UHS CFO: Tough talk with payers is paying off

Aggressive negotiating tactics have boosted Universal Health Services Inc (NYSE: UHS) commercial reimbursement rates.

UHS Chief Financial Officer Steve Felton said the same thing at a Credit Suisse conference on Thursday. For months, leaders of the nation’s acute and behavioral healthcare providers have talked about using capacity limits and inflation as bargaining chips.

That tough talk paid off in the third quarter, Felton said. Daily patient revenue in the behavioral health unit rose 5%, while patient days rose 3%, public filings show.

“We’ve made a very specific point — in terms of behavior — that we might be more aggressive about doing this because … we have to keep patients out,” Felton said. “If we’re going to keep patients out, we might as well keep out the lowest-income patients.”

Felton added that interest rate growth is “clearly at the high end of historical interest rate growth trends.”

During the pandemic, UHS has struggled to find and retain long-term employees in its acute care and behavioral health care divisions. This forces companies to rely on contractor labor, increasing personnel costs.There is a behavioral health workforce shortage in the U.S.

Still, UHS has struggled to maintain capacity at some of its behavioral health facilities due to staffing issues.

During its third-quarter earnings call, UHS executives acknowledged that rising staffing costs and shortages are a permanent reality that limits the profitability of the acute care and behavioral health segments.

“On the behavioral side of the business, the COVID surge … usually only has a negative impact on the behavioral business — there’s really no positive offset,” Felton said.

Felton said behavioral health facilities don’t get the same federal support for COVID-related care costs as emergency hospitals.

COVID and workforce pressures led UHS to cut its annual revenue forecast for 2022 by 19% in July.

“We don’t think the COVID dynamics have really changed the underlying demand for our behavioral services,” Filton said. “If we continue to address the labor shortages and the supply-demand imbalance that we have had over the past 12 or 15 months, I think both businesses will improve.”

Inflation and a looming recession could also help staffing trends. These forces may prompt healthcare workers to seek more stable employee roles rather than contractor jobs.

Felton has often pointed to the surge in wages for contractors, fueled by the pandemic, as the main reason it’s hard to find employees.

“Nurses always have the opportunity to work as a temporary or itinerant nurse,” Felton said. “The way the pandemic has changed the whole equation is the worry about not being able to make all the time you want go away.”

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