UHS reports flat profit but cheers admissions gains, low bad debt

Insurance gains under the healthcare reform law fueled a massive jump in Universal Health Services' second-quarter revenue, but rising expenses wiped away potentially large profit gains.

King of Prussia, Pa.-based UHS, which operates 24 acute-care hospitals and 182 behavioral health facilities, said admissions were up across the board. The higher-than-expected revenue—and nearly 29% drop in bad debt as more consumers obtained health insurance—prompted UHS to raise its full-year earnings guidance.

“We remain pleased with the underlying strength of our two businesses,” Alan Miller, CEO of UHS, said in a statement. “The reduction in uncompensated care at our acute-care hospitals resulting both from healthcare reform and improvements in the underlying economy partially reverses a trend that had been hindering our results for an extended period of time.”

Net income attributable to UHS stayed virtually flat year over year, totaling $151.7 million in the most recent quarter. Revenue surged 10.1% to more than $2 billion. However, expenses climbed at a higher 12.8% clip in the second quarter.

UHS' acute-care hospitals reported a 3.6% increase in same-facility adjusted admissions, which accounts for outpatient volumes, compared with the same period a year ago. Its behavioral health facilities similarly posted strong utilization figures, as adjusted admissions rose 4.4% year over year.

The average operating margins of a UHS acute-care hospital and behavioral health facility in the second quarter were 19.2% and 28.6%, respectively.

For the first six months of fiscal 2014, profit at UHS increased 6.7% to $289.7 million. Net revenue was up 7.5% to $3.9 billion. UHS said it expects full-year earnings per diluted share will fall between $5.55 and $5.85, compared with a much lower initial estimate of $4.80 to $5.10 per diluted share.

Shares of UHS closed at $97.54 Thursday. Over the past three months, the company's stock has risen almost 25%.

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