Despite swelling numbers of COVID-19 patients and a reversal of millions of dollars in federal grants, Universal Health Services managed to grow its profit 150% in the third quarter of 2020.
Net income attributable to UHS' shareholders was $241.3 million in the quarter ended Sept. 30, compared with $97.2 million in the prior-year period. The King of Prussia, Pa.-based company generated $2.9 billion in net revenue in the quarter, up 3.2% from $2.8 billion in the 2019 period.
UHS is the latest hospital chain to report an uptick in coronavirus patients across its hospitals in the third quarter compared with the second quarter, which ended June 30. Other hospital leaders described the recently ended quarter as being more challenging than the second quarter because of COVID-19 surges.
UHS' Chief Financial Officer, Steve Filton, said on an earnings call Friday that COVID-19 admissions comprised about 12% of all acute-care admissions in the third quarter, compared with just 5% in the second quarter.
"July was clearly the peak," he said. "Then we saw the COVID cases come down in August and come down again in September."
Like its some of its peers, UHS' third quarter results included a reversal of grants the company had previously recovered under the Coronavirus Aid, Relief, and Economic Security Act. HHS has gone back and forth on how it will require providers to justify keeping the money, with stricter guidance in September that capped profit replaced the following month with relaxed guidance that allows it to be based on revenue.
Filton said the company's decision to reverse roughly $5 million in grants in the third quarter was based on the September guidance. Filton said he expects the company will recognize more of its grants in the fourth quarter, but that it wants to clarify some points with HHS before it makes any decisions.
UHS has recognized about $213 million in CARES Act grants in the nine months ending Sept. 30. Of that money, $161 million went to its acute-care hospitals and $52 million went to its behavioral health division, which recently settled a sweeping federal lawsuit over allegedly admitting patients unnecessarily and holding them for as long as their insurance paid out.
Like its peers, UHS' facilities have struggled with lower volumes during the COVID-19 pandemic. Adjusted admissions to its acute-care hospitals declined 17.3% on a same-store basis year-over-year.
Like HCA Healthcare and Tenet Healthcare Corp., UHS' net revenue per adjusted admission saw a dramatic year-over-year spike: 26.2%. Other companies have said that's because the patients staying in hospitals during the pandemic tend to be sicker and fewer Medicare patients are seeking care. In UHS' case, Filton said the higher revenue per admission is based more on the higher proportion of seriously ill COVID-19 patients and less on payer mix. He said that's because COVID-19 patients are more likely to be covered by Medicare than other hospitalized patients, which doesn't reimburse as well as commercial plans.
The company's earnings before interest, taxes, depreciation and amortization also got a boost in the quarter, jumping 58% year-over-year to $471 million in the quarter ended Sept. 30.
UHS is recovering from a serious cyberattack that prompted the company to temporarily take all of its U.S. information technology networks offline, including systems for medical records, laboratories and pharmacies.
Marc Miller, UHS' president and incoming CEO, said on Friday's call that the company is still performing a forensic audit to determine what happened, including whether it should spend its cyber security dollars differently or increase spending in that area.
"We have a robust security apparatus here and even with that, we did get hit," he said.