Cambian acquisition boosts UK revenues for UHS

Universal Health Services’ (UHS) UK revenues leaped by 78% to $429m (c. £332.5m) in the year ended 31 December 2017 following its £377m acquisition of Cambian’s Adult Services at the end of 2016.

The US healthcare giant, which entered the UK market in 2014 with the acquisition of Cygnet Healthcare for £205m, now operates 108 ‘behavioural healthcare’ facilities and two outpatient services in the UK. It’s year-end accounts do not include detailed segmental information by geography but the company said its total UK assets reached approximately $1.1bn at the year-end compared to $965m in 2016 and $521m in 2015.

UHS has expanded rapidly in the UK mental health sector during the last four years. This hasn’t escaped the attention of the CMA, although its in-depth investigation into the acquisition of Cambian’s Adult Care Services eventually resulted in the divestment of just one facility.

Last month, US competitor Acadia announced that its UK business, Priory Healthcare, had been held back by high agency staff bills and lower occupancy rates resulting from the transition to local commissioning arrangements. However, UHS said it had not ‘necessarily experienced those same issues’ due to the smaller number and different markets in which it operates.

Executive vice president and chief financial officer Steve Filton said: ‘2017 was largely a transition year for us…We did the Cambian acquisition at the very end of 2016 and spent most of 2017 working with the CMA in the UK on the outcome of that acquisition and what facilities would have to be sold. We were very pleased with the outcome of that process. We had to sell a single facility with less than a $1m of EBITDA. And so, I think we felt like that work and that interaction with the CMA was worthwhile.

‘But part of the outcome of that process is we were not able to combine our two businesses really until very late in 2017. So, we really weren’t able to share best practices or achieve any synergies etc. So, I think for us, 2018 will be a much better gauge of what we can do in the UK. Look, we would acknowledge that like in the US it’s a tight behavioural market, but I think Cambian in particular has had historical success at really minimising the use of temporary nurses and registry. And we’re hoping to use their best practices in our legacy facilities.’

Despite ranking the UK’s second largest provider of mental health hospital services, the UK business remains a drop in UHS’ vast ocean. The company reported total revenue of $10.4bn for full-year 2017 and produced EBITDA of some $1.7bn.