Universal Health Services, Inc.

Ladies and gentlemen, thank you for standing by and welcome to the Universal Health Services first quarter 2020 earnings conference call. All lines are currently on a listen only mode. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question at that time, you may do so by pressing star and the number one on your telephone keypad. It is now my pleasure to hand the conference over to Mr. Steven Stilton. Please go ahead, sir.

Thank you. Good morning. Alan Miller, our CEO, and Mark Miller, our president, are also joining us on the line this morning. We welcome you to this review of universal health services results for the first quarter ended March 31st, 2020. During this conference call, we will be using words such as believes, expects, anticipates, estimates, and similar words that represent forecasts, projections, and forward-looking statements. For anyone not familiar with the risks and uncertainties inherent in these forward-looking statements, I recommend a careful reading of the section on risk factors and forward-looking statements and risk factors in our Form 10-K for the year ended December 31, 2019. We'd like to highlight just a couple of developments and business trends before opening the call up to questions. As discussed in our press release last night, the company reported net income attributable to UHS per diluted share of $1.64 for the quarter. After adjusting for the impact of the items reflected on the sub-annual schedule as included with the press release, most notably a $7.4 million or $0.08 per diluted share, unrealized loss on shares of certain marketable securities held for investment, our adjusted net income attributable to UHS per diluted share was $1.73 for the quarter ended March 31, 2020. During the first two and a half months of the quarter, volumes in our acute care segment were tracking modestly ahead of the prior year. In the last two weeks of March, however, the incidence of COVID-19 and suspected COVID cases increased dramatically in our facilities, and correspondingly, the volume of non-COVID patients declined. Consequently, we experienced a 29% decline in admissions in that two-week period at our acute care hospitals. the significant declines in patient volumes at our acute care hospitals continued into April. The decline in admissions during the second half of March as well as even more precipitous declines in emergency room visits and elective-slash-scheduled procedures resulted in a significant decline in income during the first quarter. The behavioral health segment was similarly tracking ahead of the prior year volumes until mid-March, when admissions declined 25% during the last two weeks of the quarter, resulting in a significant decline in operating income during that period. The significant declines in patient volumes experienced at our behavioral health facilities have also continued into April. In addition to the volume declines, both business segments had to deal with other material operational challenges, including constraints on COVID-related testing and a lag on results, as well as a shortage of personal protective equipment. Our paramount concern when the COVID crisis first developed was taking all the necessary steps to keep our patients and employees as safe as possible. We did recognize the severe financial stresses created by the COVID crisis, and by the end of March and the beginning of April, we undertook a series of steps to mitigate the dramatic revenue declines and to protect our capital structure, including one, cost reduction initiatives across all of our expense categories, Two, a significant reduction in planned capex spending. And three, a suspension of our share repurchase and quarterly dividend programs. Given the uncertainties in projecting when shelter-in-place directives will be lifted and when hospital volumes will return to more normalized levels, we have withdrawn our earnings guidance for 2020. Congress has recognized the severe financial strains being placed on hospitals, and it has passed a number of coronavirus bills specifically providing relief to the hospital industry. UHS's hospitals have received funding grants pursuant to the CARES Act, which are subject to meeting certain qualifications aggregating approximately $195 million to date. In addition, we have received accelerated Medicare payments totaling $375 million thus far, and we're hoping to receive additional Medicare accelerated payments in the near future. Before giving effect to receipt of these additional funds as of March 31, 2020, we had approximately $1.2 billion in unborrowed capacity under existing loan facilities to provide insulation against the decline in operating cash flow. We'd be pleased to answer your questions at this time.

At this time, if you'd like to ask an audio question, you may do so by pressing star and the number one on your telephone keypad. Again, that is star one. We'll pause for just a moment. The first question will come from the line of Steve Valliquette with Barclays.