Nearly eight months into the COVID-19 pandemic, Universal Health Services (UHS) continues to navigate challenges brought on by the coronavirus. While the nation has started adjusting to a “new normal,” the lingering effects of the pandemic have had a notable impact on behavioral health facilities operated by UHS, reflecting both temporary disruptions and long-term trends in mental health care demand.
Behavioral Admissions Dip in Q3
On a same-facility basis, UHS reported a 5.6% year-over-year decrease in behavioral health admissions during the third quarter. Adjusted patient days also decreased by 3.6% compared to Q3 2019. Despite these declines, executives at UHS remained cautiously optimistic, emphasizing that the situation reflects temporary headwinds rather than structural declines in demand.
“Despite a number of headwinds, including a decline in referrals from acute care emergency rooms, from schools … and from travel restrictions on potential patients, patient days at our behavioral health facilities improved during this year’s third quarter to approximately 97% of the volume realized during last year’s third quarter,” said Steve Filton, executive vice president and CFO, during UHS’ Q3 earnings call.
Filton highlighted that these factors—reduced school and ER referrals, and travel limitations for prospective patients—are temporary barriers. As communities reopen and referral pathways normalize, he expects behavioral health volumes to gradually return to, and potentially exceed, pre-pandemic levels.
Anticipating Post-Pandemic Behavioral Demand
The pandemic has intensified mental health and substance use challenges across the United States. Experts have noted increases in anxiety, depression, and substance abuse during periods of social isolation, economic uncertainty, and overall stress. Filton anticipates that as restrictions ease and more patients seek care, UHS could see a surge in behavioral health demand.
“I’m not exactly sure when that will be, but when that occurs, we believe that there is a reservoir of behavioral volumes still to be satisfied,” Filton said, signaling potential growth opportunities for UHS’ behavioral health division once the country returns to a more typical routine.
UHS’ Behavioral Health Network
Headquartered in King of Prussia, Pennsylvania, UHS is among the largest hospital management companies in the U.S. The organization operates both acute care hospitals and behavioral health facilities, managing a network of 330 behavioral health locations across the U.S., the United Kingdom, and Puerto Rico. These facilities offer a wide range of services, including inpatient and outpatient care for mental health disorders and substance use disorders.
Despite lower admissions and patient days, behavioral health revenues at UHS increased slightly, reflecting a complex interplay of factors beyond raw patient volume.
Revenue Trends and Financial Performance
During Q3, UHS reported net revenues of approximately $2.9 billion, a 3% increase from the prior year. Behavioral health contributed nearly $1.3 billion, representing roughly 45% of total revenue. Behavioral revenues grew about 1.2% year-over-year, despite lower patient volumes.
Filton attributed the revenue increase to a combination of higher contractual rates, more lenient managed care practices regarding denials and utilization management, and positive adjustments in reimbursement. These factors helped offset the decline in patient admissions and contributed to the overall financial stability of the behavioral health segment.
“We found that we are getting the benefit of some higher contractual rate increases,” Filton explained. “We’re seeing the impact of a little bit more leniency on the part of managed care companies in terms of things like denials and concurrent utilization management. There were small amounts of positive reimbursement adjustments in this quarter and also some negative adjustments in last year’s third quarter.”
Federal Support Amid the Pandemic
Government stimulus programs have also helped stabilize UHS’ operations during the pandemic. As of September 30, 2020, UHS received $396 million from various federal relief initiatives, most notably the Provider Relief Fund (PRF) established under the CARES Act. These funds have helped offset operational challenges, maintain staffing levels, and ensure continuity of care across the behavioral health network.
Stock Performance and Investor Confidence
Despite the ongoing pandemic-related headwinds, UHS’ stock performed positively in Q3. Shares rose nearly 4% by the end of trading on the day of the earnings call, closing at $109.55. Investor confidence appears to stem from the company’s ability to maintain revenue growth in its behavioral health division and its strategic positioning to meet post-pandemic demand.
Behavioral Health Outlook
UHS’ experience in Q3 illustrates the resilience of the behavioral health sector even amid widespread disruptions. While patient admissions and adjusted days dipped slightly, the organization’s proactive approach to contract management, federal relief, and operational flexibility has mitigated financial losses.
Behavioral health demand is expected to increase as the pandemic continues to exacerbate mental health challenges across the U.S. Facilities that can adapt to changing referral patterns, implement telehealth solutions, and provide comprehensive care are likely to benefit from a growing patient base.
Adapting to New Referral Dynamics
The decline in referrals from emergency rooms and schools underscores the need for behavioral health providers to adapt to changing channels of patient acquisition. Tele-behavioral health services, digital outreach programs, and community engagement strategies have become critical tools for maintaining patient access during periods of restricted in-person interaction.
UHS’ efforts to expand virtual care capabilities and optimize operational efficiency position the company well for this evolving landscape. By integrating technology with traditional care delivery, the organization can capture demand that might otherwise be lost due to pandemic-related restrictions.
Conclusion
Universal Health Services’ Q3 performance demonstrates both the challenges and resilience of the behavioral health sector during COVID-19. While admissions and patient days declined slightly, revenue growth and federal support have helped stabilize the organization.
Looking ahead, the industry can expect increased behavioral health demand as the country navigates the mental health and substance use crises amplified by the pandemic. UHS’ proactive strategies, including leveraging telehealth, optimizing contracts, and preparing for post-pandemic growth, position the company to capture that demand effectively.
As the nation continues to manage COVID-19, behavioral health providers like UHS are likely to play an increasingly vital role in addressing the long-term psychological and substance use consequences of the pandemic, ensuring care continuity for those who need it most.
