Universal Health Services (NYSE: UHS) saw its behavioral health services for children and teens take a downward turn in the latter half of 2023.
The company attributes its child and adolescent business declines to Medicaid redeterminations.
Despite softness in residential and adolescent segments, UHS experienced “robust” demand for its behavioral health services in Q4 of 2023, with net revenue amounting to more than $1,615,000, according to its fourth-quarter earnings call. It largely attributes positive patient volume to successfully filling vacant positions.
King of Prussia, Pennsylvania-based UHS is one of the largest behavioral health operators in the country, with approximately 96,700 employees and more than 330 inpatient behavioral health facilities.
UHS saw behavioral health admissions increase by 1.4% on a same-facility basis in the fourth quarter of 2023 and adjusted patient days increased by 1.1%. Its net revenue per adjusted patient day increased by 6.1% year-over-year.
Fourth quarter net revenues amounted to $3.704 billion, a 7.4% year-over-year increase. Its 2023 annual net revenues came to $14.282 billion, an increase of 6.6% compared to 2022.
Although Medicaid redeterminations took a significant toll, UHS chief financial officer Steve Filton believes the worst of their impact is likely over.
“For the most part, the disenrollments have taken place,” Filton said. “We’re already starting to see some of this population re-enrolled either in Medicaid or alternative programs. … We’re imagining that the impact of redeterminations in 2024 will be limited.”
Much of UHS’ child and adolescent business is on its residential side, which Filton described as soft in 2023. A “handful” of residential facilities had particular regulatory challenges.
Filton noted that the softness in the residential business has led to a higher weighting in acute patient days. Acute patient days have a higher price and revenue per adjusted day.
“I think we’ll see residential growth outpace acute growth and that will have a kind of a muting effect on pricing,” Filton said. “Our general sense of our 2024 budget is that pricing and acuity will decline a little bit on the behavioral side, but be offset by increased volumes.”
While Medicaid redeterminations impacted UHS’ behavioral business, Medicaid’s move to cover adults with substance use disorders (SUDs) through 1115 waivers did not have a material impact in 2023, Filton said.
In UHS’ Q3 earnings call, the operator identified occupancy as the most significant opportunity for growth in its behavioral health business. In that pursuit, UHS added approximately 250 new beds in 2023.
“We will probably add like numbers, maybe a little bit more, next year,” Filton said. “But I think we’re seeing, frankly, just as much opportunity on the outpatient side.”
Looking to 2024, UHS intends to grow its outpatient services, including its addiction treatment programs, according to Filton. While Medicare and Medicare Advantage patients represent a significant opportunity for increasing outpatient volumes, UHS will also target growth in outpatient services across all patient populations.
“We’re finding the need for behavioral care to be growing across all segments of the population and across all diagnoses, including addiction and others,” Filton said.
To boost efficiency within its behavioral health segment, UHS plans to take advantage of technology to simplify patient rounding procedures. The company is already experimenting with Apple Watch-style devices that track patients’ locations.
Staffing shortages, which have continually plagued the behavioral health industry, continue to be a headwind for UHS.
While staffing shortages had a “material unfavorable impact” on UHS’ 2022 performance, the impact was moderated to an extent in 2023.
“We acknowledge that in some markets and some hospitals, there are positions that we still have difficulty filling,” Filton said. “We do think that we could run higher volumes if we could fill all of our positions but we know that’s not a realistic outlook at the moment at least.”
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