A measurable shift from high-margin to low-margin surgical patients put a significant dent in for-profit Universal Health Services' revenue per admission in the first quarter of 2019.
The King of Prussia, Pa.-based hospital and behavioral health chain's net revenue per adjusted acute-care admission dropped by 0.4% year-over-year in the quarter, the chain reported Thursday. Revenue per admission is an important metric that represents a mix of pricing and acuity. That metric grew 4.1% year-over-year in the fourth quarter of 2018, by comparison.
UHS Chief Financial Officer Steve Filton said on an investor call Friday morning that surgical volumes were "extremely weak" in January, but improved in February and March and into the second quarter. Part of the reason could be patients tend to get elective procedures done at the end of the year once they have met their health insurance deductibles. As a result, the beginning of the following year tends to be slow, although that's difficult to measure, he said.
"There certainly has been speculation on the part of our operators that that may be a dynamic in what's happening," Filton said.
Filton added UHS and its peers saw higher than average acuity in the first quarter of 2018, "So I think we're working off a pretty high comparison historically."
UHS drew $2.8 billion in revenue in the quarter ended March 31, up 4.3% year over year, but slightly below estimates from Zacks Investment Research, which pegged revenue at $2.82 billion. Zacks expected UHS' earnings per share to reach $2.60, but UHS fell slightly short of that, rounding out the quarter at $2.57.
UHS' share price was down nearly 4% by midmorning Friday, likely in response to the underwhelming financial results.
UHS drew $234.2 million in net income in the first quarter of 2019, up 4.6% compared with $223.8 million during the prior-year period.
The system's earnings before interest, taxes, depreciation and amortization was $452.7 million during the first quarter of 2019, compared with $442.1 million during the first quarter of 2018.
Adjusted admissions to UHS' acute-care hospitals increased 4.9% in the quarter year-over-year, and patient days increased 4.4% during that time.
In the company's behavioral health facilities, adjusted admissions grew 2.9% year-over-year, and adjusted patient days grew by 0.9%. Net revenue per adjusted behavioral health admission grew by 0.4% year-over-year.
On a same-facility basis, UHS' behavioral health revenue grew 3% year-over-year, inching the company closer to its goal of 5%. Filton has continually walked back that goal, but said Friday he expects to meet it "at some point over the next year or two." Filton said Medicaid managed-care organizations continue to put pressure on UHS' behavioral health length of stay, which poses a revenue challenge.
UHS drew $391 million in net cash from operating activities during the first quarter of 2019, compared with $410 million during the prior-year period.
UHS continues to negotiate a settlement with the U.S. Justice Department related to a false claims investigation into its behavioral health facilities. Unlike in recent quarters, the company did not add money to its settlement fund in the recently ended quarter. The fund was at $123 million as of March 31, unchanged from the end of 2018.
Filton explained on Friday's call that the negotiations with the government have shifted to issues other than money such as the terms and periods of release and the conclusion of a related criminal investigation.
"We continue to negotiate rather vigorously with the government, and I think both sides are committed to bringing this matter to a conclusion," he said. "We, as always, hope it would go faster, but are dedicating our resources to making sure that happens."
