Earnings Slump By 78% at Universal Health Services

By Josh Goldstein, The Philadelphia Inquirer

Oct. 29–Universal Health Services Inc., of King of Prussia, yesterday reported a third-quarter profit of $8.3 million, a 78 percent decline from the same period in 2004.

The hospital company attributed the results to an increase in the number of uninsured patients treated at its acute-care facilities and the continued decline in performance of two Texas hospitals that face competition from a physician-owned facility.

In addition, Universal said its four hospitals in Louisiana sustained substantial damage from Hurricane Katrina on Aug. 29 and remain closed.

One of Universal’s hospitals in New Orleans would need to be totally replaced, and the other in the city would require substantial repair, if not total replacement, said Alan Miller, the company’s chairman and chief executive officer.

“We have to see what happens to the repairs in New Orleans. We have to see what happens to the population,” Miller said. There is an ongoing political “discussion now of what gets rebuilt in certain areas, if they get rebuilt at all,” he said.

Before the hurricane, the New Orleans market accounted for 7 percent of Universal’s revenue, the company said.

Universal said it took a combined after-tax charge of $78.1 million for hurricane-related damage. So far, the company said, it has recovered $49.8 million from insurance carriers after taxes, and it could receive more.

“We have several hundred million dollars of commercial insurance coverage in place that we think is relevant in the New Orleans market,” said Steve Filton, Universal’s chief financial officer.

Despite the coverage, Filton said it was unclear how much money the company would eventually recover or when that would occur.

Revenue in the quarter rose 6 percent to $970.8 million.

In the nine months ended Sept. 30, Universal earned $228.6 million, or $3.72 per diluted share, on revenue of $2.97 billion compared with earnings of $132.3 million during the same period in 2004.

This month, Universal announced the $207 million acquisition of the Keys Group Holdings L.L.C., of Tennessee, which expanded its behavioral-health division by adding 21 behavioral-health hospitals, 21 therapeutic day schools, and 4 detention centers.

The deal solidifies Universal’s position as the nation’s largest operator of psychiatric hospitals and other inpatient behavioral-health facilities, with 95 facilities in 26 states and Puerto Rico.

Universal also is one of the largest for-profit operators of acute-care hospitals, with 24 hospitals, including Central Montgomery Medical Center near Lansdale, as well as ambulatory surgery centers and radiation centers.

Universal’s stock price rose 41 cents a share, or 1 percent, yesterday to close at $45.95. That is 27 percent below the 52-week high of $63.20 on June 14.

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