Universal Health Services, Inc. (NYSE:UHS) Q4 2023 Earnings Call Transcript
Universal Health Services, Inc. (NYSE:UHS) Q4 2023 Earnings Call Transcript February 28, 2024
Universal Health Services, Inc. isn't one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).
Operator: Good day and thank you for standing by. Welcome to the Fourth Quarter 2023 Universal Health Services Earnings Conference Call. At this time, all participants are in a listen only mode. After the speaker’s presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today’s conference is being recorded. I would now like to hand the conference over to your first speaker today, Steve Filton, Executive Vice President and Chief Financial Officer. Please go ahead.
Steve Filton: Thank you and good morning. Marc Miller is also joining us this morning and we welcome you to this review of Universal Health Services results for the fourth quarter and to December 31, 2023. During the conference call, we’ll be using words such as believes, expects, anticipates, estimates and similar words that represent forecast projections and forward-looking statements. For anyone not familiar with the risks and uncertainties inherent in these forward-looking statements, I recommend a careful reading of the section on Risk Factors and Forward-Looking Statements and Risk Factors in our form 10-K for the year ended December 31, 2023. We would like to highlight just a couple of developments and business trends before opening the call up to questions.
As discussed in our press release last night, the company reported net income attributable to UHS per diluted share of $3.16 for the fourth quarter of 2023. After adjusting for the impact of the item reflected on the supplemental schedule as included with the press release, our adjusted net income attributable to UHS per diluted share was $3.13 for the quarter ended December 31, 2023.
Marc Miller: Our acute hospitals continue to experience strong demand for their services in the fourth quarter. With adjusted admissions increasing 5.6% year-over-year. Overall surgical volumes were solid as well, increasing 4% year-over-year. Net revenue per adjusted admission, which has lagged for much of the year, increased by 3.7% as compared to the fourth quarter of 2022, as acuity trends and pressure from payers have started to stabilize. Meanwhile, the amount of premium pay in the quarter, which declined from a peak of $153 million in the first quarter of 2022, was $67 million in the fourth quarter of 2023, similar to what it was in the third quarter. For the full year 2023, our strong acute care revenues were largely offset by elevated expenses, especially physician subsidies, which resulted in flattish margins for the full year.
During the fourth quarter, same facility revenues at our behavioral health hospitals increased by 7.2%, driven primarily by a 6.1% increase in revenue per adjusted patient day. The patient day growth in the quarter was greater at our acute behavioral hospitals versus our lower acuity residential treatment centers, which tended to drive up the revenue per day to relatively robust levels consistent with our year-to-date experience. Additionally, as we discussed last quarter, we continue to see a negative impact of Medicaid redeterminations in certain states on behavioral health volumes, although it appears that impact has also begun to stabilize. With 8% revenue growth, same-facility EBITDA for our behavioral hospitals has increased approximately 9% for the full year of 2023 compared to 2022.
Steve Filton: We also note that in the fourth quarter, we recorded approximately $18 million in connection with the recently approved Mississippi Hospital Access Program covering the six-month period of July through December of 2023. Our cash generated from operating activities was $452 million during the fourth quarter of 2023, as compared to $297 million during the same quarter in 2022 and $1.268 billion during the full year of 2023, as compared to $996 million during 2022. We spent $743 million on capital expenditures during 2023, which was consistent with our original forecast for the year. For the full year of 2023, we acquired $525 million of our own shares pursuant to our repurchase program. Since January 1, 2019, we have repurchased more than 26 million shares representing almost 30% of our shares outstanding as of that date.
As of December 31, 2023, we had $701 million of aggregate available borrowing capacity pursuant to our $1.2 billion revolving credit facility.
Marc Miller: The core operating assumptions underlying our 2024 operating results forecast, which was provided in last night’s release, largely reflect the historical pre-COVID trends in the respective businesses. We anticipate that volumes in our acute segment will moderate from the elevated 2023 levels, but conversely, acuity and pricing in our acute business will increase, and for the full year, both metrics will resemble the patterns we experienced before the pandemic. Despite the continuing shift of services from inpatient to outpatient settings and pressure from payers to restrain reimbursement increases in a variety of ways. We expect continued improvement in premium pay labor trends and general cost trends that will remain largely stable in 2024.
Specifically, physician expenses, which were a major headwind in 2023, are expected to grow by the overall inflation rate in 2024. As noted in our press release, our 2024 operating results forecast includes an additional $149 million of Nevada supplemental revenues, which were approved by CMS in late December and disclosed by us in an 8-K filed in early January. We believe demand for our behavioral services remains robust and our same-store adjusted patient day growth in 2024 is forecasted to exceed the 2.1% growth we experienced in 2023. A significant driver of behavioral volume upside is due to our success in filling vacant positions. But we acknowledge that specialty workforce shortages in certain markets continue to be an obstacle to even more volume growth.
In both our business segments, we were pleased that measures of patient satisfaction and quality of care increased in 2023 and we are focusing on continued improvement of these metrics in 2024. We are pleased to answer questions at this time.
Operator: Thank you. [Operator Instructions] Our first question comes from Ann Hynes with Mizuho. Please go ahead.
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