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Universal Health Services Explores Growth Opportunities in 3Q15

Margaret Patrick

What to Expect from Universal Health Services' 3Q15 Earnings Release

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Growth opportunities

In 3Q15, Universal Health Services (UHS) was actively involved in exploring growth opportunities, both in its acute care as well as behavioral health business. The company has focused on reinvesting organically in its acute care business while the behavioral health business has grown through targeted acquisitions.

Building acute care facilities

While other for-profit hospitals such as HCA Holdings (HCA), Tenet Healthcare (THC), and LifePoint Hospitals (LPNT) have focused more on acquisitions to grow their acute care business, Universal Health Services has adopted the organic route for strengthening its acute care business. Universal Health Services has built several hospitals in Las Vegas and Riverside County, California. The company is also actively building several freestanding emergency departments in Texas. Emergency departments tend to be the first point of contact for a majority of patients and can also lead to high inpatient volume through referrals.

Acquiring behavioral health hospitals

In 3Q15, Universal Health Services continued to grow its behavioral health business through strategic acquisitions. On September 18, 2015, the company announced its definitive agreement to acquire Foundations Recovery Network for a consideration of ~$350 million. The acquisition will add 322 residential beds to Universal Health Services’ capacity. The acquisition is targeted at strengthening Universal Health Services’ specialty behavioral health portfolio. Foundations Recovery Network specializes in addiction treatment. The acquisition will also add the latter’s call center, sales team, and web marketing program to Universal Health Services’ portfolio.

International expansion

In 3Q15, Universal Health Services continued to strengthen its Cygnet business in the United Kingdom. On September 26, 2014, the company had announced the acquisition of Cygnet Health Care Limited for a consideration of ~$335 million. The acquisition added 17 facilities, involving 15 inpatient behavioral health facilities and 2 nursing homes. On August 19, 2015, Universal Health Services announced the acquisition of Alpha Hospitals Holdings Limited to add more facilities and beds to Cygnet’s portfolio. After the acquisition, Cygnet Health Care had 21 hospitals and ~1,100 beds in the United Kingdom. To know more about the rationale behind Universal Health Services’ overseas acquisitions, please refer to Universal Health Services is expanding into the UK market

The iShares Russell Mid-Cap ETF (IWR) invests 0.2% of its portfolio in Universal Health Services.

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