UHS Sees Labor Pressures Ease in Q2, But Delta Variant Could Hinder Progress

Universal Health Services’ (NYSE: UHS) stock price hit a 52-week high of $165.16 on Tuesday after the hospital management company beat second-quarter earnings expectations. During the successful quarter, the company saw some behavioral health labor pressures ease amid increased demand for services.

“Every indicator that we have both on a … macro industry-wide basis and a micro UHS-basis indicates that the demand is still growing,” said UHS Chief Financial Officer Steve Filton. “We felt that as the pandemic eased, a lot of those [labor] pressures were easing — not necessarily disappearing by any stretch, but easing.”

Filton made those observations Tuesday during UHS’ second-quarter 2021 earnings call. Workforce shortages have been a huge pain point in behavioral health for years, with an estimated 6,000 providers needed to fix the problem. And the pandemic only made things worse.


But in Q2, as COVID let up, so did increased labor pressures. However, Filton acknowledged that the surge in the delta variant of COVID-19 could hurt the behavioral health staffing progress the company has made.

“[As COVID eased,] it just became easier to hire and to retain people,” he said during the call. “The COVID resurgence makes it a bit more challenging — but ultimately, we have a view that these shortages are temporary and transient in nature. And when they get resolved, which I think will happen as the pandemic eases over time, we’ll be able to get back to pre-pandemic volumes.”

Based in King of Prussia, Pennsylvania, UHS is one of the largest hospital management companies in the country. In addition to its acute service line, it operates more than 330 behavioral health facilities across the U.S., the United Kingdom and Puerto Rico.


Behavioral health demand helped fuel a strong quarter for the health care giant in Q2, with its operational performance beating internal guidance.

For Q2 2021, UHS reported net revenue of nearly $3.2 billion, an approximately 17% jump from the same quarter last year. Net income for Q2 2021 also saw a significant hike, coming in at $325 million, up from $251.9 million in Q2 2020.

Improved behavioral health volumes — which “reflect robust recoveries from the COVID-19 pandemic-related restrictions and policies” — helped buoy the quarter. Adjusted admissions at behavioral health facilities on a same-facility basis rose 14.1% year-over-year in Q2 2021, while adjusted patient days increased 7.4% compared to Q2 2020.

UHS leaders said a lower level of coverage denials and less uninsured patients contributed to the jump in behavioral health business. Additionally, the company touted negotiated price increases with managed care payers such as Medicaid.

“We really made a concerted effort, particularly on the managed Medicaid side of the payroll business, to negotiate price increases that in some cases … we hadn’t had for years,” Filton said. “I think that helped to drive that really strong behavioral pricing that we’ve experienced throughout the pandemic.”

Filton said that the jump in business is also reflective of payers being more flexible in compensating for behavioral services amid the pandemic.

“Our managed care payers, particularly on the behavioral side, seem to have been a little bit more lenient on utilization management and denials and length of stay during the pandemic,” he said on the call, while also noting that overall, the provider’s relationship with behavioral health payers “haven’t seen huge changes.”

Despite the uncertainty associated with the upswing in COVID-19 cases nationwide, the company raised its full-year earnings guidance following its strong Q2, predicting net revenues for the year as a whole will fall between $12.12 billion and $12.36 billion. It also approved a $1 billion increase to its stock repurchase program.

While acknowledging current uncertainty surrounding health care staffing, Filton said that he is hopeful that UHS will be able to hire new workers — and meet the sky-high demand for services — once the pandemic subsides for good.

“We have a point of view that if we could wave a magic wand and hire all the staff that we need, … our volumes would exceed … 2019 volumes by mid-single digits at least,” Filton said. “The demand is sufficiently there. … We believe that as [the pandemic] recedes, it’ll become much easier for us to meet our hiring and retention targets.”

UHS stock closed at $159.12 at the end of trading Tuesday, up nearly 3% from Monday.

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