Alan Miller founded Universal Health Services in 1978 and has long served as its chairman and CEO, with his son Marc serving as president. The publicly traded King of Prussia, Pa.-based company operates acute-care hospitals and behavioral health facilities in 37 states and the United Kingdom. Modern Healthcare senior reporter Harris Meyer recently spoke with Miller about the reasons for the company's improving financial performance at a time when some other for-profit hospital chains are struggling. This is an edited transcript.
Modern Healthcare: 2015 was a good year for Universal Health Services in terms of revenue and profits. What factors accounted for your success?
Alan Miller: We've done very nicely in 2015. We had an excellent year, and it just relates to what we've been doing for the 37-year history of the company. We've been growing every year. Our focus is on high-quality services to patients. Obviously, they vote with their feet, and their physicians suggest they come to us. So we've had increasing business because of the quality of the care we give. I also think our locations are important. We have locations in places that are growing. If you have a growing population, and you do a very good job, you're going to do well.
MH: You've focused on trying to be the dominant player in the markets you're in, whether it's Las Vegas, Hidalgo County in Texas or Washington, D.C.
Miller: We have, on occasion, been dominant, but that's not my word. We just want to be important in each market. That enables us to negotiate rates on an equal basis. If you don't have substantial market share, the insurance companies don't need you. It's as simple as that. They will just say, 'Here are the rates and if you like them, fine, if not, thank you very much,' and they'll move on. But they can't do that with us because we have become very important in every market we're in, and that was a strategy. If we're not No. 1 or No. 2, we're not going to be in that market. That was our strategy with regard to acute care. In the behavioral health business, we did the same thing. But it's not quite the same because there aren't that many behavioral facilities in every location. You're most likely going to have limited competition. Of course there are others, but we have a reputation.
One thing that was very helpful is that three years ago, we managed to buy the second-largest company, Psychiatric Solutions, when some of its leaders tried to take the company private and the board said no. They brought in Goldman Sachs and sought a fair price for the company. We were the high bidder and got the company. We had about 100 hospitals and they had about 100 hospitals. By putting them together, we got about 200 hospitals, and our company became the dominant entity in the free-standing psych business. We consolidated a good number of the free-standing psychiatric hospitals in the country.
MH: Do you see your company putting more emphasis on behavioral care and that business growing more rapidly because of the limited number of facilities in many markets, along with the increasing national focus on behavioral health and substance-abuse treatment?
Miller: We're very good at both acute care and behavioral care, so it really isn't just one line of business that we focus on. Our concern is taking care of patients. If there are opportunities to build or acquire hospitals in either division, we'll do that. We are currently talking to other people, we are currently building hospitals, and we are expanding them. It's a continual thing for us.