With behavioral health capacity shortages on the rise, Universal Health Services Inc. (NYSE: UHS) is telling payers to keep up with reimbursement trends – or go elsewhere.
The message is an important shift in behavioral health-payer relations that reflects the current operating environment. It’s also one being echoed across the health care sector, with home health agencies and other provider types taking similar stances of late.
“As we think about a business that has clearly been capacity constrained mainly on the labor side of things, we have really taken a more discerning look at our payer mix,” Steve Filton, CFO of UHS, said during an investor call Tuesday.
In light of the capacity shortages, UHS is analyzing its lowest payers across a variety of measures, including Medicaid as well as private payers.
“[We] have taken a more aggressive position with them saying, ‘Look, you know, you’ve got to adequately compensate us for the rising costs that we’re seeing, particularly on the labor side,’” Filton said. “But obviously also from a general inflation perspective.”
If some payer partners are unable or “unwilling” to do that, UHS will prioritize those that do, he suggested, noting that the company is already turning away some patients because of labor constraints.
Additionally, Filton said that the staffing dynamic in behavioral health is different from other parts of the King of Prussia, Pennsylvania-based company.
Overall, UHS and its subsidiaries own or operate 403 inpatient and outpatient facilities. That portfolio includes acute care hospitals, ambulatory centers, freestanding emergency departments and urgent care centers, along with behavioral health facilities.
“We’ve just been unable to fill our vacancies for nurses, sometimes therapists, psychologists, even non-professionals – the mental health tech, or non-degreed folks,” he said.
While the rising cost of labor is affecting UHS’ behavioral health business, Filton noted that the muted volumes is where the company is seeing the real impact. Specifically, he said patient days were down 1% in Q1 from last year.
During a Q1 earnings call at the end of April, Marc Miller, CEO and president of UHS, attributed the company’s disappointing results in part to the increase in labor costs. Increasing wages for agency workers led to a dip in revenues for the company’s behavioral health business and profits across the entire enterprise.
In the behavioral health business, Filton said during the earnings call that the company is looking to shift some of the care and administrative burden to licensed practical nurses (LPNs) and licensed vocational nurses (LVNs).
UHS isn’t the only provider focused on behavioral health reimbursement rates. During Acadia Healthcare Company Inc.’s (Nasdaq: ACHC) Q1 earnings call, CFO David Duckworth said that the provider has worked very closely with commercial and managed care payers to increase rates. Duckworth noted that CMS will likely lag behind commercial payers in the increase.
Like UHS, Acadia is also seeing staffing impact volume.
“We want to make sure that if staffing does impact our volume, it’s only temporary, and we bring the right resources to fix the situation and continue to support the strong inquiries and demand that we’re seeing across our service lines and markets,” Duckworth said during Acadia’s earnings call.
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