- Net Income per Diluted Share: $4.26 for Q2 2024.
- Adjusted Net Income per Diluted Share: $4.31 for Q2 2024.
- Revenue Growth: 6.6% year-over-year.
- Adjusted Admissions: Increased by 3.4% year-over-year.
- Premium Pay: $61 million, reflecting a 15% to 20% decline from the prior year quarter.
- Same Facility EBITDA (Acute Care Hospitals): Increased by 37% year-over-year; 20% excluding incremental Medicaid supplemental payments in Nevada.
- Same Facility Revenues (Behavioral Health Hospitals): Increased by 11%, driven by a 9.3% increase in revenue per adjusted patient day.
- Same Facility EBITDA (Behavioral Health Hospitals): Increased by 13% year-over-year.
- Cash Generated from Operating Activities: Increased by $422 million to $1.1 billion for the first six months of 2024.
- Capital Expenditures: $450 million in the first half of 2024.
- Share Repurchase: Acquired 1.1 million shares at a total cost of approximately $195 million in the first half of 2024.
- Available Borrowing Capacity: $1 billion as of June 30, 2024.
- Operational Freestanding Emergency Departments: 27 operational, with 12 more approved and in development.
- New Acute Care Hospitals: West Henderson Hospital (150 beds) expected to open late 2024, Cedar Hill Regional Medical Center (136 beds) expected to open spring 2025, Alan B. Miller Medical Center (150 beds) expected to open spring 2026.
- New Behavioral Health Hospitals: River Vista Behavioral Hospital (128 beds) recently opened, Southridge Behavioral Hospital (96 beds) expected to open later in 2024.
- 2024 EPS Guidance: Increased midpoint by 17% to $15.80 per diluted share from $13.50 per diluted share previously.
- Stock Repurchase Program: Board authorized a $1 billion increase, bringing total authorization to $1.228 billion.
Release Date: July 25, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Universal Health Services Inc (UHS, Financial) reported a net income attributable to UHS per diluted share of $4.26 for Q2 2024, with an adjusted net income of $4.31 per diluted share.
- Revenue growth was a solid 6.6% year-over-year, despite a moderation in demand for acute hospital services.
- Same facility EBITDA at acute care hospitals increased by 37% year-over-year, or 20% excluding incremental Medicaid supplemental payments in Nevada.
- Behavioral health hospitals saw an 11% increase in same facility revenues, driven by a 9.3% increase in revenue per adjusted patient day.
- Cash generated from operating activities increased by $422 million to $1.1 billion in the first six months of 2024, compared to $654 million in the same period in 2023.
Negative Points
- Acute hospital surgical growth flattened out, indicating a potential slowdown in high-margin procedures.
- Behavioral health volumes were impacted by Medicaid disenrollments, particularly in Southern states, affecting patient day growth.
- Labor challenges persist, with specific markets facing difficulties in filling positions, which can limit capacity and patient admissions.
- The company did not include potential benefits from new supplemental programs in Tennessee and Washington, DC, in their revised guidance, indicating uncertainty in future revenue from these sources.
- Turnover rates in behavioral health remain high, creating inefficiencies and challenges in maintaining a stable workforce.
Q & A Highlights
Highlights from Universal Health Services Inc (UHS) Q2 2024 Earnings Call
Q: Can you provide an update on the status of new Medicaid supplemental payment programs in Tennessee and Washington, DC?
A: Steve Filton, CFO: Both programs are pending CMS approval. Tennessee's program, which is primarily for behavioral health, is expected to be retroactive to July 2024, while Washington, DC's program, which benefits acute care, is expected to be retroactive to October 2024. The potential annual benefit is estimated at $42-$56 million for Tennessee and $80-$90 million for Washington, DC.
Q: Can you elaborate on the behavioral volume performance in Q2 and expectations for the rest of the year?
A: Steve Filton, CFO: Behavioral patient days increased by about 2% in Q1 and were expected to improve slightly in Q2 but did not. Challenges include labor shortages and Medicaid disenrollments. We still aim for a 3% patient day growth by the end of 2024.
Q: What are the trends in acute care demand and surgical volumes?
A: Steve Filton, CFO: Adjusted admissions grew by 3.4% year-over-year, and surgical growth flattened. These figures are in line with expectations given the difficult comparisons from last year. We anticipate volumes to return to pre-pandemic patterns, and cost management has been a focus to sustain margin recovery.
Q: How does the updated guidance reflect year-to-date trends and supplemental payments?
A: Steve Filton, CFO: The guidance increase captures the first half beat and includes known supplemental payments for the second half. We did not include potential benefits from Tennessee or Washington, DC programs. The core revenue and volume assumptions for the second half remain largely unchanged.
Q: What impact have the two-midnight rule and Medicaid redeterminations had on your business?
A: Steve Filton, CFO: We have not seen a significant impact from the two-midnight rule change. Medicaid redeterminations have led to an increase in commercial exchange patients on the acute side and have negatively impacted behavioral volumes, particularly in the adolescent population.
Q: Can you discuss the impact of the $1 billion increase to the share repurchase program?
A: Steve Filton, CFO: The increase reinforces our intent to spend the bulk of our free cash flow, around $500-$600 million, on share repurchases this year.
Q: What are the embedded adjusted admissions growth assumptions for the second half of the year?
A: Steve Filton, CFO: We expect adjusted admission growth in the acute segment to be in the 3%-4% range, continuing the trend from Q2. For behavioral health, we aim to reach a 3% patient day growth rate by year-end.
Q: How are you addressing labor challenges in the behavioral segment?
A: Steve Filton, CFO: We are focused on reducing turnover through mentorship programs, educational opportunities, and career development. We believe that improving these areas will help us meet the demand for behavioral health services.
Q: How do Medicaid supplemental payments compare to commercial rates, and how do they affect your strategy?
A: Steve Filton, CFO: Medicaid reimbursement remains below commercial and Medicare rates, but supplemental payments make it more attractive. In behavioral health, we are focusing on referral sources that produce Medicaid patients in states with higher supplemental payments.
Q: What is the expected timeline for new facilities to reach breakeven?
A: Steve Filton, CFO: New facilities typically reach breakeven in 6-12 months and divisional averages in 18-24 months. The timeline may be shorter in high-demand markets like Las Vegas.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
