The past year has been a rough one for behavioral health providers, with COVID-19 decreasing organizations’ revenues, while increasing their costs. Even industry powerhouses like Universal Health Services (NYSE: UHS) have felt the virus’s impact.
But company leaders at the behavioral health giant say they’re starting to see the light at the end of the tunnel.
“We are pretty optimistic that … we will see less of an impact as the year goes on,” UHS CFO Steve Filton said. “We have begun to think about the second half of 2021 as looking much more normal [and] much more like the 2019 we exited pre-COVID than anything we experienced in 2020.”
Filton made those comments Jan. 11 during a virtual presentation at the annual JP Morgan Healthcare Conference. There, he highlighted the company’s past year, as well as its future outlook.
Based in King of Prussia, Pennsylvania, UHS is one of the nation’s largest hospital management companies. It owns and operates both acute care hospitals and behavioral health facilities, with a roughly 50/50 split between the two segments. On the behavioral side, UHS has 333 inpatient facilities across the U.S., the United Kingdom and Puerto Rico.
When the coronavirus first hit the U.S. back in March, UHS felt the financial impact of the virus almost immediately, Filton said.
“From mid-March to mid-May, we probably lost a couple of hundred million dollars of EBITDA,” Filton said, blaming large volume losses at UHS’s facilities. “Even though we were trying to reduce and modify our expense load in reaction to that, we just weren’t able to do it quickly enough.”
UHS leaders expected to see volume declines on the acute care side, due to nationwide mandates to pause elective procedures and non-essential health care visits. However, Filton said volume reductions came as more of a surprise on the behavioral side, where disruptions at common referral sources, such as ERs and schools, led to “dramatic drops” in patient volume.
By mid-May UHS’s business had started to recover, and by June, volumes had virtually returned to normal. That is, until the beginning of July, when the second wave of COVID-19 hit UHS, though the virus’s impact on the company was “less dramatic” that time around, according to Filton.
In late September, volumes took yet another hit, when UHS fell victim to a “pretty significant” cyber attack, which created a “significant amount of disruption” to its facilities, Filton said. Most of the systems became severely limited for several weeks, leading to decreased referrals due to the manual intake process UHS was forced to use.
After that issue was resolved, a third bout of COVID-19 hit the company in November. In terms of impact, that wave fell somewhere between the first and the second waves of coronavirus in terms of severity, Filton said.
All that said, a return to normalcy in late 2021 will come as a welcome respite for the provider, who is expected to report its year-end and Q4 2020 financials next month.