UHS Sees Beginnings of Drop in Premium Labor Costs

Nov. 24, 2021
The company’s CFO recently told investors some hospitals are at half their October levels.

Universal Health Services Inc. CFO Steve Filton is hoping some of the October reports he is receiving from his hospital leaders are indicative of an end to the sky-high nursing costs the King of Prussia, Pa.-based company has been paying of late.

“The signs are there that, more broadly, the pressure is starting to ease and we would expect it to ease more in December,” Filton told analysts and investors at the Wolfe Research Healthcare Conference Nov. 18.

Along with its peers, UHS – which runs 400 inpatient and outpatient facilities in 38 states, Washington, D.C., the United Kingdom and Puerto Rico – has been fighting a two-front labor war during the COVID-19 pandemic, struggling both to find qualified nurses and other providers and then needing to pay large premiums on top of prevailing wages. Filton said the company typically pays premium rates for between 2% and 3% of its labor hours but that that number was closer to 9% during the third quarter. (It peaked early this year at more than 11%.) Those premium rates are typically 50% to 75% above base rates, he added, but have of late been as high as 150% of the starting number.

But with the delta variant wave ebbing and a number of contracts soon to expire, Filton said some UHS hospitals are reporting significant decreases in their use of premium labor this month, with some cutting their October number in half. That means premium pay should start to drift toward accounting for around 5% of labor hours, Filton said – while being quick to attach a major caveat to that prediction and other possible forecasts: It all depends, as so many things have done since early 2020, on how things stand with the pandemic. The more upbeat parts of his outlook, he said, are based on COVID affecting UHS’ acute-care business as it did this spring and early summer, when COVID diagnoses accounted for about 5% of admissions. Should that number climb well beyond that because of a fourth wave, all bets will be off.

Shares of UHS (Ticker: UHS) were changing hands around $130 on Nov. 23. They have lost nearly 20% of their value in the past six months.

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