UHS Ramps Up Behavioral Health JV Activity But Struggles with Workforce Shortages

Despite being one of the largest behavioral health providers in the country, Universal Health Services (NYSE: UHS) isn’t immune to industry pain points such as workforce shortages and regulatory pressures.

But even with those struggles, UHS continues to grow its behavioral health footprint and market hold.

The King of Prussia, Pennsylvania-based company has done that in part by leaning into joint ventures with acute care hospitals, an ongoing strategy CFO Steve Filton highlighted Monday during the 38th Annual J.P. Morgan Healthcare Conference in San Francisco.


“We have announced over the last few years any number of joint ventures with acute care hospitals [who] want to remain in the behavioral business,” Filton said during the presentation. “And we’ve got any number of other joint venture projects that are sort of either in discussion or [we’re] in the process of building new facilities and expanding our capacity.”

UHS is one of the nation’s biggest hospital management companies, with a roughly equal presence and revenue split between its behavioral health and acute care segments.

On the behavioral health side, the company has 324 inpatient and 21 outpatient behavioral health facilities across the United States and Puerto Rico, in addition to another 135 facilities in the United Kingdom.


While UHS has acute care hospitals of its own, it’s JV strategy relies on teaming up with non-UHS acute care facilities that offer behavioral health services in some capacity.

A large number of medical hospitals fall into that category.

In fact, about half of all the behavioral health beds in America are operated by acute care hospitals, which often have a facility, wing or number of beds dedicated to behavioral health, Filton said.

However, UHS has found that many of those hospitals struggle to provide behavioral health services well.

“What we have found — in more cases than not — is acute care hospitals [are] not doing a terribly efficient job in running their behavioral health services,” Filton said. “They tend to be focused on other things.”

That’s where UHS’ comes in, Filton explained. The company has found success in teaming up with such hospitals to open new behavioral health facilities together.

By forming those JVs, UHS helps providers stay in the behavioral health game, while also driving efficiencies and business development — in addition to referrals.

“[Acute care facilities] generate a lot of behavioral patients,” Filton said. “Many of those patients come from their own acute care emergency rooms. Probably a third of our behavioral patients in our freestanding facilities nationally come from acute care emergency rooms … and when we partner with an acute care hospital, we’re getting the benefit of those.”

The most recent example of the strategy is UHS’ JV with Beaumont Health to build a new $40 million mental health hospital in southeast Michigan, a rendering for which is pictured above.

Other examples include the company’s JV with Providence Sacred Heart Medical Center to open Inland Northwest Behavioral Health, a new private behavioral health hospital in Washington state that started seeing patients last fall, and its JV with Lancaster General Health, which is part of the University of Pennsylvania Health System, to open Lancaster Behavioral Health Hospital, also last year.

Staffing struggles

In addition to adding new JVs to its portfolio in recent years, UHS has also grown its capacity, adding about 3,000 beds to its behavioral health hospitals in the past decade while maintaining steady occupancy of around 75%, Filton said.

Despite that success, staffing shortages have hurt UHS’ bottom line.

“Behavioral revenue has started to lag,” Filton said. “Prior to 2014-15, behavioral revenue growth averaged very consistently 5% to 7%, sometimes more than that. It [began] to decline pretty significantly in 2015-16.”

Specifically, he credited the slow down to UHS’s inability to find enough nurses and doctors to staff its behavioral health hospitals.

“While patients are still being presented to our hospitals for admission, we simply don’t have sufficient clinical staff to treat them,” Filton said. “We’re turning away more and more patients.”

However, things have started to look up, Filton said.

“We’ve made some progress there,” Filton said. “Revenue is recovering — albeit more slowly than we expected — but it’s been recovering from its lows in 2017.”

While UHS’ year-end results are not yet available, company leaders previously stated their goal was to grow behavioral health revenue by 5% in 2019.

On the company’s Q1 2019 call, Filton said UHS expected to hit the goal by mid-year. However, by the end of Q3, UHS had not yet hit the target.

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