Exploring Universal Health Services’ operating expenses
Universal Health Services: A must-read company overview (Part 9 of 18)
Operating expenses
Universal Health Services’ (UHS) operating services increased marginally from 80.7% in 2012 to 81.0% in 2013. Compared to the operating expenses of peers like HCA Holdings (HCA), Community Health Systems (CYH), and Tenet Healthcare (THC), which amounted to 81.5%, 87%, and 88.8% of net revenues, respectively, Universal Health Services seems to be one of the most cost-efficient for-profit hospital operators in the US.
Salary expenses
The healthcare industry (XLV) relies heavily on skilled labor. Universal Health Services’ salaries accounted for 49.5% of Universal Health Services’ revenues in 2013, which was greater than that spent by other for-profit hospital companies. In 2013, salaries accounted for 45.7% and 49.1% of the total net revenues earned by acute care facilities and behavioral health facilities, respectively. According to a report by Mental Health America, there’s a shortage of mental healthcare professionals, with only one provider for 790 people, leading to higher salaries in behavioral healthcare facilities.
Universal Health Services is also experiencing a shortage of skilled nursing staff. Certain key markets, like California, require maintaining specified nursing staff levels. If we see a continued shortage of nursing staff, Universal Health Services will need to limit its healthcare services in these markets, further affecting revenues.
Supplies and other expenses
Universal Health Services’ expenses on medical supplies amounted to 11.3% of its total revenues in 2013, which were less than peer companies’, owing to UHS’s unique service mix. Supplies accounted for 18.0% and 4.7% of the total net revenues earned by the company’s acute care facilities and behavioral health facilities, respectively.
Universal Health Services’ other operating expenses, including contract services, professional fees, repairs and maintenance, and rents and leases, were in line with that of its peers, at 20.2%, in 2013.
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