Universal Health Services, Inc.

Ladies and gentlemen, thank you for standing by. I would now like to hand the conference over to your speaker today, Mr. Steve Filton. Thank you. Please go ahead, sir.

Thank you, Natalia. Good morning. Alan Miller, our CEO, is also joining us this morning. We welcome you to this review of universal health services results for the second quarter ended June 30, 2020. During the 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 sections on risk factors and forward-looking statements and risk factors in our Form 10-K for the year ended December 31, 2019, and our Form 10-Q for the quarter ended March 31, 2020. We would 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 $2.95 for the quarter. After adjusting for the impact of the items reflected on the supplemental schedule as included with the press release, our adjusted net income attributable to UHS per diluted share was $2.93 for the quarter ended June 30, 2020. As of June 30, 2020, we have received approximately $320 million of funds from various governmental stimulus programs, most notably the CARES Act. Included in our reported income for the second quarter is approximately $218 million of net revenues recorded in connection with these stimulus programs. Approximately 157 million of these revenues were attributable to our acute care facilities, and 61 million were attributable to our behavioral health facilities. In addition, during the second quarter of 2020, we received approximately 375 million of Medicare accelerated payment, which had no impact on our earnings during the quarter. As previously discussed in our first quarter conference call, Beginning in mid-March, the incidence of COVID-19 and suspected COVID cases increased in our acute facilities, and correspondingly, the volume of non-COVID patients declined significantly. These declines in patient volumes generally continued into the first half of April. Beginning with the second half of April, our admission and patient day metrics began to rebound. By the first half of May, local authorities had lifted restrictions on elective surgeries and other procedures, and those volumes began to rebound sharply as well. ER visits, while also gradually improving, have been the volume unit slowest to recover. But the increased acuity of our patient population suggests, at least in part, that the more severely ill patients who tended to return to the emergency rooms and the less acute patients were the ones continuing to avoid that level of care. In late June and continuing into July, most of our hospitals experienced the second wave of COVID cases, although to date, this second wave has not been accompanied by the same magnitude of non-COVID case declines that we experienced in the first wave in the March-April timeframe. Generally, our hospitals were better able to prepare for this second wave with greater ICU and isolation room capacity, as well as more ample inventories of PPE. Obtaining timely COVID test results as demand has increased does remain a challenge in certain instances. The behavioral health segment experienced a similar pattern of volume changes, with patient day metrics hitting a trough in early April and incrementally recovering for the rest of the quarter. Despite a number of headwinds, including a decline in referrals from acute care emergency rooms and from schools, which mostly remain closed, and from travel restrictions on potential patients, behavioral patient days returned to close to pre-COVID levels by mid-June, prior to the late-June second COVID wave. As we noted in the first quarter, our paramount concern throughout the COVID crisis has been taking all the necessary steps to keep our patients and employees as safe as possible. We did, however, also recognize the severe financial stresses created by the COVID crisis, and 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. Our approach in this regard, especially as it relates to labor expenses, has been a balanced one. reflecting our expectation that the dramatic declines in volumes would, in many instances, be temporary in nature, and also recognizing the severe strains that the crisis has created on our employee caregivers. Two, a reduction in planned capital spending. This effort was somewhat transparent in the second quarter as most of our existing and committed projects continued on schedule, but we expect the pace of spending to slow in the second half of the year, as newer projects are repriced and possibly postponed. And three, a suspension of share repurchase and quarterly dividend program. As a result of these actions, as well as the funds received during the second quarter in connection with the governmental stimulus programs and Medicare accelerated payment, the company had close to $1.4 billion of aggregate available borrowing capacity as of June 30, 2020, along with almost $600 million of short-term cash investments on the balance sheet. While we are encouraged by the improving volume trends in the quarter, we acknowledge the potential impact COVID-19 could have on our future operations and financial results. And since the nature of these future COVID developments are largely beyond our ability to control, we have continued to withhold any further earnings guidance for the balance of 2020. Alan and I would be pleased to answer your questions at this time. Natalia, whenever you're ready.

Ladies and gentlemen, at this time, if you would like to ask a question, please press star, then the number 1 on your telephone keypad. Again, that is star 1 to ask a question. To withdraw your question, press the pound key. Please stand by while we compile the Q&A roster. Your first question is from the line of Andrew Mock with Barclays.