Hospital owner reports profit decline

Michelle Swafford

Friday, Feb. 25, 2005 | 10:43 a.m.

The parent company of Desert Springs, Valley, Summerlin and Spring Valley hospitals reported its profitability declined 20 percent in the fourth quarter.

King of Prussia, Pa.-based Universal Health Services Inc. reported Thursday afternoon its net income dipped to $37.2 million, or 61 cents per share, in the fourth quarter, compared with $46.5 million, or 75 cents per share, in the year-ago quarter. The fourth-quarter results included an after-tax one-time gain of $7.1 million, or 11 cents per share, because of a reversal of expenses related to restricted share options for its chief executive. The shares were contingent on an earnings target that was not met. The year-ago results included an extra month of income from the company's French hospitals.

Minus the $7.1 million boost from the CEO's restricted share options that were not granted, Universal's net income fell short of analysts expectations. Analsysts surveyed by Thomson Financial Network had expected Universal to earn an average of 55 cents per share.

Shares of Universal's stock rose $1.74, or nearly 4 percent, to $46.52 per share in midmorning trading on the New York Stock Exchange.

The company reported its revenue increased 12 percent in the fourth quarter to $994.8 million from $887.3 million in the year-ago quarter. Revenue for Universal's acute-care hospitals increased 2.6 percent during the fourth quarter, which was attributed to a 3.3 percent increase in revenue per adjusted patient day.

The provision for doubtful accounts, or bad debt, was 7 percent of revenue in the fourth quarter, compared with 8 percent in the year-ago quarter. That was primarily attributed to a change in the company's discounts for uninsured patients, which shifted about $10 million from bad debt to charity care, or free care.

Patient admissions in the acute-care hospitals that were owned in the last two fourth quarters declined 0.5 percent to 57,488 patients. Patient-bed days, which is the number of days a patient occupies a bed, dropped nearly 2 percent to 255,990 bed days.

In Las Vegas, patient volumes are increasing and the market continues to grow, Chief Financial Officer Steve Filton told investors in a conference call this morning.

"We continue to see in Las Vegas the trends that we've talked about since Spring Valley opened in the fourth quarter of 2003," he said. "Every quarter since then, we've seen sequential improvement in our admissions. We're see improvement in our margins although our margins are still somewhat lower than they were when Spring Valley opened."

In the quarters following Spring Valley 's opening, Filton told investors that it "cannibalized" Universal's other Las Vegas hospital admissions.

"Although the market has experienced certain pressures, particularly from a bad debt and wage rate perspective, volumes look good," he said. We'll continue to see improvement at the spring valley facility throughout 2005.

In Las Vegas, Universal also operates two outpatient surgery centers, Spring Mountain Treatment Center and land in the northwest to build a fifth acute-care hospital, Centennial Hills.

Las Vegas hospitals continue to ramp up their services and community involvement.

At Summerlin Hospital Medical Center, $10 million was spent for a new patient tower and upgrades in 2004, Summerlin CEO Tim Hingtgen said.

Summerlin added 17 rehabilitation beds and larger rehab area in January, bringing the total beds to 46. It added general pediatric beds, a pediatric intensive care unit and a pediatric emergency room, which will open in the second quarter.

It is investing $1.5 million for a new computed tomography scanner that will be added this summer and $3.5 million to add a catheterization lab and develop open-heart services, Hingtgen said.

"We're very excited with these investments to make this a well-rounded hospital for the community," he said. "This community has increased its health care without an increase tax subsidy."

At Desert Springs Hospital, construction will begin next quarter on an expansion of its cardiology department, which will include a 16-bed intermediate care unit, an 18-bed general cardiac care unit and an eight-bed chest pain center. The cardiac department also will include a new computed-tomography scanner that will be available in the third quarter and a catheterization lab, which should be completed in the second quarter.

Desert Springs added a gastric bypass center to its portfolio of services last year. Last year, the hospital has invested about $250,000 in community screenings and outreach programs in the areas of diabetes, cardiac care and bariatircs.

At Spring Valley Hospital Medical Center, the fourth floor opened, which added 35 medical-surgical beds.

Later this year, the hospital will begin construction of a second medical-office building, which will be 60,000 square feet.

At Valley Hospital Medical Center expansion continues for additional medical-surgical beds. The hospital closed its 16-bed rehabilitation department in December to accommodate 11 private medical-surgical rooms.

It is expanding its women's services and building a surgery center.