UHS beats expectations amid behavioral health, DOJ costs
- Universal Health Services reported a 28% drop in net income to $158.1 million in the fourth quarter of 2018 compared to the same period the year prior. Net revenues increased 4.2% to $2.75 billion during the same period.
- The King of Prussia, Pennsylvania-based hospital chain put $31.9 million toward a growing settlement fund related to the Department of Justice's investigation into its behavioral health facilities, according to financials released Wednesday. The fund now totals $102.3 million. CFO Steve Filton told investors Thursday that the investigation is nearing settlement.
- The company reported $10.8 billion in net revenue for the full year, and anticipates revenue growth as high as 5% in 2019. Though revenue continues to rise for the company, investors on the call questioned regulatory and leadership troubles with UHS' behavioral health arm.
Some analysts praised the revenue trend while others sought clarity on the hospital operator's behavioral health headwinds, including regulatory challenges around shorter lengths of stay and leadership loss, in questions on the company's Thursday call. Shares rose about 5% in late morning trade.
Income was hampered by costs associated with the ongoing DOJ investigation into false claims allegedly submitted by its behavioral health facilities and permanent closure of one such facility that was severely damaged in the California wildfires during the fourth quarter, according to earnings documents issued by the hospital chain.
Filton forecast the DOJ investigation would soon reach settlement.
"We've adjusted our reserves periodically, lately every quarter, to reflect whatever our latest offer is," Filton said. "I also think it's worth noting that the gap in between our offer and the government's demand has narrowed quite considerably."
UHS acute care facilities experienced a 2.2% bump in adjusted admissions and a 4.8% increase in adjusted patient days for the fourth quarter, both compared to the same period in 2017.
The full year saw net revenues jump 3.5% compared to 2017, with full-year adjusted admissions and patient days increasing 2.1% and 4.8% respectively compared to the year prior. Operating income dropped to $1.2 billion from $1.3 billion in 2017, while net income increased to $779.7 million in 2018 compared to $752.3 million over the same period.
The company also reported a $12.5 million loss as a result of decreased market value in shares. The UHS board of directors in December signed off on a $500 million increase to the company's stock buyback program. The authorization was followed by a $149 million reacquisition of about 1.22 million shares before the year's end.
Filton said share repurchasing can be expected to accelerate as a result of the DOJ case.
Follow Tony Abraham on Twitter