Universal Health earnings decrease

Michelle Swafford

Friday, Oct. 22, 2004 | 10:54 a.m.

Universal Health Services Inc., operator of four Las Vegas hospitals, reported Thursday afternoon a decline in its profit for the third quarter because of hurricane damage and lower patient admissions.

Universal Health operates Desert Springs, Valley, Summerlin and Spring Valley hospitals in Las Vegas and has plans to build a fifth hospital in the northwest part of Las Vegas. Universal Health purchased Las Vegas behavioral health hospital Spring Mountain Treatment Center during the second quarter, which rounded out the company's local portfolio. Universal also operates two outpatient surgery centers.

The King of Prussia, Pa.-based company reported its profit declined to $37.8 million, or 62 cents per share, during the third quarter, compared with $49.1 million, or 79 cents per share, in the year-ago quarter. Analysts surveyed by Thomson Financial on average had expected Universal Health to earn 68 cents per share.

The company's third quarter net income included a $1.5 million after-tax property write-down for damages caused by the hurricanes in the last few months. That portion was not covered by the company's insurance because of deductibles, Universal Chief Financial Officer Steve Filton said in a conference call with analysts today.

The company increased its revenue by 16 percent to $1.01 billion for the quarter partly because of newly opened and acquired hospitals, compared with $871 million during the year-ago quarter.

Universal Health's stock price rose nearly 3 percent to $41 per share in midmorning trading on the New York Stock Exchange.

On a same-hospital basis, revenue rose 3 percent during the third quarter from the same time a year ago, which was primarily because of a 4.6 percent increase in revenue per adjusted-patient day. A patient day measures how many days a patient occupied a bed.

Patient admissions at its acute-care hospitals on a same-hospital basis declined 2 percent in the third quarter from the year-ago quarter and patient days decreased 3 percent during the same period.

Filton attributed the declines to fewer patients who are now paying a higher share of their health care costs during a sluggish economy. He added that the hurricanes in Florida, Louisiana and Puerto Rico also hurt Universal Health's admissions and patient days.

Universal Health's behavioral-health hospital admissions rose 5 percent during the third quarter from the year-ago quarter and patient days increased 7 percent during the same time. Net revenue for its behavioral hospitals increased 8 percent in the third quarter over a year ago and revenue per adjusted-patient day increased 0.7 percent.

Universal Health increased its provision for doubtful accounts from uninsured patients to $82 million in the third quarter from $60.6 million in the year-ago quarter.

"It's still a big issue for us and the rest of the country," Filton said Thursday afternoon in an interview with the Sun. "It continues to be a challenge for the hospital community. I don't think it's getting any worse."

Today he said the bad debt situation should stabilize as the job market improves.

"I don't think we've seen any real change in collection rates in self-pay (patients) or any dramatic changes in the amount of self-pay (patients)," he said, adding that the number of uninsured patients was increasing dramatically a few quarters ago.

Universal Health does not disclose financial information on a local basis, but Filton said Thursday afternoon that the Las Vegas Valley continues to be an important market for the company.

"Las Vegas is one of, if not our most important market," he said. "We feel very good about the market. Our market share in the market continues to improve a little bit every quarter."

When Universal Health's newest Las Vegas hospital, Spring Valley, opened Oct. 2, 2003, the company reported that its sister hospitals were being "cannibalized."

Filton said Thursday that patient volumes are improving at Desert Springs, Valley and Summerlin hospitals. "The third quarter will be the first quarter since Spring Valley opened on a same-facility basis that volumes have improved year over year," he said.

When HCA Inc.-owned Southern Hills opened March 1 a few miles from Spring Valley, patient volumes softened at Spring Valley, but that was a short-term impact, Filton said.

During today's call, Filton said Spring Valley is operating in the black, but is reporting lower operating margins than the other Las Vegas hospitals because it is seeing a disproportionate number of emergency-room patients who can spike the amount of bad debt a hospital has.

He added that Spring Valley has seen gradual improvement since opening.

Universal Health's Las Vegas hospitals continue to expand and accentuate their specialties.

Spring Valley is scheduled to open its fourth floor soon, which will add 35 medical-surgical beds to the hospital, Spring Valley spokeswoman Naomi Linardo said.

The hospital has been a popular place to deliver babies and will soon deliver its 1,000th baby, Linardo said.

Desert Springs opened a long-term acute care hospital in an old wing of the hospital Sept. 27. Kindred Healthcare Inc. will operate the long-term acute care hospital, which will be open to patients from all hospitals.

Desert Springs has applied to be certified as a center of excellence for gastric-bypass surgery, which is a form of weight-loss surgery, and plans to have the new service available in December, Desert Springs spokeswoman Lori Harris said.

The hospital is moving forward with plans to expand its cardiology services with a cardiology institute that will offer 16 intermediate-care beds, 18 general-cardiac beds and eight beds in a chest pain center, she said.

Summerlin Hospital completed construction of a three-story, 76-bed patient tower for pediatrics and medical-surgical patients, Summerlin spokeswoman Stacy Lee-Harrington said. A pediatric intensive care unit is scheduled to open early next year and the hospital is also expanding its rehabilitation department, she said.

During the third quarter, Valley Hospital added 11 emergency-room beds as part of an overall expansion that provides 54 emergency beds, Valley spokeswoman Gretchen Papez said.

Universal Health is designing its next hospital, Centennial Hills, which is scheduled to open in late 2006 in the northwest part of Las Vegas, Filton said Thursday.