Universal Health Services Inc. (NYSE: UHS) continues to forecast staffing challenges going forward after years of difficulties driven by the coronavirus pandemic.
Elevated premium temp staffing rates relative to pre-COVID rates are likely a new permanent reality for the company, UHS leaders said during the company’s third-quarter earnings call. The company also expects specific facilities to struggle with limited capacity, choking revenue and elevated staffing costs, tamping down profitability.
“At certain facilities, particularly within our behavioral health care segment, we have been unable to fill all vacant positions and, consequently, have been required to limit patient volumes,” the company said in a news release. “These factors, which had a material unfavorable impact on our results of operations during the first nine months of 2022, are expected to continue to have an unfavorable material impact on our results of operations for the foreseeable future.”
The King Of Prussia, Pennsylvania-based acute care and behavioral health system operator cut its annual earnings projection in July by 19% because patient volumes and workforce issues didn’t abate at the rate they estimated.
To make up for shortfalls, UHS has turned to temporary staffing to make up the difference, but at a much higher cost than its typical staff rates. The company has made some progress in filling staff vacancies with permanent employees, according to UHS leaders.
In the acute care division, temporary staffing costs peaked at $150 million in the first quarter, dipped to $117 million in the second quarter and fell again to $81 million in the third quarter.
The company previously spent $35 million on premium staffing rates in the acute care division pre-pandemic, said UHS Chief Financial Officer Steve Filton.
“There is some sort of level of fixed amount of premium pay that is appropriate,” Filton said.
Referring to pre-pandemic levels he added, “I don’t think that’s a realistic target at this point.”
“That’s the basis on which we believe that we can continue to reduce that number,” he continued. “It’s clearly a trend, and it has not yet flattened out and I don’t think it will.”
Specific to the behavioral health division, UHS’ staffing troubles have been powerful enough to close beds and reduce facility capacity. While he didn’t mention specifics, UHS CEO Marc Miller said that the company had to close fewer beds in the third quarter.
As CFO, Filton shared an optimistic view on the behavioral health business.
“We think the underlying demand for behavioral services remains quite strong,” Filton said. “And as long as we can continue to address and make progress on the labor issue, I think we’re going to continue to see revenue growth that’s more closely related to our historical trends.”
UHS beat the Zacks Consensus Estimate of $2.40 for earnings per share by bringing in $2.50. Net income totaled about $177 million, down about 19% from the third quarter of 2021.
On revenue, UHS produced $3.34 billion. UHS slightly beat the Zacks Consensus Estimate by 0.76%.
As of Wednesday early afternoon, UHS’ shares traded at $110.38, a 13.9% increase from the opening of trading.
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