UNIVERSAL HEALTH SERVICES
Company Overview
Universal Health Services, Inc. is America’s fifth largest hospital operator as well as the largest publicly-traded psychiatric and substance abuse facility operator. It owns and operates 23 acute care hospitals, and 197 behavioral health centers; it has also acquired Ascend Health Corporation in October 2012. The various forms of services that the hospitals provide include specialty and general surgery, internal medicine, obstetrics, radiology, oncology, pediatric services, pharmacy services and behavioral health services. All the capital resources that are required in the facilities are provided by the company itself along with other resources like the information services, planning of facilities, administrative personnel management, marketing, public relations, central purchasing and finance and control system. The aim is to ensure the provision of care to those patients who meet certain financial criteria; these amounts are qualified as charity care and so are not included in the net revenues. Although the facilities of the company are also present in the urban areas, but majority are located in the suburban areas. The revenue of the company is generated through private insurers, state government, patients, and the federal government.
Financial Statement Analysis
This also means that due to high indebtedness, company cannot react to any economic changes. Due to the acquisitions, there has been a clear fall in the cash reserves during 2012; since 2010, the cash flows have been decreasing which is an alarming situation for the company as is shown in the chart.
Health Care Industry
The healthcare industry is under the impact of various laws and regulations which are associated with the requirements of the government regarding the participation in healthcare, reimbursements for the services of patients, rules for the privacy and security of the patient information, provisions pertaining to fraud and abuse, and also various licensures. It is important for the healthcare providers to comply with these laws or else their right to participation is taken away. In addition, they are penalized and have to repay huge amounts (Kolstad and Kowalski et al., 2012). One of the major trends in the industry has been the rise in the number of patients who prefer remaining uninsured. The rising number of such patients is one of the reasons why the company has to face the bad debt expenses because it is the obligation of the hospitals to care for all the patients.
As is with the case of other industries, the healthcare industry is also undergoing evolution; the consumers are gaining more awareness regarding health; more employers have become interested in implementing incentive programs that support healthy lifestyles. In addition, the industry has also become highly competitive because of the changes in regulations, technology, pressures of cost containment, and also the increase in the use of managed care payment systems (Aaron and Newhouse, 2009). Many of the competitors also have exemptions of sales and income tax due to the support they gain from the charitable contributions. Due to the decline in the number of employed individuals, the patient volume has been decreased because without employment, there are fewer patients that possess health insurance. So, the worsening of the conditions of the economy leads to higher rate of unemployment which results in more people without health insurance. This leads to increase in uninsured patients.
Impact of UHS
Recommendations
The government definitely needs to intervene in this case and all those delayed reimbursements should be released to the hospitals which the company has been providing the poor. The Affordable Case Act requires attending to the issue of the uninsured patients which is hurting the earnings for the company. There is a high bad debt for the company which needs to be taken into consideration. The CFO has the responsibility to change the process for the service; in order to reduce the bad debt, the environment similar to a retail needs to be developed; first of all, the verification of insurance must be completed; in addition, the process of registration should also include the collection of payment. Further, the patients who are qualified for charity should be clearly identified and distinguished and only they should be included for reduced payment program. One of the ways of improving the financial performance of the company is to ensure the compliance of regulations by the government. Further, it should focus on growing its behavioral health segment as it would eventually work to improve the health of the company and also compensate for the high indebtedness as well as the delayed reimbursements; with more generation of revenue in this segment, the company can improve its financial health. By executing the strategy of verifying insurances before giving the treatments, the company would reduce its bad debts and with focus on this segment, it can eventually achieve its goal.
References
Aaron, H. and Newhouse, J. (2009). Meeting the Dilemma of Health Care Access: Extend Insurance Coverage while Controlling Costs. Opportunity 08, The Brookings Institution.
Ho, V., Dugan, J. and Ku-Goto, M. (2013). Why Are Hospital Prices Rising?. Health Management, Policy and Innovation, 1 (4), pp. 1--16.
Kolstad, J., Kowalski, A. and E, A. (2012). The impact of health care reform on hospital and preventive care: Evidence from Massachusetts. Journal of public economics.
