Universal Health Services, Inc.

Good day and thank you for standing by. Welcome to the Q2 2024 Universal Health Services 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 the session, you will need to press star 11 on your telephone. You will then hear an automated message advising that your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Steve Filton, Executive Vice President and CFO, please go ahead.

Good morning. Mark Miller is also joining us this morning. We welcome you to this review of Universal Health Services results for the second quarter ended June 30, 2024. During the conference call, we'll be using words such as believes, expects, anticipates, estimates, and similar words that represent forecast 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, 2023, and our Form 10-Q for the quarter ended March 31, 2024. 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 $4.26 for the second quarter of 2024. 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 $4.31 for the quarter ended June 30, 2024. Our acute hospitals experienced a moderation of the demand for their services in the second quarter, with adjusted admissions increasing 3.4% year over year, and surgical growth flattening out. Overall, revenue growth was still a solid 6.6%. Meanwhile, expenses were well controlled. Specifically, the amount of premium pay in the second quarter was $61 million, reflecting a 15% to 20% decline from the prior year quarter. On a same facility basis, EBITDA at our acute care hospitals increased 37% during the second quarter of 2024 as compared to the comparable prior year quarter. And the increase was 20% if you exclude the impact of the incremental Medicaid supplemental payments in Nevada. During the second quarter, same facility revenues at our behavioral health hospitals increased by 11%, primarily driven by a 9.3% increase in revenue per adjusted patient day. Even after adjusting for Medicaid supplemental payments not included in our original 2024 guidance, same facility revenues increased by 7.2% and same facility EBITDA for our behavioral health hospitals increased 13% in the second quarter as compared to the comparable prior year period. Our cash generated from operating activities increased by $422 million to $1.1 billion during the first six months of 2024 as compared to $654 million during the same period in 2023. In the first half of 2024, we spent $450 million on capital expenditures and acquired 1.1 million of our own shares at a total cost of approximately $195 million. Since 2019, we have repurchased approximately 30% of the company's outstanding shares. As of June 30, 2024, we had $1 billion of aggregate available borrowing capacity pursuant to our $1.2 billion revolving credit facility. In our acute care segment, we continue to develop additional inpatient and ambulatory care capacity. We currently have 27 operational freestanding emergency departments as well as 12 more which have been approved and are in various stages of development. Also, construction continues on our de novo acute care hospitals consisting of the 150-bed West Henderson Hospital in Las Vegas, Nevada, which is expected to open late this year, the 136-bed Cedar Hill Regional Medical Center in Washington, D.C., which is expected to open in the spring of 2025, and the 150-bed Allen B. Miller Medical Center in Palm Beach Gardens, Florida, which is expected to open in the spring of 2026. In our behavioral health segment, we recently opened the 128-bed River Vista Behavioral Hospital in Madera, California, and we are developing the 96-bed Southridge Behavioral Hospital in West Michigan, a joint venture with Trinity Health Michigan, which is expected to open later this year. Now turn the call over to Mark Miller, President and CEO, for closing comments.

Thanks, Steve. We're pleased with our second quarter results as both our business segments continue to make operational improvements. As we anticipated, acute care volumes have moderated somewhat and are gradually going to resemble the patterns we experienced prior to the pandemic. The increase in operating income in comparison to last year's second quarter for our acute care hospitals is a further step towards a more extended margin recovery we hope to sustain for the next several periods. In our acute segment, physician expense, which was a significant headwind in 2023, has stabilized at approximately 7.5% revenue. Based on the generally favorable operating trends in the first half of the year, we are increasing the midpoint of our 2024 EPS guidance by 17% to $15.80 per diluted share from $13.50 per diluted share previously. New supplemental programs being developed in Tennessee and Washington, D.C., which are not yet fully approved, are not included in our revised guidance. Lastly, as announced in yesterday's earnings release, our board of directors has authorized a $1 billion increase to our stock repurchase program, thereby increasing the current aggregate repurchase authorization to $1.228 billion. We're happy to answer questions at this time.