Universal Health Services reported an increase in net revenue during the third quarter, but a legal settlement and early debt repayment cut into the bottom line.
The King of Prussia-based chain, which operates both acute-care and behavioral health hospitals, reported third-quarter net income of $82.8 million on revenue of $2 billion compared with net income of $114.6 million on revenue of $1.8 billion during the same period last year.
UHS disclosed in September that it had settled a shareholder class-action suit for $65 million and in the third quarter booked a $44 million pre-tax charge after accounting for funds from its liability insurance. The chain inherited the lawsuit when it purchased subsidiary Psychiatric Solutions in 2010. Investors had sued Psychiatric Solutions in 2009 for providing falsely upbeat financial projections and misleading them about abuse and neglect at one of its hospitals.
UHS also recorded $36.2 million in pre-tax charges after it redeemed $250 million in senior unsecured debt that had a 7% interest rate and was scheduled to mature in 2018. It also repaid another $550 million on a term loan facility that was scheduled to mature in 2016.
But UHS' core operations experienced the same growth that its peers are demonstrating. Admissions at its acute-care hospitals, adjusted for outpatient activity, increased 4.1% in the third quarter over the same period in 2013. Net revenue increased 7.9% on a same-facility basis, and its operating margin increased to 18.3% compared with 14.4% in the third quarter of last year.
Adjusted admissions also increased 5.4% at its behavioral health hospitals, but revenue per equivalent admission declined 0.3%. As a result, the division's operating margin was nearly flat, increasing to 27.6% in the third quarter from 27.3% in the year-ago period.
UHS also spent $327 million in the quarter to purchase Cygnet Health Care, a U.K.-based provider with 16 behavioral health hospitals and two nursing homes.
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