Universal Health Services, Inc.

Good day and thank you for standing by. Welcome to the UHS third quarter 2021 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during this session, you will need to press star one on your telephone. Please be advised that today's conference may be recorded. If you require any further assistance, please press star then zero. I would now like to hand the conference over to your host today, Steve Fulton. Please go ahead.

Thank you, Michelle. Good morning. Mark Miller is also joining us this morning. We both welcome you to this review of universal health services results for the third quarter ended September 30, 2021. During the conference call, we'll 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, 2020, and our Form 10-Q for the quarter ended June 30, 2021. 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 $2.60 for the third quarter of 2021. 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 $2.67 for the quarter ended September 30, 2021. For most of the third quarter, we experienced an escalation in the number of COVID-19 patients being treated in our hospitals. In our acute segment, this COVID surge resulted in measurably increased revenues due to the higher acuity and incremental government reimbursement associated with COVID patients. Unlike previous surges, however, non-COVID volumes, including emergency room visits and elective and or scheduled procedures, were not crowded out and, in fact, generally were running at or near pre-pandemic levels. As a result, acute care revenues in the quarter were higher and managed to offset the premium labor costs and increased supply expense associated with the COVID patients, leading to an acute care EBITDA result in the quarter that was above our internal forecast. At the same time, the most recent surge created significant challenges for our behavioral segment. Volumes were pressured throughout the quarter due to the capping of bed capacity, in some cases to properly isolate COVID patients, and in other cases because of a shortage of appropriate patient care personnel. Generally, behavioral patient days during the quarter ran 4% to 6% below comparable pre-pandemic levels. The effect of the reduced volumes combined with higher labor costs led to a behavioral EBITDA result in the quarter measurably below our internal forecast. Our cash generated from operating activities was $442 million during the third quarter of 2021 as compared to $767 million during the same period in 2020. included in our cash generated from operating activities during last year's third quarter was approximately $400 million of additional funds received in connection with various governmental stimulus programs, most notably the CARES Act. We spent $667 million on capital expenditures during the first nine months of 2021. At September 30, 2021, our ratio of debt to total capitalization declined to 37.4%, as compared to 37.7% at September 30, 2020. During the third quarter of 2021, we opened 157 new beds in our Las Vegas market, including 69 new beds at Henderson Hospital. We acquired 88 new beds through the acquisition of the Las Vegas Specialty Hospital, which will serve orthopedic and surgical patients. And we acquired Elite Medical Center, a micro hospital offering emergency and inpatient care adjacent to the Las Vegas Strip. In addition, we continue to grow our freestanding emergency department footprint with 19 sites expected to be operational by the end of the year in 2021, and an additional five approved and under construction, which are expected to open in 2022. Construction also continues on Northern Nevada Sierra Hospital, a 170-bed acute care hospital in Reno, Nevada, which is expected to open in March of 2022. Additionally, during the third quarter of 2021, we continued to be an active acquirer of our own shares, based in large part on our view that the underlying patient demand for our services, and particularly in our behavioral segment, remains fundamentally strong. and that our ability to more fully to meet that demand will incrementally improve as COVID volumes continue to decline. During the third quarter, we repurchased approximately 2.78 million shares at an aggregate cost of $419 million. Since the inception of the current share repurchase program in 2014, we have repurchased more than 20% of the company's outstanding shares. We'll be pleased to answer your questions at this time.

Thank you. If you have a question at this time, please press star then 1 on your touchtone telephone. If your question has been answered or you wish to remove yourself from the queue, please press the pound key. And our first question comes from the line of Kevin Fishbeck with Bank of America. Your line is open. Please go ahead.