KING OF PRUSSIA, Pa., Feb. 27, 2014 /PRNewswire/ -- Universal Health Services, Inc. (NYSE: UHS) announced today that its reported net income attributable to UHS was $124.5 million, or $1.24 per diluted share, during the fourth quarter of 2013 as compared to $135.5 million, or $1.39 per diluted share, during the comparable quarter of 2012.  Net revenues increased 2.0% to $1.80 billion during the fourth quarter of 2013 as compared to $1.76 billion during the fourth quarter of 2012. 

Reported net income attributable to UHS was $510.7 million, or $5.14 per diluted share, during the year ended December 31, 2013 as compared to $443.4 million, or $4.53 per diluted share, during the 2012 full year period.  Net revenues increased 4.6% to $7.28 billion during the twelve-month period of 2013 as compared to $6.96 billion during the comparable 2012 twelve-month period. 

Consolidated Results of Operations, As Adjusted – Three-month periods ended December 31, 2013 and 2012:

For the three-month period ended December 31, 2013, our adjusted net income attributable to UHS, as calculated on the attached Schedule of Non-GAAP Supplemental Consolidated Statements of Income Information ("Supplemental Schedule"), was $103.6 million, or $1.03 per diluted share, as compared to $98.0 million, or $1.00 per diluted share, during the fourth quarter of 2012.     

As reflected on the Supplemental Schedule, included in our reported results during the fourth quarter of 2013 was an aggregate net favorable after-tax impact of approximately $20.9 million, or $.21 per diluted share, consisting of: (i) a favorable after-tax impact of $9.2 million, or $.09 per diluted share, resulting from a reduction to our professional and general liability self-insurance reserves relating to years prior to 2013, based upon a reserve analysis, and; (ii) a net favorable after-tax impact of approximately $11.8 million, or $.12 per diluted share, related to the incentive income ($33.1 million) and expenses ($14.2 million excluding income taxes) recorded in connection with the implementation of electronic health records ("EHR") applications at our acute care hospitals (as discussed below in Accounting for HITECH Act incentive income and EHR expenses). 

As reflected on the Supplemental Schedule, included in our reported results during the fourth quarter of 2012, was an aggregate net favorable after-tax impact of $37.4 million, or $.39 per diluted share, consisting of: (i) a favorable after-tax impact of approximately $15.5 million, or $.16 per diluted share, resulting from a reduction to our professional and general liability self-insurance reserves relating to years prior to 2012, based upon a reserve analysis; (ii) a favorable after-tax impact of approximately $16.4 million, or $.17 per diluted share, resulting from the gain realized on the sale of Auburn Regional Medical Center which was divested in October, 2012, and; (iii) a net favorable after-tax impact of approximately $5.5 million, or $.06 per diluted share, related to the incentive income ($17.5 million) and expenses ($8.7 million excluding income taxes) recorded in connection with the implementation of EHR applications at our acute care hospitals.

Consolidated Results of Operations, As Adjusted – Twelve-month periods ended December 31, 2013 and 2012:

For the twelve-month period ended December 31, 2013, our adjusted net income attributable to UHS, as calculated on the attached Supplemental Schedule, was $452.1 million, or $4.55 per diluted share, as compared to $406.4 million, or $4.15 per diluted share, during the twelve-month period of 2012.

As reflected on the Supplemental Schedule, included in our reported results during the full year of 2013 was an aggregate net favorable after-tax impact of approximately $58.6 million, or $.59 per diluted share, consisting of: (i) a favorable after-tax impact of $47.0 million, or $.47 per diluted share, resulting from a reduction to our professional and general liability self-insurance reserves relating to years prior to 2013, based upon reserve analyses, and; (ii) a net favorable after-tax impact of approximately $11.6 million, or $.12 per diluted share, related to the incentive income ($61.0 million) and expenses ($42.4 million excluding income taxes) recorded in connection with the implementation of EHR applications at our acute care hospitals.

Included in our reported results during the year ended December 31, 2012 was a net favorable after-tax impact of approximately $1.9 million, or $.02 per diluted share, recorded in connection with the implementation of EHR applications, as well as a net aggregate favorable after-tax impact of $35.2 million, or $.36 per diluted share, consisting of the following: (i) a favorable after-tax impact of approximately $15.5 million resulting from a reduction to our professional and general liability self-insurance reserves relating to years prior to 2012, based upon a reserve analysis; (ii)  a favorable after-tax impact of approximately $16.4 million resulting from the gain realized on the sale of Auburn Regional Medical Center which was divested in October, 2012; (iii) an after-tax charge of $18.1 million resulting from the write-off of deferred financing costs related to the portion of our Term Loan B credit facility that was extinguished during the third quarter of 2012; (iv) a favorable after-tax impact of $18.8 million resulting from an industry-wide settlement with the United States Department of Health and Human Services, the Secretary of Health and Human Services, and the Centers for Medicare and Medicaid Services, related to underpayments of Medicare inpatient prospective payments during a number of years prior to 2012; (v) a favorable after-tax impact of $4.3 million representing the 2011 portion of the net Medicaid supplemental reimbursements recorded pursuant to the Oklahoma Supplemental Hospital Offset Payment Program; (vi) an aggregate unfavorable after-tax impact of $5.1 million resulting from the revised Supplemental Security Income ratios utilized for calculating Medicare disproportionate share hospital reimbursements for federal fiscal years 2006 through 2009 ($2.4 million unfavorable after-tax impact), and the write-off of receivables related to revenues recorded during 2011 at two of our acute care hospitals located in Florida resulting from reductions in certain county reimbursements due to reductions in federal matching Inter-Governmental Transfer funds ($2.7 million unfavorable after-tax impact), and; (vii) a net favorable after-tax impact of $3.4 million consisting primarily of the 2011 portion of net Medicaid supplemental revenues recorded during the second quarter of 2012. 

Acute Care Services – Three and twelve-month periods ended December 31, 2013 and 2012:

During the fourth quarter of 2013, at our acute care hospitals owned during both periods ("same facility basis"), adjusted admissions (adjusted for outpatient activity) were unchanged and adjusted patient days increased 3.6%, as compared to the fourth quarter of 2012. Net revenues at these facilities increased 1.1% during the fourth quarter of 2013 as compared to the comparable quarter of the prior year. At these facilities, net revenue per adjusted admission increased 2.1% while net revenue per adjusted patient day decreased 1.5% during the fourth quarter of 2013 as compared to the comparable quarter of the prior year. On a same facility basis, the operating margin at our acute care hospitals was 14.1% during the fourth quarter of 2013 as compared to 14.4% during the fourth quarter of 2012. We define operating margin as net revenues less salaries, wages and benefits, other operating expenses and supplies expense (excluding the impact of the items mentioned above and excluding the EHR impact, as indicated on the Supplemental Schedule).

During the year ended December 31, 2013, at our acute care hospitals on a same facility basis, adjusted admissions increased 1.0% and adjusted patient days increased 2.2%, as compared to the year ended December 31, 2012. Net revenues at these facilities increased 3.8% during the full year of 2013 as compared to 2012.  At these facilities, net revenue per adjusted admission increased 2.7% while net revenue per adjusted patient day increased 1.5% during the full year of 2013, as compared to 2012. The operating margin at our acute care hospitals owned during both years decreased to 14.8% during 2013, as compared to 15.8% during 2012.

We provide care to patients who meet certain financial or economic criteria without charge or at amounts substantially less than our established rates. Because we do not pursue collection of amounts determined to qualify as charity care, they are not reported in net revenues or in accounts receivable, net. Our acute care hospitals provided charity care and uninsured discounts, based on charges at established rates, amounting to approximately $234 million and $206 million during the three-month periods ended December 31, 2013 and 2012, respectively, and approximately $999 million and $1.05 billion during the years ended December 31, 2013 and 2012, respectively. In addition, the provision for doubtful accounts at our acute care hospitals increased to approximately $291 million during the fourth quarter of 2013 as compared to approximately $179 million during the fourth quarter of 2012 and increased to approximately $1.02 billion during the full year of 2013 as compared to approximately $635 million during the year ended December 31, 2012. 

Behavioral Health Care Services – Three and twelve-month periods ended December 31, 2013 and 2012:

During the fourth quarter of 2013, at our behavioral health care facilities on a same facility basis, adjusted admissions increased 2.4% while adjusted patient days increased 0.8%, as compared to the fourth quarter of 2012. Net revenues at these facilities increased 4.0% during the fourth quarter of 2013, as compared to the comparable quarter in 2012. At these facilities, net revenue per adjusted admission increased 1.5% while net revenue per adjusted patient day increased 3.2% during the fourth quarter of 2013 over the comparable quarter in 2012. The operating margin at our behavioral health care facilities owned during both periods was 27.9% during the fourth quarter of 2013, as compared to 27.8% during the fourth quarter of 2012. 

During the year ended December 31, 2013, at our behavioral health care facilities on a same facility basis, adjusted admissions increased 3.5% while adjusted patient days increased 1.0%, as compared to the full year of 2012. Net revenues at these facilities increased 3.2% during the twelve-months of 2013, as compared to the comparable twelve-month period of 2012. At these facilities, net revenue per adjusted admission decreased 0.3% while net revenue per adjusted patient day increased 2.2% during the full year of 2013 over 2012. The operating margin at our behavioral health care facilities owned during both years increased to 28.1% during 2013 as compared to 27.8% during 2012. 

Accounting for HITECH Act incentive income and EHR expenses:

The health information technology provisions of the American Recovery and Reinvestment Act (referred to as the "HITECH Act") established criteria related to the "meaningful use" of electronic health records ("EHR") for acute care hospitals and established requirements for the Medicare and Medicaid EHR payment incentive programs.   

During 2011, we began implementing EHR applications at certain of our acute care hospitals and continued to do so, on a hospital-by-hospital basis, until completion which occurred at the end of June, 2013. Our acute care hospitals are eligible for Medicare and Medicaid EHR incentive payments upon implementation of the EHR application, once they have demonstrated meaningful use of certified EHR technology for the applicable stage or have completed attestations to their adoption or implementation of certified EHR technology.  With the exception of the newly constructed and recently opened Temecula Valley Hospital (as discussed below), we believe that all of our acute care hospitals have met the stage 1, year one meaningful use criteria.   

As reflected on the Supplemental Schedule, in connection with the implementation of EHR applications, our consolidated results of operations include the net favorable after-tax impact of $11.8 million ($18.9 million pre-tax), or $.12 per diluted share, during the fourth quarter of 2013 and $5.5 million ($8.9 million pre-tax), or $.06 per diluted share, during the fourth quarter of 2012. 

In connection with the implementation of EHR applications, our consolidated results of operations include the net favorable after-tax impact of $11.6 million ($18.7 million pre-tax), or $.12 per diluted share, during the year ended December 31, 2013 and $1.9 million ($3.0 million pre-tax), or $.02 per diluted share, during the prior year.   

During 2014, based upon our anticipated "meaningful use" qualifications, we expect to record approximately $27 million of EHR incentive income and approximately $37 million of EHR-related depreciation and amortization expense resulting in a net unfavorable after-tax (and after income attributable to noncontrolling interest) impact of approximately $5 million, or $.05 per diluted share.       

2014 Full Year Guidance:

Our estimated range of net income attributable to UHS for the year ended December 31, 2014, is $4.80 to $5.10 per diluted share.  This guidance range represents an increase of approximately 6% to 12% over the adjusted net income attributable to UHS of $4.55 per diluted share for the year ended December 31, 2013, as calculated on the attached supplemental schedule.  This range includes an estimated increase of approximately 3% to 7% (or approximately $0.15 to $0.30 per diluted share) related to the Patient Protection and Affordable Care Act. The range excludes the above-mentioned unfavorable EHR impact of $.05 per diluted share.  

During 2014, our net revenues are estimated to be approximately $7.89 billion to $7.94 billion representing an increase of approximately 8% to 9% over our 2013 net revenues.    

This guidance range excludes the impact of items, if applicable, that are nonrecurring or non-operational in nature including items such as, but not limited to, gains on sales of assets and businesses, reserves for settlements, legal judgments and lawsuits and other material amounts that may be reflected in our financial statements that relate to prior periods. It is also subject to certain conditions including those as set forth below in General Information, Forward-Looking Statements and Risk Factors and Non-GAAP Financial Measures.

Opening of the newly constructed Temecula Valley Hospital:

In October, 2013, we opened the newly constructed Temecula Valley Hospital, an acute care facility located in Temecula, California.  With 140 private patient rooms, Temecula Valley Hospital offers emergency care, advanced cardiac and stroke care, orthopedics and general medical care, along with surgical specialties.  The new hospital is our fourth located in Riverside County, which is one of the fastest-growing counties in the United States. 

Conference call information:          

We will hold a conference call for investors and analysts at 9:00 a.m. eastern time on February 28, 2014. The dial-in number is 1-877-648-7971. 

A live broadcast of the conference call will be available on our website at www.uhsinc.com.  A replay of the call will follow shortly after conclusion of the live call and will be available for one full year.

General Information, Forward-Looking Statements and Risk Factors and Non-GAAP Financial Measures:

Universal Health Services, Inc. ("UHS") is one of the nation's largest hospital companies, operating acute care and behavioral health hospitals and ambulatory centers nationwide and in Puerto Rico and the U.S. Virgin Islands.  It acts as the advisor to Universal Health Realty Income Trust, a real estate investment trust (NYSE: UHT).  For additional information on the Company, visit our web site: http://www.uhsinc.com.

This press release contains forward-looking statements based on current management expectations.  Numerous factors, including those disclosed herein, those related to healthcare industry trends and those detailed in our filings with the Securities and Exchange Commission (as set forth in Item 1A-Risk Factors and in Item 7-Forward-Looking Statements and Risk Factors in our Form 10-K for the year ended December 31, 2013, may cause the results to differ materially from those anticipated in the forward-looking statements.  The operating pressures that we continue to experience in many of our acute care markets has increased the volatility of our financial results making estimation of future results more challenging.  Many of the factors that will determine our future results are beyond our capability to control or predict. These statements are subject to risks and uncertainties and therefore actual results may differ materially.  Readers should not place undue reliance on such forward-looking statements which reflect management's view only as of the date hereof.  We undertake no obligation to revise or update any forward-looking statements, or to make any other forward-looking statements, whether as a result of new information, future events or otherwise.

As mentioned above, our acute care hospitals are eligible for Medicare and Medicaid EHR incentive payments upon implementation of the EHR application, once they have demonstrated meaningful use of certified EHR technology for the applicable stage or have completed attestations to their adoption or implementation of certified EHR technology.  However, there may be timing differences in the recognition of the incentive income and expenses recorded in connection with the implementation of the EHR application which may cause material period-to-period changes in our future results of operations. Hospitals that do not qualify as a meaningful user of EHR by 2015 are subject to a reduced market basket update to the inpatient prospective payment system standardized amount in 2015 and each subsequent fiscal year. Although we believe that our acute care hospitals will be in compliance with the EHR standards by 2015, there can be no assurance that all of our facilities will be in compliance and therefore not subject to the penalty provision of the HITECH Act.

We believe that operating income, operating margin, adjusted net income attributable to UHS, adjusted net income attributable to UHS per diluted share and earnings before interest, taxes, depreciation and amortization ("EBITDA"), which are non-GAAP financial measures ("GAAP" is Generally Accepted Accounting Principles in the United States of America), are helpful to our investors as measures of our operating performance. In addition, we believe that, when applicable, comparing and discussing our financial results based on these measures, as calculated, is helpful to our investors since it neutralizes the effect in each year of material items that are nonrecurring or non-operational in nature including items such as, but not limited to, costs related to extinguishment of debt, gains on sales of assets and businesses, reserves for settlements, legal judgments and lawsuits and other amounts that may be reflected in the current or prior year financial statements that relate to prior periods.  To obtain a complete understanding of our financial performance these measures should be examined in connection with net income, determined in accordance with GAAP, as presented in the condensed consolidated financial statements and notes thereto in this report or in our other filings with the Securities and Exchange Commission including our Report on Form 10-K for the year ended December 31, 2013. Since the items included or excluded from these measures are significant components in understanding and assessing financial performance under GAAP, these measures should not be considered to be alternatives to net income as a measure of our operating performance or profitability.  Since these measures, as presented, are not determined in accordance with GAAP and are thus susceptible to varying calculations, they may not be comparable to other similarly titled measures of other companies.  Investors are encouraged to use GAAP measures when evaluating our financial performance.