Universal Health Services profit drops

Michelle Swafford

Friday, July 23, 2004 | 10:43 a.m.

Universal Health Services Inc., which owns Valley, Desert Springs, Summerlin and Spring Valley hospitals in Las Vegas, Thursday reported a decline in its second-quarter profit as a result of lower patient admissions and a higher number of unpaid patient bills, but the company still beat analysts' estimates by 9 cents per share.

The King of Prussia, Pa.-based operator of acute care and behavioral health hospitals reported its net income dropped 5 percent to $48.3 million, or 78 cents per share, in the second quarter from $51 million, or 82 cents per share, in the year-ago quarter.

Universal Health increased its allowance for bad debt from unpaid patient bills by 26.5 percent to $75.8 million in the second quarter from $59.9 million in the year-ago quarter.

Also, the number of patients admitted to Universal's acute care hospitals on a same-facility basis declined 1 percent to 64,127 patients.

Analysts polled by Thomson Financial Network had expected Universal to post average second quarter earnings per share of 69 cents and annual earnings per share of $2.82.

Universal Health stock fell 38 cents to $44.58 per share in mid-morning trading.

The company's revenue rose 15.8 percent to $1.02 billion for the second quarter from $879.7 million. Universal's acquisition of hospitals and the opening of new hospitals such as Spring Valley boosted the company's quarterly revenue, said Chief Financial Officer Steve Filton.

Also, the company's acute care inpatient and outpatient revenue increased in the second quarter partly because the number of patient days was up from the year-ago quarter. Patient days, which are the number of days a patient occupied a bed, rose to 320,285 in the second quarter from 294,829 in the year-ago quarter.

Behavioral health admissions rose 8.7 percent in the second quarter to 23,944 patients. The number of patient days rose 15.3 percent to 310,723 in the second quarter.

During the second quarter, Universal purchased four behavioral health centers including Spring Mountain Treatment Center in Las Vegas for $105 million. It also purchased a behavioral health hospital in Connecticut that includes a school and group homes.

The purchase of Spring Mountain Treatment Center rounds out Universal Health's local portfolio that includes two outpatient surgery centers, four acute-care hospitals and land to build a fifth hospital.

Universal Health does not release local admissions or patient days information, but Filton told investors this morning that Spring Valley's opening on Oct. 2 "cannibalized" admissions at its sister hospitals.

Competitor HCA Inc.'s opening of Southern Hills Hospital March 1 has also hurt Universal's older hospitals, Filton said.

Chief Executive Alan Miller said Spring Valley "continues to progress nicely and has had sequential admissions growth even with the new HCA facility."

Universal's hospitals may have lost some patients, but that hasn't stopped them from expanding.

Summerlin Hospital added a 58-bed patient tower that is scheduled to open later this summer for pediatrics and medical-surgical patients. Later this year, the hospital plans to open a pediatric intensive care unit within the pediatric department and double its rehabilitation department by adding a patient gym and 17 private rooms.

Desert Springs is scheduled to open a long-term acute care hospital within it hospital. In April, the company announced a partnership with Kindred Healthcare Inc., which will manage the long-term care center.

Valley Hospital plans to complete its emergency room renovation in August, which is when the final 11 beds will be available, bringing the total number of emergency room beds to 54.

Spring Valley opened a six-bed nursery for critical babies in April, bringing the total number of beds to 176.

Universal Health has announced plans to build Centennial Hills Hospital in the northwest part of Las Vegas, but the company has not announced a time line or construction details.

At end of the quarter, Universal Health operated 26 acute care hospitals and 44 behavioral health hospitals.