Dive summary:
- Universal Health Services raised its financial forecast for 2025 on Monday, after the operator reported third-quarter revenue that rose 13.4% year over year to $4.5 billion.
- The for-profit operator attributed the The revenue increase is due in part to a $90 million increase in Washington, D.C.’s recently approved Medicaid supplemental payment program, as well as growth in its acute care volumes.
- The health system now expects to make between $17.3 billion and $17.4 billion in revenue for the year, up from its previous forecast of $17.1 billion to $17.3 billion.
Diving information:
UHS posted net revenue of $373 million in the third quarter, an increase of more than 44% from the same period last year.
UHS’ acute care division’s growth once again outpaced its behavioral health portfolio in the third quarter, a pattern that has been reflected in UHS’ earnings all year. Adjusted same-facility admissions increased 2% year-over-year in UHS acute services, while adjusted same-facility admissions increased 0.5% in behavioral services.
In its acute care division, UHS posted another $25 million loss during the quarter at its new Cedar Hill Regional Medical Center in Washington, D.C. The facility’s slow startup schedule has been a drag on UHS‘ finances, but President and CEO Marc Miller said on a Tuesday morning call with investors that the facility received early certification from Medicare in September. The certification followed a Joint Commission survey to ensure the hospital met national quality and safety standards, and Cedar Hill is now eligible to receive government funding. UHS hopes to break even or upgrade the facility by the end of the year.
UHS plans to open its next acute care hospital, Alan B. Miller Medical Center, in Palm Beach Gardens, Florida, this spring, according to Miller. The health system currently operates 29 acute care hospitals.
Meanwhile, UHS has been working for several quarters to address lagging growth in its behavioral health business. UHS executives wanted the health system to increase adjusted patient days by 2% to 3% in 2025. That figure seemed out of reach last quarter, and on Tuesday Chief Financial Officer Steve Filton confirmed it was now a “reasonable goal for next year.”
Executives say part of the problem is that UHS’ behavioral health portfolio is not aligned to meet demand for outpatient care. UHS’s portfolio leans heavily toward inpatients: It has 345 inpatient facilities and 100 outpatient access points.
According to Miller, most UHS outpatient facilities have “step-down” services for patients exiting UHS inpatient behavioral services. The operator “really hasn’t had much of a presence historically” in offering intermediate outpatient services, where patients enter behavioral health care for the first time through outpatient care, Filton said.
Incoming patients “often do not feel comfortable…entering the system on a hospital campus, preferring to receive that care in a self-contained outpatient setting.” Filton saying. To capture their business, UHS is opening 10 clinics that will not be branded as inpatient hospitals this year, according to Miller.
Still, other problems dog the behavioral care division, including problems recruiting and retaining talent.
“Arrive [to 2% to 3% targets]”We have to continue to be able to fill our vacancies and reduce our turnover,” Filton said. The health system said it has been making progress in solving its labor problems, but “that process has been somewhat slower than we expected,” the chief financial officer said.
UHS executives also addressed Washington headwinds during Tuesday’s call, particularly upcoming changes to the state’s Medicaid supplemental payment programs.
The programs, which are designed to help providers fill the gap between Medicaid reimbursement rates and actual costs of care, have historically offered reliable revenue increases for hospital operators. During the third quarter, that increase came from the passage of the Washington, DC, state-led program. Through 2025, UHS expects to earn a net $1.3 billion from state supplemental payment programs.
However, limits on payments included in the One Big Beautiful Bill will result in UHS receiving between $420 million and $470 million less in state-directed payments by 2032.
More immediately, UHS says it could face pressure in its Texas and Florida markets and lose between $50 million and $100 million annually if Congress does not act to extend enhanced COVID-era Affordable Care Act subsidies. Millions of people are expected to be left uninsured if subsidies expire and providers are expected to lose billions in revenue.
The fate of the subsidies is at the center of a funding battle between Democrats and Republicans that led to the government shutdown earlier this month.
