Universal Health Services (UHS) has raised its revenue forecast for the fiscal year 2025 to between $17.3 billion and $17.4 billion, following a robust third-quarter performance that saw revenues climb by 13.4% year-over-year to $4.5 billion. This revised outlook reflects a significant contribution from Washington D.C.’s newly approved Medicaid supplemental payment program, which added approximately $90 million to UHS’s revenues, alongside growth in acute care volumes.
In the third quarter, UHS reported a net income of $373 million, marking an impressive increase of more than 44% compared to the same period last year. Growth in the acute care division surpassed that of its behavioral health segment, a trend that has been consistent throughout the year. Same-facility adjusted admissions in acute services grew by 2%, while admissions in behavioral services increased by only 0.5%.
Challenges and Opportunities Ahead
Despite the positive overall financial results, UHS continues to face challenges, particularly related to its new Cedar Hill Regional Medical Center in Washington, D.C. The facility incurred a loss of $25 million in the third quarter, primarily due to its slow ramp-up timeline. However, UHS President and CEO Marc Miller announced during a call with investors that the facility received Medicare certification in September, allowing it to access federal funding and potentially reach break-even status by the end of the year.
Looking ahead, UHS is set to open the Alan B. Miller Medical Center in Palm Beach Gardens, Florida, this coming spring. Currently, the health system operates 29 inpatient acute hospitals, which are critical to its revenue generation.
UHS is also addressing its behavioral health division, which has been lagging in growth. Executives aim for a 2% to 3% increase in adjusted patient days for 2025. In the latest commentary, CFO Steve Filton expressed optimism that this target is now achievable, despite previous concerns about meeting demand for outpatient care. UHS’s behavioral health portfolio has historically focused heavily on inpatient services, operating 345 inpatient facilities against 100 outpatient access points.
To adapt to shifting patient needs, UHS plans to open 10 new clinics this year that will not carry inpatient hospital branding. This strategic shift aims to attract patients who prefer receiving initial behavioral healthcare in a more accessible outpatient setting, rather than in a hospital environment.
Financial Landscape and Market Pressures
UHS executives also discussed potential headwinds arising from upcoming changes to Medicaid state supplemental payment programs. These programs help providers manage the disparity between Medicaid reimbursement rates and actual care costs. The approval of D.C.’s state-directed program provided a notable financial boost in the third quarter, but UHS anticipates a reduction of between $420 million and $470 million in state-directed payments by 2032 due to caps imposed by the One Big Beautiful Bill Act.
Additionally, UHS could face significant financial pressures in its Texas and Florida markets. The potential expiration of enhanced COVID-era Affordable Care Act subsidies could leave millions uninsured and result in a revenue loss of $50 million to $100 million annually if Congress does not act. The ongoing funding battle between Democrats and Republicans has already caused disruptions, including a government shutdown earlier this month.
As UHS navigates these challenges, the health system is focused on optimizing its operations and expanding its services to ensure continued growth and improved patient care. The upcoming years will be crucial as UHS strives to meet its ambitious targets while adapting to the evolving healthcare landscape.
