Universal Health Services Inc. (NYSE: UHS), a leading operator of acute care and behavioral health facilities, continues to confront ongoing healthcare staffing challenges that have lingered since the coronavirus pandemic. During the company’s third-quarter earnings call, UHS leaders acknowledged that elevated premium temporary staffing rates—significantly higher than pre-COVID levels—are likely a long-term reality. Certain facilities, particularly in its behavioral health division, continue to experience limited capacity, which suppresses revenue and increases operational costs, ultimately impacting profitability.
“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 in a news release. “These factors…are expected to continue to have an unfavorable material impact on our results of operations for the foreseeable future.”
Rising Costs and Temporary Staffing Solutions
UHS’ healthcare staffing challenges have required the company to rely increasingly on temporary staff. While this strategy ensures patient care continuity, it comes at a significantly higher cost than pre-pandemic staffing levels. In the acute care division, temporary staffing costs peaked at $150 million in the first quarter, dropped to $117 million in the second quarter, and fell further to $81 million in the third quarter. By comparison, pre-pandemic premium staffing costs in the acute care division were just $35 million.
“There is some sort of level of fixed amount of premium pay that is appropriate,” said CFO Steve Filton. “Returning to pre-pandemic levels is not a realistic target at this point, but we continue to make progress in reducing temporary staffing costs.” The company expects elevated staffing rates to remain part of its operational landscape for the foreseeable future, highlighting the ongoing nature of healthcare staffing challenges across the industry.
Behavioral Health Division Faces Capacity Constraints
Staffing shortages have been particularly impactful in UHS’ behavioral health division, forcing some facilities to close beds and reduce patient volumes. While CEO Marc Miller did not provide specific figures, he noted that fewer beds were closed in the third quarter compared to earlier periods, signaling gradual improvement.
Despite these operational hurdles, CFO Filton emphasized that demand for behavioral health services remains strong. “As long as we can continue to address and make progress on the labor issue, I think we’re going to continue to see revenue growth that’s more closely related to our historical trends,” he said. This underscores that, even amid persistent healthcare staffing challenges, UHS sees long-term opportunities for growth in its behavioral health segment.
Financial Outlook and Performance
UHS’ ongoing healthcare staffing challenges have influenced its financial projections. In July, the company cut its annual earnings forecast by 19% after patient volumes and workforce issues persisted longer than expected. Despite these headwinds, the company posted third-quarter earnings of $2.50 per share, surpassing the Zacks Consensus Estimate of $2.40. Net income totaled approximately $177 million, down 19% from the third quarter of 2021.
Revenue for the quarter reached $3.34 billion, slightly above expectations by 0.76%. Following the earnings announcement, UHS shares traded at $110.38, marking a 13.9% increase from the opening of trading. The results highlight that the company can still achieve revenue growth and maintain investor confidence despite persistent labor shortages.
Temporary Staffing as the New Normal
While permanent staff recruitment remains a priority, temporary staffing continues to play a central role in addressing healthcare staffing challenges. Elevated premium rates, though costly, allow UHS facilities to remain operational and continue serving patients. Filton emphasized that while temporary staffing costs have declined from their peak, they are unlikely to return to pre-pandemic levels in the near term.
“This is clearly a trend that has not yet flattened out, and I don’t think it will,” Filton said. The reliance on temporary staffing reflects broader industry-wide healthcare staffing challenges, where workforce shortages and high patient demand have reshaped the operational realities for hospitals and behavioral health facilities.
Outlook for UHS
Despite these ongoing challenges, UHS remains optimistic about the long-term prospects of its acute care and behavioral health divisions. The company continues to focus on recruiting permanent staff, managing temporary staffing costs, and improving operational efficiency where possible. In particular, behavioral health facilities benefit from strong underlying demand for services, which provides a foundation for future revenue growth once labor constraints are addressed.
In summary, healthcare staffing challenges continue to shape UHS’ operations, financial outlook, and long-term strategy. While elevated temporary staffing costs are now part of the new normal, the company’s recent financial results and strategic initiatives show resilience and the potential to sustain revenue growth in both acute care and behavioral health services.
