Regulatory Update of Southwest Healthcare System

News provided by

Universal Health Realty Income Trust

May 17, 2010, 08:00 ET

KING OF PRUSSIA, Pa., May 17 /PRNewswire-FirstCall/ -- Universal Health Realty Income Trust (NYSE: UHT) announced today an update to the previously disclosed regulatory matter related to Southwest Healthcare System ("SWHCS").

As previously disclosed on April 20, 2010, Universal Health Services, Inc. ("UHS") advised us that, SWHCS, a wholly-owned subsidiary of UHS which operates Rancho Springs Medical Center (the real property of which is not owned by us) and Inland Valley Regional Medical Center ("Inland Valley" the real property of which is owned by us) in Riverside County, California, received notification from the Centers for Medicare and Medicaid Services ("CMS") that it intended to effectuate the termination of SWHCS's Medicare provider agreement effective June 1, 2010. At that time, SWHCS commenced discussions with officials from CMS regarding an agreement in an effort to remedy the provider agreement termination action.

UHS has advised us that they have entered into an agreement with CMS which will abate the termination action scheduled for June 1, 2010. The agreement is one year in duration and requires SWHCS to engage independent experts in various disciplines to analyze and develop implementation plans for SWHCS to meet the Medicare conditions of participation. At the conclusion of the agreement, CMS will conduct a full certification survey to determine if SWHCS has achieved substantial compliance with the Medicare conditions of participation. During the term of the agreement, SWHCS will remain eligible to receive reimbursements from Medicare for services rendered to Medicare beneficiaries.

As also disclosed on April 20, 2010, SWHCS received notification from the California Department of Public Health ("CDPH") indicating that they planned to initiate a process to revoke SWHCS's hospital license. SWHCS has recently received the formal document initiating the revocation action. UHS has advised us that they plan to appeal CDPH's action and SWHCS will remain operational pending the appeal. CDPH has previously indicated its willingness to rescind this revocation should SWHCS demonstrate its ability to meet all state licensing requirements. UHS intends to pursue a resolution of this action with CDPH consistent with the agreement reached with CMS, however, there can be no assurance they will be able to do so. Failure to resolve this matter could have a material adverse effect on UHS and, in turn, us. While the base rentals on Inland Valley are guaranteed by UHS through the end of the existing lease term (December, 2011), should this matter adversely impact the future revenues and/or operating results of SWHCS, the future bonus rental earned by us on Inland Valley, and the underlying value of the property, may be materially adversely impacted.

Universal Health Realty Income Trust, a real estate investment trust, invests in healthcare and human service related facilities including acute care hospitals, behavioral healthcare facilities, rehabilitation hospitals, sub-acute care facilities, surgery centers, childcare centers and medical office buildings. We have fifty-two real estate investments in fifteen states.

This press release contains forward-looking statements based on current management expectations. Many of the factors related to these issues are beyond our ability to control or predict. These statements are subject to risks and uncertainties. Readers should not place undue reliance on such forward-looking statements which reflect management's view only as of the date hereof. We undertake no obligation to revise or update any forward-looking statements, or to make any other forward-looking statements, whether as a result of new information, future events or otherwise.

SOURCE Universal Health Realty Income Trust