UHS posts strong quarter even as it faces federal probe

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UHS reported a 28.6 percent operating margin in the first quarter. Federal investigators are scrutinizing 21 UHS facilities in nine states.

Universal Health Services Inc.'s psychiatric hospitals chalked up another strong quarter even though some face a federal probe for suspected fraud, some of it potentially criminal.

The King of Prussia company, one of the country's largest for-profit hospital owners, said its operating margin in behavioral health was a robust 28.6 percent in the first quarter, up from 27.7 percent in the same period of 2014.

On March 31, the last day of the quarter, UHS disclosed that it was under criminal investigation at the corporate level and that in March two additional hospitals that treat people for addiction, depression, and other mental illnesses had received subpoenas. Federal investigators now are scrutinizing 21 UHS facilities in nine states.

An analyst on an investors' conference call Tuesday said his firm had received questions about the investigations and wondered if UHS officials could say anything about "what's happening behind the scenes."

"Looking at the behavioral business from a high level, it doesn't look like those inquiries are having any impact, at least in aggregate on the business," said A.J. Rice of UBS Securities. "Is that your assessment of it or is there anything we should be aware of?"

Steve Filton, UHS's chief financial officer, said the company was cooperating with the government's requests.

"It may go in for a while, and while it does, we'll continue to take it seriously and comply with the government and cooperate with the government, but at the same time we're going to continue to run the business, which we feel delivers high-quality care throughout the portfolio," Filton said.

Psychiatric hospitals accounted for $1.08 billion of UHS's net revenue, or 28 percent of its $2.23 billion in total net revenue, for the quarter. UHS owned 203 psychiatric facilities and 24 acute-care hospitals as of March 31. Acute-care hospital results were driven in part by an increase in patients stemming from the Affordable Care Act.

UHS said in a regulatory filing last month that the False Claims Act investigations of certain behavioral health facilities, underway for more than two years, are focused on bills sent to government payers. Court filings allege that some UHS facilities billed for treatment by a psychiatrist when the service was performed by a person with less training.

Among the hospitals under investigation is Arbour-HRI Hospital in Brookline, Mass., a unit of UHS's Arbour Health System, which describes itself as the largest private behavioral health system in Massachusetts.

Another Arbor unit, Arbour Counseling Services in Lawrence, Mass., is the subject of a 2011 federal False Claims case, which in March was reinstated by the U.S. Court of Appeals for the First Circuit after it was dismissed by a District Court judge last year.

The original lawsuit alleged that teenager Yarushka Rivera died after being treated for psychiatric problems by Arbour employees who were not licensed to do so and were not supervised by a licensed psychiatrist as regulations required.

UHS said in a District Court filing Tuesday in Massachusetts that it had decided to ask the U.S. Supreme Court to accept an appeal of the Circuit Court decision.

The company's shares closed at $121.84, up $1.59 on the New York Stock Exchange. On Friday the shares were at an all-time high of $122.69.

 


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