Stock study guide: Universal Health Services

Shareowner, Nov/Dec 2003

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The Business. UHS owns and operates over 100 health-care facilities including acute-care hospitals, behavioral health centers, ambulatory centers and radiation oncology centers.

Facilities are located throughout the United States - primarily in small to mid-sized markets (e.g. Grand Rapids, Michigan; Lexington, Kentucky). Additional facilities are located in France and Puerto Rico.

Services offered include: general surgery; intensive and cardiac care; pediatrics; cancer treatment; and, solutions for addictive and psychiatric illness.

Future Growth. Revenue growth is expected to be driven by capital expenditures, acquisitions and demographic trends.

Capital Expenditures. Significant capital expenditures (exceeding $200 million annually) are expected to improve the scope and quality of services at existing facilities, which will promote greater patient loyalty and new referrals.

In addition, UHS frequently builds new facilities. For example, in 2002, the company completed construction of the 317-bed George Washington University Hospital. Construction of two more hospitals is expected to be completed in fiscal 2003.

Acquisitions. UHS is expected to continue its strategy of acquiring hospitals in small to mid-sized markets, both within the U.S. and abroad. For example, in 2001, UHS acquired an 80% interest in a chain of 10 acute-care hospitals in France.

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Demographics. Aging baby boomers are expected to generate increased demand for medical services. In particular, strong population growth in UHS markets is expected to spur revenue growth.