Hospital Chain CEO Hits Billionaire Jackpot by Keeping Control

  • Alan Miller is the fifth longest serving Fortune 500 CEO
  • Holds 83 percent of voting rights at Universal Health Services

Alan Miller learned the hard way that being in charge isn’t the same thing as having control. Back in 1978, when the hospital operation that he ran fell prey to a hostile takeover, Miller found himself without a job.

“I went up the street when the deal was completed, rented a small office and got a telephone,” Miller, 78, said in an interview this month with Bloomberg Television. “I had about five people with me and said, ‘We’re in business and we want to buy hospitals.”’

The result: Universal Health Services Inc., which today operates about 250 hospitals and health centers covering both acute and behavioral care, including addiction treatment clinics. This time Miller assured his control from the start, and four decades later he’s still CEO -- and a billionaire.

When Miller listed the company, he oversaw a share structure for Universal Health that gives him 83 percent voting control with a 7 percent economic interest, according to the company’s 2015 proxy. The arrangement helped protect the business from takeover attempts as it grew into one of America’s largest hospital operators, giving him a fortune valued at $1.1 billion, according to the Bloomberg Billionaires Index.

Miller declined to comment on his net worth, said Bob Conrad, a spokesman at Ketchum.

Behavioral Care

Miller’s longevity hasn’t narrowed his horizons. He’s overseen Universal Health’s shift into behavioral care, including California’s Fremont Hospital, whose beige brick buildings sit sandwiched anonymously between an office park, retirement home and strip mall. The hospital is part of the largest network of private psychiatric hospitals in the U.S.

Fremont, with 148 beds handling 5,000 admissions a year, is one of more than 200 such facilities run by Universal Health. The company added 94 of them in 2010 when it acquired Psychiatric Solutions for $3.1 billion. The behavioral division contributes two-thirds of the company’s earnings before interest, taxes, depreciation and amortization, Miller told the Barclays Capital Global Health Care Conference in Miami on March 17.

“UHS is the biggest private player in behavioral health,” said Jason Gurda, an analyst at KeyBanc Capital Markets. “It’s a higher margin business than acute care. It has a much better long-term growth outlook.”

Photographer: Tom Metcalf/Bloomberg

The King of Prussia, Pennsylvania-based company continues to expand in the sector, buying Foundations Recovery Network for about $350 million from Chicago’s billionaire Pritzker family in September. Its four facilities and eight outpatient centers focus on treating adults with addiction and mental health disorders.

Personal Network

The soaring number of addicts -- more Americans now die from drug overdoses than car accidents, according to the White House -- and the industry’s fragmented nature made Foundations an attractive proposition. The network Miller built up while controlling Universal Health helped him secure the prized asset.

“The man running it used to work for us,” Miller said at the Barclays conference. “When they were ready to sell, he told the Pritzkers that he only wanted to sell to us. And so Pritzker gave us the price, we paid it, and now they’re part of the company.”

As Universal Health expands its behavioral care offering, its more traditional acute care division, which contributed half of the company’s $9 billion of revenue in 2015, continues to be boosted by the Affordable Care Act.

Obamacare Surge

“There are something like 20 million more people covered. That’s good for us and it’s good for people who haven’t had coverage,” Miller told Bloomberg Television in the March 10 interview.

Universal Health shares are down 2 percent this year as investors question whether the fillip from health-care reform is starting to peter out. As he nears his fifth decade at the helm, Miller says he isn’t concerned. He’s using the dip to expand the company’s control over its shares.

“The market is very nervous, we’ve had a very solid year,” Miller said. “As a matter of fact we have increased the amount available for stock buyback so we’re not unhappy with the current situation.”