With dozens of health care facilities in nearly every state, Universal Health Services (UHS) isn't quite ubiquitous, but it's working on it. One of the largest for-profit hospital operators in the nation, UHS owns or leases about 25 acute care hospitals with a total of 5,500 beds, primarily in midsized rural and suburban communities. The company also operates several outpatient surgery centers and radiation treatment facilities, most of which are located near its acute care hospitals. In addition, UHS' behavioral health division operates about 200 psychiatric and substance abuse hospitals with a combined capacity of about 20,000 beds. The company is controlled by founder and CEO Alan Miller.
UHS' acute care facilities are located in more than half a dozen states and are situated mostly in smaller towns and cities with limited competition, though the division does have facilities in a few larger markets (such as Las Vegas and Washington, DC). UHS' behavioral health hospitals are scattered across about 40 US states, as well as Puerto Rico and the US Virgin Islands. The company's biggest markets for both segments are California, Nevada, and Texas, which together account for nearly half of the company's revenue.
UHS receives about 55% of its annual revenues from its acute care segment, which includes medical hospitals, surgical outpatient facilities, and radiation oncology centers. The remainder of the company's revenue comes from its portfolio of behavioral health hospitals, which includes residential facilities for teens, adult psychiatric hospitals, substance abuse facilities, and special education schools for students with emotional problems.
The company's behavioral health business accounted for a larger portion of sales in 2011 (45%, up from 30% the previous year) due to UHS' acquisition of Psychiatric Solutions in late 2010.
Sales & Marketing
Both of UHS' operating segments (acute care hospitals and behavioral health hospitals) earn between 40% and 50% of revenues from managed care providers (HMOs, PPOs, Medicare Advantage, and other commercial plans), with the remainder of sales coming from traditional Medicare and Medicaid plans, self-pay customers, and other sources.
UHS' growth strategies have helped it to steadily increase sales over the past decade. The firm saw its revenues jump by 35% to some $7.5 billion in 2011, largely due to the Psychiatric Services acquisition the previous year. Net income levels also rose by more than 70% to $398 million that year, reaffirming the company's profitability after a slight dip in net income levels in 2010 (largely due to acquisition costs).
While the company's growth strategy is to build or purchase new facilities in rapidly growing areas -- it has grown both of its units through selective acquisitions and construction efforts over the years -- UHS also has no qualms about ridding itself of operations that just don't quite fit anymore. The company sold some $118 million and $21 million in assets in 2011 and 2010, respectively; divestitures in 2011 included several behavioral health facilities that the FTC required UHS to sell following the Psychiatric Solutions acquisition. In 2012 the company exited the Washington State acute care market through the sale of its Auburn Regional Medical Center.
By focusing its operations on high-growth regions, UHS also works towards its goal of increasing hospital utilization rates (which is often a key indicator of the financial health of a hospital). To further draw more patients and high-quality physicians to its existing facilities, the company invests in new technology, makes capital improvements, and increases the breadth of services it offers. Initiatives include upgrades to surgical equipment and billing systems, as well as the implementation of electronic health record (EHR) systems to improve patient care coordination. UHS is especially expanding its outpatient service capabilities, as payers put pressure on hospitals to control inpatient care costs.
Mergers & Acquisitions
The $3.1 billion acquisition of Psychiatric Solutions in 2010 doubled the behavioral health division's operations by adding roughly 100 mental health care facilities in more than 30 states. UHS had already been growing the division through smaller purchases.
UHS further expanded the behavioral health business in 2012 by acquiring private psychiatric hospital provider Ascend Health for $500 million. The purchase added Ascend's nine freestanding psychiatric inpatient facilities in five states in the Southwest.
Chairman and CEO Alan Miller, who founded the company in 1978, controls about 80% of UHS' voting power. – less