KING OF PRUSSIA, Pa., Oct. 27, 2015 /PRNewswire/ -- Universal Health Services, Inc. (NYSE: UHS) announced today that its reported net income attributable to UHS was $150.3 million, or $1.48 per diluted share, during the third quarter of 2015 as compared to $82.8 million, or $.82 per diluted share, during the comparable quarter of 2014.  Net revenues increased 9.3% to $2.23 billion during the third quarter of 2015 as compared to $2.04 billion during the third quarter of 2014.

For the three-month period ended September 30, 2015, our adjusted net income attributable to UHS, as calculated on the attached Schedule of Non-GAAP Supplemental Consolidated Statements of Income Information ("Supplemental Schedule"), increased approximately 13% to $155.3 million, or $1.53 per diluted share, as compared to $137.5 million, or $1.36 per diluted share, during the third quarter of 2014.

As reflected on the Supplemental Schedule, included in our reported results during the third quarters of 2015 and 2014 are net unfavorable after-tax impacts of approximately $5.0 million, or $.05 per diluted share, during the third quarter of 2015 and $4.5 million, or $.04 per diluted share, during the third quarter of 2014, related to the incentive income and depreciation and amortization expense recorded in connection with the implementation of electronic health records ("EHR") applications at our acute care hospitals.  In addition, included in our reported results during the three-month period ended September 30, 2014 was an aggregate after-tax charge of $50.2 million, or $.50 per diluted share, incurred in connection with a legal settlement ($27.6 million, or $.27 per diluted share) as well as the costs related to the extinguishment of debt in connection with financing transactions that occurred during the third quarter of 2014 ($22.6 million, or $.23 per diluted share).

Consolidated Results of Operations, As Reported and As Adjusted – Nine-month periods ended September 30, 2015 and 2014:

Reported net income attributable to UHS was $506.8 million, or $5.02 per diluted share, during the first nine months of 2015 as compared to $372.5 million, or $3.71 per diluted share, during the comparable period of 2014. Net revenues increased 11.6% to $6.73 billion during the first nine months of 2015 as compared to $6.03 billion during the comparable period of 2014. 

For the nine-month period ended September 30, 2015, our adjusted net income attributable to UHS, as calculated on the attached Supplemental Schedule, increased approximately 21% to $521.4 million, or $5.16 per diluted share, as compared to $429.8 million, or $4.28 per diluted share, during the first nine months of 2014.

As reflected on the Supplemental Schedule, included in our reported results during the first nine months of 2015 is a net unfavorable after-tax impact of approximately $14.6 million, or $.14 per diluted share, related to the incentive income and depreciation and amortization expense recorded in connection with the implementation of EHR applications at our acute care hospitals.  As reflected on the Supplemental Schedule, included in our reported results during the nine-month period ended September 30, 2014 was a net aggregate after-tax charge of $57.2 million, or $.57 per diluted share, consisting of: (i) an aggregate net unfavorable after-tax impact of approximately $13.3 million, or $.13 per diluted share, related to the incentive income and depreciation and amortization expense recorded in connection with the implementation of EHR applications; (ii) the above-mentioned aggregate after-tax charge of $50.2 million, or $.50 per diluted share, incurred in connection with a legal settlement and costs related to the extinguishment of debt that occurred during the third quarter of 2014, and; (iii) a favorable after-tax impact of $6.3 million, or $.06 per diluted share, resulting from a gain realized on the sale of a non-operating investment during the first quarter of 2014.  

Acute Care Services – Three and nine-month periods ended September 30, 2015 and 2014:

During the third quarter of 2015, at our acute care hospitals owned during both periods ("same facility basis"), adjusted admissions (adjusted for outpatient activity) increased 5.1% and adjusted patient days increased 5.6%, as compared to the third quarter of 2014. Net revenues at these facilities increased 7.2% during the third quarter of 2015 as compared to the comparable quarter of the prior year. At these facilities, net revenue per adjusted admission increased 3.0% while net revenue per adjusted patient day increased 2.6% during the third quarter of 2015 as compared to the comparable quarter of 2014. On a same facility basis, the operating margin at our acute care hospitals decreased to 15.4% during the third quarter of 2015 as compared to 17.1% during the third quarter of 2014. We define operating margin as net revenues less salaries, wages and benefits, other operating expenses and supplies expense (excluding the EHR impact, as indicated on the Supplemental Schedule).

During the first nine months of 2015, at our acute care hospitals on a same facility basis, adjusted admissions increased 5.5% and adjusted patient days increased 6.1%, as compared to the comparable period of 2014. Net revenues at these facilities increased 9.2% during the first nine months of 2015 as compared to the comparable period of the prior year. At these facilities, net revenue per adjusted admission increased 4.1% while net revenue per adjusted patient day increased 3.5% during the first nine months of 2015 as compared to the comparable period of 2014. On a same facility basis, the operating margin at our acute care hospitals increased to 18.9% during the first nine months of 2015 as compared to 18.3% during the comparable period of 2014.

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 gross charges, amounting to approximately $322 million and $266 million during the three-month periods ended September 30, 2015 and 2014, respectively, and $872 million and $852 million during the nine-month periods ended September 30, 2015 and 2014, respectively.  The provision for doubtful accounts at our acute care hospitals amounted to approximately $185 million and $129 million during the three-month periods ended September 30, 2015 and 2014, respectively, and $459 million and $460 million during the nine-month periods ended September 30, 2015 and 2014, respectively.   Our acute care hospitals experienced an increase in the aggregate of charity care, uninsured discounts and provision for doubtful accounts, as a percentage of gross charges, during the third quarter of 2015, as compared to the third quarter of 2014. During the first nine months of 2015, as compared to the comparable period of 2014, our acute care hospitals experienced a decrease in the aggregate of charity care, uninsured discounts and provision for doubtful accounts, as a percentage of gross charges.       

Behavioral Health Care Services – Three and nine-month periods ended September 30, 2015 and 2014:

During the third quarter of 2015, at our behavioral health care facilities on a same facility basis, adjusted admissions and adjusted patient days each increased 1.6% as compared to the third quarter of 2014. At these facilities, net revenue per adjusted admission and net revenue per adjusted patient day each increased 3.1% during the third quarter of 2015 over the comparable quarter in 2014. On a same facility basis, our behavioral health services' net revenues increased 5.0% during the third quarter of 2015, as compared to the comparable quarter in 2014, and the operating margins were 27.5% and 27.6% during the three-month periods ended September 30, 2015 and 2014, respectively.   

During the nine-month period ended September 30, 2015, at our behavioral health care facilities on a same facility basis, adjusted admissions increased 3.8% while adjusted patient days increased 1.5% compared to the comparable period of 2014. At these facilities, net revenue per adjusted admission increased 1.4% and net revenue per adjusted patient day increased 3.7% during the first nine months of 2015 over the comparable period of 2014. On a same facility basis, our behavioral health services' net revenues increased 5.5% during the first nine months of 2015, as compared to the comparable period of 2014, and the operating margins were 28.2% and 27.9% during the nine-month periods ended September 30, 2015 and 2014, respectively.

2015 Full Year Earnings Guidance Revision:

Based upon the operating trends and financial results experienced during the first nine months of 2015, our revised estimated range of adjusted net income attributable to UHS, for the year ended December 31, 2015, is $6.75 to $7.05 per diluted share. This revised guidance, which excludes the expected EHR impact for the year, maintains the lower end of the previously provided range of $6.75 to $7.15 per diluted share, and decreases the upper end of the range by approximately 1%.     

This guidance range also excludes the impact of future 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, costs related to extinguishment of debt, reserves for settlements, legal judgments and lawsuits, impairments of long-lived assets, impact of share repurchases 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.

Acquisitions in August and October of 2015:

As previously announced:

• In August, 2015, we acquired the stock of Alpha Hospitals Holdings Limited ("Alpha") consisting of four behavioral health care hospitals with 305 beds located in the U.K. The acquisition of the Alpha hospitals increases our behavioral health care presence in the U.K. to 21 hospitals consisting of approximately 1,100 beds.
• In October, 2015, we completed the acquisition of Foundations Recovery Network, LLC ("Foundations").  Through this acquisition, we have added 4 inpatient facilities consisting of 322 beds as well as 8 outpatient centers.  In addition, there are over 140 expansion beds in progress.  Foundations, one of the premier names in addiction treatment, is focused on treating adults with co-occurring addiction and mental health disorders through an evidence-based integrated treatment model in residential and outpatient settings.          

Share Repurchase Program:

During the third quarter of 2014, our Board of Directors authorized a stock repurchase program whereby, from time to time as conditions allow, we may spend up to $400 million to purchase shares of our Class B Common Stock on the open market or in negotiated private transactions.  In conjunction with this program, during the third quarter of 2015, we repurchased 543,380 shares at an aggregate cost of $72.0 million. Since inception of the program through September 30, 2015, we repurchased approximately 1.4 million shares at an aggregate cost of $166.4 million.             

Conference call information:

We will hold a conference call for investors and analysts at 9:00 a.m. eastern time on October 28, 2015. 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 be available following the 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 through its subsidiaries acute care hospitals, behavioral health facilities and ambulatory centers located throughout the United States, the United Kingdom, 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, 2014 and in Item 2-Forward Looking Statements and Risk Factors in our Form 10-Q for the quarterly period ended June 30, 2015), may cause the results to differ materially from those anticipated in the forward-looking statements.  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.

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, impairments of long-lived assets 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, 2014 and our Report on Form 10-Q for the quarterly period ended June 30, 2015. 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.

We incur health-care related taxes ("Provider Taxes") imposed by states in the form of a licensing fee, assessment or other mandatory payment which are related to: (i) healthcare items or services; (ii) the provision of, or the authority to provide, the health care items or services, or; (iii) the payment for the health care items or services.  Such Provider Taxes are subject to various federal regulations that limit the scope and amount of the taxes that can be levied by states in order to secure federal matching funds as part of their respective state Medicaid programs. We derive a related Medicaid reimbursement benefit from assessed Provider Taxes in the form of Medicaid claims based payment increases and/or lump sum Medicaid supplemental payments. Under these programs, including the impact of uncompensated care and upper payment limit programs, and the Texas Delivery System Reform Incentive program, we earned revenues (before Provider Tax assessments) of approximately $62 million and $53 million during the three-month periods ended September 30, 2015 and 2014, respectively, and $221 million and $180 million during the nine-month periods ended September 30, 2015 and 2014, respectively. These revenues were offset by assessments of $30 million and $21 million during the third quarters of 2015 and 2014, respectively, and $97 million and $71 million during the nine-month periods ended September 30, 2015 and 2014, respectively, which are recorded in other operating expenses on the attached Condensed Consolidated Statement of Income. Prior to 2015, these assessments were recorded as a reduction to our net revenues. Accordingly, to conform with current year presentation, these assessments were reclassified on our Condensed Consolidated Statement of Income for the three and nine-month periods ended September 30, 2014.    

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. Pursuant to regulations, 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. We believe that all of our acute care hospitals have met the applicable meaningful use criteria and therefore are not subject to a reduced market basked update to the inpatient prospective payment standardized amount in federal fiscal year 2015. Under the HITECH Act, hospitals must continue to meet the applicable meaningful use criteria in each fiscal year or they will be subject to a market basket update reduction in a subsequent fiscal year.