Aggressive negotiating tactics have given Universal Health Services Inc (NYSE: UHS) high commercial reimbursement rate increases.
Steve Filton, UHS’ CFO, said as much on Thursday during a Credit Suisse conference. Leaders of the national acute and behavioral health care provider have talked about using capacity limitations and inflation as negotiating leverage for months.
This tough talk bore fruit in the third quarter, Filton said. Daily patient revenue rose 5% while patient days increased by 3% in the behavioral health division, public filings state.
“We’ve made a very specific point that — on the behavioral side — we’re probably undertaking that exercise even more aggressively because … we’ve had to turn patients away,” Filton said. “If we’re going to turn patients away, we may as well turn away our lowest-paying patients.”
Filton added that the rate increases were “clearly on the high end” of historical rate increase trends.
During the pandemic, UHS struggled to find and retain permanent staff in both its acute care and behavioral health care divisions. This forced the company to lean on contractor labor, raising staffing costs. There is a behavioral health workforce shortage across the U.S.
Still, UHS has struggled to keep capacity up at some of its behavioral health facilities due to staffing issues.
In its third-quarter earnings call, UHS executives conceded that elevated staffing costs and shortages were a permanent reality, limiting profitability in both acute care and behavioral health divisions.
“On the behavioral side of the business, COVID surges … have generally had only negative implications for the behavioral business — there’s really no positive offset,” Filton said.
Behavioral health facilities do not get access to federal government support for COVID-related care costs like acute care hospitals do, Filton said.
COVID and workforce pressures led UHS to cut its annual earnings projection for 2022 by 19% in July.
“We don’t feel like the COVID dynamics have really changed the underlying demand for our behavioral services,” Filton said. “As we continue to work out the labor scarcity and the supply-demand imbalance issues that have existed for the last 12 or 15 months, I think both businesses will improve.”
Inflation and a looming economic downturn may also help staffing trends. These forces could drive health care workers to seek more stable employee roles rather than contractor work.
Filton has frequently pointed to highly elevated contractor wages, driven by the pandemic, as a primary reason it’s hard to find staff.
“Nurses have always had the opportunity to work as temporary or traveling nurses,” Filton said. “The way the pandemic changed that whole equation was the concern about not being able to get all the hours you wanted disappeared.”
