Universal Health Services Inc. can’t fill gaps in its nursing workforce — even when it pays top dollar to hire contract nurses.

Steve Filton, CFO for the King of Prussia, Pennsylvania-based behavioral and acute care giant, said that the present labor shortage in health care led UHS to cap bed capacity in the third quarter.

This has led to a limited recovery in the company’s behavioral health segment, which saw behavioral patient days running about 6% below where it would be before the pandemic.

Contrast that with the acute side of the business: UHS is paying wide premiums on labor costs to ensure that its acute care hospitals are staffed up. But as a result, it is able to operate hospitals at the levels it wants. Further, the performance of the acute side of the business more than covers those costs, Filton said.

“The challenge on the behavioral side is that we are unable to fill a lot of those vacant hours, even with premium dollars,” Filton said on the company’s third-quarter conference call for investors and analysts. “ We’re certainly spending some premium dollars. But in some cases, we’re just unable to fill the hours and as a consequence, we’re having to turn patients away, and, therefore, we’ve got lower volumes.”

Here are a few third-quarter financial indicators for the whole company compared to the same period last year:

—Revenue: $3.16 billion, up 8.4%

—Net income: $218.4 million, down 9.4%

—Earnings per share: $2.60, down 7.8%.

UHS missed on earnings per share estimates. Consensus earnings per share estimates for the quarter, according to Yahoo Finance, came to $2.75 per share.

The company operates 27 acute care hospitals, 333 behavioral health facilities, 40 outpatient facilities and ambulatory care locations in 38 American states, the District of Columbia, Puerto Rico and the United Kingdom. It employs about 89,000 people.

The COVID pandemic intermingles with and drives many of UHS frustrations on the behavioral health business while driving performance on the acute care side.

Within specific markets, the surge in the Delta variant forced nurses out of facilities while they coped with their own COVID infections or isolated after an exposure.

But at a macro level, the COVID pandemic exacted a steep toll on the nursing workforce, which was already coping with a shortage of workers and facing a major share of the workforce approaching retirement age before the pandemic. Many nurses have left the profession, either to move into other areas of health care or have left the sector altogether, Filton said.

This spurred on huge increases in the charges health care staffing agencies could demand for their services. In turn, this led to many nurses leaving staff jobs to chase much higher wages on a contract and travel basis.

And because of the huge increases in cost for staffing agency nurses, salaries for nurses have ballooned beyond the realm of competition for many health care providers.

“If you go online and look for nursing opportunities, you can see that there are nursing opportunities in which nurses can easily earn $10,000 a week working in a COVID environment,” Filton said. “So these are nurses who maybe are earning $70- or $80,000 a year … Now they’re earning at a rate of $500,000 a year. So when you have those sorts of opportunities, there’s no way we can close that gap.”

Just as the staffing challenges are driven by COVID, the challenges won’t abate until COVID does, Filton said.

Filton and the analysts on the call highlighted the fact that there is a pay gap between what behavioral health nurses make compared to their counterparts in the acute care settings. But that gap hasn’t been a marquee issue until COVID raised the possibility for nurses to make a lot more money in acute settings.

“I think for the most part, [nurses] work where they work because they enjoy the patient care dynamics in the setting in which they work,” Filton said. “When there’s a 10 or 20% pay differential, I think nurses can convince themselves that they want to work where they’re happier. When there’s a 4 or 500% differential, that becomes a tougher argument to make.”

Joint venture activity holds major promise for behavioral business

One of UHS’ major expansion plans in behavioral health focuses on joint ventures with acute care providers. Filton said the company recently opened up JV facilities in Iowa and Missouri and will open similar facilities in Michigan and Wisconsin.

“These joint venture opportunities continue and, we think, is a source of significant growth for us,” Filton said.

While he didn’t get specific, Filton mentioned that UHS sees other opportunities for deals in the behavioral health space. He added that the fact that UHS attracts interest in doing deals from health care providers and from financial players indicates the robustness of UHS’ behavioral health business.

UHS bullish on behavioral health, working on returning capital to shareholders

During the third quarter, UHS acquired 2.78 million shares for $419 million. Since 2014, the company has bought back about 20% of its stock.

“We continued to be an active acquire of our own shares, based in large part on our view that the underlying patient demand for our services and particularly in our behavioral segment remains fundamentally strong, and that our ability to more fully to meet that demand will incrementally improve as COVID volumes continue to decline,” Filton said.

UHS will buy back about $750 million worth of company shares by the end of the year. The company’s stock price was about $127.58 per share, down about 5.4% on the day, at about noon Tuesday.