The COVID-19 pandemic shrunk Universal Health Services' net income by 39% in the first quarter of 2020, but executives said Tuesday they're confident they can turn things around.
King of Prussia, Pa.-based UHS drew $142 million in net income in the quarter ended March 31, compared with $234 million in the prior-year period. The company also said it is following moves by its peers to pull its 2020 guidance amid the uncertainty.
The COVID-19 pandemic has driven a "very unfavorable" shift in service mix, Steve Filton, UHS' chief financial officer, explained on an earnings call Tuesday morning.
"You've got many more medical patients who are a little bit more expensive to treat because of all the isolation and other protective steps that we're taking to protect our patient and our employee population," he said, "and you're losing a lot of this higher profitability, higher margin business for the last couple weeks of the month of March."
UHS' net revenue grew 0.9% in the first quarter to $2.8 billion. Expenses grew at a faster clip—5.2%—to $2.6 billion.
UHS' patient volumes were "significantly reduced" in the latter half of March across its acute-care and behavioral health hospitals as various COVID-19 policies were implemented. The procedures being postponed include cardiac surgeries such as stents and pacemakers as well as oncology, orthopedic and neurosurgeries, Filton said. He said he's more confident the company can recapture volumes on the acute-care side than on the behavioral health side.
In addition to pulling its guidance, UHS said it has responded by increasing labor productivity, cutting certain capital projects and suspending its stock repurchase and quarterly dividend programs. But given how dramatic the decline in revenue has been, Filton said it would be impossible for UHS to compensate with cost cutting.
"I would say if we can reduce our cost at half the rate revenues are declining, then we've probably done a pretty thorough job," he said.
UHS also said it has so far received $195 million grant funding and $375 million in accelerated Medicare payments under the Coronavirus Aid, Relief, and Economic Security Act. That money was not included in the company's first quarter results.
Adjusted admissions to UHS' acute-care hospitals decreased 4% on a same-facility basis in the first quarter of 2020 year-over-year. Net revenue per adjusted admission increased 3.7%. Across UHS' behavioral health facilities, same-facility adjusted admissions declined 2% in that time, and net revenue per adjusted admission increased 4.3%.
Alan Miller, UHS' CEO, said on Tuesday's call that he fully expects the company's business to return in May, June or July.
"We just got interrupted," he said. "I am thankful that at this point it seems that COVID-19 is on the way down or is down."
Filton added that the crisis could spur additional merger and acquisition activity for companies that emerge stronger and better positioned. He said he thinks UHS can operate in this environment better than most of its competitors in its geographies.
"While we don't relish the notion that others will suffer in this environment, we're prepared to step in if they do," he said. "If other can't provide the service and capital investment that's required in our markets, we certainly feel like we can do that."
