Monday, March 1, 2004 | 11:10 a.m.
SUN STAFF AND WIRE REPORTS
Universal Health Services Inc., an owner of acute-care and psychiatric hospitals in Las Vegas and other cities, today said first-quarter earnings may fall 25 percent as more patients fail to pay bills and competitors take business. The company's shares slid as much as 18 percent.
Operating as the Valley Health System, Universal has four hospitals in the Las Vegas area: Valley, Desert Springs, Summerlin and Spring Valley.
The Las Vegas market is among those markets where Universal faces tougher competition with hospital giant HCA Inc., which this morning opened Southern Hills Hospital and Medical Center in the southwest Las Vegas Valley.
Earnings may fall to as low as 63 cents a share from 84 cents in the same quarter of 2003, Universal said in a statement.
Shares of biggest U.S. chain, HCA, and Triad Hospitals Inc. also fell.
Hospitals are treating more patients who can't pay their bills because U.S. employers cut jobs or raised fees to rein in health-care costs. Universal said admissions fell and bad debt rose at its acute-care hospitals, factors that also have hurt profit at HCA and at second-biggest Tenet Healthcare Corp., which recently exited the Las Vegas market with its sale of Lake Mead Hospital in North Las Vegas.
"It's the same trend everybody else has been talking about," said Nancy Weaver, an analyst at Stephens Inc. who has an "overweight" rating on Universal and doesn't own shares. "They're in some difficult markets, so it may be worse for them than for their competitors."
Shares of King of Prussia, Pa.-based Universal Health fell $9.15, or 17 percent, to $44.78 as of 11:58 a.m. today in New York Stock Exchange composite trading after touching $44.40. Before today, they had risen 40 percent in 12 months.
Universal is losing customers in markets such as Aiken, S.C., where competitors have added hospital beds and boosted advertising, the company said on a conference call.
HCA's new Las Vegas hospital also was mentioned on the Universal conference call.
"The opening of the new HCA hospital will likely further exacerbate the temporary disruption in the market's practice patterns and increase competition for patients and nurses in the short term," Chief Financial Officer Steve Filton said. "The market demographics remain very strong and our expectation is the growth will easily absorb the new capacity that has recently come online."
Filton said existing hospitals, Valley, Summerlin, Spring Valley and Desert Springs, have already hired additional nurses to replace those who went to competitor Southern Hills Hospital.
In reporting earnings last month, Universal said its new Spring Valley hospital had taken some business from its own older Las Vegas hospitals.
Surgeons who referred to Universal hospitals in South Carolina and Texas have left and competing surgery centers have taken other patients, the company said.
"Some of the good business has gone elsewhere," Chief Executive Officer Alan Miller told investors on the call.
Filton said Universal will cut some jobs, freeze hiring for administrative positions and cut costs. Universal named a new division head to battle competitors in south Texas, is building a new emergency room in Aiken and will recruit more physicians in markets where doctors have fled. "You've got to keep the good ones and replace the ones who aren't going to support you," Miller said of the doctors.
U.S. hospitals began seeing unpaid bills pile up last year after Americans lost health-insurance coverage through job cuts or couldn't afford to pay higher co-payments. Some patients also are deferring medical care, cutting into hospital admissions.
HCA, Tenet and Triad have said they are trying to collect more from uninsured patients and have increased reserves for unpaid debts. HCA said the trend may slow once the economy improves and employers begin hiring workers.
HCA fell $2.41, or 5.7 percent, to $40.11. Triad fell $2.08, or 5.9 percent, to $33.21, and Health Management Associates Inc., the biggest rural-hospital company, fell $1.04, or 4.7 percent, to $21.25. Tenet rose 14 cents to $12.16.
Universal hospitals in Las Vegas and Puerto Rico have seen increases in patients without insurance, Weaver said.
"A little bit of this is some market-specific issues," she said.
Costs related to Universal's acquisition of hospitals at the end of last year also may be hurting profit, Weaver said. The company spent $230 million for four acute-care hospitals, three of them in California and one in Louisiana.
Bloomberg News
and Sun reporter Michelle Swafford contributed to this story.
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