Universal Health Services (NYSE: UHS) is setting its sights on increasing behavioral health bed occupancy after seeing improvement in its recruitment and retention metrics.
UHS identified increasing occupancy as its next target for growth in its Q3 earnings call, utilizing a strategy of recruitment retention and expanding service lines to achieve this goal.
“Broadly increasing occupancy is the most significant opportunity we see in our behavioral business,” Steve Filton, chief financial officer of UHS, said. “We absolutely have the ability to increase occupancy significantly. There’s a handful of important initiatives in behavioral, but all would fall under this umbrella of being able to increase occupancy.”
The company reported a net income of $167 million in the third quarter of 2023, as compared to $182.8 million from the previous year’s third quarter.
Net revenues generated from its behavioral health care services increased by 7.6% during the third quarter of 2023, as compared to the same time period in 2022. Adjusted admissions at behavioral health care facilities increased by 0.8% during 2023’s third quarter, on a same facility basis, and adjusted patient days increased by 1.1%, as compared to the third quarter of 2022.
King Of Prussia, Pennsylvania-based UHS employs approximately 93,800 people and operates 27 inpatient acute care hospitals, 331 inpatient behavioral health facilities and 43 outpatient facilities and ambulatory care access points across 39 states, Washington, D.C., the United Kingdom and Puerto Rico.
Among the other initiatives under the company’s “umbrella” goal of increasing occupancy are improving recruiting and retention and broadening its behavioral services and its payer mix.
Broadening service lines
Last quarter the health care operator announced plans to expand its services to include medication-assisted treatment (MAT).
The announcement marked a shift in the company’s approach to substance use disorder (SUD) treatment, historically dominated by more traditional methods, including drug and alcohol detox, step-down programs, sober living and aftercare.
The company also plans to broaden its continuum of care by further expanding its substance use disorder (SUD), telehealth and outpatient services.
Behavioral health pricing has stayed strong, Filton said, but may experience a downtick.
“In behavioral, we’re likely to see pricing moderate a little bit,” he said. “It should put us in a position where we’re back on that trajectory of getting back to pre-pandemic margins.”
Headwinds
Medicaid redeterminations have begun to negatively impact the company’s behavioral health volumes in certain states, particularly in its residential business amongst child and adolescent populations.
A significant portion of UHS’ revenue flows from Medicare and Medicaid programs, according to SEC documents filed in June.
“It’s been reported that there’s been at least a million people redeemed off the rolls in Texas,” Filton said. “But what we’ve noticed in a place like Texas, is that the number of calls and inquiries that we’re getting that qualify from both a clinical and financial perspective, meaning there’s adequate coverage available, have declined a little bit in the quarter. We don’t know that it’s precisely related to Medicaid Redeterminations, but we’ve drawn that conclusion based on historical trends and metrics.”
Many of these redeterminations were performed for administrative reasons, Filton said. In some of those instances, patients will be able to re-enroll in Medicaid.
Staffing has continued to be an ongoing challenge for the company.
“We remain constrained in some markets in some facilities by a lack of staff,” Filton said. “That could be nurses, therapists or mental health technicians … Generally, we continue to improve our recruitment and retention metrics.”
Improving recruitment and retention metrics will be a crucial driver for the company’s desired volume increase.
UHS experienced weakness in its residential programs but saw growth in acute care behavioral hospitals.
“The patient day growth in the quarter was greater in our acute care behavioral hospitals versus our lower acuity residential treatment centers, which tended to drive up the revenue per day beyond the already robust levels we’ve been posting for several periods,” Filton said.
Some of the residential weakness was driven by “specific and nuanced” issues with problems with regulators or referral sources.
Filton predicts that higher acuity volume will moderate to more historic levels, informing the company’s approach to the new year.
“Every path and quarter continue to resemble more of our pre-pandemic operating environment,” he said. “Broadly, that’s the way we’re thinking about 2024.”
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