Universal Health Services, Inc. Earnings Call Nuggets: Vegas Market Mix Shift, Volumes

On Friday, Universal Health Services, Inc. (NYSE:UHS) reported its first quarter earnings and discussed the following topics in its earnings conference call. Take a look.

Vegas Market Mix Shift

Bryan Sekino – Barclays Capital: This is Bryan Sekino on behalf of Adam this morning. Just wanted to know if you could provide us with some details in Vegas on some of the mix shift that you saw in acute care versus the strong Q1 of ’11? If you could provide us with some details on how the mix shift, if that was really the bolus of the mix shift in the quarter.

Steve G. Filton – SVP and CFO: Sure, Bryan. I mean I think that in talking about the comparison, the sort of anomaly was in the first quarter of last year. For those of you who recall, we talked a great deal in Q1 of ’11 about the fact that rather dramatically unemployment rates had declined in the Vegas market from like 15% at the end of ’10 to 12% in the first quarter of ’11 and we saw a benefit from that in our business almost immediately. We saw a reduction in uninsured volumes in the first quarter of ’11 that had an extremely favorable effect on our results and our revenues per admission et cetera. As 2011 progressed the payer mix should have regressed back to kind of a normal mean if you will both in the Vegas market, I think in the portfolio in general. Most of those trends continued into the first quarter of ’12 and those trends are again the same as we have about the last few quarters. Commercial volumes are down, Medicare volumes are down, really the only volumes that are up are Medicaid, which is actually managed Medicaid and to some degree our uninsured volumes that’s particularly true in some of our more economically troubled markets like Vegas and South Taxes, but it is generally true to the portfolio. That’s what made the comparison so difficult from an acute care perspective in Q1.

Bryan Sekino – Barclays Capital: Just a question on the behavioral side, it looks like you adjusted admissions were up very strong and adjusted patient days were up, but there was a gap in the growth, is there a shift in more acute versus RTC or is there also some length of stay pressures from the Medicaid payers as well?

Steve G. Filton – SVP and CFO: Brian, again it’s a continuing trend where we’re seeing compression in our length of stay, not anything new, but also not something that seems to be decelerating yet at this point. It is primarily focused in the residential business, length of stay is down on both sides of our behavioral business, but primarily on the residential side and it is mostly I think a function of Medicaid and managed Medicaid payers intentionally obviously trying to get their patients out of the residential facilities sooner than previously.


Thomas Gallucci – Lazard Capital Markets: I guess just on volumes, over and above mix, on absolute utilization, did you see anything that was new or different as you sort of look inside the details of the numbers that indicate that anything is better is worse than maybe where the trends have been in recent quarters, or is there a more stabilization?

Steve G. Filton – SVP and CFO: No the growth in the volumes, that 1.6% growth in adjusted same-store admissions, we thought seemed to be much as expected and were reasonable number. I think Tom we are more focused on the fact that when the economy begins to improve in number of our markets, but in particularly some of our larger markets, that we are well positioned to benefit from that and we are waiting patiently for that to happen. Obviously, this has been an extended recession and it’s been particularly extended again in some of our most important markets. So, that’s really where we are keeping our eye on most importantly.

Thomas Gallucci – Lazard Capital Markets: So, not seeing things worst, but it doesn’t sound like you are still waiting for things to get a little bit better. On the cash flow you mentioned some of the state collections I guess in particular, was there anything else that you can talk about on collections or rates are still pretty consistent relative to outside I guess of the states that you mentioned?

Steve G. Filton – SVP and CFO: I think from a rate perspective there is nothing significant going on either from our government payers or our private payers. I mean the biggest collection issue which we discussed last quarter as well is almost a complete lack of payments from Illinois Medicaid, although payments did resume again this past week, so we view that as an encouraging sign. We believe the Texas Medicaid disproportionate share payments, which were not made in Q1, we’re actually expecting at least a portion of those payments to be made either today or Monday. So, we’re hoping to get a little bit of easing of that pressure.

Thomas Gallucci – Lazard Capital Markets: As Illinois has resumed, did they take a catch up or how fast do you expect to make up with what you haven’t been paid in the past?

Steve G. Filton – SVP and CFO: I wish I could precisely answer that question Tom, the state is not terribly helpful in letting folks know what their plan is, although they certainly have taken the position consistently that they intent to pay all the outstanding receivables. So, that’s our expectation and obviously that’s the way we’ve reflected in our financials, but there is no plan that the state has issued as to when the timing of payments will take place.