Universal Health Services is the latest for-profit health system to beat Wall Street’s estimates in third-quarter earnings and raise its forecast for 2025 on the back of substantial revenue gains.
The acute and behavioral hospital operator reported Monday afternoon $373 million in net income, or $5.86 per diluted share, and net revenues of about $4.5 billion. Those are year-over-year gains of 44.2% for net income and 13.4% for net revenues.
Per Zacks, the market last week had UHS at consensus estimates of $4.56 per share earnings and $4.31 billion net earnings. Though its stock had already inched higher Friday alongside the strong performances of its for-profit peers HCA Healthcare and Community Health Systems, UHS closed Tuesday about 2.5% higher than the prior day's close.
UHS, after its second quarter, had forecasted net revenues between $17.1 billion and $17.3 billion, and adjusted earnings per diluted share between $20.00 and $21.00. Those have been revised upward, with net revenues now estimated to land between $17.3 billion and $17.4 billion, and adjusted earnings per diluted share between $21.50 and $22.10.
The forecast change came from $90 million of pre-tax reimbursements tied to recently approved Medicaid state directed payment program in the District of Columbia, another $25 million expected to be recorded from the same program in the coming quarter and $25 million of miscellaneous increases from multiple states' programs, offset somewhat by a $35 million pre-tax charge UHS incurred to increase its reserves for liabilities, explained Chief Financial Officer Steve Filton during Tuesday morning's quarterly earnings call.
Even excluding the state directed payments, both sides of UHS' business saw revenue and pricing gains that Filton acknowledged are likely above sustainable levels.
Within the company’s acute care segment, which includes 29 hospitals, UHS outlined a 12.8% jump in same-facility net revenues. While part of that came from a 2% year-over-year increase in same-facility adjusted admissions and a rise in adjusted patient days of 0.4%, much of the spike stemmed from a 9.8% increase in same-facility net revenue per adjusted admission and an 11.5% increase in same-facility net revenue per adjusted patient stay.
"Our solid acute care revenues combined with effective expense controls resulted in a 190 basis point increase year over year in same-facility EBITDA margin to 15.8%, after excluding the prior period impact of the District of Columbia Supplemental Benefit," Filton said.
Filton noted that some of the soft outpatient surgical volumes UHS had been dealing with in recent quarters have begun to recover, and that case mix increased but was "not a big driver of improvement—maybe 30 basis points."
In its behavioral health segment, which has 345 inpatient facilities, same-facility net revenues rose by 9.3%. The volume and revenue gains here were less pronounced than in the acute segment, with a 0.5% increase in adjusted admissions, a 1.3% rise in adjusted patient days, net revenue per adjusted admission rose by 8.8% and net revenue per adjusted patient day growing by 7.9% (all on a same-facility basis).
"We expect further volume improvements during the fourth quarter, although we now believe a reasonable expectation for same-facility adjusted patient day growth should be in the 2% to 3% range, with our near-term expectations at the lower end of this range," Filton said.
Analysts noted that UHS has posted relatively high labor spending growth on a same-store basis within the behavioral business. Filton acknowledged the rise was UHS hiring to address labor scarcity affecting "maybe a quarter to a third" of its behavioral hospitals. He also pointed to the company's opportunity to capture more behavioral and acute business through a strengthened outpatient network, with new facilities requiring more staff.
"I think the increase that you're alluding to in salaries and wages is something that's preparing us to be able to treat and absorb more patient volume," he said in response to the analyst's question.
Across 2025’s first nine months, UHS has so far reported more than $1 billion of net income, or $16.07 per diluted share, and $12.9 billion of net revenues. Those are year-over-year increases of 28.9% and 9.9%, respectively.
UHS noted that it has repurchased more than 1.3 million shares at an aggregate cost of about $234.3 million, for a year-to-date total of nearly 3.2 million shares for $565.8 million, and that its board on Oct. 27 authorized a $1.5 billion increase to its stock repurchase program.
Filton said the company expects to continue prioritizing the buybacks "in the absence of compelling acquisition opportunities over the near term," and somewhat pushed back on an analyst who noted room for UHS to increase its debt leverage with more capital expenditure investments.
"I think we've intentionally kept our leverage ratios low in an environment where there has been some level of uncertainty at the policy, regulatory, legislative level," he said. "I think that's been a prudent approach. As I think we start to experience, and hopefully we do start to experience more certainty, you know, we may be more comfortable increasing those leverage levels."
Editor's note: This story has been updated after publication with additional quotes and commentary from UHS' Q3 earnings call.