UNIVERSAL HEALTH SERVICES INC Q3 FY2024 earnings call

• Acute care volumes have moderated to pre-pandemic patterns. Adjusted admissions up 1.5% YOY. EBITDA at acute care hospitals up 36% in Q3 2024. - Behavioral health same facility revenues up 10.5% in Q3 2024, with revenue per adjusted patient day up 8.5%. - Net income attributable to UHS per diluted share was $3.80, adjusted net income $3.71. Cash from operating activities $1.4 billion in first nine months of 2024. Capital expenditures $698 million, share repurchases $350 million. - Aggregate net incremental reimbursements of ~$20 million in Q3 2024 from state supplemental Medicaid programs, exceeding projections. Tennessee, D.C., and Nevada programs have potential net benefits.

Acute Care Segment: Adjusted admissions increased 1.5% year-over-year with surgical growth slowing. Same facility EBITDA at acute care hospitals increased 36% in Q3 2024, and 17% excluding Nevada Medicaid supplemental payments. Physician expense, a prior headwind, stabilized at ~7.2% of revenues. Revenue growth was 8.6% excluding the insurance subsidiary. Behavioral Health Segment: Same facility revenues increased 10.5% in Q3 2024, driven by an 8.5% increase in revenue per adjusted patient day. Facility revenues increased 8.3% and same facility EBITDA rose 9.6% compared to the prior year period.

• Full year 2024 guidance was revised, and Q3 2024 exceeded supplemental program projections. Expect continued margin recovery in acute care. - Behavioral health revenue growth expected in mid-to-upper single digits. 2025 guidance to be provided in February, with two new facilities opening in 2025 (West Henderson and D.C. hospital).

• Increased reserves for self-insured, professional, and general liability claims due to unfavorable trends. - Managed care payer behavior remains aggressive, with issues like denials and patient status changes. - Potential legal and regulatory risks, including verdicts in behavioral health and appeals.

Q: Could you speak to managed care plan behavior, patient denials, and trends between commercial and MA plans?

A: Payer behavior has been more aggressive since late 2022/early 2023 regarding denials, etc. No dramatic change in current quarter. Focus on two-midnight rule coding.

Q: Heading into 2025, any major headwinds/tailwinds?

A: Two new facilities opening in 2025 (not significant EBITDA drag). Tailwinds from Tennessee, D.C., Nevada Medicaid supplemental programs.

Q: On acute volumes, outlook for growth?

A: Expected to return to pre-COVID levels, ~6%-7% revenue growth split between price and volume. Difficult comparison to prior year due to deferred procedures.

Q: Trajectory of behavioral volumes and pricing?

A: Behavioral volumes expected to exit 2024 at 3% growth. Pricing strong but likely to moderate, still in 4%-5% range.

Q: Labor trends and premium pay?

A: Wage inflation stabilized, premium pay down 12% YOY. Labor trends stabilized in both segments.

Q: Outlook for psych business in 2025?

A: Revenue growth mid-to-upper single digits, skewed to pricing. Volume growth 3%-3.5%.

Q: Acute care volumes in Q3, any payer class details?

A: Difficult comparison to prior year due to deferred procedures. Year-to-date 3% adjusted admission growth, 5% revenue per adjusted admission growth ex-Nevada supplementals.

Q: Medicaid supplemental payments, sizing for California, New Mexico?

A: California and New Mexico have potential benefits, but sizing unclear until state plans are formalized.

Q: EMR investments in behavioral segment?

A: ~25-30 facilities to be live on EMR by early 2025. Telehealth and patient observation tech developments for quality care.