Universal Health Services: Financial Statement Analysis

Abstract

The paper provides the discussion of the financial statements’ analysis related to operations of Universal Health Services. This company is one of the leading providers of healthcare services in the United States. The analysis of the data indicates that the financial health of Universal Health Services can be regarded as good. The industry trend that can influence the company’s development is the staff shortages observed in all types of facilities. The company needs to revise its business and financial strategy to address changes in the modern market.

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Introduction

Universal Health Services is one of the leading companies in the United States that specialize in providing the hospital management. Universal Health Services was founded in 1979, and it is headquartered in Pennsylvania. The company covers more than 230 facilities nationally. Its mission is to provide the healthcare services of the high quality for community members in more than 35 states of the country.

Currently, Universal Health Services employs about 75,000 employees nationally, and its average annual revenue is more than $8 billion (UHS Financials, 2016). The purpose of this paper is to evaluate the financial health of Universal Health Services with reference to the financial statements’ analysis, discuss the industry trends that can influence the company’s development, and recommend the approach to improving the financial performance of the organization.

Financial Health of Universal Health Services

In order to state whether the financial health of Universal Health Services is good or not, it is necessary to refer to the results of the horizontal and vertical analyses based on the data presented in the company’s income statement, the statement of cash flows, and the balance sheet (Hofmann & Lampe, 2013). According to the findings of the horizontal analysis, the company’s total revenue increased by 11% in 2014 in comparison to 2013, and for the year of 2015, the increase was 10% (UHS Financials, 2016). This tendency indicates the company’s stable growth. This information is important for investors interested in the company’s development.

2015 2014 2013
Total Revenue 9,043,451 10% 8,205,088 11% 7,367,873

The horizontal analysis also provides the information for shareholders. The compared data regarding the company’s total stockholders’ equity and net income applicable to common shares indicate the value and profits for stockholders. Following the analysis, it is possible to state that the profits available to shareholders tend to remain stable after the increase in 2014 (UHS Financials, 2016).

2015 2014 2013
Net Income Applicable to Common Shares 680,528 25% 545,343 7% 510,733
Total Stockholder Equity 4,249,647 14% 3,735,946 15% 3,249,979

All groups of stakeholders, including employees and investors, are also interested in the company’s measures regarding the correlation between total assets and total liabilities for the past three years. The analysis of the financial statements indicates that the difference between total assets and total liabilities tends to increase (from 40% in 2013 to 47% in 2015). From this point, the financial health of Universal Health Services can be discussed as good, and the company remains to preserve the leading positions in the market.

2015 2014 2013
Total Assets 9,634,113 8,974,443 8,311,723
Total Liabilities 5,141,957 4,998,945 4,843,637
Difference 4,492,156 47% 3,945,498 44% 3,468,086 40%

Currently, the healthcare industry suffers from the staff shortages and the inability of many organizations to recruit high-quality specialists. Universal Health Services also experiences the outcomes of this negative trend because the company’s behavioral health facilities face a problem of recruiting psychiatrists to sign the long-term contracts. As a result, the recruitment, retention, and talent development costs for Universal Health Services can increase significantly in the 2016-2017 fiscal year.

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In order to minimize the impact of this specific industry trend on the Universal Health Services, it is necessary to revise the balance sheets for the company’s behavioral health facilities, address tangible assets, and decrease the associated costs to support recruitment strategies and cover the staff shortage (Hall, Agrawal, & Agrawal, 2013). In addition, it is necessary to optimize the provision of the mental health care and increase wages of healthcare providers who need to perform additional duties.

The Strategy to Improve Financial Performance

In order to gain more profits, Universal Health Services should balance the number of healthcare providers and specialists in relation to the number of patients and the length of stays in each facility. More attention should be paid to analyzing the patients’ flows with the focus on differences typical of acute care hospitals, surgery centers, and behavioral health facilities. It is necessary to analyze the current trends in the industry related to these sectors of the market and adjust the strategy in these facilities according to the current demands to reduce costs, guarantee the efficient use of assets, and increase profits (Kim, Li, Lu, & Yu, 2016).

To implement the proposed change strategy, it is necessary to organize project teams responsible for the analysis of situations in facilities. These project teams should include the chief financial officer, healthcare providers, administrators, and accountants because the implementation of the strategy should be based on the detailed financial analysis of the situation in the company and industry (Grimm & Blazovich, 2016).

Conclusion

Universal Health Services remains to be one of the leading providers of healthcare services in the United States, and its profits increase annually. The analysis of the financial data related to the company’s performance indicates that the financial health of Universal Health Services can be discussed as good. The industry tendency that can influence the company’s development is the problem of staff shortages observed in different facilities. To address the problem, the company needs to revise its business and financial strategy with reference to demands of each healthcare facility.

References

Grimm, S. D., & Blazovich, J. L. (2016). Developing student competencies: An integrated approach to a financial statement analysis project. Journal of Accounting Education, 35(1), 69-101.

Hall, S. C., Agrawal, V., & Agrawal, P. (2013). Earnings management and the financial statement analyst. Accounting and Finance Research, 2(2), 105-112.

Hofmann, E., & Lampe, K. (2013). Financial statement analysis of logistics service providers: Ways of enhancing performance. International Journal of Physical Distribution & Logistics Management, 43(4), 321-342.

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Kim, J. B., Li, L., Lu, L. Y., & Yu, Y. (2016). Financial statement comparability and expected crash risk. Journal of Accounting and Economics, 61(2), 294-312.

UHS Financials. (2016). Web.

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StudyCorgi. (2021, March 4). Universal Health Services: Financial Statement Analysis. Retrieved from https://studycorgi.com/universal-health-services-financial-statement-analysis/

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StudyCorgi. 2021. "Universal Health Services: Financial Statement Analysis." March 4, 2021. https://studycorgi.com/universal-health-services-financial-statement-analysis/.

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StudyCorgi. (2021) 'Universal Health Services: Financial Statement Analysis'. 4 March.

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