Universal Health Services Posts Strong 1Q15 Results (Part 5 of 5)
Key markets
Universal Health Services witnessed exceptionally strong patient volumes in Las Vegas and Nevada as a whole in 1Q15. Universal Health Services (UHS) earns more than 50% of its total revenue from the markets in Texas, Nevada, Florida, California, and Washington DC.
The above graph shows that Universal Health Services operates in 37 states in the US, Washington DC, Puerto Rico, the Virgin Islands, and the United Kingdom.
Geographic performance
In 2015, Medicaid expansion has been one of the key drivers of the hospital industry’s (XLV) increased revenue. Universal Health Services’ patient volume growth in Nevada is a result of the reduction in the uninsured population. The state adopted an expanded Medicaid program. The company also experienced improved performance in its Temecula facility in California. It started in 2014.
Although Texas has been suffering from increased layoffs, especially in the oil and gas sector, Universal Health Services wasn’t impacted by this trend in 1Q15. The company has limited exposure to the Texas markets that depend heavily on this sector. However, the company is concerned about the weakening Texas economy, which can impact the state budget levels. This can affect Universal Health Services’ future Medicaid revenue because the company is one of the major Medicaid health providers in Texas.
Changing payer mix
An increasing percentage of the insured population reduced the percentage of bad debt expenses for Universal Health Services and other companies in the industry like HCA Holdings (HCA), Community Health Systems (CYH), and Tenet Healthcare (THC). However, with the payer landscape dominated by government and commercial insurers, payers are entering into risk sharing payment contracts with hospitals. Although Universal Health Services’ reimbursement agreements in 1Q15 were mainly fee-for-service, the company expects to shift to other risk sharing reimbursement arrangements in the future.
Browse this series on Market Realist: