Local hospital chain thriving in mental-health-care realm

People who care for the mentally ill have long complained that it's a tough way to make a living.

But Universal Health Services Inc., a hospital chain based in King of Prussia, has turned inpatient behavioral health into a profit center. It reported an operating margin in the first quarter of this year of 26.3 percent for its psychiatric hospitals.

UHS likes the behavioral-health business so much that it bought rival Psychiatric Solutions Inc. last year and nearly doubled its psychiatric facilities. It now owns almost 200 facilities - including seven in the Philadelphia area - that generate $3.4 billion a year. That makes it the largest provider of behavioral-health services in the country, says Alan Miller, the chief executive officer.

He gives a lot of the credit for UHS's success with the mentally ill to Debra Osteen, who runs the behavioral-health division.

"She picks good people," Miller said. "She gives very good direction. She holds people accountable, and she does it in a way that gets the best out of them, without irritation. People like to work for her."

Asked what makes UHS different, Osteen said: "I've seen some businesses, they didn't really know what they were doing from a financial point of view, from a clinical point of view." UHS does, she said, and it's good at "basic fundamentals," such as making sure it gets paid. "I say, count the pennies and the paper clips."

Everything stems from patient care. "I tell people, 'Do what's right for the patient, and all these other things will take care of themselves.' "

Even though it's a public company, UHS allows her to think well beyond the next quarter's earnings. "I've always felt like I could look at what I wanted long term rather than what was right in front of me," she said, "and that changes all the action."

One key to UHS's success is that it expanded its behavioral-health segment while others cut back. The number of inpatient psychiatric beds in regular or specialized hospitals fell from 160,645 in 1995 to 114,027 in 2009, according to the American Hospital Association. The number of freestanding psychiatric hospitals dropped from 662 in 1995 to 446 in 2009.

That left UHS in a good position in recent years when reimbursements got better and the national health parity law, for which Osteen lobbied, improved insurance coverage of mental illnesses.

Gerald Katz, a health-care consultant, said "the whole field" of psychiatric hospital care has been going for-profit. "The not-for-profit world can't make it," he said. He suspects for-profit chains are able to negotiate better rates with insurers than individual hospitals.

Katz said patients probably wouldn't notice big changes as a result of UHS's new dominance in this market.

Osteen, an energetic 57-year-old with short, blond hair, said demand for inpatient care was strong now. The military is a big customer.

They "cannot keep up with demand and are asking for resources. A lot of these soldiers, they're not going for one deployment. They're going for two or three, so the stress on them and the family is far greater than it's been in any of the wars we've had before."

Osteen - most people call her Debbie - said employees from the newly merged companies were learning from each other. UHS immediately changed the way the former PSI hospitals prepared for site visits from regulatory groups. PSI had been more "fragmentary," while UHS has an audit tool it uses to get ready for visits.

Meanwhile, UHS has adopted a PSI tradition. PSI hospitals publicly posted quality scores from various organizations, an idea Osteen liked.

She said UHS's behavioral services likely would benefit from health-care reform because more people would have health insurance. Even the proliferation of high-deductible health plans, which could lead subscribers to put off outpatient care, is having little impact.

People end up in a psych hospital only when there's a dramatic crisis, one that may leave them suicidal or homicidal. "It's not an elective," she said.

Osteen grew up Wichita, Kan. Her mother was a secretary for an oil company. Her father worked in the Wichita Eagle's pressroom. She is the only member of her family to graduate from college. She worked her way through Oral Roberts University and a master's program.

Her last name is a remnant of her first marriage, to Paul Osteen, then a surgeon and the big brother of prominent TV minister Joel Osteen. She kept the name, she said, because that was what everyone at work knew her by.

A big believer in face time, she travels at least one or two days a week. She has already visited more than a third of the PSI hospitals. "I was a million-miler on Delta before I moved here."

Osteen, who was picked by Modern Healthcare magazine in April as one of the top 25 women in health care, sees herself as a good multitasker who has learned to manage a bigger team as the company has grown.

She tries to separate her time at home - she has a 14-year-old daughter - from work. "I make sure I give time to my family when I'm off. I don't carry my BlackBerry around with me in the house. I have it out in the car, turned off."

She has no qualms that UHS is making double-digit profit while many of its customers are squeezed by higher insurance costs and possibly lower salaries.

"That strength is the reason we've been able to make it through harder times. We put a lot of resources back, and that's not seen in that margin," she said.

"I'm glad we're a healthy company."