medicaid and Medicare patients have already migrated to managed care plans, and the changes should stabilize.
DOJ investigation continues
Universal Health also saw a pretax increase of $48 million to a reserve for the ongoing U.S. Department of Justice investigation of possible false-claims violations perpetrated by the company. The reserve has been bumped up multiple times and currently sits at approximately $90 million, according to the company.
When questioned about the future of the investigation, Filton said the gap between the company's offer and the government investigation has narrowed and he is optimistic about moving forward. Filton did not, however, indicate when the matter would be settled or what the final dollar amount would be.
"It's difficult to predict that endgame with precision because we do largely proceed at the pace that the government sets," Filton said.
Hurricane impacts expected for Q4
Much like last year, the company expects a negative impact from hurricane damage to facilities for the fourth quarter. Filton specifically pointed to a facility in Panama City, Fla. that received significant damage from Hurricane Michael. The facility will be closed for four to six months and will be a drag of $5 million to $7 million into the fourth quarter and possibly the first quarter of 2019, Filton noted.
Despite these possible drags, Filton said most of the damage will be covered by insurance and that Universal Health should "recover most of the loss sometime next year."