UHS’ Workforce Woes May Sink Financial Projections for 2022

Nagging workforce issues may scuttle Universal Health Services Inc.’s (NYSE: UHS) financial projections for 2022.

The company’s financial forecasts predicted that the massive increase in labor costs would begin to abate in 2022: It has not.

Increased spending on wages for staffing agency workers, driven by COVID-19 and a prevailing workforce shortage, stymied both revenues for the company’s behavioral health business and profits across the entire UHS enterprise.


“The primary driver of the shortfall was the fact that the labor scarcity has not moderated as quickly as we were expecting,” Marc Miller, CEO and president of UHS, said on a conference call to discuss the company’s first-quarter earnings.

The company did not adjust its earnings guidance for 2022 in response to the first-quarter result, a news release states.

An average of analysts’ estimates for the quarter put earnings per share at $2.46, according to Yahoo Finance. UHS disclosed earnings per share of $2.02 and net income of $154 million. These numbers are 17% and 28%, respectively, compared to a year ago.


Revenue for UHS in the first quarter increased 9.3% to $3.3 billion, beating expectations by about $50 million.

The talent shortage strains UHS’ finances as well as its operations on the ground. The company’s behavioral health business, which operates 336 facilities in the U.S. and the U.K., again needed to moderate patient volumes because of a lack of staff.

One study predicts that the U.S. needs to produce more than 510,000 new nurses to cover a projected gap between supply and demand in 2030.

Steve Filton, UHS’ chief financial officer, said on the call that the company may temporarily close down units until the staffing situation on a market improves. But he was swift to add that the company would be more apt to stop operating in areas where managed care providers would not give acceptable reimbursement rate increases to help cope with the increased labor costs.

“Unlike some providers, we don’t have the point of view that we’re going to pay whatever it takes for a nurse,” Filton said in response to an analyst question. “I think in some cases we believe that it just makes sense to rationalize — using your term — some of the capacity; you just run a lower volume for a period of time until rates come into a more normalized range.”

At the end of the year, UHS employed about 89,000 employees in 55 acute care hospitals, free-standing ERs and other outpatient facilities as well as 349 inpatient and outpatient behavioral health facilities. Its annual income in 2021 was $12.6 billion and earnings per share totaled $11.82

UHS’ financial guidance for the year estimates revenue to come in between $13.4 billion and $13.7 billion and $11.90 and $12.90 for earnings per share.

On Friday, health care shares dipped — including UHS’ — on the news that Nashville, Tennessee-based acute care facility and health care services operator HCA Healthcare Inc. (NYSE: HCA) also saw steeper-than-expected workforce costs. The company revised its full-year financial guidance across all measures including revising earnings per share numbers down to a range of $16.40 to $17.60. Previously, HCA Healthcare predicted $18.40 to $19.20 in earnings per share.

HCA Healthcare operates 182 hospitals, 125 freestanding surgery centers and 21 freestanding endoscopy centers in the U.S. and in England.

Workforce shortage challenges prompting major changes at UHS, elsewhere

As they have said in previous earnings calls, UHS management sees the workforce pressures plaguing the company’s bottom line as transient: Someday, the company won’t be so reliant on high-priced staffing agency workers.

Still, the pressures of COVID-19 and the workforce may usher in a new era of higher wages for staff nurses, Filton said.

“We’re replacing nurses who were making $65 or $70 an hour with temporary traveling nurses who are making $225 an hour,” Filton said. “That’s really the drag on our earnings in the current period. If we ultimately replaced those nursing hours that we were paying $225 at $75 — even though that’s a reasonable increase from what we had been paying pre-pandemic — it’s still an enormous improvement over where we’re sitting right now.”

UHS has hired new clinical staff at “record rates” in the behavioral health business over the last “six to eight months” but has seen turnover increase, Filton said.

Filton also projected that the ballooning of nurse wages within all health care may draw new workers into the field, potentially addressing a systemic issue in the U.S.

Specific to the behavioral health business, UHS is trying to shift more of the care and administrative burden to licensed practical nurses (LPNs) and licensed vocational nurses (LVNs).

“We’re not having people practice … above their license,” Filton said. “What we’re trying to do is relieve our RNs from doing more clerical and administrative work than they need to do.

“Somebody else can answer the phone. Somebody else can speak with families. Somebody else can change the sheets in a room, whatever it may be that allows the nurses to do the things that are at the top of their license.”

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