Universal Health Services (UHS) has raised its revenue forecast for 2025 after reporting a third-quarter revenue increase of 13.4% year over year, totaling approximately $4.5 billion. The for-profit healthcare operator attributed this growth partly to a $90 million boost from the recently approved Medicaid supplemental payment program in Washington D.C., along with increased volumes in acute care services.
The health system now anticipates revenues between $17.3 billion and $17.4 billion for the year, an increase from its previous estimate of $17.1 billion to $17.3 billion.
Financial Performance and Operational Challenges
UHS reported a net income of $373 million for the third quarter, marking an increase of over 44% compared to the same period last year. The acute care division continues to show stronger growth than the behavioral health portfolio, a trend consistent throughout the year. Same-facility adjusted admissions in acute services rose by 2%, while behavioral services experienced a modest increase of 0.5%.
The performance of UHS has been impacted by challenges at the Cedar Hill Regional Medical Center, which experienced a loss of $25 million in the quarter. Despite the slow ramp-up, President and CEO Marc Miller noted that the facility received Medicare certification in September, allowing it to access government funds. UHS expects to either break even or achieve better financial results for this facility by the end of the year. Plans are also in place to open the new Alan B. Miller Medical Center in Palm Beach Gardens, Florida, in spring 2024.
Addressing Growth in Behavioral Health
UHS executives have expressed their commitment to improving growth in the behavioral health sector. The organization aims to achieve an adjusted patient day increase of 2% to 3% in 2025, a target that seemed challenging last quarter. However, CFO Steve Filton confirmed during a recent investor call that this goal is now more achievable for the upcoming year.
A significant issue identified is that UHS’s behavioral health services are primarily designed for inpatient care, with 345 inpatient facilities compared to only 100 outpatient access points. This misalignment with market demand for outpatient services has been a barrier to growth. Filton explained that many potential patients prefer receiving care in freestanding outpatient settings rather than hospital campuses. To address this, UHS plans to open ten clinics that will not carry inpatient hospital branding.
Recruitment and retention of talent in the behavioral care division also remain a challenge. Filton emphasized the importance of filling vacancies and reducing turnover to meet growth targets. Although progress has been made in addressing these labor challenges, the pace of improvement has been slower than anticipated.
UHS executives also discussed potential challenges arising from changes to Medicaid state supplemental payment programs during the investor call. These programs traditionally provide crucial financial support to healthcare providers. The recent approval of Washington D.C.’s state-directed program resulted in a revenue boost for UHS, which anticipates netting approximately $1.3 billion from state supplemental payments in 2025. However, the One Big Beautiful Bill Act is expected to impose caps on these payments, potentially leading to a reduction of between $420 million and $470 million by 2032.
Additionally, UHS may face financial pressure in its Texas and Florida markets, estimating a potential annual loss of $50 million to $100 million if Congress does not extend enhanced Affordable Care Act subsidies. The expiration of these subsidies could result in millions of individuals losing health coverage, significantly impacting healthcare providers’ revenues.
The ongoing discussions in Congress regarding the future of these subsidies have already contributed to tensions that recently led to a government shutdown. As UHS navigates these complexities, its focus remains on enhancing operational performance and adapting to evolving market demands.