Dive Brief:

• Universal Health Services’ profit halved in the second quarter compared to the same time last year amid a punishing operational environment, with operational expenses ticking up across every line item of its financial statement.
• Net income attributable to UHS was $164 million, compared to $325 million in the second quarter of 2021. That’s despite revenue rising on a year-over-year basis to $3.3 billion from to $3.2 billion.
• However, the health system — which warned investors it was experiencing a significant shortfall in operational results in June — still performed better than analysts expected, beating Wall Street expectations for earnings and revenue. Peers Tenet and HCA have also reported notable year-over-year earnings drops in the quarter.

Dive Insight:

UHS is one of the largest operators in the U.S., with 28 acute care hospitals and hundreds of behavioral health, outpatient and ambulatory facilities, along with a physician network and insurance offering.

The system’s acute hospitals saw a significant decline in COVID-19 patients in the second quarter compared to the same time last year. That drop wasn’t offset by a corresponding increase in non-COVID-19 utilization, UHS said, “resulting in significant shortfalls in revenues and earnings as compared to our original forecasts.”

Though the decreased volumes have helped alleviate the system’s staffing shortages and resulting costs, recovery from labor pressures is occurring at a “somewhat slower pace than expected,” the system said in a Monday release on the quarter.

The nationwide shortage of nurses and other staff has been a significant operating issue for UHS and its peers. Labor scarcity is straining resources, leading systems to pivot to more expensive temporary labor, or increase wages and benefits to retain existing workers.

In some cases, it’s also impacting patient care.

“At certain facilities, particularly within our behavioral health care segment, we have been unable to fill all vacant positions and, consequently, have been required to limit patient volumes,” UHS said.

The operator has been affected more heavily by labor pressures than some of its competitors. In the second quarter, HCA’s expenses for salaries and benefits rose just 6% while Tenet’s fell 7% on a year-over-year basis. By comparison, UHS saw its salaries, wages and benefits costs rise 14%.

UHS expects these factors to continue having an unfavorable impact on its operations for the remainder of 2022.

In June, the system slashed its financial forecast for the year after grim operations in April and May, following similar moves from HCA and CHS. The new outlook assumes that staffing vacancies and the corresponding premium labor costs will continue to decline sequentially in the back half of the year, and that non-COVID-19 volumes will improve, though at a slower pace than previously thought.

The system reiterated that it plans to continue staff recruitment and retention efforts to boost operations, along with an aggressive stance on contract negotiations with its managed care payers to get a better deal on payment for services rendered.