Universal Health Services Inc. CEO Marc Miller struck a bullish tone on the near-term future of the company’s behavioral health division due to signs staffing challenges could be stabilizing.
The underlying demand for the behavioral health side of Universal Health Services (NYSE: UHS) has risen since the onset of the pandemic. But the story from the company for all of 2021 was that it was missing out on potential revenue because of the national health care staffing shortage.
But on the UHS annual earning conference call, company executives said that they see the staffing shortage — which was exacerbated by the coronavirus pandemic — abating as the pandemic wanes.
And once it does, UHS will be able to capture the persistent 20% increase in inbound interest that CFO Steve Filton described on the call on Friday as well as on other earnings calls.
“With the demand being where it is, we’re very excited that — once we get the staffing stabilized and it is stabilizing and it will continue throughout this year — we should be able to pop,” UHS CEO Marc Miller said.
UHS, a King of Prussia, Pennsylvania-based acute care and behavioral care company, also posted better-than-expected earnings across the enterprise in 2021.
Net income for the company was up about 5.4% to $992 million which translates to earnings per share (EPS) of $11.99. An analyst consensus estimate on Yahoo Finance for EPS was $11.76. Similarly, revenue rose to $12.6 billion, up 9.4% year-over-year.
The company’s stock was up 7.5% on the day to $146.53 as of the writing of this article.
UHS’ behavioral health prospects improve as COVID declines
Both Filton and Miller tied improving success to lower volumes of COVID patients for the behavioral health division. However, Miller said that there may be a lag between the decline in COVID case volumes and the company’s ability to stabilize its staffing issues.
“While the pace of recovery is difficult to predict, we remain confident in the fundamental underlying demand in both of our business segments,” Filton said. “The early signs of which have already been emerging in the last few weeks.”
New COVID cases across the country are falling rapidly after the highest surge of new cases of the pandemic peaked in January at a seven-day average of 802,000 new cases a day. As of Feb. 22, the weekly average of new cases dropped to about 68,700, according to a data dashboard maintained by Johns Hopkins University.
Filton reiterated that the staffing shortage on the behavioral health side has been caused by nurses and other staff seeking much higher wages as traveling or staffing agency nurses. As the pandemic subsides, so will this staffing pressure, he said.
Even with the shortage of staff and the inflated rate to hire staffing agency nurses, UHS did see the same high cost of staffing on the behavioral health division as it has in the acute care division. In the fourth quarter alone, UHS paid $120 million in premium pay in the acute care division. In the behavioral health division, USH incurred between $25 and $30 million of premium pay expenses for all of 2021.
“The bigger issue on the behavioral side has been just an absolute inability to fill some of those vacancies,” Filton said, “And as a consequence, the labor shortage on the behavioral side really manifests itself on the volume side more so than in actual salary expense.
“And we expect that both those dynamics continue into 2022, although they begin to recede as COVID volumes begin to recede.”
UHS is choosy over behavioral health JV partners
Miller said in prepared remarks that it opened two new de novo joint-venture hospitals opened in 2021 — one in Clive, Iowa through a partnership with MercyOne and the other in Cape Girardeau, Missouri in partnership with Southeast HEALTH.
So far in 2022, UHS opened two new joint venture hospitals — in Michigan and in Wisconsin — and has another JV planned to open later in the year in Arizona with HonorHealth, Miller said.
While Miller said JV opportunities remain robust in the behavioral health space, he said that “all JV partners are not created equal.”
“There are a lot of JV opportunities that we look at that we pass on … because we just don’t see the merit long term,” Miller said. “If you notice, the ones that we do for the most part are recognizable, nationally known names or they’re very strong regional players, and that’s purposely done.”
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