Universal Health Services, Inc. Reports 2011 Fourth Quarter and Full Year Earnings and 2012 Earnings Guidance Consolidated Results of Operations, As Reported - Three-month periods ended December 31, 2011 and 2010:

KING OF PRUSSIA, Pa., Feb. 27, 2012 /PRNewswire/ -- Universal Health Services, Inc. (NYSE: UHS) announced today that its reported net income attributable to UHS was $95.3 million, or $.98 per diluted share, during the fourth quarter of 2011 as compared to $37.2 million, or $.38 per diluted share, during the comparable prior year quarter.

Net revenues increased 18% to $1.84 billion during the fourth quarter of 2011 as compared to $1.56 billion during the fourth quarter of 2010.  The increase in net revenues during the fourth quarter of 2011, as compared to the comparable quarter of the prior year, was due primarily to the revenues generated at the behavioral health care facilities acquired from Psychiatric Solutions, Inc. ("PSI") in November, 2010.  

Consolidated Results of Operations, As Reported – Years ended December 31, 2011 and 2010:

Reported net income attributable to UHS was $398.2 million, or $4.04 per diluted share, during the year ended December 31, 2011 as compared to $230.2 million, or $2.34 per diluted share, during 2010.  Net revenues increased 35% to $7.50 billion during 2011 as compared to $5.57 billion during 2010.  The increase in revenues was due primarily to the acquisition of the behavioral health facilities formerly owned by PSI.  

"This past quarter marked the one year anniversary of our acquisition of PSI and we remain pleased with how that integration process has gone, as well as, with the continued strong demand for our behavioral services, in general", said Alan B. Miller, Chief Executive Officer.  "As we enter 2012, we are encouraged by the opportunities to expand our presence in the behavioral health business and we look forward to improvement in our acute care business as the economy continues its gradual recovery."

Consolidated Results of Operations, As Adjusted – Three-month periods ended December 31, 2011 and 2010:

After adjusting the reported results for the three-month periods ended December 31, 2011 and 2010 to neutralize the net impact of the items mentioned below, and as reflected on the attached Schedules of Non-GAAP Supplemental Consolidated Statements of Income Information ("Supplemental Schedules"), our adjusted net income attributable to UHS was $88.8 million, or $.91 per diluted share, during the fourth quarter of 2011 as compared to $57.5 million, or $.58 per diluted share, during the fourth quarter of 2010.  

As indicated on the attached Supplemental Schedules, included in our net income attributable to UHS during the three-month period ended December 31, 2011, was the favorable after-tax impact of $6.5 million, or $.07 per diluted share, resulting from a reduction to our professional and general liability self-insurance reserves relating to years prior to 2011 based upon a reserve analysis.

As indicated on the attached Supplemental Schedules, included in our net income attributable to UHS during the three-month period ended December 31, 2010, was a net charge of $20.4 million, or $.20 per diluted share, consisting of: (i) the unfavorable after-tax impact of $24.9 million, or $.25 per diluted share, resulting from the recording of transaction fees incurred in connection with our acquisition of PSI; (ii) the unfavorable after-tax impact of $9.2 million, or $.09 per diluted share, resulting from the charge incurred in connection with the previously disclosed split-dollar life insurance agreements; (iii) the unfavorable after-tax impact of $4.1 million, or $.04 per diluted share, resulting from the write-off of certain construction costs, partially offset by; (iv) the favorable after-tax impact of $17.9 million, or $.18 per diluted share, resulting from a reduction to our professional and general liability self-insurance reserves relating to years prior to 2010 based upon a reserve analysis.

Consolidated Results of Operations, As Adjusted – Years ended December 31, 2011 and 2010:

After adjusting the reported results for the years ended December 31, 2011 and 2010 to neutralize the impact of the items mentioned below, and as reflected on the attached Supplemental Schedule, our adjusted net income attributable to UHS was $391.7 million, or $3.97 per diluted share, during 2011 as compared to $249.8 million, or $2.54 per diluted share, during 2010.  

As indicated on the attached Supplemental Schedules, included in our net income attributable to UHS during the year ended December 31, 2011, was the favorable after-tax impact of $6.5 million, or $.07 per diluted share, resulting from a reduction to our professional and general liability self-insurance reserves relating to years prior to 2011.

As indicated on the attached Supplemental Schedules, included in our net income attributable to UHS during the year ended December 31, 2010, was a net charge of $19.6 million, or $.20 per diluted share, consisting of: (i) the unfavorable after-tax impact of $38.7 million, or $.39 per diluted share, resulting from the recording of transaction fees incurred in connection with our acquisition of PSI; (ii) the unfavorable after-tax impact of $9.2 million, or $.09 per diluted share, resulting from the charge incurred in connection with split-dollar life insurance agreements; (iii) the unfavorable after-tax impact of $4.1 million, or $.04 per diluted share, resulting from the write-off of certain construction costs, partially offset by; (iv) the favorable after-tax impact of $28.1 million, or $.28 per diluted share, resulting from a reduction to our professional and general liability self-insurance reserves relating to years prior to 2010, and; (v) a favorable discrete tax item of $4.3 million, or $.04 per diluted share.

Acute Care Services - Three-month periods ended December 31, 2011 and 2010:

At our acute care hospitals owned during both periods ("same facility basis"), adjusted admissions (adjusted for outpatient activity) increased 0.3% and adjusted patient days increased 0.8% during the fourth quarter of 2011, as compared to the fourth quarter of 2010. Net revenues at these facilities increased 1.6% during the fourth quarter of 2011 as compared to the comparable quarter of the prior year. At these facilities, net revenue per adjusted admission increased 1.3% while net revenue per adjusted patient day increased 0.8% during the fourth quarter of 2011 as compared to the comparable quarter of the prior year. On a same facility basis, the operating margin (net revenues less salaries, wages and benefits, other operating expenses, supplies expense and provision for doubtful accounts, excluding the items indicated on the Supplemental Schedules) at our acute care hospitals decreased to 13.3% during the fourth quarter of 2011 as compared to 14.4% during the fourth quarter of 2010.  The decrease in the operating margin at our acute care hospitals during the fourth quarter of 2011 was caused by pressure on patient volumes and payor mix as several of our more significant markets continue to be negatively impacted by local economic trends.

We provide care to patients who meet certain financial or economic criteria without charge or at amounts substantially less than our established rates. Because we do not pursue collection of amounts determined to qualify as charity care, they are not reported in net revenues or in accounts receivable, net. Our acute care hospitals provided charity care and uninsured discounts, based on charges at established rates, amounting to $248 million and $208 million during the three-month periods ended December 31, 2011 and 2010, respectively.

Acute Care Services – Years ended December 31, 2011 and 2010:

During the year ended December 31, 2011, on a same facility basis, adjusted admissions to our acute care facilities were relatively unchanged while adjusted patient days increased 1.7%, as compared to 2010. Net revenues at our acute care facilities increased 4.4% during 2011 as compared to 2010. At these facilities, net revenue per adjusted admission increased 4.5% while net revenue per adjusted patient day increased 2.6% during 2011 as compared to 2010. On a same facility basis, the operating margin at our acute care hospitals increased to 14.7% during 2011 as compared to 14.5% during 2010.    

Our acute care hospitals provided charity care and uninsured discounts, based on charges at established rates, amounting to $956 million and $807 million during 2011 and 2010, respectively.  

Behavioral Health Care Services - Three-month periods ended December 31, 2011 and 2010:

Since the former PSI facilities were acquired by us in mid-November, 2010, for accurate comparability purposes, we have included the patient statistics and financial results for these facilities in our same facility results provided below beginning on December 1st of 2011 and 2010.

At our behavioral health care facilities, on a same facility basis, adjusted admissions increased 8.3% while adjusted patient days increased 4.1% during the fourth quarter of 2011 as compared to the fourth quarter of 2010.  Net revenues at these facilities increased 6.3% during the fourth quarter of 2011 as compared to the comparable quarter in the prior year. At these facilities, net revenue per adjusted admission decreased 1.6% while net revenue per adjusted patient day increased 2.4% during the fourth quarter of 2011 over the comparable prior year quarter. The operating margin at our behavioral health care facilities owned during both periods increased to 24.7% during the fourth quarter of 2011 as compared to 22.6% during the fourth quarter of 2010.  

Behavioral Health Care Services – Years ended December 31, 2011 and 2010:

During the year ended December 31, 2011, on a same facility basis, adjusted admissions to our behavioral health care facilities increased 7.6% while adjusted patient days increased 3.3%, as compared to 2010. Net revenues at our behavioral health care facilities increased 6.4% during 2011 as compared to 2010. At these facilities, net revenue per adjusted admission decreased 0.8% while net revenue per adjusted patient day increased 3.3% during 2011 as compared to 2010. On a same facility basis, the operating margin at our behavioral health facilities increased to 25.8% during 2011 as compared to 25.3% during 2010.

Accounting for HITECH Act incentive payments and EHR expenses:

The health information technology provisions of the American Recovery and Reinvestment Act (referred to as the "HITECH Act") established criteria related to the "meaningful use" of electronic health records ("EHR") for acute care hospitals and established requirements for the Medicare and Medicaid EHR payment incentive programs.    

During 2011, we began implementing EHR applications at certain of our acute care facilities and will continue to do so, on a facility-by-facility basis, until completion which is scheduled to occur by the end of 2013. Our acute care hospitals will be eligible for Medicare and Medicaid EHR incentive payments upon implementation of the EHR application, assuming they meet the "meaningful use" criteria.

There are no EHR-related revenues included in our consolidated results of operations for the three or twelve-month periods ended December 31, 2011. Although we received approximately $11 million of EHR incentive payments during the fourth quarter of 2011 related to state Medicaid programs, these payments have been reflected as deferred revenue on our consolidated balance sheet as of December 31, 2011. These payments will be recorded as revenue on our consolidated statements of income in the periods in which the applicable hospitals are deemed to have met the "meaningful use" criteria.  Although our 2011 results of operations include certain EHR-related expenses, the amounts did not have a material impact on our consolidated financial results during the three or twelve-month periods ended December 31, 2011.  

During 2012, based upon our scheduled EHR implementations and anticipated "meaningful use" qualifications, we expect to record approximately $12 million of EHR revenues and $17 million of EHR-related incremental expenses resulting in a net after-tax charge of approximately $4 million, or $.04 per diluted share.        

2012 Full Year Guidance:

Excluding the unfavorable $.04 per diluted share EHR impact mentioned above, our estimated range of net income attributable to UHS for the year ended December 31, 2012, is $4.33 to $4.48 per diluted share.    

During 2012, our net revenues are estimated to increase approximately 5% to $7.24 billion, as compared to $6.89 billion during 2011.  Our net revenues for 2012 and 2011 have been adjusted to reflect reclassifications of our provision for doubtful accounts which, beginning on January 1st 2012, will be reflected as a deduction from revenues rather than as an operating expense. This reclassification will have no impact on our net income attributable to UHS.      

This guidance range excludes the impact of items, if applicable, that are nonrecurring or non-operational in nature including items such as, but not limited to, gains on sales of assets and businesses, reserves for settlements, legal judgments and lawsuits and other material amounts that may be reflected in our financial statements that relate to prior periods. It is also subject to certain conditions including those as set forth below in General Information, Forward-Looking Statements and Risk Factors and Non-GAAP Financial Measures.

Conference Call Information:        

We will hold a conference call for investors and analysts at 9:00 a.m. eastern time on February 28, 2012. The dial-in number is 1-877-648-7971.  A digital recording of the conference call will be available two hours after the completion of the conference call on February 28, 2012 and will continue through midnight on March 13, 2012.  The recording can be accessed by calling 1-855-859-2056 and entering the pass code 47643444.

This call will also be available live over the internet at our web site at www.uhsinc.com.  The webcast will also be available through the Thomson StreetEvents Network at www.earnings.com or www.streetevents.com, a password-protected event management site for institutional investors.

General Information, Forward-Looking Statements and Risk Factors and Non-GAAP Financial Measures:

Universal Health Services, Inc. ("UHS") is one of the nation's largest hospital companies, operating acute care and behavioral health hospitals and ambulatory centers nationwide and in Puerto Rico and the U.S. Virgin Islands.  It acts as the advisor to Universal Health Realty Income Trust, a real estate investment trust (NYSE: UHT).  For additional information on the Company, visit our web site: http://www.uhsinc.com.

This press release contains forward-looking statements based on current management expectations.  Numerous factors, including those disclosed herein, those related to healthcare industry trends and those detailed in our filings with the Securities and Exchange Commission (as set forth in Item 1A-Risk Factors and in Item 7-Forward-Looking Statements and Risk Factors in our Form 10-K for the year ended December 31, 2011), may cause the results to differ materially from those anticipated in the forward-looking statements.  Many of the factors that will determine our future results are beyond our capability to control or predict.  These statements are subject to risks and uncertainties and therefore actual results may differ materially.  Readers should not place undue reliance on such forward-looking statements which reflect management's view only as of the date hereof.  We undertake no obligation to revise or update any forward-looking statements, or to make any other forward-looking statements, whether as a result of new information, future events or otherwise.

As mentioned above, our acute care hospitals may qualify for EHR incentive payments upon implementation of a EHR application assuming they meet the "meaningful use" criteria. However, there can be no assurance that we (our acute care hospitals) will ultimately qualify for these incentive payments and, should we qualify, we are unable to quantify the amount of incentive payments we may receive since the amounts are dependent upon various factors including the implementation timing at each hospital. Should we qualify for incentive payments, there may be timing differences in the recognition of the revenues and expenses recorded in connection with the implementation of the EHR application which may cause material period-to-period changes in our future results of operations. Hospitals that do not qualify as a meaningful user of EHR by 2015 are subject to a reduced market basket update to the inpatient prospective payment system standardized amount in 2015 and each subsequent fiscal year. Although we believe that our acute care hospitals will be in compliance with the EHR standards by 2015, there can be no assurance that all of our facilities will be in compliance and therefore not subject to the penalty provision of the HITECH Act.