UHS CEO on Talkspace Acquisition: This Will Ultimately Be a Wise Financial Decision

Universal Health Services (UHS), the largest provider of behavioral health services in the United States, completed its acquisition of Talkspace, a major player in the online therapy market, on Monday. This marks a significant leap forward in the virtual care capabilities of the healthcare system headquartered in King of Prussia, Pennsylvania.

With this $835 million deal, UHS says it can now offer care at any stage of a patient's mental health journey—from a single therapy session to round-the-clock inpatient care. This is a major bet on the continued demand for behavioral health services, which has risen significantly as conditions like anxiety and depression become more common and the stigma of seeking treatment fades.

UHS CEO Marc Miller said the company believes this venture into "on-demand" behavioral health services will pay off. He said it is a core driver of UHS's growth prospects and a key element of the company's pitch to investors at a time when hospital operators face widespread challenges.

Healthcare Dive spoke with Miller about the acquisition, how it fits into UHS's overall strategy, and the potential for future deals.

HEALTHCARE DIVE: UHS is betting a considerable amount of money on continued high demand for behavioral health services. What are you seeing in the system that convinces you Talkspace will be a value driver?

MARC MILLER:For us, this has been obvious for a long time. But reality keeps reinforcing the fact that the demand is there, and it is not necessarily being met.

Before acquiring Talkspace, when we looked at our own business, we saw cases of unmet need in many states. Part of the reason is that patients cannot be matched to the type of services offered in a particular location. There are also, of course, reimbursement issues, insurance coverage issues, and so on. We are currently in 40 states, but we do not offer the same services in every state. So, we are working to ensure our service offerings can be matched everywhere, and this acquisition will play a significant role in that.

Are there specific regions in UHS's geographic footprint where demand for behavioral health services is highest?

No. The demand is across the board, and it is intermittent. Certain months may see higher demand in specific regions, but overall, it shifts over time.

In March, CFO Steve Filton said acquiring Talkspace would help UHS bypass the staffing shortages that create bottlenecks for existing patients accessing behavioral health services, and that Talkspace would also serve as a gateway for new patients to access UHS's other services. Can you talk about those benefits?

There are many benefits. I don't quite remember the specific comments about staffing. But there has certainly been a lot of discussion about staffing over the past two years. Our staffing situation is much better than it was in the post-pandemic era.

When we look to expand our remote services—we have been offering remote services for years, but on a much smaller scale than some of our other services. Obviously, many people see us as an inpatient provider, but we actually have a strong network offering intensive outpatient services. We also have a significant number of partial hospitalization programs. We are working to ensure we provide care to patients where they need it.

Speaking of the demand for mental health services—the way we look at this is, when we started this deal, the opportunity we saw was not only in bringing patients who have long used Talkspace into the UHS network, and vice versa, but also, and perhaps just as importantly, many UHS patients who have never used remote services could benefit from them.

Now, we will be able to offer patients, within our own system, products that may be more suitable for them. We will be able to offer patients a full suite of "on-demand" service options, ensuring people can get treatment where they need it, in the right way.

This will be a game-changer because we will be the only company in the United States with a national, end-to-end behavioral health continuum of care. We will be able to offer services that no other company can.

Is UHS open to future acquisitions in virtual care or behavioral health?

Yes, absolutely. We will have this continuum of care, but we want to continue to make it better. If there are accretive opportunities in the market that make sense for us, we will take them.

We have known Talkspace for many years. We have discussed different ways of working with them. We have been impressed by them. By the time they decided to pursue a deal, we already knew them well. The same is true for many other companies. If one of them decides to pursue a deal in the future, we would naturally be someone they would consider.

What characteristics make a target most attractive to UHS?

If there is an area we are focused on, it is outpatient services. We have done a lot of work on the inpatient side. We will continue to add beds where we see a need. But right now, we are very focused on outpatient services.

Let me come back to Talkspace. They run an excellent operation. They have a significant competitive advantage in technology—their IT team is top-notch in the industry. That is what excites us, and it is a trait we look for when we look ahead.

How will UHS's focus on expanding behavioral health services help the company weather the current headwinds in the hospital industry? For example, more Americans losing insurance due to the expiration of expanded Affordable Care Act subsidies, and looming Medicaid cuts, are concerns on people's minds.

Those things you mentioned—they are real issues. What I will tell you is that the demand for more mental health services has not diminished. And I think many of these issues are cyclical. There are certainly some reimbursement pressures right now. We will see what happens at the end of the year with the new Congress.

We are in constant communication with Washington. They are asking for our input, and we are not shy about sharing our views. We need to be fairly compensated to have the ability to provide the healthcare this country needs. From what I understand, they do realize that this Congress made some significant changes this year.

This is a bipartisan issue. People from both parties have told us they hope some of these issues will be adjusted in the future because they recognize that companies like ours might be able to weather these ups and downs. But there are many nonprofit providers across the country, especially in some rural areas, that are struggling much more than we are. So, I expect things to improve in the coming years.

Given these industry-wide and UHS-specific challenges, how would you pitch UHS to investors who are cautious about investing in your company? For example, in July, UHS lowered its guidance due to unstable volumes at some facilities and unexpected losses, and your stock is down more than 20% year-to-date.

I get this question every week. You hit the nail on the head. I try to focus on a few things.

First, I cannot tell you where to put your money. If you are going to invest in healthcare, it is us, or one or two other companies at the top of the industry. That is a fact. Most people agree with that.

I have a very positive long-term outlook on this business, and especially on our company. We are taking the right steps to remain profitable, and the way we will continue to be profitable is by providing high-quality healthcare. More patients and physicians will choose us, and that will put us where we need to be.

This is a very tough industry, and that is something we often talk about when asked various questions. The patient population is complex. We are the best equipped to handle this patient population. So, whether you are investing money or healthcare services, people choose UHS because they know we have top-notch facilities, providers, and staff. That will not change.

We will only get stronger in that regard. Acquisitions like Talkspace are a perfect example of what we can do that many others cannot. It was a costly acquisition. But we were happy to do it because it is the right thing for our patients. And, ultimately, it will be a smart financial decision.