NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
UNIVERSAL HEALTH SERVICES, INC.
UNIVERSAL CORPORATE CENTER • 367 SOUTH GULPH ROAD • KING OF PRUSSIA, PENNSYLVANIA 19406
 |  |  | ||||||||||
Date and Time May 10:00 a.m.
| Live Audio Webcast www.meetnow.global/ | Record Date March | ||||||||||
Items to be Voted On
| (1) | the election of one director by the holders of Class A and Class C Common Stock (voting together as a single class) and the election of one director by the holders of Class B and Class D Common Stock (voting together as a single class); |
| (2) | to |
| (3) | to conduct an advisory (nonbinding) vote on the frequency of an advisory stockholder vote to approve named executive officer compensation; |
| (4) | the ratification of the selection of PricewaterhouseCoopers LLP as our independent registered public accounting firm for the fiscal year ending December 31, |
|
| (5) | the transaction of such other business as may properly come before the meeting or any adjournment thereof. |
You are entitled to vote at the Annual Meeting only if you were a Company stockholder of record at the close of business on March 24, 2022.22, 2023.
This year out of an abundance of caution, to proactively deal with the continuing health impact of coronavirus disease, also known as COVID-19, and to mitigate risks to the health and well-being or our communities, employees, stockholders and other stakeholders, we will hold the Annual Meeting in a virtual only format, which will be conducted via live audio webcast. Stockholders will have an equal opportunity to participate at the Annual Meeting online regardless of their geographic location.
WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING ONLINE, PLEASE VOTE BY TELEPHONE OR INTERNET OR, IF YOU RECEIVED PRINTED PROXY MATERIALS AND WISH TO VOTE BY MAIL, MARK YOUR VOTES, THEN DATE AND SIGN THE ENCLOSED FORM OF PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED POSTAGE-PAID ENVELOPE. YOU MAY REVOKE YOUR PROXY IF YOU DECIDE TO ATTEND THE ANNUAL MEETING AND WISH TO VOTE YOUR SHARES ONLINE AT THE MEETING.
Important Notice Regarding the Availability of Proxy Materials for the Stockholder Meeting to be held on Wednesday, May 18, 2022:17, 2023:
The Proxy Statement and Annual Report to Stockholders are available at http://www.edocumentview.com/uhs.
BY ORDER OF THE BOARD OF DIRECTORS
Steve G. Filton,
Secretary
King of Prussia, Pennsylvania
April 7, 20226, 2023
Universal Health Services, Inc. 20222023 Proxy Statement
A LETTER FROM OUR SENIOR EXECUTIVES
April 7, 20226, 2023
Dear Stockholder:
You are cordially invited to attend the 20222023 Annual Meeting of Stockholders of Universal Health Services, Inc. (the “Company”) to be held on Wednesday, May 18, 2022,17, 2023, beginning at 10:00 a.m. In light of the continuing public health impact of the novel coronavirus (COVID-19) outbreak and to support the health and well-being of our communities, employees, stockholders and other stakeholders, thisThis year’s Annual Meeting will be conducted completely virtually, via a live audio webcast; there will be no physical meeting location. You will be able to attend and participate in the Annual Meeting by visiting www.meetnow.global/MKLFJSM,MRVPLHZ, where you will be able to listen to the meeting live, submit questions, and vote. The annual meeting is being held for the following purposes:
(1) | the election of one director by the holders of Class A and Class C Common Stock (voting together as a single class) and the election of one director by the holders of Class B and Class D Common Stock (voting together as a single class); |
| (2) | to |
| (3) | to conduct an advisory (nonbinding) vote on the frequency of an advisory stockholder vote to approve named executive officer compensation; |
| (4) | the ratification of the selection of PricewaterhouseCoopers LLP as our independent registered public accounting firm for the fiscal year ending December 31, |
|
| (5) | the transaction of such other business as may properly come before the meeting or any adjournment thereof. |
Detailed information concerning these matters is set forth in the Important Notice Regarding the Availability of Proxy Materials (the “Notice”) you received in the mail and in the attached Notice of Annual Meeting of Stockholders and Proxy Statement. We have elected to provide access to our Proxy
Materials over the internet under the Securities and Exchange Commission’s “notice and access” rules. If you want more information, please see the Questions and Answers section of this Proxy Statement.
Your vote is important. Whether or not you plan to attend the meeting online, please either vote by telephone or internet or, if you received printed Proxy Materials and wish to vote by mail, by promptly signing and returning your Proxy card in the enclosed envelope. Please review the instructions on each of your voting options described in this Proxy Statement as well as in the Notice you received in the mail. If you then attend and wish to vote your shares online, you still may do so. In addition to the matters noted above, we will discuss the business of the Company and be available for your questions relating to the Company.
Sincerely,
Alan B. Miller
Executive Chairman of the Board of Directors
Marc D. Miller
Chief Executive Officer and President
Universal Health Services, Inc. 20222023 Proxy Statement
PROXY STATEMENT
QUESTIONS AND ANSWERS
UNIVERSAL HEALTH SERVICES, INC.
UNIVERSAL CORPORATE CENTER • 367 SOUTH GULPH ROAD • KING OF PRUSSIA, PA 19406
| 1. | Q: Why am I receiving these materials? |
| A: | This Proxy Statement and enclosed forms of Proxy (first mailed to the holders of Class A and Class C Common Stock, and to the holders of Class B and Class D Common Stock who requested to receive printed Proxy Materials, on or about April |
| 2. | Q: What is the purpose of the Annual Meeting? |
| A: | The Annual Meeting is being held for the following purposes (1) to have the holders of Class A and C Common Stock (voting together as a single class) elect one Class |
| 3. | Q: Why did holders of Class B and Class D Common Stock receive a notice in the mail regarding the internet availability of Proxy Materials instead of a full set of Proxy Materials? |
| A: | In accordance with “notice and access” rules adopted by the U.S. Securities and Exchange Commission, or SEC, we may furnish Proxy Materials, including this Proxy Statement and our Annual Report to Stockholders, to our stockholders by providing access to such documents on the internet instead of mailing printed copies. Holders of Class B and Class D Common Stock will not receive printed copies of the Proxy Materials unless they request them. Instead, the Notice, which was mailed to holders of Class B and Class D Common Stock that did not request printed copies of the Proxy Materials, will instruct you as to how you may access and review all of the Proxy Materials on the internet. Please visit http://www.edocumentview.com/uhs. The Notice also instructs you as to how you may submit your Proxy on the internet. If you would like to receive a paper or e-mail copy of our Proxy Materials, you should follow the instructions for requesting such materials in the Notice. |
| 4. | Q: Who may attend the Annual Meeting? |
| A: | All stockholders of record and registered beneficial holders as of the close of business on March |
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Universal Health Services, Inc. 20222023 Proxy Statement
Proxy Statement
| 5. | Q: How can I attend and vote at the online meeting? |
| A: | For registered stockholders: If on the record date your Shares were registered directly in your name with our transfer agent, Computershare Trust Company, N.A. (“Computershare”), then you are a stockholder of record (also known as a “record holder”). Stockholders of record at the close of business on the record date will be able to attend the Annual Meeting online, ask a question and vote by visiting www.meetnow.global/ |
For beneficial owners: If on the record date your Shares were not registered directly in your name with Computershare but instead held by an intermediary, such as a bank, broker or other nominee, then you are the beneficial owner of shares held in “street name”. The organization holding your account is considered to be the stockholder of record for purposes of voting at the Annual Meeting. As a beneficial owner, you must register in advance to attend the Annual Meeting, vote and submit questions. To register in advance you will need to obtain a legal proxy from the bank, broker or other nominee that holds your Shares giving you the right to vote the Shares. Once you have received a legal proxy form from your bank, broker or other nominee, forward the email with your name and the legal proxy attached or send a separate email with your name and legal proxy attached labeled “Legal Proxy” in the subject line to Computershare, at legalproxy@computershare.com. Requests for registration must be received no later than 5:00 p.m., Eastern Time, on May 13, 2022.12, 2023. You will then receive a confirmation of your registration, with a control number, by email from Computershare. At the time of the meeting, go to www.meetnow.global/MKLFJSMMRVPLHZ and enter your control number. If you do not have your control number you may attend as a guest (non-stockholder) by going to www.meetnow.global/MKLFJSM,MRVPLHZ, clicking on the “Guest” link and entering the requested information. Please note that guest access is in listen-only mode and you will not have the ability to ask questions or vote during the Annual Meeting.
| 6. | Q: Do I need to register to attend the Annual Meeting virtually? |
| A: | Registration is only required if you are a beneficial owner. Beneficial holders may register as set forth above or they may register at the Annual Meeting using the control number received with their voting information form. Beginning |
| 7. | Q: What if I have trouble accessing the Annual Meeting virtually? |
| A: | The virtual meeting platform is fully supported across browsers (MS Edge, Firefox, Chrome and Safari) and devices (desktops, laptops, tablets and cell phones) running the most up-to-date version of applicable software and plugins. Participants should ensure that they have a strong Wi-Fi connection wherever they intend to participate in the meeting. We encourage you to access the meeting prior to the start time. A link on the meeting page will provide further assistance should you need it, or you may call 1-888-724-2416. |
| 8. | Q: Who is entitled to vote at the Annual Meeting? |
| A: | Only stockholders as of the close of business on March |
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Universal Health Services, Inc. 20222023 Proxy Statement
Proxy Statement
| 9. | Q: Who is soliciting my vote? |
| A: | The principal solicitation of Proxies is being made by the Board of Directors by mail. Certain of our officers, directors and employees, none of whom will receive additional compensation therefor, may solicit Proxies by telephone or other personal contact. We will bear the cost of the solicitation of the Proxies, including postage, printing and handling and will reimburse the reasonable expenses of brokerage firms and others for forwarding material to beneficial owners of shares. We have not engaged any third party to assist us in solicitation of proxies at the Annual Meeting, but we may decide to retain the services of a proxy solicitation firm in the future if we believe it is appropriate under the circumstances. |
| 10. | Q: What items of business will be voted on at the Annual Meeting? |
| A: | The holders of Class A and C Common Stock (voting together as a single class) will elect one Class |
| 11. | Q: How does the Board of Directors recommend that I vote? |
| A: | The Board of Directors recommends that holders of Class A and Class C Common Stock and Class B and Class D Common Stock vote shares “FOR” the election of the respective nominees to the Board of Directors (Proposal 1). |
The Board of Directors recommends that holders of Class A, Class C, Class B and Class D Common Stock vote shares “FOR” the approvaladvisory (nonbinding) vote to approve named executive officer compensation (Proposal 2).
The Board of Directors recommends that holders of Class A, Class C, Class B and Class D Common Stock vote shares “FOR” the advisory (nonbinding) vote on the frequency of an amendment and restatement of the Company’s 2020 Omnibus Stock and Incentive Planadvisory stockholder vote to approve named executive officer compensation (Proposal 2)3).
The Board of Directors recommends that holders of Class A, Class C, Class B and Class D Common Stock vote shares “FOR” the ratification of the selection of PricewaterhouseCoopers LLP as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2022 (Proposal 3).
The Board of Directors recommends that holders of Class A, Class C, Class B and Class D Common Stock vote shares “AGAINST” the stockholder proposal regarding majority vote standard in director elections, if properly presented at the meeting;2023 (Proposal 4).
| 12. | Q: How will voting on any other business be conducted? |
| A: | Other than the items of business described in this Proxy Statement, we know of no other business to be presented for action at the Annual Meeting. As for any business that may properly come before the Annual Meeting, your signed Proxy gives authority to the persons named therein. Those persons may vote on such matters at their discretion and will use their best judgment with respect thereto. |
| 13. | Q: What is the difference between a “stockholder of record” and a “street name” holder? |
| A: | These terms describe how your shares are held. If your shares are registered directly in your name with Computershare, our transfer agent, you are a “stockholder of record.” If your shares are held in the name of a brokerage, bank, trust or other nominee as a custodian, you are a “street name” holder. |
| 14. | Q: How do I vote my shares if I am a stockholder of record? |
| A: | A separate form of Proxy applies to our Class A and Class C Common Stock and a separate form of Proxy applies to our Class B and Class D Common Stock. For specific instructions on how to vote your shares, please refer to the instructions on the Notice Regarding the Availability of Proxy Materials you received in the mail or, if you received printed Proxy Materials, your enclosed Proxy card. If you received printed Proxy Materials, enclosed is a Proxy card for the shares of stock held by you on the record date. If you received printed Proxy Materials, you may vote by signing and dating each |
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Universal Health Services, Inc. 2022 Proxy Statement
Proxy Statement
| Proxy card you receive and returning it in the enclosed prepaid envelope, or you may vote by telephone or internet. |
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Universal Health Services, Inc. 2023 Proxy Statement
Proxy Statement
| Unless otherwise indicated on the Proxy, shares represented by any Proxy will, if the Proxy is properly executed and received by us prior to the Annual Meeting, be voted “FOR” each of the nominees for director, “FOR” the advisory (nonbinding) vote to approve named executive officer compensation, “FOR” the approval, on an advisory (nonbinding) basis, of |
| 15. | Q: How do I vote by telephone or electronically? |
| A: | Instead of submitting your vote by mail on the enclosed Proxy card (if you received printed Proxy Materials), your vote can be submitted by telephone or electronically, via the internet. Please refer to the specific instructions set forth on the Notice Regarding the Availability of Proxy Materials or, if you received printed Proxy Materials, on the enclosed Proxy card. For security reasons, our electronic voting system has been designed to authenticate your identity as a stockholder. |
| 16. | Q: How do I vote my shares if they are held in street name? |
| A: | If your shares are held in street name, your broker or other nominee will provide you with a form seeking instruction on how your shares should be voted. |
| 17. | Q: Can I change or revoke my vote? |
| A: | Yes. Any Proxy executed and returned to us is revocable by delivering a later signed and dated Proxy or other written notice to our Secretary at any time prior to its exercise. Your Proxy is also subject to revocation by attending the meeting and voting online. |
| 18. | Q: How do I vote during the meeting? |
| A: | If you have not already voted your shares in advance as described above, provided you are a registered stockholder or a registered beneficial stockholder with a control number, you will also be able to vote your shares electronically during the Annual Meeting by clicking on the “Vote” tab on the virtual meeting site. Whether or not you plan to attend the Annual Meeting, we urge you to vote and submit your proxy in advance of or during the Annual Meeting by one of the methods described in the proxy materials. |
| 19. | Q: How do I ask questions during the meeting? |
| A: | If you are attending the meeting as a stockholder of record or registered beneficial owner, questions can be submitted by accessing the virtual meeting site at www.meetnow.global/ |
| 20. | Q: What constitutes a “quorum”? |
| A: | The holders of a majority of the common stock votes issued and outstanding and entitled to vote, either in person or represented by Proxy, constitutes a quorum. Proxies received but marked as abstentions and broker non-votes will be included in the calculation of the number of shares considered to be present at the meeting. |
| 21. | Q: What are our voting rights with respect to the election of directors? |
| A: | Our Restated Certificate of Incorporation provides that, with respect to the election of directors, holders of Class A Common Stock vote as a class with the holders of Class C Common Stock, and holders of Class B Common Stock vote as a class with holders of Class D Common Stock, with holders of all classes of Common Stock entitled to one vote per share. |
Each holder of Class A Common Stock may cumulate his or her votes for directors giving one candidate a number of votes equal to the number of directors to be elected, multiplied by the number of shares of Class A Common Stock, or he or she may distribute his or her votes on the same principle among as many candidates as he or she shall see fit. For a holder of Class A Common Stock to exercise his or her cumulative voting rights, the stockholder must give notice at the meeting of such intention to cumulate votes.
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Universal Health Services, Inc. 2023 Proxy Statement
Proxy Statement
As of March 24, 2022,22, 2023, the shares of Class A and Class C Common Stock constituted 9.7%10.3% of the aggregate outstanding shares of our Common Stock, had the right to elect five members of the Board of Directors and constituted 89.5%90.4% of our general voting power; and as of that date the shares of Class B and Class D Common Stock (excluding shares issuable upon exercise of options) constituted 90.3%89.7% of the outstanding shares of our Common Stock, had the right to elect two members of the Board of Directors and constituted 10.5%9.6% of our general voting power.
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Universal Health Services, Inc. 2022 Proxy Statement
Proxy Statement
| 22. | Q: What are our voting rights with respect to matters other than the election of directors? |
| A: | As to matters other than the election of directors, our Restated Certificate of Incorporation provides that holders of Class A, Class B, Class C and Class D Common Stock all vote together as a single class, except as otherwise provided by law. |
Each share of Class A Common Stock entitles the holder thereof to one vote; each share of Class B Common Stock entitles the holder thereof to one-tenth of a vote; each share of Class C Common Stock entitles the holder thereof to 100 votes (provided the holder of Class C Common Stock holds a number of shares of Class A Common Stock equal to ten times the number of shares of Class C Common Stock that holder holds); and each share of Class D Common Stock entitles the holder thereof to ten votes (provided the holder of Class D Common Stock holds a number of shares of Class B Common Stock equal to ten times the number of shares of Class D Common Stock that holder holds).
In the event a holder of Class C or Class D Common Stock holds a number of shares of Class A or Class B Common Stock, respectively, less than ten times the number of shares of Class C or Class D Common Stock that holder holds, then that holder will be entitled to only one vote for every share of Class C Common Stock, or one-tenth of a vote for every share of Class D Common Stock, which that holder holds in excess of one-tenth the number of shares of Class A or Class B Common Stock, respectively, held by that holder. The Board of Directors, in its discretion, may require holders of Class C or Class D Common Stock to provide satisfactory evidence that such owner holds ten times as many shares of Class A or Class B Common Stock as Class C or Class D Common Stock, respectively, if such facts are not apparent from our stock records.
| 23. | Q: Will my shares be voted if I do not sign and return my Proxy card or vote by telephone or internet? |
| A: | If you are a stockholder of record and you do not sign and return your Proxy card or vote by telephone or internet, your shares will not be voted at the Annual Meeting. If your shares are held in street name and you do not issue instructions to your broker, your broker may vote your shares at its discretion on routine matters, but may not vote your shares on nonroutine matters. Under the New York Stock Exchange rules, each of the proposals other than the ratification of the selection of the Company’s independent registered public accounting firm is deemed to be a nonroutine matter with respect to which brokers and nominees may not exercise their voting discretion without receiving instructions from the beneficial owner of the shares. |
| 24. | Q: What is a “broker non-vote”? |
| A: | “Broker non-votes” are shares held by brokers or nominees which are present in person or represented by Proxy, but which are not voted on a particular matter because instructions have not been received from the beneficial owner. Under the rules of the Financial Industry Regulatory Authority, member brokers generally may not vote shares held by them in street name for customers unless they are permitted to do so under the rules of any national securities exchange of which they are a member. Under the rules of the New York Stock Exchange, New York Stock Exchange-member brokers who hold shares of Common Stock in street name for their customers and have transmitted our Proxy solicitation materials to their customers, but do not receive voting instructions from such customers, are not permitted to vote on nonroutine matters. Under the New York Stock Exchange rules, each of the proposals other than the ratification of the selection of the Company’s independent registered public accounting firm is deemed to be nonroutine matters with respect to which brokers and nominees may not exercise their voting discretion without receiving instructions from the beneficial owner of the shares. |
| 25. | Q: What is the effect of a broker non-vote? |
| A: | Broker non-votes will be counted for the purpose of determining the presence or absence of a quorum but will not be considered present and entitled to vote on any matter for which a broker, bank or other nominee does not have authority. |
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Universal Health Services, Inc. 2023 Proxy Statement
Proxy Statement
| For the Annual Meeting, pursuant to the rules of the New York Stock Exchange, your broker, bank or other nominee will be permitted to vote for you without instruction only with respect to Proposal |
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Universal Health Services, Inc. 2022 Proxy Statement
Proxy Statement
| 26. | Q: What is the vote required to approve each proposal? |
| A: |
|
Item of Business | Votes Required for Approval | Abstentions | Withholding Authority | Signed But Unmarked Proxy Cards | Broker Non-Votes | |||||
Proposal 1: Election of Directors |
One Class
One Class
|
No effect |
No effect | Count as votes FOR |
No effect on voting | |||||
Proposal 2:
| Affirmative “FOR” vote of the holders of a majority of the voting power of shares of Class A, B, C, and D Common Stock, present in person or represented by Proxy and entitled to vote, voting together as a single class.
| Count as votes AGAINST | Not applicable | Count as votes FOR | No effect on voting | |||||
Proposal 3: Advisory (nonbinding) Vote on the Frequency of Future Advisory Votes on Named Executive Officer Compensation | Number of years (1, 2, or 3) receiving the highest number of votes. | No effect | Not applicable | Count as vote for EVERY THREE YEARS | No effect on voting | |||||
Proposal 4: Ratification of Independent Registered Public Accounting Firm
| Majority of the Class A, B, C and D Common Stock votes, present in person or represented by Proxy and entitled to vote.
| Count as votes AGAINST | Not applicable | Count as votes FOR | Not applicable | |||||
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| 27. | Q: Who will count the votes? |
| A: | The Secretary will count the Class A and Class C votes. Our transfer agent will count the Class B and Class D votes and serve as inspector of elections. |
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Universal Health Services, Inc. 2023 Proxy Statement
Proxy Statement
| 28. | Q: When are stockholder proposals or director nominations due |
| A: | Any stockholder proposal intended to be included in the proxy materials for the |
In addition, our Amended and Restated Bylaws require that the Company be given advanced notice of stockholder proposals containing nominations for election to the Board of Directors or other matters which stockholders wish to present for action at an annual meeting. These requirements are separate from, and in addition to, the requirements discussed above to have the stockholder proposal included in the proxy materials for the 2024 Annual Meeting pursuant to the SEC’s rules. The Company’s Amended and Restated Bylaws separately require that any stockholder proposal intended to be brought before the annual meeting of stockholders, including a proposal nominating one or more persons for election as directors, be received in writing by our Secretary at the address listed above not later than the close of business on the 90th day nor earlier than the close of business on the 120th day prior to the first anniversary of the preceding year’s annual meeting, for the 2024 Annual Meeting being between January 18, 2024 and February 17, 2024, provided, however, that in the event that the date of the 2024 Annual Meeting is advanced by more than 30 days, or delayed by more than 30 days, from the first anniversary of the 2023 Annual Meeting, the notice must be received no earlier than the close of business on the 120th day prior to such meeting and not later than the close of business on the later of the 90th day prior to such meeting or the 10th day following the day on which public announcement of the date of such meeting is first made.
Our Amended and Restated Bylaws set forth certain informational requirements for stockholders’ nominations of directors and other proposals. In addition to satisfying the requirements under our Amended and Restated Bylaws, in order to comply with the new universal proxy rules, stockholders who intend to solicit proxies in support of director nominees, other than the Company’s nominees, must provide notice that sets forth the information required by Rule 14a-19 under the Exchange Act.
| 29. | Q: Can I receive more than one set of Annual Meeting materials? |
| A: | If you share an address with another stockholder, each stockholder may not receive a separate copy of our Annual Report and Proxy Statement. We will promptly deliver a separate copy of either document to any stockholder upon written or oral request to our Secretary at Universal Health Services, Inc., Universal Corporate Center, 367 South Gulph Road, P.O. Box 61558, King of Prussia, Pennsylvania 19406, telephone (610) 768-3300. If you share an address with another stockholder and (i) would like to receive multiple copies of the Proxy Statement or Annual Report to Stockholders in the future, or (ii) if you are receiving multiple copies and would like to receive only one copy per household in the future, please contact your bank, broker, or other nominee record holder, or you may contact us at the above address and phone number. |
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Universal Health Services, Inc. 2022 Proxy Statement
Proxy Statement
| 30. | Q: How can I obtain additional information about the Company? |
| A: | Copies of our annual, quarterly and current reports we file with the |
As required by Delaware law, the names of registered shareholders entitled to vote at the virtual Annual Meeting will be available for a period of ten days prior toending on the day before the date of the Annual Meeting for any purpose germane to the Annual Meeting, between the hours of 9:00 a.m. and 4:00 p.m., at our principal executive offices at Universal Corporate Center, 367 South Gulph Road, P.O. Box 61558, King of Prussia, Pennsylvania 19406. Due to the COVID-19 pandemic, registered shareholders must make an appointment and must comply with the company’s COVID-19 protocols. The stockholder list will be available at the Annual Meeting, and through the conclusion of the Meeting, on the virtual Annual Meeting website at www.meetnow.global/MKLFJSM. Only those persons logging into the virtual Annual Meeting as a registered stockholder will be able to access the list and you will be required to provide the 15-digit control number found on your Notice, proxy card and electronic notification that was mailed or made available to you on or about April 7, 2022.
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Universal Health Services, Inc. 20222023 Proxy Statement
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth as of March 24, 2022,22, 2023, the number of shares of our equity securities and the percentage of each class beneficially owned, within the meaning of Securities and Exchange Commission Rule 13d-3, and the percentage of our general voting power currently held, by (i) all stockholders known by us to own more than 5% of any class of our equity securities, (ii) all of our directors and nominees who are stockholders (including Lawrence S. Gibbs, who resigned from the Board of Directors effective as of March 31, 2023), (iii) the executive officers named in the Summary Compensation Table and (iv) all directors and executive officers as a group. Except as otherwise specified, the named beneficial owner has sole voting and investment power.
| Title of Class | Title of Class | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Name and Address of Beneficial Owner(1)
| Class A Common Stock(2) | Class B Common Stock(2) | Class C Common Stock(2) | Class D Common Stock(2) | Percentage of General Voting Power(3) | Class A Common Stock(2) | Class B Common Stock(2) | Class C Common Stock(2) | Class D Common Stock(2) | Percentage of General Voting Power(3) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Shares | % | Shares | % | Shares | % | Shares | % | Shares | % | Shares | % | Shares | % | Shares | % | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Alan B. Miller | 5,163,885 | (6)(17)(20) | 78.5 | % | 8,846,421 | (4)(11)(12)(18)(21) | 11.9 | % | 661,688 | 100 | % | — | — | 86.5 | % | 5,163,885 | (6)(16)(19) | 78.5 | % | 9,043,123 | (4)(11)(12)(17)(20)(22) | 12.2 | % | 661,688 | 100 | % | — | — | 87.0 | % | ||||||||||||||||||||||||||||||||||||||||||
Marc D. Miller | 1,641,815 | (7)(15)(17)(22) | 25.0 | % | 2,773,569 | (4)(11)(14)(18)(19) | 4.0 | % | — | — | — | — | 2.7 | % | 1,641,815 | (7)(14)(16)(21) | 25.0 | % | 2,918,231 | (4)(11)(13)(17)(18) | 4.3 | % | — | — | — | — | 2.7 | % | ||||||||||||||||||||||||||||||||||||||||||||
Elliot J. Sussman, M.D. The Villages Health 3619 Kiessel Road The Villages, FL 32163 | — | — | 12,500 | (11) | (5) | — | — | — | — | (5) | — | — | 21,680 | (11)(23) | (5) | — | — | — | — | (5) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Maria R. Singer New York, NY 10167 | — | — | 7,500 | (11) | (5) | — | — | — | — | (5) | — | — | 14,180 | (11)(23) | (5) | — | — | — | — | (5) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Warren J. Nimetz Norton Rose Fulbright US LLP 1301 Avenue of the Americas New York, NY 10019 | 799,830 | (13)(16)(20)(22) | — | 996,256 | (4)(11)(14) | (5) | — | — | — | — | (5) | 377,530 | (15)(19) | — | 411,710 | (4)(11)(23) | (5) | — | — | — | — | (5) | ||||||||||||||||||||||||||||||||||||||||||||||||||
Lawrence S. Gibbs 48 Crescent Road Livingston, NJ 07039 | — | — | 26,869 | (11) | (5) | — | — | — | — | (5) | — | — | 26,410 | (11)(23) | (5) | — | — | — | — | (5) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Eileen C. McDonnell The Penn Mutual Life Insurance Company 600 Dresher Road Horsham, PA 19044 | — | — | 16,077 | (11) | (5) | — | — | — | — | (5) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Eileen C. McDonnell | — | — | 23,008 | (11)(23) | (5) | — | — | — | — | (5) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Nina Chen-Langenmayr | — | — | — | (5) | — | — | — | — | (5) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Steve G. Filton | — | — | 457,201 | (8)(11) | (5) | — | — | — | — | (5) | — | — | 521,243 | (8)(11) | (5) | — | — | — | — | (5) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Marvin G. Pember | — | — | 200,716 | (11) | (5) | — | — | — | — | (5) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Edward H. Sim | — | — | — | (5) | — | — | — | — | (5) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Matthew J. Peterson | — | — | 48,455 | (11) | (5) | — | — | — | — | (5) | — | — | 102,218 | (11) | (5) | — | — | — | — | (5) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
BlackRock, Inc. 55 East 52nd Street New York, NY 10055 | — | — | 4,913,253 | (9) | 7.3 | % | — | — | — | — | (5) | — | — | 4,625,635 | (9) | 7.3 | % | — | — | — | — | (5) | ||||||||||||||||||||||||||||||||||||||||||||||||||
First Eagle Investment Management, LLC 1345 Avenue of the Americas New York, NY 10105 | — | — | 4,099,131 | (10) | 6.1 | % | — | — | — | — | (5) | — | — | 4,733,178 | (10) | 7.6 | % | — | — | — | — | (5) | ||||||||||||||||||||||||||||||||||||||||||||||||||
FMR LLC 245 Summer Street Boston, MA 02210 | — | — | 5,433,130 | (23) | 8.1 | % | — | — | — | — | (5) | — | — | 5,689,836 | (24) | 9.0 | % | — | — | — | — | (5) | ||||||||||||||||||||||||||||||||||||||||||||||||||
Invesco Ltd. 1555 Peachtree Street NE Suite 1800 Atlanta, GA 30309 | — | — | 3,811,217 | (24) | 5.7 | % | — | — | — | — | (5) | — | — | 4,898,383 | (25) | 7.8 | % | — | — | — | — | (5) | ||||||||||||||||||||||||||||||||||||||||||||||||||
The Vanguard Group 100 Vanguard Blvd. Malvern, PA 19355 | — | — | 7,709,190 | (25) | 11.5 | % | — | — | — | — | 1.2 | % | — | — | 7,294,009 | (26) | 11.6 | % | — | — | — | — | 1.2 | % | ||||||||||||||||||||||||||||||||||||||||||||||||
All directors & executive officers as a group (10 persons) | 6,574,600 | 99.96 | % | 11,783,208 | 15.4 | % | 661,688 | 100.0 | % | — | — | 89.8 | % | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
All directors & executive officers as a group (11 persons)(27) | 6,574,600 | 99.96 | % | 12,073,173 | 16.6 | % | 661,688 | 100.0 | % | — | — | 90.5 | % | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| (1) | Unless otherwise shown, the address of each beneficial owner is c/o Universal Health Services, Inc., Universal Corporate Center, 367 South Gulph Road, King of Prussia, PA 19406. |
| (2) | Each share of Class A, Class C and Class D Common Stock is convertible at any time into one share of Class B Common Stock. |
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Universal Health Services, Inc. 20222023 Proxy Statement
Security Ownership of Certain Beneficial Owners and Management
| (3) | As to matters other than the election of directors, holders of Class A, Class B, Class C and Class D Common Stock vote together as a single class. Each share of Class A Common Stock entitles the holder thereof to one vote; each share of Class B Common Stock entitles the holder thereof to one-tenth of a vote; each share of Class C Common Stock entitles the holder thereof to 100 votes (provided the holder of Class C Common Stock holds a number of shares of Class A Common Stock equal to ten times the number of shares of Class C Common Stock that holder holds); and each share of Class D Common Stock entitles the holder thereof to ten votes (provided the holder of Class D Common Stock holds a number of shares of Class B Common Stock equal to ten times the number of shares of Class D Common Stock that holder holds). |
| (4) | Includes shares issuable upon the conversion of Classes A, C and/or D Common Stock. |
| (5) | Less than 1% of the class of stock or general voting power. |
| (6) | Includes 400,000 shares of Class A Common Stock that are beneficially owned by Mr. Alan Miller and are held by Mr. Alan Miller in trust for the benefit of his spouse. |
| (7) | Includes 337,321 shares of Class A Common Stock which are held by three trusts (the “2002 Trusts”) for the benefit of certain of Alan B. Miller’s family members of which Marc D. Miller (who is the Chief Executive Officer and President, director and the son of Alan B. Miller) and Mr. Nimetz are trustees; and 532,194 shares held by the A. Miller Family, LLC, whose members are the 2002 Trusts. Marc D. Miller is the sole manager of the A. Miller Family, LLC and during his tenure as such, has voting and dispositive power with respect to the Class A Common Stock held by the A. Miller Family, LLC and sole voting and dispositive power with respect to the shares held by the 2002 Trusts. Mr. Nimetz disclaims beneficial interest in all shares held by the 2002 Trusts and the A. Miller Family LLC. Marc D. Miller disclaims beneficial interest in the shares held by the 2002 Trusts and the A Miller Family LLC other than those of which Marc Miller is the beneficiary. |
| (8) | Includes 161,000 shares of Class B Common Stock which are held by two Irrevocable Trusts. Mr. Filton is the Trustee and beneficiary of The Betsy H. Filton 2020 Irrevocable Trust (80,500 shares) and disclaims beneficial ownership of The Steve G. Filton 2020 Irrevocable Trust, of which Mr. Filton’s spouse is the Trustee and beneficiary (80,500 shares). |
| (9) | These securities are held by Blackrock, Inc. and its subsidiaries. Blackrock, Inc. has sole power to vote with respect to |
| (10) | These securities are held by First Eagle Investment Management, LLC and its subsidiaries. First Eagle Investment Management, LLC has sole power to vote with respect to |
| (11) | Includes |
| (12) | Includes |
| (13) |
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Includes 171,426 shares held by the three 2011 Family Trusts for the benefit of Alan B. Miller’s three children. |
Includes 237,800 shares held by the 2012 Family Trust for the benefit of Abby Miller King and Marni Spencer. |
Includes |
Includes 350,000 shares held by three separate limited liability companies, 100% of the interests of which are held by Alan B. Miller and the three 2002 Trusts for the benefit of Alan B. Miller’s three children. Alan B. Miller has the sole dispositive power and Marc D. Miller has sole voting power with respect to these shares. Marc D. Miller disclaims beneficial ownership of the shares held by the 2002 Trust for the benefit of Abby Miller King (100,000) and the shares held by the 2002 Trust for the benefit of Marni Spencer (100,000). |
Includes 400,000 shares held by the three separate limited liability companies, 100% of the interests of which are held by Alan B. Miller and the three 2002 Trusts for the benefit of Alan B. Miller’s three children. Alan B. Miller has the sole dispositive power and Marc D. Miller has sole voting power with respect to these shares. Marc D. Miller disclaims beneficial ownership of the shares held by and the 2002 Trust for the benefit of Abby Miller King (100,000) and the shares held by the 2002 Trust for the benefit of Marni Spencer (100,000). |
Includes 110,172 shares held by the three 2002 Trusts for the benefit of Alan B. Miller’s three children. |
Includes 258,630 shares held by The Alan B. Miller 2002 Trust. Warren Nimetz is the Trustee of the Trust and has sole voting and dispositive power with respect to these shares. Mr. Nimetz disclaims any beneficial interest in the shares. |
Excludes |
Includes 184,500 shares of Class A Common Stock which are held by three sub-trusts (the “2017 Sub-Trusts”) for the benefit of certain of Alan B. Miller’s family members of which Marc D. Miller |
| (22) | Includes 76,783 shares held by the three 2022 Grantor Retained Annuity Trusts. Alan B. Miller has sole dispositive power and sole voting power with respect to these shares. |
| (23) | Includes 8,400 restricted stock units which will convert to Class B Common Stock upon vesting. These units are held by our directors and scheduled to vest within 60 days of March 22, 2023 as follows: Elliot J. Sussman, M.D. (1,680); Lawrence S. Gibbs (1,680); Eileen C. McDonnell (1,680); Warren Nimetz (1,680); and Maria R. Singer (1,680). |
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Universal Health Services, Inc. 2023 Proxy Statement
Security Ownership of Certain Beneficial Owners and Management
| (24) | These securities are held by FMR LLC and its subsidiaries. FMR LLC has sole power to vote with respect to |
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Universal Health Services, Inc. 2022 Proxy Statement
Security Ownership of Certain Beneficial Owners and Management
These securities are held by Invesco Ltd. and its subsidiaries. Invesco Ltd. has sole power to vote with respect to |
These securities are held by The Vanguard Group and its subsidiaries. Vanguard Group has shared power to vote or direct the vote with respect to |
| (27) | Notes (4)—(8) and (11)—(23) apply to the respective directors and executive officers as further indicated above. |
Equity Compensation Plan Information
The table below provides information, as of the end of December 31, 2021,2022, concerning securities authorized for issuance under our equity compensation plans.
Plan Category(1.) | (a) Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights(2.) | (b) Weighted Average Exercise Price of Outstanding Options, Warrants and Rights | (c) Number of Securities Remaining Available for Future Issuance under Equity Compensation Plan (excluding securities reflected in column (a))(3.)(4.) | (a) Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights(2.) | (b) Weighted Average Exercise Price of Outstanding Options, Warrants and Rights | (c) Number of Securities Remaining Available for Future Issuance under Equity Compensation Plan (excluding securities reflected in column (a))(3.)(4.) | |||||||||||||||||||||
Equity compensation plans approved by security holders | 8,556,115 | $ | 116.80 | 3,660,667 | 7,875,667 | $ | 122.04 | 7,168,146 | |||||||||||||||||||
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Total | 8,556,115 | $ | 116.80 | 3,660,667 | 7,875,667 | $ | 122.04 | 7,168,146 | |||||||||||||||||||
Shares of Class B Common Stock. |
As of March |
As of March |
For purposes of determining the remaining number of shares subject to the Company’s 2020 Omnibus and Stock Incentive Plan, each share underlying a stock option or SAR shall be counted as one (1) share, while all other awards, including full-value restricted stock or units, shall be counted as four (4) shares against the reserve balance for future issuance. |
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Universal Health Services, Inc. 20222023 Proxy Statement
PROPOSAL NO. 1
ELECTION OF DIRECTORS
Our Restated Certificate of Incorporation provides for a Board of Directors of not fewer than three members nor more than nine members.members, the exact number to be determined by the Board of Directors. The Board of Directors is currently comprised of seveneight members, and is divided into three classes, with members of each class serving for a three-year term. At each Annual Meeting of Stockholders, directors are chosen to succeed those in the class whose term expires at such Annual Meeting and, in the case of this Annual Meeting, directors will be elected as Class IIIII directors. Under
On March 20, 2023, Class III director Lawrence S. Gibbs notified the Board of Directors that he accepted a new employment opportunity which restricts his ability to serve on the Board of Directors. Therefore, Mr. Gibbs resigned from the Board of Directors effective as of March 31, 2023 and accordingly will not stand for reelection at the 2023 Annual Meeting of Stockholders. Mr. Gibbs’ decision to resign was not due to any disagreement with the Company, its management, or the Board of Directors on any matter relating to our Restated Certificateoperations, policies or practices. Upon Mr. Gibbs’ resignation having become effective on March 31, 2023, the Board of Incorporation, holdersDirectors determined to set the number of directors comprising the Board of Directors to seven directors. Thus, after March 31, 2023, the Board of Directors consists of seven directors. Holders of shares of our outstanding Class B and Class D Common Stock (voting together as a single class) are entitled to elect 20% (but not less than one) of thetwo directors, currently two directors, one in Class II and one in Class III, and the holders of Class A and Class C Common Stock (voting together as a single class) are entitled to elect the remaining five directors, currently three in Class I, one in Class II, and one in Class III.
The persons listed below include the members of our Board of Directors whose term of office will continue after the meeting and nominees. The terms of the current Class IIIII directors, Mr. Warren J. NimetzAlan B. Miller and Ms. Maria R. SingerNina Chen-Langenmayr, expire at the 20222023 Annual Meeting. Mr. Warren J. NimetzAlan B. Miller has been nominated to be elected by the holders of Class A and C Common Stock and Ms. Maria R. SingerNina Chen-Langenmayr has been nominated to be elected by the holders of Class B and D Common Stock. We have no reason to believe that any of the nominees will be unavailable for election; however, if either nominee becomes unavailable for any reason, the shares represented by the Proxy will be voted for the person, if any, who is designated by the Board of Directors to replace the nominee. All nominees have consented to be named and have indicated their intent to serve if elected. The following information is furnished with respect to each of the nominees for election as a director and each member of the Board of Directors whose term of office will continue after the meeting.
The Board of Directors believes that it is essential that its members represent diverse viewpoints, with a broad array of experiences, professions, skills, geographic representation and backgrounds, including diversity of gender and race that, when considered as a group, provide a sufficient mix of perspectives to allow the Board of Directors to best fulfill its responsibilities to the long-term interests of our stockholders. The Board has tworefreshed the Board by replacing 50% of the non-management members of the Board within the last five years. The Board has three female members, one of whom, Eileen McDonnell, serves as lead director and has refreshed the Board by replacing 60%one of the non-management members of the Board within the last four years. The Board believes that itwhom is important to further increase the diversity of the Board. In that regard the Nominating and Governance Committee has recommended to the Board and the Board has agreed to actively seek and is committed to add a member of an underrepresented minority group to the Board within the next year. The Company’s executive recruiter has recently commenced the candidate search.group.
Director Nominees
Class II Directors
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Universal Health Services, Inc. 2022 Proxy Statement
Proposal No. 1
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Directors whose Terms Expire in 2023
Class III Directors
Alan B. Miller | ||||
Director Since: 1978 Age:
| Class of Stockholders Entitled to Vote: • A Common • C Common | Committee Membership: • Executive (Chair) • Finance (Chair) | ||
Business Experience Mr. Alan B. Miller, who had previously served as our Chief Executive Officer since our inception in 1978, stepped down from that role effective as of January 1, 2021 and assumed the role of Executive Chairman of the Board. Prior to 1978, Mr. Alan B. Miller was Chairman of the Board, Chief Executive Officer and President of American Medicorp, Inc. Mr. Alan B. Miller continues to serve as Chairman of the Board of Trustees, Chief Executive Officer and President of Universal Health Realty Income Trust. He is the father of Marc D. Miller, a Director, and our Chief Executive Officer and President. | ||||
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Universal Health Services, Inc. 2023 Proxy Statement
Proposal No. 1
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Director Since: Age:
| Class of Stockholders Entitled to Vote: • B Common • D Common | Committee Membership: •
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Business Experience
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Universal Health Services, Inc. 2022 Proxy Statement
Proposal No. 1
Directors whose Terms Expire in 2024
Class I Directors
Elliot J. Sussman, M.D. | ||||
Director Since: 2018 Age:
| Class of Stockholders Entitled to Vote: • A Common • C Common | Committee Membership: • Audit • Compensation • Nominating and Governance (Chair) • Quality and Compliance (Chair) | ||
Business Experience Chairman of The Villages Health. Former President and Chief Executive Officer of Lehigh Valley Hospital and Health Network from 1993 to 2010. A member of the Board of Directors of Yale New Haven Health System since 2011. Chair of Board of Directors of North East Medical Group, a wholly owned subsidiary of Yale New Haven Health System. | ||||
Marc D. Miller | ||||
Director Since: 2006 Age:
| Class of Stockholders Entitled to Vote: • A Common • C Common | Committee Membership: • Executive • Finance | ||
Business Experience Appointed as our Chief Executive Officer in January 2021 and continues to serve as President. Previously served as Senior Vice President and Co-Head of our Acute Care Division since 2007 and served as a Vice President since 2004. Also served in various roles in our Acute Care Division since 2003 and served in other management positions at various hospitals from 1999 to 2003. Currently serves as a member of the Board of Trustees of Universal Health Realty Income Trust and as a member of the Board of Directors of Premier, Inc. Son of Alan B. Miller, our Executive Chairman, and former Chief Executive Officer. | ||||
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Universal Health Services, Inc. 2023 Proxy Statement
Proposal No. 1
Eileen C. McDonnell | ||||
Director Since: 2013 Age:
| Class of Stockholders Entitled to Vote: • A Common • C Common | Committee Membership: • Audit (Chair) • Compensation (Chair) • Executive | ||
Business Experience Ms. McDonnell currently serves as | ||||
Directors whose Terms Expire in 2025
Class II Directors
Warren J. Nimetz | ||||
Director Since: 2018 Age: 66 | Class of Stockholders Entitled to Vote: • A Common • C Common | Committee Membership: • Executive • Finance | ||
Business Experience Mr. Nimetz is a Partner at the law firm of Norton Rose Fulbright US LLP and has been an attorney since 1979. We utilized during the year ended December 31, 2022, and currently utilize, the services of Norton Rose Fulbright US LLP as outside counsel. | ||||
Maria R. Singer | ||||
Director Since: 2020 Age: 49 | Class of Stockholders Entitled to Vote: • B Common • D Common | Committee Membership: • Audit • Finance • Nominating and Governance • Quality and Compliance | ||
Business Experience Ms. Singer is Chief Operating Officer, Corporate Finance at Houlihan Lokey. She previously served as Managing Director and COO of Blackstone Advisory Partners from 2008-2015. She served in various roles at Lehman Brothers, Inc. from 2002-2008, including Senior Vice President, Office of the Chairman and Senior Vice President, Debt Capital Markets. | ||||
See the “Corporate Governance” section for additional information about our Board of Directors.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THE ELECTION OF THESE
NOMINEES AS DIRECTORS.
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Universal Health Services, Inc. 20222023 Proxy Statement
PROPOSAL NO. 2
AMENDMENT AND RESTATEMENT OF 2020 OMNIBUS STOCK AND INCENTIVE PLAN
On March 23, 2022, the Board of Directors adopted an amendment and restatement of our 2020 Omnibus Stock and Incentive Plan (the “2020 Stock Incentive Plan”), subject to the approval of our stockholders at the 2022 Annual Meeting. The amendment adopted by the Board would:
increase the number of shares of our Class B Common Stock that may be issued under the 2020 Stock Incentive Plan by 6.0 million (to 12.1 million shares from 6,100,000 shares); and
reduce the maximum term of awards from 10 years to five years.
We are not seeking stockholder approval of any other changes to the 2020 Stock Incentive Plan. The full text of the Amended and Restated 2020 Stock Incentive Plan is attached hereto as Exhibit A.ADVISORY VOTE ON NAMED EXECUTIVE OFFICER COMPENSATION
As of March 24, 2022, awards with respect to approximately 4.1 million shares, net of cancellations, of our Class B Common Stock had been issued under the 2020 Stock Incentive Plan, of which awards for approximately 4.1 million shares were outstanding (with a weighted-average option price of $142.17 per share and a weighted-average remaining term of 4.4 years). All current outstanding stock options have terms that do not exceed five years. In addition, there were approximately 304,565 full-value restricted stock units, net of cancellations, issued under the 2020 Stock Incentive Plan, of which approximately 269,555 are outstanding as of March 24, 2022. Additionally, there were 73,782 performance-based restricted stock units issued, all of which remain outstanding as of March 24, 2022. The restricted stock units do not have any voting rights. Only approximately 487,761 shares remained available for future grants (assuming full vesting and exercise of all of the then outstanding awards). On March 24, 2022, the closing price of a share of Class B Common Stock, as reported on the New York Stock Exchange, was $146.35.
The Board of Directors believes that the 6.0 million share increase covered by the proposal should be sufficient to enable us to continue making an adequate level of awards under the 2020 Stock Incentive Plan for approximately two more years, based upon the grant levels during the past ten years. If an increasediscussed in the number of authorized shares is not approved, the number of remaining available shares would be insufficient to cover an appropriate level of awards for even one year. The Board of Directors believes that reducing the maximum term of awards under the 2020 Stock Incentive Plan will provide the Company with greater flexibility in respect of future grants under the plan with no adverse effect, given that the Company has never granted awards under with a term greater than five years.
Long-term equity incentive compensation has been and is expected to continue to be a necessary and key component of our overall compensation program. The Board believes that our ability to grant equity-based incentive compensation under the 2020 Stock Incentive Plan enables us to meet several important objectives, including, for example, fostering an ownership mentality that aligns the interests of our management and other key personnel with those of our stockholders, and enabling us to recruit, attract, motivate, reward and retain qualified individuals whose skills, experience and efforts contribute to the success of our business and the enhancement of stockholder value. If this proposal is not approved, we will run out of shares and lose our main vehicle for providing equity-based incentive opportunities to our employees. The Board believes this would present serious challenges to our ability to attract and retain management and other key personnel and, if not addressed in other ways, would be detrimental to our business and the interests of our stockholders. Our executive officers and directors have an interest in the continuation of the 2020 Stock Incentive Plan because they are eligible for awards under the 2020 Stock Incentive Plan.
Description of 2020 Stock Incentive Plan
The following summary describes the principal features of the 2020 Stock Incentive Plan and is qualified in its entirety by reference to the full text of the plan document, which is attached hereto as Exhibit A.
Purpose
The purpose of the 2020 Stock Incentive Plan is to advance the interests of the Company and increase stockholder value by providing additional incentives to attract, retain and motivate those qualified and competent employees, directors, and consultants upon whose efforts and judgment its success is largely dependent.
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Universal Health Services, Inc. 2022 Proxy Statement,
Proposal No. 2
Eligibility
Awards may be granted pursuant to the 2020 Stock Incentive Plan to any of our present or future employees, consultants and outside directors. Actual selection of any eligible individual to receive an award pursuant to the 2020 Stock Incentive Plan is within the sole discretion of the Compensation Committee or its authorized delegate (where applicable, references herein to the Compensation Committee are inclusive of its authorized delegate). “Incentive stock options” may be granted only to employees, and all other awards may be granted to either employees, consultants or outside directors.
Types of Awards
The 2020 Stock Incentive Plan authorizes the granting of “incentive stock options” and “non-qualified stock options” to purchase shares of our common stock. The maximum number of shares of common stock available for issuance pursuant to incentive stock options granted under the 2020 Stock Incentive Plan is the same as the number of shares of common stock available for issuance under the 2020 Stock Incentive Plan. In accordance with the rules under the Internal Revenue Code of 1986, as amended, for incentive stock options, the 2020 Stock Incentive Plan provides that incentive stock options granted to any particular employee may not “vest” for more than $100,000 in fair market value of the common stock (measured on the grant date) in any calendar year. If incentive stock options granted to a participant would vest for more than $100,000 in any calendar year, then such incentive stock options will, to such extent, be treated as non-statutory stock options. Unless the context otherwise requires, the term “options” includes both incentive stock options and non-qualified stock options.
The 2020 Stock Incentive Plan also authorizes awards of restricted stock. A restricted stock award is the grant of shares of our common stock that are nontransferable and may be subject to substantial risk of forfeiture until specific conditions are met. The vesting and number of shares of a restricted stock award may be determined by the Compensation Committee. Except as otherwise provided in the agreement granting the restricted stock award, the recipient of restricted stock will have all of the rights of a stockholder, including with respect to voting rights, other than the right to receive dividends on unvested restricted stock (although the agreement granting the restricted stock award may allow for the accrual of dividend equivalents on unvested restricted stock).
The 2020 Stock Incentive Plan also authorizes the granting of stock appreciation rights, or SARs. A SAR is the right to receive payment of an amount equal to the excess of the fair market value of a share of our common stock on the date of exercise of the SAR over the grant price of the SAR (which grant price may not be less than the fair market value of a share of our common stock on the date of grant of the SAR). SARs may be granted under the 2020 Stock Incentive Plan in tandem with other awards.
The 2020 Stock Incentive Plan also authorizes awards of restricted stock units that, that once vested (based on the criteria the Compensation Committee establishes, which may be based on the passage of time or the attainment of performance-based conditions), may be settled in a number of shares of our common stock equal to the number of units earned, or in cash equal to the fair market value of the number of shares of our common stock (or a combination of stock and cash) earned in respect of the number of units earned.
The 2020 Stock Incentive Plan also authorizes awards of restricted stock units and awards intended to be performance-based awards that are payable in stock, cash, or a combination of stock and cash. Any performance-based awards granted will vest upon the achievement of performance objectives. The Compensation Committee will establish the performance measure as well as the length of the performance period.
Administration
The 2020 Stock Incentive Plan is administered by the Compensation Committee (or by the Board of Directors to the extent reserved or determined by the Board of Directors). The Compensation Committee has the authority to interpret and adopt rules and regulations for carrying out the 2020 Stock Incentive Plan. All decisions and acts of the Compensation Committee shall be final and binding on all participants under the 2020 Stock Incentive Plan.
The Compensation Committee will have the full power and authority under the 2020 Stock Incentive Plan to:
Designate participants to receive awards;
Determine the type or types of awards to be granted to each participant;
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Universal Health Services, Inc. 2022 Proxy Statement
Proposal No. 2
Determine the number of awards to be granted and the number of shares to which an award will relate;
Determine the terms and conditions of any award, including, but not limited to, the exercise price, grant price, or purchase price, any restrictions or limitations on the award, any schedule for lapse of forfeiture restrictions or restrictions on the exercisability of an award, and accelerations or waivers thereof, any provisions related to non-competition and recapture of gain on an award, based in each case on such considerations as the Compensation Committee in its sole discretion determines;
Determine whether, to what extent, and pursuant to what circumstances an award may be settled in, or the exercise price of an award may be paid in, cash, shares, other awards, or other property, or an award may be canceled, forfeited, or surrendered;
Prescribe the form of each award agreement, which need not be identical for each participant;
Decide all other matters that must be determined in connection with an award;
Establish, adopt, or revise any rules and regulations as it may deem necessary or advisable to administer the 2020 Stock Incentive Plan;
Suspend or terminate the 2020 Stock Incentive Plan at any time provided that such suspension or termination does not impair rights and obligations under any outstanding award without written consent of the affected participant;
Interpret the terms of, and any matter arising pursuant to, the 2020 Stock Incentive Plan or any award agreement thereunder; and
Make all other decisions and determinations that may be required pursuant to the 2020 Stock Incentive Plan or as the Compensation Committee deems necessary or advisable to administer the 2020 Stock Incentive Plan.
Authorized Shares and Share Counting Method
Subject to the approval of the Amendment and Restatement of the 2020 Stock Incentive Plan at the 2022 Annual Meeting, a total of 12.1 million shares of our common stock (subject to adjustment as discussed below) may be issued under the 2020 Stock Incentive Plan. Authorized shares are counted and subject to adjustments, as described below:
Shares that are subject to stock options and SARs shall be counted as one share for every one share subject to stock options and SARs.
Shares that are subject to restricted stock awards, restricted stock unit awards, performance shares and other share-based awards shall be counted as four shares for every one share subject to such awards.
The following shares shall not be added to the number of shares authorized: shares tendered or withheld to satisfy the grant or exercise price or tax withholding obligation related to any award; shares not issued or delivered as a result of the net settlement of an outstanding stock option or SAR; and shares repurchased by us on the open market with the cash proceeds of the exercise price from stock options.
To the extent that any share-based award under the 2020 Stock Incentive Plan terminates, expires, is cancelled or is paid in cash, the available shares subject to such award shall remain available shares; shares will be added back as one share if they were subject to a stock option or a SAR and as four shares if they were subject to a restricted stock award, restricted stock unit award, performance share or other share-based award.
Substitute awards issued in connection with acquiring other companies shall neither increase nor decrease the shares authorized under the 2020 Stock Incentive Plan.
Granting of Awards
The Compensation Committee may from time to time grant awards in its discretion. In granting awards, the Compensation Committee may take into consideration the contribution the eligible person has made or may be reasonably expected to make to our success and such other factors as the Compensation Committee determines. The number of discretionary grants to be made under the 2020 Stock Incentive Plan in the future to our directors and executive officers, including our named executive officers, and the dollar values of such grants, are not determinable.
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Universal Health Services, Inc. 2022 Proxy Statement
Proposal No. 2
Exercise Price of Options and Grant Price of SARs
The exercise price of options granted under the 2020 Stock Incentive Plan shall be any price determined by the Compensation Committee, but may not be less than the fair market value of our common stock on the date of grant. The exercise price of incentive stock options shall not be less than 110% of the fair market value on the date of grant if the optionee owns, directly or indirectly, stock possessing more than 10% of the total combined voting power of all classes of our stock.
The grant price of SARs granted under the 2020 Stock Incentive Plan shall be determined by the Compensation Committee, and may not be less than the fair market value of our common stock on the date of grant.
Price of Restricted Stock
The price, if any, to be paid by a recipient for restricted stock awarded under the 2020 Stock Incentive Plan shall be determined by the Compensation Committee. As a condition to the grant of a restricted stock award, if required by applicable law, the Compensation Committee will require the person receiving the award to pay to us an amount equal to the par value of the restricted stock granted under the award.
Payment of Exercise Price
Unless further limited by the Compensation Committee, the exercise price of an option shall be paid solely in cash, by certified or cashier’s check, by wire transfer, by money order, by personal check, by delivery of shares of our common stock if expressly permitted by the terms of the optionshareholder feedback (including withholding of shares otherwise deliverable upon exercise of the option by “net exercise” or otherwise), by promissory note bearing interest at no less than such rate as shall then preclude the imputation of interest under the Internal Revenue Code of 1986, as amended, other property acceptable to the Committee, or by a combination of the foregoing. If the exercise price is paid in whole or in part with shares of our common stock, the value of the shares surrendered shall be their fair market value on the date surrendered.
Restrictions on Transfer of Awards
No award granted under the 2020 Stock Incentive Plan is transferable otherwise than by will or by the laws of descent and distribution. However, the Committee by express provision in the award or an amendment thereto may permit awards to be transferred (without consideration) to, exercised by and paid to certain persons or entities related to the participant, including, but not limited to, members of the participant’s family, charitable institutions, or trusts or other entities whose beneficiaries or beneficial owners are members of the participant’s family and/or charitable institutions, or to such other persons or entities as may be expressly approved by the Compensation Committee, pursuant to such conditions and procedures as the Compensation Committee may establish.
During the lifetime of a participant, each award will be exercisable only by the participant or the guardian or legal representative of the participant.
Restrictions on Transfer of Restricted Stock
A participant may not sell, transfer, assign or pledge shares of restricted stock until the shares have vested. Stock certificates representing the restricted stock shall be held by us bearing a legend to restrict transfer of the certificate until the restricted stock has vested. At the time the restricted stock vests, a certificate for the vested shares will be delivered to the participant and, if the award agreement so provides, dividend equivalents accrued on the restricted stock from the date of grant.
Exercisability of Options and SARs
Each option and SAR shall become exercisable in whole or in part and cumulatively, and shall expire, according to the terms of the option or the SAR, as applicable, to the extent not inconsistent with the express provisions of the 2020 Stock Incentive Plan. In addition, in the case of the grant of an option to an officer, the Compensation Committee may provide that no shares acquired on the exercise of such option shall be transferable during such six month period following the date of grant of such option.
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The Compensation Committee, in its sole discretion, may accelerate the date on which all or any portion of an otherwise un-exercisable option or SAR may be exercised or a restriction will lapse.
Vesting of Restricted Stock and Restricted Stock Units
In granting restricted stock and restricted stock unit awards, the Compensation Committee, in its sole discretion, may determine the terms and conditions under which such awards shall vest.
The Compensation Committee also has the right, exercisable in its sole discretion, to accelerate the date on which restricted stock and restricted stock units may vest or otherwise waive or amend any conditions in respect of a grant of restricted stock or restricted stock units.
Dividends and Dividend Equivalents
The Compensation Committee may provide that any award (other than options and SARs) shall earn dividends or dividend equivalents (payable in cash or additional shares, or a combination of cash and shares). Notwithstanding the foregoing, dividends or dividend equivalents may not be paid with respect to any award that is subject to the achievement of performance criteria (including time-based vesting conditions), unless and until the relevant performance criteria have been satisfied. Generally, holders of restricted stock and restricted stock units receive dividend equivalents which are subject to vesting in line with the underlying award to which they relate. No dividends or dividend equivalents will be paid on options or SARs.
Minimum Vesting Requirement
A one-year minimum vesting requirement will generally apply to all awards, except for a limited carve-out with respect to awards for up to 5% of the total number of shares that are available for new awards as of the effective date of the 2020 Stock Incentive Plan. In addition, the one-year minimum vesting requirement does not apply to awards granted to non-employee directors that vest on the earlier of the one-year anniversary of the grant date and the next annual meeting of stockholders that occurs at least 50 weeks after the prior year’s annual meeting.
Terms of Performance Awards
The Compensation Committee may grant performance awards to any person who is eligible to receive an award pursuant to the 2020 Stock Incentive Plan which are conditioned on the satisfaction of performance objectives, including those comprising one or more of the performance measures under a performance-based award, as the Compensation Committee, in its sole discretion, may select.
Performance-based awards, in the sole discretion of the Compensation Committee, may be made in the form of:
Shares or unit equivalents to shares of our common stock (including, without limitation, shares of restricted stock subject to restrictions that will lapse on the basis of the satisfaction of the selected performance measure(s));
cash; or
a combination of shares of our common stock and cash.
The Compensation Committee shall establish the performance measures which will be required to be satisfied during the performance period in order to earn the amounts specified in a performance-based award, as well as the duration of any performance period, each of which may differ with respect to each covered person, or with respect to separate performance-based awards issued to the same covered person. The performance measures may be one or more (or a combination) of the following:
pre-tax income, after-tax income or adjusted net income;
earnings per share (basic or diluted), adjusted earnings per share (basic or diluted);
earnings, including one or more of operating income, earnings before or after interest, depreciation, amortization, rent (or restructuring) costs, adjusted EBITDA, adjusted EBITDAR, economic earnings, or extraordinary or special items or book value per share (which may exclude nonrecurring items);
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Universal Health Services, Inc. 2022 Proxy Statement
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operating profit;
revenue, revenue growth or rate of revenue growth;
return on assets (gross or net), return on investment, return on capital, or return on equity;
operating expenses;
total stockholder return or stock price appreciation;
cash flow, free cash flow, cash flow return on investment (discounted or otherwise), or net cash provided by operations;
implementation or completion of critical projects or processes;
acquisition financing;
cumulative earnings per share growth;
operating margin or profit margin;
containment of our expenses;
expense targets, reductions and savings, productivity and efficiencies;
strategic business criteria, consisting of one or more objectives based on meeting specified market penetration, geographic business expansion, employee satisfaction, human resources management, supervision of litigation and/or information technology goals, goals relating to acquisitions, divestitures, joint ventures and/or similar transactions and/or goals relating to budget comparisons;
personal professional objectives, including, without limitation, any of the foregoing performance goals, the implementation of policies and plans, the negotiation of transactions, the development of long term business goals, formation of joint ventures, research or development collaborations, and the completion of other corporate transactions;
any combination of, or a specified increase or decrease in, any of the foregoing; and
any other criteria as determined by the Committee in its sole discretion, any of which may be measured either in absolute terms or as compared to any incremental increase or as compared to results of a peer group or securities or stock market index.
Expiration of Options
The expiration date of an option will be determined by the Compensation Committee at the time of the grant. However, unless the terms of the option expressly provide for a different date of termination, the unexercised portion of the option shall automatically and without notice terminate and become null and void on the earlier of:
the date that holder ceases to be employed by or provide services to us, if such cessation is for “Cause,” as defined in the 2020 Stock Incentive Plan;
three months following the date on which the holder ceases to be employed by or provide services to us for any reason other than because of the holder’s death or disability or for Cause;
the first anniversary of the date on which the holder ceased to be employed by or provide services to us by reason of the holder’s death or disability; or
the fifth anniversary of the date of grant.
Change in Control
In the event of the occurrence of a “change in control” as defined in the 2020 Stock Incentive Plan, outstanding awards may be assumed by, or converted into an award with respect to shares of common stock of, the successor or acquiring company. If an outstanding award is not assumed by the successor or acquiring company, then the award (to the extent not exercised and whether or not otherwise vested) will be cancelled immediately prior to the change in control in exchange for the right to receive the product of (a) the number of shares still covered by the outstanding award multiplied by (b) the excess, if any, of the per share considerationfeedback received by our stockholders over the exercise or base price specified in the award. If the per share transaction value
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is not greater than the exercise or base price under the award, then the award will be cancelled for no consideration. The Board of Directors may accelerate the vesting of an outstanding award in connection with a change in control, whether or not the vesting requirements set forth in the applicable award agreement have been satisfied and whether or not the award is otherwise assumed or substituted by the successor company.
Prohibition on Repricing
Repricing of outstanding stock options or SARs and repurchases of “underwater” stock options or SARs is prohibited without stockholder approval.
Clawback / Recovery
All Awards granted under the 2020 Stock Incentive Plan will be subject to recoupment in accordance with the Company’s recoupment policy. In addition, the Compensation Committee may impose such other clawback, recovery or recoupment provisions on an award as the Compensation Committee determines necessary or appropriate in view of applicable laws, governance requirements or best practices, including, but not limited to, a reacquisition right in respect of previously acquired shares or other cash or property upon the occurrence of cause (as determined by the Compensation Committee).
Expiration of the 2020 Stock Incentive Plan
Unless terminated sooner by the Board of Directors, the 2020 Stock Incentive Plan will terminate on May 20, 2030.
Adjustments
The 2020 Stock Incentive Plan provides for adjustments to (a)��the aggregate number and kind of shares that may be issued, (b) the terms and conditions of any outstanding awards (including, any applicable performance targets or criteria with respect thereto), and (c) the grant or exercise price per share for outstanding awards, in the event of any stock dividend, stock split, combination or exchange of shares, merger, consolidation or other distribution (other than normal cash dividends) of our assets to stockholders, or any other change affecting the shares or the price of the shares other than an equity restructuring.
Amendments
The Compensation Committee (with the approval of the Board of Directors) may amend or modify the 2020 Stock Incentive Plan at any time, provided that no amendment may, without the approval of our stockholders:
increase the number of shares available for issuance under the 2020 Stock Incentive Plan; or
permit the Compensation Committee to extend the exercise period for an option beyond five years from the date of grant.
Notwithstanding any provision in the 2020 Stock Incentive Plan to the contrary, absent approval of the stockholders of the Company, no option or SAR may be amended to reduce the per share exercise price of the shares subject to such option or SAR below the per share exercise price as of the date of grant and, except as otherwise permitted in the 2020 Stock Incentive Plan, (a) no option or SAR may be granted in exchange for, or in connection with the cancellation, surrender or substitution of an option or SAR having a higher per share exercise price and (b) no option or SAR may be cancelled in exchange for, or in connection with, the payment of a cash amount or another award at a time when the option or SAR has a per share exercise price that is higher than the fair market value of a share.
In addition, in general no amendment shall adversely affect in any material way any award previously granted pursuant to the 2020 Stock Incentive Plan without the prior written consent of the participant; provided, however, that an amendment or modification that may cause an incentive stock option to become a non-qualified stock option shall not be treated as adversely affecting the rights of the participant.
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Proposal No. 2
Federal Income Tax Consequences
Grants of Options
Under current tax laws, the grant of an option will not be a taxable event to the recipient and we will not be entitled to a deduction with respect to such grant.
Exercise of Incentive Stock Options and Subsequent Sale of Stock
An optionee will not recognize taxable income, and we will not be entitled to any deduction, upon the timely exercise of an incentive stock option if the optionee was our employee at all times from the date the option was granted to the day three months (or, in the case of an employee who is disabled within the meaning of Code Section 22(e)(3), one year) before the date of such exercise. However, the excess of the fair market value of the shares acquired at the time of exercise over the option exercise price will be includable in the employee’s “alternative minimum taxable income” and may therefore be subject to the “alternative minimum tax” imposed on such income. If the optionee holds the shares acquired for at least one year (and two years after the option was granted), gain or loss recognized on the subsequent disposition of the shares will be treated as long-term taxable capital gain or loss. If there is an earlier disposition, the optionee will recognize ordinary taxable income in the year of disposition in an amount equal to the lesser of (i) the excess of the fair market value of the shares on the date of exercise over the option exercise price, or (ii) if the disposition is a taxable sale or exchange, the amount of any gain recognized. Any taxable gain recognized on the disposition of the shares in excess of the amount thus taxable as ordinary income will be treated as capital gain, long-term or short-term depending on whether the shares have been held for more than one year. Upon such a disqualifying disposition, we will be entitled to a deduction at the same time and in an amount equal to the ordinary taxable income recognized by the optionee, subject to the limitations of Section 162(m) of the Internal Revenue Code (“Code Section 162(m)”).
If an optionee is not our employee at all times from the date the option was granted to the day three months (or, in the case of an employee who is disabled within the meaning of Code Section 22(e)(3), one year) before the date on which an incentive stock option is exercised, the optionee will recognize ordinary taxable income at the time of exercise equal to the excess of the then fair market value of the shares of our common stock received over the exercise price. The taxable income recognized upon exercise of the option will be treated as compensation income subject to withholding and, subject to the limitations of Code Section 162(m), we will be entitled to deduct as a compensation expense an amount equal to the ordinary income an optionee recognizes with respect to such exercise. When shares of our common stock received upon the exercise of a the option subsequently are sold or exchanged in a taxable transaction, the holder thereof generally will recognize capital gain (or loss) equal to the difference between the total amount realized and the adjusted tax basis in the shares (the exercise price plus the amount of ordinary income recognized at the time of exercise); the character of such gain or loss as long-term or short-term capital gain or loss will depend upon the holding period of the shares following exercise.
Exercise of Non-qualified Options and Subsequent Sale of Stock
Upon the exercise of a non-qualified stock option, an optionee will recognize ordinary income at the time of exercise equal to the excess of the then fair market value of the shares of our common stock received over the exercise price. The taxable income recognized upon exercise of a non-qualified stock option will be treated as compensation income subject to withholding and, subject to the limitations of Code Section 162(m), we will be entitled to deduct as a compensation expense an amount equal to the ordinary income an optionee recognizes with respect to such exercise. When shares of our common stock received upon the exercise of a non-qualified stock option subsequently are sold or exchanged in a taxable transaction, the holder thereof generally will recognize capital gain (or loss) equal to the difference between the total amount realized and the adjusted tax basis in the shares (the exercise price plus the amount of ordinary income recognized at the time of exercise); the character of such gain or loss as long-term or short-term capital gain or loss will depend upon the holding period of the shares following exercise. Special tax rules apply when all or a portion of the exercise price of a non-qualified stock option is paid by the delivery of already owned shares.
Restricted Stock
Except as noted below, a recipient of restricted stock normally will not recognize taxable income upon an award of restricted stock, and we will not be entitled to a deduction, until the termination of the restrictions. Upon such termination, the holder will recognize
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Proposal No. 2
ordinary taxable income in an amount equal to the fair market value of the shares at that time and we will be entitled to a deduction in the same amount and at the same time, subject to the limitations of Code Section 162(m).
However, a holder of restricted stock may elect under Code Section 83(b) (within 30 days following receipt of the stock) to recognize ordinary taxable income in the year the restricted stock is awarded in an amount equal to their fair market value at the time received, determined without regard to the restrictions. In this event, we will be entitled to a deduction in such year in the same amount, subject to the limitations of Code Section 162(m), and any gain or loss recognized by the holder upon subsequent disposition of the shares will be capital gain or loss. If the shares are forfeited pursuant to the restrictions, no deduction will be allowed in respect of the amount previously includable in taxable income because of the election.
The tax basis of restricted stock will be equal to its fair market value at the time the restrictions terminate, and its holding period will begin at that time, except that, if an election is made under Code Section 83(b), then the holding period of the restricted stock will begin at the time received and its tax basis will be equal to its fair market value at that time, determined without regard to the restrictions. Notwithstanding an election under Code Section 83(b), dividends and/or dividend equivalents, and any interest thereon, on restricted stock for which the election has been made will not be includable in the holder’s taxable income until paid to the holder.
Stock Appreciation Rights (SARs)
The grant of either a tandem SAR or a freestanding SAR will not result in any immediate tax consequences to us or the grantee. Upon the exercise of either a tandem SAR or a freestanding SAR, the grantee will recognize ordinary taxable income in an amount equal to any cash received and the fair market value on the exercise date of any shares received. We will be entitled to a deduction in the same amount and at the same time, subject to the limitations of Code Section 162(m).
The grant of stock appreciation rights with respect to a previously granted incentive stock option may constitute a “modification” of the related option. In this event, the option will be treated as having been granted at the time the stock appreciation rights were granted, with the result that the option could not qualify as an incentive stock option if the market price of the stock at that time were greater than the option price.
Restricted Stock Units
The grant of a restricted stock unit will not result in any immediate tax consequences to us or the recipient. When a restricted stock unit is paid out, the recipient will recognize ordinary taxable income in an amount equal to the fair market value of the shares received at that time. We will be entitled to a deduction in the same amount and at the same time, subject to the limitations of Code Section 162(m).
Performance Shares and Performance Units
The grant of a performance share or a performance unit will not result in any immediate tax consequences to us or the recipient. When a performance share or a performance unit is paid out, the recipient will recognize ordinary taxable income in an amount equal to any cash and the fair market value of any shares received at that time. We will be entitled to a deduction in the same amount and at the same time, subject to the limitations of Code Section 162(m).
Payouts of Performance Compensation Awards
The designation of an award of restricted stock or the grant of a restricted stock unit, performance share, or performance unit as a performance compensation award will not change the tax treatment described above to an employee who receives such an award or grant
Dividend Equivalents
Dividend equivalents generally will be taxed at ordinary income rates when paid. In most instances, they will be treated as additional compensation that we will be able to deduct at that time. subject to the limitations of Code Section 162(m).
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Section 409A of the Internal Revenue Code
If an award is subject to Section 409A of the Internal Revenue Code (which relates to nonqualified deferred compensation arrangements) (“Code Section 409A”), and if the requirements of Code Section 409A are not met, the taxable events as described above could apply earlier than described, and could result in the imposition of additional taxes and penalties to the participants. It is anticipated that all awards made in compliance with the terms of the 2020 Stock Incentive Plan will be exempt from the application of Code Section 409A or will comply with the requirements of Code Section 409A in order to avoid such early taxation and additional taxes and penalties.
The foregoing does not purport to be a complete description of the federal income tax aspects of the benefits under the 2020 Stock Incentive Plan and does not consider the effect of any state or foreign laws, or potential changes to the applicable tax laws. Employees should consult their tax advisors on any questions they may have.
New Plan Benefits
Awards under the 2020 Stock Incentive Plan are made by the Compensation Committee in its sole discretion and therefore cannot be determined in advance.
Vote Required
The affirmative vote of the holders of a majority of the Common Stock votes present in person or represented by proxy and entitled torecent shareholder advisory vote on the matter is required for the approval of the Amendment and Restatement of the Universal Health Services, Inc. 2020 Omnibus Stock and Incentive Plan. Abstentions from voting on this proposal will have the practical effect of a vote against this proposal because an abstention results in one less vote for the proposal. Broker non-votes will have no effect on the outcome of this proposal.
THE BOARD OF DIRECTORS DEEMS “PROPOSAL NO. 2—APPROVAL OF AN AMENDMENT AND RESTATEMENT OF THE UNIVERSAL HEALTH SERVICES, INC. 2020 OMNIBUS STOCK AND INCENTIVE PLAN”—TO BE IN THE BEST INTERESTS OF THE COMPANY AND ITS STOCKHOLDERS AND RECOMMENDS A VOTE “FOR” APPROVAL THEREOF.
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Universal Health Services, Inc. 2022 Proxy Statement
PROPOSAL NO. 3
RATIFICATION OF THE SELECTION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTANTS
The Audit Committee of the Board has selected, and as a matter of good corporate governance, is requesting the ratification by the stockholders of the selection of PricewaterhouseCoopers LLP to serve as our independent registered public accountants for the year ending December 31, 2022. PricewaterhouseCoopers LLP has served as our independent registered public accountants since 2007. If a favorable vote is not obtained, the Audit Committee may reconsider the selection of PricewaterhouseCoopers LLP. Even if the selection is ratified, the Audit Committee, in its discretion, may select different independent auditors if it subsequently determines that such a change would be in the best interest of the Company and its stockholders.
PricewaterhouseCoopers LLP representatives will attend the Annual Meeting and respond to questions where appropriate. Such representatives may make a statement at the Annual Meeting should they so desire.
Vote Required
Ratification of the selection of the independent registered public accountants by the stockholders requires that affirmative “FOR” vote of the holders of a majority of the Class A, Class B, Class C and Class D Common Stock votes present in person or represented by proxy and entitled to vote on the matter. Unless marked to the contrary, proxies will be voted FOR the ratification of the selection of PricewaterhouseCoopers LLP as our independent registered public accountants.
THE BOARD RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE RATIFICATION OF
THE SELECTION OF PRICEWATERHOUSECOOPERS LLP AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTANTS FOR THE FISCAL YEAR ENDING DECEMBER 31, 2022.
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Universal Health Services, Inc. 2022 Proxy Statement
PROPOSAL NO. 4
STOCKHOLDER PROPOSAL TO ADOPT MAJORITY VOTE STANDARD IN DIRECTOR ELECTIONS
We have been notified that the North Atlantic States Carpenters Pension Fund (“Fund”) intends to present a non-binding proposal for consideration at the Annual Meeting. The Fund is the beneficial owner of 1,800 shares of the Company’s common stock. The stockholders making this proposal have provided the proposal and supporting statement, which is set forth below.
The Board of Directors opposes the following Proposal for the reasons stated after the proposal.
The stockholder’s proposal follows:
MAJORITY VOTE STANDARD IN DIRECTOR ELECTIONS
RESOLVED: Shareholders of Universal Health Services, Inc. (“Company”) hereby request that the Board of Directors initiate the appropriate process to amend the Company’s corporate governance documents (certificate of incorporation or bylaws) to provide that director nominees shall be elected by the affirmative vote of the majority of votes cast at an annual meeting of shareholders, with a plurality vote standard retained for contested director elections, that is, when the number of director nominees exceeds the number of board seats.
SUPPORTING STATEMENT
Corporate shareholders most important board accountability right is their right to vote in director elections. The use of a plurality vote standard in the common uncontested director elections renders these voting rights meaningless. The Universal Health Services, Inc. Board of Directors (“Board”) has not established a majority vote standard, choosing rather to retain a plurality vote standard for all director elections. Under the Company’s current plurality standard, a board nominee can be elected with as little as a single affirmative vote, even if a nominee receives a substantial majority of so-called “withhold” votes.
The Board must establish a majority vote election standard to afford shareholders a meaningful role in director elections. The broadly adopted majority vote standard is a “majority of votes cast” standard that requires a director nominee to receive more “For” votes than “Against” votes to be elected or re-elected. The proposed majority vote standard is particularly well-suited for the common “uncontested” director elections in which the number of board nominees does not exceed the number of available board seats. Nearly all corporate elections are “uncontested,” and the use of a majority vote standard makes these elections meaningful governance events.
Presently, well over 90% of the companies in the S&P 500 Index and thousands of small and mid-cap companies have adopted a majority vote director election standard in their formal governance documents. Generally, these companies also have adopted director resignation policies to determine the continuing board status of any director nominee that is not elected but continues as a “holdover” director under state corporate law. The Board should take the important first step of establishing a meaningful majority vote standard and then act to adopt a director resignation review process bylaw. The Company’s current director resignation guideline used in conjunction with the plurality vote standard is wholly inadequate. We urge the Board to join the mainstream of major U.S. companies and establish a majority vote standard in director elections.
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UHS STATEMENT IN OPPOSITION TO STOCKHOLDER PROPOSAL
We oppose the proposal because it is not in the best interest of UHS or our stockholders.
The Board of Directors has carefully considered the proposal seeking to elect directors by the affirmative vote of the majority of votes cast, rather than by the current standard calling for a plurality of the votes cast by stockholders. The Board of Directors opposes the proposal because it is not in the long-term interests of the Company or its stockholders. To the contrary, the Board of Directors strongly believes that our current method of plurality voting continues to be in the best interests of the Company and its stockholders.
We have implemented a number of practices and policies to promote independent leadership in the boardroom and the protection of stockholder rights. The Board of Directors is currently comprised of seven members, and is divided into three classes, with members of each class serving for a three-year term. Under our Restated Certificate of Incorporation, holders of shares of our outstanding Class B and Class D Common Stock (voting together as a single class) are entitled to elect 20% (but not less than one) of the directors, currently two directors, one in Class II and one in Class III, and the holders of Class A and Class C Common Stock (voting together as a single class) are entitled to elect the remaining five directors, three in Class I, one in Class II, and one in Class III. At each Annual Meeting of Stockholders, directors are chosen to succeed those in the class whose term expires at such Annual Meeting and, in the case of this Annual Meeting, directors will be elected as Class I directors. Currently, our directors are elected using a plurality voting standard.
With respect to the directors who are to be elected by the holders of Class B and Class D Common Stock of the Company in accordance with our Restated Certificate of Incorporation, the Nominating & Governance Committee is tasked with evaluating and recommending Class B and D director nominees recommended by stockholders for election to our Board of Directors. As part of the process, the Nominating & Governance Committee reviews and considers, among other factors, the following minimum qualifications: the individual’s integrity, experience, education, expertise, independence and any other factors that the Board of Directors and the Nominating & Governance Committee deem would enhance the effectiveness of the Board of Directors and our governance. The Nominating & Governance Committee seeks persons who have achieved prominence in their fields and who possess significant experience in areas of importance to the Company. Additionally, strong analytical skills, independence, engagement, forthrightness and integrity are desired characteristics that the Nominating & Governance Committee seeks in potential candidates. Also, the Board of Directors believes that it is essential that its members represent diverse viewpoints, with a broad array of experiences, professions, skills, geographic representation and backgrounds, including diversity of gender and race that, when considered as a group, provide a sufficient mix of perspectives to allow the Board of Directors to best fulfill its responsibilities to the long-term interests of our stockholders. Currently, our Board of Directors is comprised of such qualified members with diverse viewpoints, including two female directors. Stockholders can currently express dissatisfaction with an incumbent director’s performance by withholding their vote. In addition, stockholders are also empowered to nominate or recommend candidates for elections to our Board if they are truly dissatisfied with incumbent directors.
Under the Delaware General Corporation Law, plurality, rather than majority, voting is the default standard for director elections. Plurality voting protects the Company from “failed elections”executive compensation), which are elections in which a director is not chosen, resulting in a vacancy on the board. The Board of Directors believes that the current plurality voting standard ensures that we avoid such failed elections and any resulting uncertainty or risk to our director election process or corporate governance policies. Failure to adopt majority election of directors also has no effect on the right of stockholders to express disapproval of actions of the Board of Directors. The “withhold” vote is a well-established means of registering dissatisfaction, and there is no question that a substantial withhold vote would send a message and cause our Board of Directors to examine the reasons for the dissatisfaction. A failed election would either result in the existing director continuing to serve as a holdover director or create a vacancy for the Board of Directors to fill. Similarly, the majority vote standard in director elections standard could leave the Board of Directors with an insufficient number of directors to conduct business or perform its duties. We don’t believe such a result furthers stockholder democracy. By contrast, the plurality voting standard promotes stability in our governance processes by ensuring that a full slate of directors is elected at each annual meeting of stockholders
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Universal Health Services, Inc. 2022 Proxy Statement
Proposal No. 4
The Board of Directors is concerned that the majority-vote requirement contemplated by the Proposal would significantly increase the influence of stockholder advisory firms and certain activist stockholders or special interest groups, whose interests and agenda may differ from those of our stockholders generally. Under majority election, because of the increased threat of one or more directors not being reelected in an uncontested election, the Board of Directors may be forced either to follow the dictates of special interest groups, or to engage in expensive and distracting solicitation campaigns at each annual meeting for matters that generally are only peripherally related to the best interests of the Company and its stockholders. This situation is exacerbated by the failure of many retail holders to return voting instructions, and the Company’s inability to contact many of such holders directly, the elimination of broker voting for directors and the routine delegation by many institutional holders of their voting decisions to proxy advisory firms, without considering the merits of the matter at issue or the impact of following the recommendation. Our Board of Directors believes that they are better informed to respond to stockholder concerns than others that may have special interests. Consequently, our Board of Directors believe it is their duty to retain as much flexibility to consider and negotiate these matters for the best interests of the Company and all of its stockholders rather than effectively abdicate these duties to influential special interests.
Other than Mr. Alan B. Miller, our former Chief Executive Officer, and Mr. Marc D,. Miller, our current Chief Executive Officer, all members of the Board of Directors have relatively short tenure as directors (all were elected after 2011, including two who were elected in 2018 and one who was elected in 2020), and having a majority vote standard in director elections standard will increase the risk for “failed elections” and instability in our governance processes due to having potentially ever-changing members of the Board of Directors in future. Our current plurality voting standard promotes stability in our governance processes by ensuring that a full slate of directors is elected at each Annual Meeting of Stockholders.
Adopting a majority vote standard in director elections could also have unforeseen consequences, such as an inability to comply with NYSE listing requirements or other applicable laws and regulations. This includes listing standards or rules related to director independence, board committee composition and the maintenance of an audit committee financial expert. We note that as a “controlled company” for purposes of NYSE Listed Company Manual Section 303A.00, we are not required to have a majority of independent directors and we are exempt from the NYSE’s requirements relating to compensation committees and nominating/corporate governance committees. However, the Company has a majority of independent directors on our Board of Directors and all independent directors serving on our Compensation Committee and Nominating & Governance Committee as well as our Audit Committee and Quality and Compliance Committee. We believe that our Board and committee structure provides independence and good corporate governance practices, and the current plurality voting standard preserves our ability to manage the Company in the best interestsreview of all our stockholders.
Our Board of Directors believes that the current nominating and voting procedures for election to our Board of Directors, as opposed to a mandated majority vote standard in director elections, provide the Board of Directors with the flexibility to appropriately respond to stockholder interests without the risk of potential corporate governance complications arising from failed elections. Overall, the Board of Directors believes that these practices and policies ensure that the Company’s directors are highly qualified and have a broad range of company and industry knowledge, viewpoints and experiences. Accordingly, our Board of Directors has concluded that the proposal is not in the best interests of the Company and our stockholders and recommends that stockholders vote AGAINST the proposal.
Required Vote
The affirmative vote of the holders of a majority of the Common Stock votes present in person or represented by proxy and entitled to votecomparable executive compensation benchmarking comparisons, on the matter is required for the approval of the stockholder proposal. Abstentions from voting on this proposal will have the practical effect of a vote against this proposal because an abstention results in one less vote for the proposal. Broker non-votes will have no effect on the outcome of the vote.
THE BOARD RECOMMENDS THAT STOCKHOLDERS VOTE “AGAINST” THE STOCKHOLDER PROPOSAL REGARDING A MAJORITY VOTE STANDARD IN DIRECTOR ELECTIONS DESCRIBED IN PROPOSAL NO. 4.
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Universal Health Services, Inc. 2022 Proxy Statement
EXECUTIVE COMPENSATION
Compensation Discussion and Analysis
The following Compensation Discussion and Analysis describes the 2022 compensation program for our named executive officers. For 2022, our named executive officers were:
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Table of Contents
Our 2021 Performance and Highlights
The impact of the COVID-19 pandemic, which began during the second half of March, 2020, has had a material effect on our operations and financial results since that time. The COVID-19 vaccination process commenced during the first quarter of 2021. Since that time through the second quarter of 2021, we had generally experienced a decline in COVID-19 patients as well as a corresponding recovery in non-COVID patient activity. However, during the third and fourth quarters of 2021, and continuing into the first quarter of 2022, our facilities generally experienced an increase in COVID-19 patients resulting from the Delta and, more recently, the highly transmissible Omicron variants. Booster doses for COVID-19 vaccinations began during the third quarter of 2021, and while we expect the administration of vaccines booster doses will assist in easing the number of COVID-19 patients, the pace at which this is likely to occur is very difficult to predict.
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Universal Health Services, Inc. 2022 Proxy Statement
Executive Compensation
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During 2021, we received approximately $189 million of additional funds from the federal government in connection with the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”), substantially all of which were received during the first quarter of 2021. During the second quarter of 2021, we returned the $189 million to the appropriate government agencies. Therefore, our results of operations for the twelve-month period ended December 31, 2021 include no impact from the receipt of those funds. Also, in March of 2021 we made an early repayment of $695 million of funds received during 2020 pursuant to the Medicare Accelerated and Advance Payment Program. During 2020, our results of operations included approximately $413 million of CARES Act and other grant income revenues, approximately $316 million of which were attributable to our acute care services and $97 million of which were attributable to our behavioral health care services.
During 2021, our adjusted net income attributable to UHS (see footnote A. below) was $991.7 million, or $11.82 per diluted share, as compared to $954.7 million, or $11.12 per diluted share, during 2020.
Our net revenues increased 9.4% to $12.64 billion during 2021 as compared to $11.56 billion during 2020.
Net revenues generated from our acute care services, on a same facility basis, increased 11.6% during 2021, as compared to 2020. During 2021, adjusted admissions (adjusted for outpatient activity) at our acute care hospitals, on a same facility basis, increased 7.7% and adjusted patient days increased 8.6%, as compared to 2020.
Net revenues generated from our behavioral health care services, on a same facility basis, increased 5.4% during 2021, as compared to 2020. During 2021, adjusted admissions at our behavioral health care hospitals, on a same facility basis, increased 1.6% and adjusted patient days increased 0.4%, as compared to 2020.
We invested more than $626 million in our acute care division, and approximately $224 million in our behavioral health care division, to construct, expand, equip and improve our facilities.
In February, 2022, our Board of Directors authorized a $1.4 billion increase to our stock repurchase program. During 2021, pursuant to previous share repurchase authorizations, including a $1.0 billion increase to the program approved by our Board of Directors in July, 2021, we repurchased approximately 8.41 million shares at an aggregate cost of approximately $1.20 billion, or approximately $143 per share.
Over the past few years, we have implemented various changes to our long-term incentive program for our named executive officers including the following:
In March of 2022, we began awarding 50% of the long-term equity awards to our named executive officers in the form of performance based restricted stock units.
Previously, in March of 2021 and 2020, 50% of the long-term equity awards to our named executive consisted of performance stock options with a premium exercise price.
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The following are a few of the quality and patient care highlights achieved in 2021:
Acute Care Services:
The Leapfrog Group evaluates hospitals efforts in protecting patients from harm and meeting national safety standards. Eleven of our acute care hospitals were awarded an “A” or “B” grade in the fall 2021 Leapfrog Hospital safety grades.
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Universal Health Services, Inc. 2022 Proxy Statement
Executive Compensation
The Leapfrog Group named Lakewood Ranch Medical Center a Top General Hospital (our facility was 1 of only 46 hospitals to receive the designation), and named Henderson Hospital a Top Teaching Hospital for the second consecutive year (our facility was 1 of only 72 teaching hospitals to receive the designation).
In 2021, the Centers for Medicare and Medicaid Services designated Lakewood Ranch Medical Center, Saint Mary’s Regional Medical Center and Doctor’s Hospital of Laredo with the Five-Star Overall Rating, the highest rating which is earned by less than 14% of hospitals nationwide.
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UHS was named the #1 Healthcare System in the U.S. for our acute care hospital overall online reputation score by Reputiation.com in its January, 2021 report. Our acute care hospitals rate on average 4.2 out of 5.0 stars, accumulated collectively over approximately 11,000 individual reviews during the year.
The Hospital Readmission Reduction Program (“HRRP”) encourages hospitals to improve communication and care coordination to better engage patients and caregivers in discharge plans and, in turn, reduce avoidable readmissions. For 2021, the aggregate average score for our acute care hospitals (15.5) compared favorably to the national average HRRP score for all payers (11.125) as well as for the Medicare population (11.985).
Risk-adjusted observed to expected mortality (“O:E Ratio”) is another commonly used method to assess acute care quality (an O:E Ratio of 1.0 represents the average mortality rate; less than 1.0 represents a better-than-expected mortality rate). Our acute care hospitals’ 2021 O:E Ratio of 0.8835 compared favorably to the expected O:E Ratio.
Our acute care hospitals delivered nearly $2.0 billion in uncompensated care.
Behavioral Health Care Services:
The Centers for Medicare and Medicaid Services’ inpatient psychiatric facility quality reporting measures compare our behavioral health care facilities to approximately 1,600 providers in the U.S. Our 2020 behavioral health results exceed the average of the group in 9 out of 14 indicators.
In 2021, patients in our behavioral health care facilities rated their overall care, on average, as 4.4 out of 5 in our patient satisfaction surveys. More than 91% indicated they felt better following care at one of our facilities; and 89% of our patients indicated that their treatment goals were met.
As indicated by our referral source satisfaction survey, 83% of our referral sources consider our behavioral health care facilities as their provider of choice while scoring a 4 out of 5.
In 2020, our behavioral health care facilities began obtaining “net promoter scores” which are utilized by approximately two-thirds of Fortune 1000 companies to gauge customer loyalty. In 2021, the average aggregate score for our behavioral health care facilities was 37.1 which is considered very good by industry standards.
Marc D. Miller – Chief Executive Officer, President and Director: Mr. Marc D. Miller was appointed Chief Executive Officer and President effective January 1, 2021. He has served as President since May, 2009 and prior thereto served as Senior Vice President and co-head of our Acute Care Hospitals since 2007. He was elected a Director in May, 2006 and Vice President in 2005. He has served in various capacities related to our acute care division since 2000. He was elected to the Board of Trustees of Universal Health Realty Income Trust in December, 2008. He also serves as a member of the Board of Directors of Premier, Inc., a publicly traded healthcare performance improvement alliance.
Alan B. Miller – Executive Chairman of the Board and Founder: Mr. Alan B. Miller was appointed Executive Chairman of the Board effective January 1, 2021. He had been Chairman of the Board and Chief Executive Officer since our inception in 1978 and
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Universal Health Services, Inc. 2022 Proxy Statement
Executive Compensation
also served as President from inception until 2009. Prior thereto, he was President, Chairman of the Board and Chief Executive Officer of American Medicorp, Inc. He currently serves as Chairman of the Board, Chief Executive Officer and President of Universal Health Realty Income Trust.
Steve G. Filton – Executive Vice President, Chief Financial Officer and Secretary: Mr. Filton was elected Executive Vice President in 2017 and continues to serve as Chief Financial Officer since his appointment in 2003. He has also served as Secretary since 1999. He had served as Senior Vice President since 2003, as Vice President and Controller since 1991, and as Director of Corporate Accounting since 1985.
Marvin G. Pember – Executive Vice President, President of Acute Care Division: Mr. Pember was elected Executive Vice President in 2017 and continues to serve as President of our Acute Care Division since commencement of his employment with us in 2011. He had served as Senior Vice President since 2011. He was formerly employed for 12 years at Indiana University Health, Inc. (formerly known as Clarian Health Partners, Inc.), a nonprofit hospital system that operates multiple facilities in Indiana, where he served as Executive Vice President and Chief Financial Officer.
Matthew J. Peterson – Executive Vice President, President of Behavioral Health Division: Mr. Peterson’s employment with us commenced in September, 2019 as Executive Vice President and President of our Behavioral Health Division. He was formerly employed at UnitedHealth Group for 11 years serving in various capacities including Chief Operating Officer for OptumGovernment, a health services and technology company, as well as various other Senior Vice President/Vice President roles. In addition to his civilian business career, Mr. Peterson has served for nearly 32 years as a member of the United States Military, currently as a Colonel and healthcare executive/global health in the Air National Guard.
Summary of Changes Implemented in 2022 to Executive Officer Compensation
On March 23, 2022, our Compensation Committee of the Board of Directors (the “Compensation Committee”) approved changes to various elements of compensation for our Chief Executive Officer (“CEO”) and certain of our other named executive officers (“NEOs”).
Below is a general summary of those changes, as compared to 2021:
| • | Decrease in the weighting of long-term incentives (“LTI”), with accompanying increase in weighting of cash incentives. |
| • | No significant changes in target compensation levels (i.e., changes generally consist of shifts in mix of pay, not pay amounts). |
| • | Continued commitment to significant at-risk, performance-based CEO and NEO compensation programs. |
After reviewing market data prepared by FW Cook, a third-party executive compensation consultant, the Compensation Committee determined that the target pay mix for our CEO and certain of our other NEOs could be more closely aligned with the comparable target pay mix at our peer group companies. For example, in 2021, our CEO received 82% of target total direct compensation (“TDC”) in the form of long-term incentives whereas LTI of peer group CEOs accounted for 66% of target TDC. Certain of our other NEOs (on average) received approximately 75% of target TDC in the form of long-term incentives whereas LTI of comparable peer company NEOs (on average) accounted for 56% of target TDC. Conversely, the weighting of annual cash incentives was below that of our peer group.
Due to the differences between our target pay mix and that of our peer group, our Compensation Committee determined that decreases in the weighting of LTI, and accompanying increases in cash incentive pay mix, were warranted for our CEO and certain of our other NEOs. Adjustments to base salaries were also warranted to further align the elements of our executive compensation to the pay mix of our peer group companies.
Commencing in March of 2022, each NEO began receiving their stock-based compensation as fixed dollar awards rather than awards that were denominated in a fixed number of shares. In addition, changes were also implemented in connection with the form of stock-based compensation awards made to our CEO and other NEOs to further align with peer group long-term incentive mix. In March of 2022, our CEO and NEOs each received: (i) 50% of their annual target stock-based compensation awards in the form of options to purchase shares of our Class B Common Stock at the grant date market value, and; (ii) 50% of their annual
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Universal Health Services, Inc. 2022 Proxy Statement
Executive Compensation
target stock-based compensation awards in the form of performance-based restricted stock units that will be earned based on the cumulative three-year growth in our earnings before interest, taxes, depreciation & amortization, the impacts of other income/expense and net income attributable to noncontrolling interests, as compared to a range of pre-established three-year growth thresholds. Previously, in 2021, the annual stock-based compensation awards to our CEO and NEOs consisted of: (i) 50% of the target awards were made in the form of options to purchase shares of our Class B Common Stock at the grant date market value, and; (ii) 50% of the target awards were made in the form of option to purchase shares of our Class B Common Stock at 110% of the grant date market value.
We believe the changes to the elements of compensation for each of our NEOs, as outlined above, continue to preserve significant reliance on at-risk, performance-based compensation for our CEO and other NEOs. After giving effect to the changes in the elements of compensation during 2022, as reflected above, approximately 90% of the target pay for our CEO, and approximately 80% of the target pay for our other NEOs’, is comprised of performance-based incentive compensation.
Please see additional disclosure below in Compensation Discussion and Analysis.
Pursuant to Section 14A of the Exchange Act and rules of the Securities and Exchange Commission, we are asking you to approve, on an advisory (non-binding) basis, the compensation paid to our named executive officers as disclosed in the Compensation Discussion and Analysis below, the compensation tables below, and any related narrative discussion contained in
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Universal Health Services, Inc. 2023 Proxy Statement
Proposal No. 2
this Proxy Statement. This proposal, commonly known as a “say-on-pay” proposal, gives stockholders the opportunity to express their views on the compensation paid to our named executive officers. This vote is not intended to address any specific item of compensation, but rather the overall compensation of our named executive officers and the philosophy, policies and practices described in this Proxy Statement. Accordingly, we are asking the stockholders to vote “FOR” the following resolution at the Annual Meeting:
“RESOLVED, that the Company’s stockholders approve, on an advisory basis, the compensation paid to the Company’s named executive officers, as disclosed in the Company’s proxy statement for the 2023 Annual Meeting of Stockholders, pursuant to Item 402 of Regulation S-K, including the Compensation Discussion and Analysis, compensation tables and narrative discussion contained in this Proxy Statement.”
Vote Required
The affirmative vote of the holders of a majority of the Class A, B, C and D Common Stock votes present in person or represented by proxy and entitled to vote on the matter is required for the approval of this proposal.
If you are a stockholder of record and you do not sign and return your Proxy card or vote by telephone or internet, your shares will not be voted at the Annual Meeting. Under the New York Stock Exchange rules, this proposal is not a routine matter and broker non-votes may occur with respect to this proposal. If your shares are held in street name and you do not issue instructions to your broker, your broker or nominee may not vote your shares on these matters without receiving instructions.
Broker non-votes with respect to this matter will be treated as neither a vote “for” nor a vote “against” the matter, although they will be counted in determining the number of votes required to attain a majority of the shares present or represented at the meeting and entitled to vote. An abstention from voting by a stockholder present in person or by proxy at the meeting has the same legal effect as a vote “against” the matter because it represents a share present or represented at the meeting and entitled to vote, thereby increasing the number of affirmative votes required to approve this proposal.
The “say-on-pay” vote is advisory and will not be binding upon the Company, the Board of Directors or the Compensation Committee. However, the Compensation Committee will take into account the outcome of the vote when considering future named executive officer compensation arrangements.
THE BOARD RECOMMENDS STOCKHOLDERS VOTE FOR THE APPROVAL OF THE COMPENSATION PAID TO THE COMPANY’S NAMED EXECUTIVE OFFICERS, AS DISCLOSED PURSUANT TO ITEM 402 OF REGULATION S-K, INCLUDING THE COMPENSATION DISCUSSION AND ANALYSIS, COMPENSATION TABLES AND NARRATIVE DISCUSSION CONTAINED IN THIS PROXY STATEMENT.
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Universal Health Services, Inc. 2023 Proxy Statement
PROPOSAL NO. 3
ADVISORY VOTE ON THE FREQUENCY OF AN ADVISORY VOTE ON NAMED EXECUTIVE OFFICER COMPENSATION
Pursuant to Section 14A of the Exchange Act and rules of the Securities and Exchange Commission, every six years, the Company is required to provide stockholders with an opportunity to vote, on an advisory (non-binding) basis, as to whether the Company should hold an advisory vote on executive compensation every one, two or three years. Stockholders may also abstain from voting on the matter.
In light of the voting results at our 2017 Annual Meeting of Stockholders with respect to this topic, the Board of Directors has held the “say-on-pay” vote every three years.
After careful consideration, the Board recommends that future advisory votes on compensation of our named executive officers continue to be held every three years (a triennial vote). We ask that you support a frequency period of every three years for future advisory stockholder votes on the compensation of our named executive officers.
Our executive compensation program is designed to support long-term value creation, and a triennial vote will allow stockholders to better judge our executive compensation program in relation to our long-term performance. As described in the Compensation Discussion and Analysis section below, one of the core principles of our executive compensation program is to ensure that management’s interests are aligned with our stockholders’ interests to support long-term value creation. Accordingly, we grant awards with multi-year performance and service periods to encourage our named executive officers to focus on long-term performance, and recommend a triennial vote which would allow our executive compensation programs to be evaluated over a similar time-frame and in relation to our long-term performance.
Additionally, a triennial vote will provide us with the time to thoughtfully respond to the views of our stockholders and implement any necessary changes. We carefully review changes to our executive compensation program to ensure that the program appropriately aligns our named executive officers’ interests with the long-term interests of our stockholders and to ensure that the program appropriately balances risk and reward. We therefore believe that a vote every three years is the appropriate frequency to provide sufficient time to thoughtfully consider stockholders’ input and to implement any appropriate changes to our executive compensation program, in light of the timing that would be required to implement any decisions related to such changes.
Vote Required
The advisory vote on the frequency of the stockholder advisory vote to approve named executive officer compensation will be determined by a plurality of the votes cast.
If you are a stockholder of record and you do not sign and return your Proxy card or vote by telephone or internet, your shares will not be voted at the Annual Meeting. Under the New York Stock Exchange rules, this proposal is not a routine matter and broker non-votes may occur with respect to this proposal. If your shares are held in street name and you do not issue instructions to your broker, your broker or nominee may not vote your shares on these matters without receiving instructions.
Abstentions and broker non-votes represented by submitted proxies will not be taken into account in determining the outcome of this proposal.
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Universal Health Services, Inc. 2023 Proxy Statement
Proposal No. 3
The “say-on-frequency” vote is advisory and will not be binding upon the Company, the Board of Directors, or the Compensation Committee. The Board may decide that it is in the best interests of our stockholders and the Company to hold an advisory vote on executive compensation more or less frequently than the option approved by our stockholders. However, the Compensation Committee will take into account the outcome of the vote when considering the frequency of future advisory votes on the compensation of our named executive officers.
THE BOARD RECOMMENDS A VOTE FOR A FREQUENCY PERIOD OF EVERY THREE YEARS (A TRIENNIAL VOTE) FOR FUTURE ADVISORY STOCKHOLDER VOTES ON NAMED EXECUTIVE OFFICER COMPENSATION.
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Universal Health Services, Inc. 2023 Proxy Statement
PROPOSAL NO. 4
RATIFICATION OF THE SELECTION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTANTS
The Audit Committee of the Board has selected, and as a matter of good corporate governance, is requesting the ratification by the stockholders of the selection of PricewaterhouseCoopers LLP to serve as our independent registered public accountants for the year ending December 31, 2023. PricewaterhouseCoopers LLP has served as our independent registered public accountants since 2007. If a favorable vote is not obtained, the Audit Committee may reconsider the selection of PricewaterhouseCoopers LLP. Even if the selection is ratified, the Audit Committee, in its discretion, may select different independent auditors if it subsequently determines that such a change would be in the best interest of the Company and its stockholders.
PricewaterhouseCoopers LLP representatives will attend the Annual Meeting and respond to questions where appropriate. Such representatives may make a statement at the Annual Meeting should they so desire.
Vote Required
Ratification of the selection of the independent registered public accountants by the stockholders requires that affirmative “FOR” vote of the holders of a majority of the Class A, Class B, Class C and Class D Common Stock votes present in person or represented by proxy and entitled to vote on the matter. Unless marked to the contrary, proxies will be voted FOR the ratification of the selection of PricewaterhouseCoopers LLP as our independent registered public accountants.
THE BOARD RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE RATIFICATION OF
THE SELECTION OF PRICEWATERHOUSECOOPERS LLP AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTANTS FOR THE FISCAL YEAR ENDING DECEMBER 31, 2023.
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Universal Health Services, Inc. 2023 Proxy Statement
EXECUTIVE COMPENSATION
Compensation Discussion and Analysis
The following Compensation Discussion and Analysis describes the 2022 compensation program for our named executive officers. For 2022, our named executive officers were:
Marc D. Miller Chief Executive Officer, President and Director | Alan B. Miller Executive Chairman of the Board and Founder |
Steve G. Filton Executive Vice President, | Edward H. Sim New Executive Vice | Marvin G. Pember Former Executive Vice President, | Matthew J. Peterson Executive Vice President, |
Table of Contents
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| Compensation Committee Interlocks and Insider Participation | 35 | |||
Our 2022 Performance and Highlights
| • | The impact of the COVID-19 pandemic, which began during the second half of March, 2020, has had a material effect on our operations and financial results since that time. The length and extent of the disruptions caused by the COVID-19 pandemic are currently unknown; however, we expect such disruptions to continue into the future. Since the future volumes and severity of COVID-19 patients remain highly uncertain and subject to change, including potential increases in future COVID-19 patient volumes caused by new variants of the virus, as well as related pressures on staffing and wage rates, we are not able to fully quantify the impact that these factors will have on our future financial results. However, developments related to the COVID-19 pandemic could continue to materially affect our financial performance. Even after the COVID-19 pandemic has subsided, we may continue to experience materially adverse impacts on our financial condition and our results of operations as a result of its |
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Universal Health Services, Inc. 2023 Proxy Statement
Executive Compensation
| macroeconomic impact, including the risks of a global recession or a recession in one or more of our key markets, the impact they may have on us and our customers and our assessment of that impact, and any disruptions and inefficiencies in the supply chain, and many of our known risks described in the Risk Factors section of our Annual Report on Form 10-K for the year ended December 31, 2022. |
| • | The nationwide shortage of nurses and other clinical staff and support personnel has been a significant operating issue facing us and other healthcare providers. Like others in the healthcare industry, we continue to experience a shortage of nurses and other clinical staff and support personnel at our acute care and behavioral health care hospitals in many geographic areas. In some areas, the labor scarcity is putting a strain on our resources and staff, which has required us to utilize higher-cost temporary labor and pay premiums above standard compensation for essential workers. This staffing shortage has required us to hire expensive temporary personnel and/or enhance wages and benefits to recruit and retain nurses and other clinical staff and support personnel. At certain facilities, particularly within our behavioral health care segment, we have been unable to fill all vacant positions and, consequently, have been required to limit patient volumes. These factors, which had a material unfavorable impact on our results of operations during 2022, are expected to continue to have an unfavorable material impact on our results of operations for the foreseeable future. |
| • | During 2022, our adjusted net income attributable to UHS (see footnote A. below) was $730.2 million, or $9.88 per diluted share, as compared to $991.7 million, or $11.82 per diluted, share during 2021. |
| • | Our net revenues increased by 6.0% to $13.40 billion during 2022 as compared to $12.64 billion during 2021. |
| • | Net revenues generated from our acute care services, on a same facility basis, increased 4.1% during 2022, as compared to 2021. During 2022, adjusted admissions (adjusted for outpatient activity) at our acute care hospitals, on a same facility basis, increased 3.1% and adjusted patient days increased 0.9%, as compared to 2021. |
| • | Net revenues generated from our behavioral health care services, on a same facility basis, increased 4.2% during 2022, as compared to 2021. During 2022, adjusted admissions at our behavioral health care hospitals, on a same facility basis, increased 0.7% and adjusted patient days increased 1.2%, as compared to 2021. |
| • | We invested more than $524 million in our acute care division, and approximately $207 million in our behavioral health care division, to construct, expand, equip and improve our facilities. |
| • | During 2022, pursuant to our share repurchase program, we repurchased approximately 6.67 million shares at an aggregate cost of approximately $810.9 million, or approximately $122 per share. |
| • | Over the past few years, we have implemented various changes to our long-term incentive program for our named executive officers including the following: |
| • | In March of 2022, we began awarding 50% of the long-term equity awards to our named executive officers in the form of performance based restricted stock units. |
| • | Previously, in March of 2021 and 2020, 50% of the long-term equity awards to our named executive consisted of performance stock options with a premium exercise price. |
| A. | Adjusted net income and adjusted net income per diluted share for 2022 and 2021 were publicly disclosed and reconciled to our reported results for each year on the Schedule of Non-GAAP Supplemental Consolidated Statements of Income Information, included with our earnings for the years ended December 31, 2022 and 2021, as filed on Form 8-K on February 27, 2023. Annex A contains a reconciliation of these non-GAAP financial measures to financial measurements determined in accordance with GAAP. |
The following are a few of the quality and patient care highlights achieved in 2022:
Acute Care Services:
| • | The Leapfrog Group evaluates hospitals’ efforts in protecting patients from harm and meeting national safety standards. Thirteen of our acute care hospitals were awarded an “A” or “B” grade in the spring and/or fall of 2022 Leapfrog Hospital safety grades. |
| • | In 2022, the Centers for Medicare and Medicaid Services awarded Saint Mary’s Regional Medical Center a Five-Star Overall Rating, a designation earned by less than 14% of the hospitals evaluated nationwide. The CMS Five-Star designation is based on performance across various measures of quality including safety of care, readmission rate, mortality, timely and effective care and patient experience. |
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Universal Health Services, Inc. 2023 Proxy Statement
Executive Compensation
| • | Lakewood Ranch Medical Center was one of 350 hospitals in the United States named on the 2022 list of America’s Best Maternity Hospitals issued by Newsweek and the data firm, Statista Inc. The evaluation is based on a nationwide online survey in which hospital managers and maternity healthcare professionals were asked to recommend leading maternity hospitals, medical key performance indicator data relevant to maternity care, and patient satisfaction data. |
| • | The ER at Fruitville, an extension of Lakewood Ranch Medical Center, was named a Press Ganey 2022 Human Experience (HX) Guardian of Excellence Award – Patient Experience winner. |
| • | U.S. News & World Report’s 2022-2023 Best Hospital Rankings recognized South Texas Health System Edinburg as Best Regional Hospital in the McAllen Metro area. Six of our acute care hospitals/health systems received “high performing” designations in at least four specialty care areas, including, but not limited to, COPD, heart failure, kidney failure and stroke. |
| • | Based on nearly 14,400 individual Facebook and Google reviews, our acute care hospitals’ collective average rating was 4.0 out of 5.0. |
| • | Risk-adjusted observed to expected mortality (“O:E Ratio”) is another commonly used method to assess acute care quality (an O:E Ratio of 1.0 represents the average mortality rate; less than 1.0 represents a better-than-expected mortality rate). Our acute care hospitals’ 2022 O:E Ratio, using CareScience Standard Practice Methodology, was 0.95 which compared favorably to the expected O:E Ratio. |
| • | Our acute care hospitals delivered nearly $2.3 billion in uncompensated care. |
Behavioral Health Care Services:
| • | The Centers for Medicare and Medicaid Services’ inpatient psychiatric facility quality reporting measures compare our behavioral health care facilities to approximately 1,600 providers in the U.S. Our 2021 behavioral health results exceed the national average in 11 out of 15 indicators. These measures are publicly available. |
| • | In 2022, patients in our behavioral health care facilities rated their overall care, on average, as 4.4 out of 5 in our patient satisfaction surveys. More than 91% indicated they felt better following care at one of our facilities; and 89% of our patients indicated that their treatment goals were met. |
| • | As indicated by our referral source satisfaction survey, 84% of our referral sources consider our behavioral health care facilities as their provider of choice while scoring a 4 out of 5. |
| • | In 2020, our behavioral health care facilities began obtaining Net Promoter Scores (“NPS”) which are utilized by approximately two-thirds of Fortune 1000 companies to gauge customer loyalty. In 2022, the average aggregate score for our behavioral health care facilities was 37.5 which is considered very good by industry standards. Our outpatient programs’ NPS score was 66.1 and our substance use disorder programs’ NPS score was 55.5, both of which are considered excellent. |
| • | In 2022, 173 of our facilities participated in patient reported outcome evaluations. An evidence-based tool is administered at admission and at discharge to determine effectiveness and impact of care provided. 80% of our patients exhibited statistically meaningful improvement. Utilizing these tools in addition to patient satisfaction, publicly reported measures and NPS, provides our facilities the opportunity to benchmark, improve and report on the quality of care provided. |
Our Executive Officers
Marc D. Miller – Chief Executive Officer, President and Director: Mr. Marc D. Miller was appointed Chief Executive Officer and President effective January 1, 2021. He has served as President since May, 2009 and prior thereto served as Senior Vice President and co-head of our Acute Care Hospitals since 2007. He was elected a Director in May, 2006 and Vice President in 2005. He has served in various capacities related to our acute care division since 2000. He was elected to the Board of Trustees of Universal Health Realty Income Trust in December, 2008. He also serves as a member of the Board of Directors of Premier, Inc., a publicly traded healthcare performance improvement alliance.
Alan B. Miller – Executive Chairman of the Board and Founder: Mr. Alan B. Miller was appointed Executive Chairman of the Board effective January 1, 2021. He had been Chairman of the Board and Chief Executive Officer since our inception in 1978 and also served as President from inception until 2009. Prior thereto, he was President, Chairman of the Board and Chief Executive Officer of American Medicorp, Inc. He currently serves as Chairman of the Board, Chief Executive Officer and President of Universal Health Realty Income Trust.
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Executive Compensation
Steve G. Filton – Executive Vice President, Chief Financial Officer and Secretary: Mr. Filton was elected Executive Vice President in 2017 and continues to serve as Chief Financial Officer since his appointment in 2003. He has also served as Secretary since 1999. He had served as Senior Vice President since 2003, as Vice President and Controller since 1991, and as Director of Corporate Accounting since 1985.
Edward H. Sim – Executive Vice President, President of Acute Care Division: Mr. Sim was hired as Executive Vice President, President of our Acute Care Division in December, 2022 to succeed Mr. Marvin G. Pember who retired on December 31, 2022. Mr. Sim was formerly employed as Chief Operating Officer at Centura Health, since 2017. Prior to joining Centura Health, Mr. Sim served in senior leadership roles of increasing responsibility for 11 years at Baptist Health.
Matthew J. Peterson – Executive Vice President, President of Behavioral Health Division: Mr. Peterson’s employment with us commenced in September, 2019 as Executive Vice President and President of our Behavioral Health Division. He was formerly employed at UnitedHealth Group for 11 years serving in various capacities including Chief Operating Officer for OptumGovernment, a health services and technology company, as well as various other Senior Vice President/Vice President roles. In addition to his civilian business career, Mr. Peterson also serves in the Air National Guard (“ANG”), U.S. Airforce, and was recently promoted to Brigadier General. He has also served for over 25 years with the ANG as a Healthcare Executive/Medical Service Corps Officer and has held numerous leadership roles.
Marvin G. Pember – Former Executive Vice President, President of Acute Care Division: Mr. Pember was elected Executive Vice President in 2017 and served as President of our Acute Care Division since commencement of his employment with us in 2011 until his retirement on December 31, 2022.
Summary of Changes Implemented in 2022 to Executive Officer Compensation
As a result of shareholder feedback (including feedback received in connection with the most recent shareholder advisory vote on executive compensation), as well as review of comparable executive compensation benchmarking comparisons, on March 23, 2022, our Compensation Committee of the Board of Directors (the “Compensation Committee”) approved changes to various elements of compensation for our Chief Executive Officer (“CEO”) and certain of our other named executive officers (“NEOs”).
Below is a general summary of those changes, as compared to 2021:
| • | Decrease in the weighting of long-term incentives (“LTI”), with accompanying increase in weighting of cash incentives. |
| • | No significant changes in target compensation levels (i.e., changes generally consist of shifts in mix of pay, not pay amounts). |
| • | Continued commitment to significant at-risk, performance-based CEO and NEO compensation programs. |
After reviewing market data prepared by FW Cook, a third-party executive compensation consultant, the Compensation Committee determined that the target pay mix for our CEO and certain of our other NEOs could be more closely aligned with the comparable target pay mix at our peer group companies. For example, in 2021, our CEO received 82% of target total direct compensation (“TDC”) in the form of long-term incentives whereas LTI of peer group CEOs accounted for 66% of target TDC. Certain of our other NEOs (on average) received approximately 75% of target TDC in the form of long-term incentives whereas LTI of comparable peer company NEOs (on average) accounted for 56% of target TDC. Conversely, the weighting of annual cash incentives was below that of our peer group.
Due to the differences between our target pay mix and that of our peer group, our Compensation Committee determined that decreases in the weighting of LTI, and accompanying increases in cash incentive pay mix, were warranted for our CEO and certain of our other NEOs. Adjustments to base salaries were also warranted to further align the elements of our executive compensation to the pay mix of our peer group companies.
Commencing in March of 2022, each NEO began receiving their stock-based compensation as fixed dollar awards rather than awards that were denominated in a fixed number of shares. In addition, changes were also implemented in connection with the form of stock-based compensation awards made to our CEO and other NEOs to further align with peer group long-term incentive mix. In March of 2022, our CEO and NEOs each received: (i) 50% of their annual target stock-based compensation awards in the
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Universal Health Services, Inc. 2023 Proxy Statement
Executive Compensation
form of options to purchase shares of our Class B Common Stock at the grant date market value, and; (ii) 50% of their annual target stock-based compensation awards in the form of performance-based restricted stock units that will be earned based upon achievement of a pre-established specified range of target levels based on the three-year growth in our earnings before interest, taxes, depreciation & amortization, and the impacts of other income/expense and net income attributable to noncontrolling interests. Previously, in 2021, the annual stock-based compensation awards to our CEO and NEOs consisted of: (i) 50% of the target awards were made in the form of options to purchase shares of our Class B Common Stock at the grant date market value, and; (ii) 50% of the target awards were made in the form of option to purchase shares of our Class B Common Stock at 110% of the grant date market value.
The base salary changes will bewere retroactively applied in 2022 to correspond to each individual’s historical annual merit increase date which iswas January 1st for Mr. Marc Miller and March 1st for each of Messrs. Filton, Pember and Peterson.
The cash incentives values reflected below for 2022 were computed at the target bonus awards for each individual, which as a percentage of their base salary, after giving effect to the changes implemented in 2022, amounted to 150% for Mr. Marc Miller and 100% for each of Messrs. Filton, Pember and Peterson. The cash incentives values reflected below for 2021 were computed at the target bonus awards for each individual, which as a percentage of their base salary, before giving effect to the changes implemented in 2022, amounted to 100% for Mr. Marc Miller, 50% for Mr. Filton and 31% for each of Messrs. Pember and Peterson.
As compared to 2021, below is a summary of the primary elements of compensation for our CEO and certain other NEOs, other than our Executive Chairman, Mr. Alan Miller, and Mr. Edward H. Sim who was hired in December 2022, after giving effect to the changes implemented in 2022.
| ($000s) | ||||||||||||||||||||||||||||||||
Compensation Elements
| M. Miller (Pres. & CEO) | S. Filton (EVP & CFO) | M. Pember (EVP & Pres.- Acute Care) | M. Peterson (EVP & Pres.- Behavioral Health) | ||||||||||||||||||||||||||||
| 2021 | 2022 | 2021 | 2022 | 2021 | 2022 | 2021 | 2022 | |||||||||||||||||||||||||
Base Salary | $ | 1,100 | $ | 1,300 | $ | 719 | $ | 800 | $ | 740 | $ | 800 | $ | 626 | $ | 675 | ||||||||||||||||
Cash Incentives | $ | 1,100 | $ | 1,950 | $ | 360 | $ | 800 | $ | 231 | $ | 800 | $ | 196 | $ | 675 | ||||||||||||||||
Equity Comp | $ | 10,105 | $ | 9,508 | $ | 3,169 | $ | 2,420 | $ | 3,181 | $ | 2,305 | $ | 2,724 | $ | 1,988 | ||||||||||||||||
Total Direct Comp | $ | 12,305 | $ | 12,758 | $ | 4,248 | $ | 4,020 | $ | 4,152 | $ | 3,905 | $ | 3,546 | $ | 3,338 | ||||||||||||||||
| ($000s) | ||||||||||||||||||||||||||||||||
Compensation Elements
| M. Miller (Pres. & CEO) | S. Filton (EVP & CFO) | M. Pember (Former EVP & Pres.- Acute Care) | M. Peterson (EVP & Pres.- Behavioral Health) | ||||||||||||||||||||||||||||
| 2021 | 2022 | 2021 | 2022 | 2021 | 2022 | 2021 | 2022 | |||||||||||||||||||||||||
Base Salary | $ | 1,100 | $ | 1,300 | $ | 719 | $ | 800 | $ | 740 | $ | 800 | $ | 626 | $ | 675 | ||||||||||||||||
Target Cash Incentives | $ | 1,100 | $ | 1,950 | $ | 360 | $ | 800 | $ | 231 | $ | 800 | $ | 196 | $ | 675 | ||||||||||||||||
Equity Comp | $ | 10,105 | $ | 9,508 | $ | 3,169 | $ | 2,420 | $ | 3,181 | $ | 2,305 | $ | 2,724 | $ | 1,988 | ||||||||||||||||
Target Total Direct Comp | $ | 12,305 | $ | 12,758 | $ | 4,248 | $ | 4,020 | $ | 4,152 | $ | 3,905 | $ | 3,546 | $ | 3,338 | ||||||||||||||||
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Universal Health Services, Inc. 20222023 Proxy Statement
Executive Compensation
We believe the changes to the elements of compensation for each of our NEOs, as outlined above, continue to preserve significant reliance on at-risk, performance-based compensation for our CEO and other NEOs. After giving effect to the changes in the elements of compensation during 2022, as reflected above, approximately 90% of the target pay for our CEO, and approximately 80% of the target pay for our other NEOs’,NEOs, is comprised of performance-based incentive compensation.
Mr. Alan Miller, our Executive Chairman, receives compensation pursuant to his employment agreement which provides for a base salary of $1.0 million in 2022 (unchanged from 2021), a discretionary cash bonus which was $1.0 million for 2021 and zero for 2022, and discretionary LTIP awards which had grant date market values of approximately $5.0 million in 2022 and $10.1 million in 2021. Mr. Alan Miller’s LTIP awards in each of 2022 and 2021 were consistent with the form of the stock-based awards made to our CEO and other NEOs during each year, as discussed above.
Mr. Edward H. Sim was hired as Executive Vice President, President of our Acute Care Division in December, 2022 to succeed Mr. Marvin G. Pember who retired on December 31, 2022. Mr. Sim has an annual base salary of $775,000. He was not eligible for an annual incentive bonus for 2022.
Compensation Philosophy and Objectives
Our compensation philosophy of strongly aligning pay strongly with performance is grounded in best practices that are regulatory compliant, financially sound and provide long-term value to stockholders. Specifically, we:
Review peer group market data on an annual basis;
| • | Review peer group market data on an annual basis; |
Discuss financial and operational performance rigorously in determining any base salary and incentive decisions;
| • | Discuss financial and operational performance rigorously in determining any base salary and incentive decisions; |
Enforce maximums on incentive payments to limit undue risk;
| • | Enforce maximums on incentive payments to limit undue risk; |
Evaluate our compensation practices on an annual basis;
| • | Evaluate our compensation practices on an annual basis; |
Retain an independent, outside consultant;
| • | Retain an independent, outside consultant; |
Do not provide plans generally outside of current market practices, and;
| • | Do not provide plans generally outside of current market practices, and; |
Do not offer excessive perquisites to our executives.
| • | Do not offer excessive perquisites to our executives. |
In designing our compensation programs for our named executive officers, we follow our belief that compensation should reflect the value created for stockholders while supporting our strategic business goals. In doing so, our compensation programs reflect the following objectives:
Compensation should encourage increases in stockholder value;
| • | Compensation should encourage increases in stockholder value; |
Compensation programs should support our short-term and long-term strategic business goals and objectives;
| • | Compensation programs should support our short-term and long-term strategic business goals and objectives; |
Compensation programs should reflect and promote our core values set forth in our mission statement, which includes commitment to excellence, high ethical standards, teamwork and innovation;
| • | Compensation programs should reflect and promote our core values set forth in our mission statement, which includes commitment to excellence, high ethical standards, teamwork and innovation; |
Compensation should reward individuals for outstanding performance and contributions toward business goals, and;
| • | Compensation should reward individuals for outstanding performance and contributions toward business goals, and; |
Compensation programs should enable us to attract, retain and motivate highly qualified professionals.
| • | Compensation programs should enable us to attract, retain and motivate highly qualified professionals. |
These objectives govern the decisions that the Compensation Committee and management of the Company make with respect to the amount and type of compensation payable to our named executive officers. The Compensation Committee believes that linking executive compensation to corporate performance results in a strong alignment of compensation with corporate business goals and stockholder value. This belief has been adhered to through the use of incentive pay programs that provide competitive compensation for achieving superior performance and creating value for stockholders. Executives are rewarded commensurately for the achievement of specified business goals and performance objectives, which may increase the value of our stock. Our compensation programs are reviewed annually to ensure that these objectives continue to be met.
In late 2020, we retained the services of FW Cook to provide data from our established peer group in addition to competitive market data for the Board to consider for changes during Alan Miller’s transition to
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Universal Health Services, Inc. 2023 Proxy Statement
Executive Chairman and Marc Miller’s move to Chief Executive Officer and President. Discussion and guidance were used to determine appropriate base pay, short- and long-term compensation components for their updated employment contracts.Compensation
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Universal Health Services, Inc. 2022 Proxy Statement
Executive Compensation
Setting Process
In late 2021, we retained the services of FW Cook to conduct a full comprehensive review of total direct compensation (base, incentive and equity) for our named executives and market analysis of Board of Director fee and equity award structure. Information was reviewed from two reference points: UHS peer group established and detailed in our 20202021 proxy and a secondary reference of size-adjusted (by revenues) data from the broader general industry. Data for the peer reference were drawn from publicly filed proxies. FW Cook’s advice and analysis were used to make decisions on an updated remix of all direct compensation elements, as discussed above. As discussed in “Director Compensation” below, compensation practices for our Board of Directors were modified as well to reflect current peer and market practices.
With the approval of the Compensation Committee, management engaged FW Cook for compensation-related consulting services, substantially all of which related to the review and analysis of the elements and amounts of compensation for our CEO and other named executive officers. FW Cook did not receive more than $120,000 in fees during 2022 from the Company for services other than for work requested by the Compensation Committee with respect to executive compensation. For 2022, the Compensation Committee analyzed whether the work of FW Cook raised any conflicts of interest, taking into consideration all relevant factors, and determined, based on its analysis of all relevant factors, that no conflicts of interest were present.
Elements of Compensation
Our executive compensation is based on six primary components, each of which is intended to serve the overall compensation objectives. These components include:
annual base salary;
| • | annual base salary; |
annual cash incentive;
| • | annual cash incentive; |
long-term incentive awards, and;
| • | long-term incentive awards, and; |
| • | deferred compensation, retirement benefits and other benefits, including perquisites. |
deferred compensation, retirement benefits and other benefits, including perquisites.
Acadia Healthcare Company, Inc.
| • | Acadia Healthcare Company, Inc. |
Brookdale Senior Living, Inc.
| • | Brookdale Senior Living, Inc. |
Community Health Systems, Inc.
| • | Community Health Systems, Inc. |
DaVita, Inc.
| • | DaVita, Inc. |
| • | Encompass Health Corporation |
| • | Genesis Healthcare, Inc. |
| • | HCA Healthcare, Inc. |
| • | Henry Schein, Inc. |
| • | Laboratory Corporation of America Holdings |
| • | Molina Healthcare, Inc. |
| • | Quest Diagnostics Incorporated |
| • | Select Medical Holdings Corporation |
| • | Tenet Healthcare Corporation |
Annual Base Salary
Our annual base salary levels are intended to be consistent with competitive pay practices and level of responsibility, with salary increases reflecting competitive trends, our overall financial performance, the performance of each individual executive and general economic conditions.
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Universal Health Services, Inc. 2023 Proxy Statement
Executive Compensation
In establishing the base salary for our named executive officers, various criteria are reviewed including the following:
| • | the executive officer’s achievements, performance in his or her position with us, taking into account the tenure of service, the complexity of the position and current job responsibilities; |
| • | company financial performance, and; |
| • | salaries of similar positions in our peer competitor companies and general industry comparisons.
|
We believe these peer companies, which are indicated above, are comparable peer companies based upon the median revenues of this peer group, which were approximately $11.6 billion in 2022, as compared to our 2022 revenues of approximately $13.4 billion.
For 2022, for our other named executive officers (excluding Mr. Alan Miller), we targeted the median (50th percentile) base salary paid by the peer companies (listed above), along with the median of broader general industry data, to establish our base market rate. We generally consider our base salaries to be competitive if they are approximately within a 15% range of the median market rate. For 2022, Mr. Marc Miller, Mr. Filton and Mr. Peterson’s salaries were within 15% of the data (as assessed relative to our peer and general industry groups). Mr. Pember’s salary was within 20%. However, actual base salaries are not dictated solely by the median market rate. We also take into account an individual’s expertise, tenure in the position, responsibilities and achievements.
Annual Cash Incentives
Cash incentives for our named executive officers are awarded under the Executive Incentive Plan. A new 2022 Executive Incentive Plan was adopted in March, 2022 which contained certain minor updates to our prior plan due to changes in tax laws regarding executive compensation. The Executive Incentive Plan is intended to support our efforts to attract, retain and motivate highly qualified senior management and other executive officers of the Company and its affiliates through the payment of performance-based incentive compensation. Annual incentive compensation may be awarded under the Executive Incentive Plan to our named executive officers and others as selected by the Compensation Committee for any calendar year. The Compensation Committee believes that the payment of cash incentives to our named executive officers under the Executive Incentive Plan is consistent with the objectives for our compensation programs by rewarding such officers for the achievement of specified business goals and performance objectives and that may increase the value of our stock.
The amount of an employee’s cash incentive award for a calendar year is based upon the employee’s target cash incentive and the extent to which the performance goal(s) applicable to the employee are achieved. For each calendar year, an employee’s target cash incentive will be equal to a fixed percentage of the employee’s base salary earned during the year.
The Compensation Committee establishes performance goals for the named executive officers using such business criteria and other measures of performance discussed herein and the Compensation Committee will establish objective performance goals based upon one or more of the following business criteria:
| • | attainment of certain target levels of, or a specified increase in, after-tax or pre-tax profits; |
| • | attainment of certain target levels of, or a specified increase in, earnings per diluted share or adjusted earnings per diluted share, and; |
| • | attainment of certain target levels of, or a specified increase in, return on capital or return on invested capital.
|
In the case of an award intended to qualify as “performance-based compensation”, the applicable target cash incentive, performance goals and performance factors with respect to any calendar year will be established in writing by the Compensation Committee no later than 90 days after the commencement of that year. Promptly after the date on which the necessary financial or other information for a particular year becomes available, the Compensation Committee will determine the amount, if any, of the cash incentive compensation payable to each participant for that calendar year and will certify in writing prior to payment that the performance goals for the year were in fact satisfied. The maximum incentive award which any participant may earn under the Executive Incentive Plan for any calendar year shall not exceed $5 million. The Executive Incentive Plan provides the Compensation Committee with the discretion to establish higher or lower performance factors for levels of performance that are more or less than the target levels. Performance goals may be adjusted for changes in accounting methods, corporate transactions and other similar types of events.
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Universal Health Services, Inc. 2023 Proxy Statement
Executive Compensation
2022 Annual Cash Incentive Formula and Performance Goals:
On March 23, 2022, the Compensation Committee approved specific bonus formulae for the determination of the target annual incentive compensation for the Company’s named executive officers pursuant to the Executive Incentive Plan (the “Plan”) for the year ending December 31, 2022. Under the formulae approved by the Compensation Committee, each of the Company’s named executive officers was assigned a percentage of such executive officer’s 2022 base salary as a target bonus based upon corporate performance criteria. The corporate performance criteria target bonus award indicated below for Mr. Marc D. Miller is stipulated in his employment agreement dated December 23, 2020, which became effective on January 1, 2021. Mr. Marc Miller’s employment agreement was amended in March, 2022, primarily to provide for the changes to the elements of his compensation implemented in 2022, as discussed above.
Mr. Alan B. Miller, who previously served as our Chief Executive Officer and Chairman of the Board of Directors, transitioned to the role of Executive Chairman of the Board of Directors effective January 1, 2021. As part of his compensation in connection with his role as Executive Chairman of the Board, Mr. Alan B. Miller may be entitled to bonuses and other compensation (including annual incentive bonuses) as may be determined by the Board of Directors.
The following table shows each executive officer’s corporate performance criteria target bonus as a percentage of their base salary for 2022.
With respect to:
| • |
|
| • | Messrs. Pember and Peterson – their |
| • | 25% of their annual salary based upon the achievement of the corporate performance criteria, and; |
| • | 75% of their annual salary based upon the achievement of the divisional income targets, as described below.
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Name | Title | Target Incentive Bonus Award as a % of salary | ||||
Marc D. Miller | Chief Executive Officer and | 150 | % | |||
Steve G. Filton | Executive Vice President and | 100 | % | |||
Marvin G. Pember
| Former Executive Vice President and | 100 | % | |||
Matthew J. Peterson | Executive Vice President and
| 100 | % | |||
As part of our peer company compensation review for executive officers as discussed above in Annual Base Salary, we also target the median (50th percentile) market rate from our healthcare peers and the broader general industry data when determining each officer’s target annual incentive. Actual cash incentive awards, however, appropriately vary from this targeted level based upon performance, consistent with our pay for performance philosophy, and are detailed in the Summary Compensation Table in this Proxy Statement. The Compensation Committee believes that the annual incentive opportunities offered to our named executive officers are appropriate to facilitate our ability to attract, retain, motivate and reward our named executive officers, and that actual incentive payouts appropriately reflect the Company’s performance.
2022 Annual Cash Incentive Targets:
Target Corporate Performance Criteria:
On February 24, 2022, we publicly announced that our initial estimated range of adjusted net income per diluted share attributable to UHS for 2022 was $11.90 to $12.90. In June of 2022, based upon our actual operating results experienced during the first six months of 2022, we publicly disclosed a decrease to our previously disclosed estimated range of adjusted net income per diluted share attributable to UHS for 2022 (decreased the upper end of the range to $10.40 per diluted share from $12.90 per diluted share while the lower end of the range was adjusted to $9.60 per diluted share from $11.90 per diluted share); however, our annual incentive performance targets were not impacted by these publicly disclosed revisions.
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Universal Health Services, Inc. 2023 Proxy Statement
Executive Compensation
On March 23, 2022, the Compensation Committee approved specific bonus formulae for the determination of annual incentive compensation for our named executive officers pursuant to the 2022 Executive Incentive Plan for the year ending December 31, 2022. For 2022, our named executive officers were eligible to receive the applicable portion of their annual cash incentive (which were based on the corporate performance criteria) at various increments ranging from 0% of their bonus target award (based upon the achievement of a Target of adjusted net income per diluted share attributable to UHS of $11.15 or less, and Return on Capital of 7.7% or less) up to 200% of their annual cash incentive target award (based upon the achievement of a Target of adjusted net income per diluted share attributable to UHS of $13.64 or greater and Return on Capital of 9.5% or greater). The 2022 Target of adjusted net income per diluted share attributable to UHS, which represented the approximate midpoint within the publicly disclosed range of our projected consolidated earnings per diluted share estimate for the year, was $12.40 per diluted share. The 2022 Return on Capital Target was 8.7%
The adjusted net income per diluted share attributable to UHS excludes, among potentially other things if applicable and material and/or nonrecurring or nonoperational in nature, the impact of unrealized gains/losses resulting from changes in the market value of shares of certain equity securities, provision for asset impairments, and the impact on our provision for income taxes and net income attributable to UHS resulting from ASU 2016-09, “Compensation-Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting. The Targets were adjusted from prior years to correlate to the range of our initial estimated 2022 adjusted net income per diluted share attributable to UHS, as publicly disclosed on February 24, 2022.
Target Divisional Performance Criteria:
Also on March 23, 2022, the Compensation Committee approved the specific bonus formulae based upon the achievement of the divisional income targets pursuant to the 2022 Executive Incentive Plan for the year ended December 31, 2022. Messrs. Pember and Peterson were each entitled to receive between 0% and 200% of their target bonus that was based on the divisional results (75%). The divisional income targets consist of the projected aggregate pre-tax income for our acute care and behavioral health services segments, net of certain deductions which consist primarily of a charge for the estimated cost of capital. The divisional income targets may be adjusted to include or exclude the impact of items, if applicable and material, that are, among other things, nonrecurring or non-operational in nature.
For 2022, the divisional income targets were as follows:
| • | Acute Care: The divisional income target was determined to be $206.0 million and Mr. Pember was eligible to receive the applicable portion of
|
| • |
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2022 Actual Annual Cash Incentive Results:
On March 15, 2023, the Compensation Committee determined that, based upon our actual corporate and divisional operating results during the year ended December 31, 2022, the minimum thresholds for the corporate performance criteria and the divisional performance criteria were not achieved and therefore no cash incentives were payable to Messrs. Marc D. Miller, Steve G. Filton, Marvin G. Pember or Matthew J. Peterson.
Actual Corporate Performance Criteria:
During 2022, our adjusted net income per diluted share attributable to UHS was $9.88, as compared to a target of $12.40 per diluted share and a minimum threshold of $11.16 per diluted share. This adjusted net income per diluted share attributable to UHS for 2022 was publicly disclosed and reconciled to our reported 2022 net income per diluted share attributable to UHS of $9.14, on the Schedule of Non-GAAP Supplemental Information included with our financial results for the year ended December 31, 2022, as
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Universal Health Services, Inc. 2023 Proxy Statement
Executive Compensation
filed on Form 8-K on February 27, 2023. The Return on Capital was 7.0% for 2022, as compared to a target of 8.7% and a minimum threshold of 7.8%. The Return on Capital is calculated by dividing our annual adjusted net income attributable to UHS by the consolidated average net capital.
Actual Divisional Performance Criteria:
During 2022, the actual divisional income was as follows:
| • | Acute Care: The acute care divisional income was a loss of $26.9 million and therefore the minimum income threshold of $185.4 million was not achieved. |
| • |
|
In determining the corporate and divisional performance criteria, various factors are considered, including the projected revenue and earnings growth over the prior year. Since the value received by stockholders is measured, in large part, by an increase in stock price, which is in turn typically influenced by increases in revenues and earnings, our performance criteria are established at reasonably aggressive levels to encourage the attainment of our financial objectives which, if accomplished, may result in an increase to our stock price and increased value to stockholders. As mentioned above, the corporate performance criteria are established annually (except for 2020 due to the impact of the COVID-19 pandemic and no cash incentive bonuses were paid to any of our named executive officers pursuant to the Executive Incentive Plan) and the Target of adjusted net income per diluted share attributable to UHS directly correlates to our annual earnings guidance that is typically publicly disclosed by us in February of each year. The divisional performance criteria are also established annually and represent each segment’s respective portion of the Company’s consolidated estimated earnings.
For each of our named executive officers that had approved specific bonus formulae for the determination of annual incentive compensation pursuant to the Executive Incentive Plan, the following table sets forth the actual 2022 annual incentive bonus awarded as well as the pre-established ranges of potential payouts under our non-equity incentive plan.
| 2022 Non-Equity Incentive Plan Awards | ||||||||||||||||||
Name | Title | Actual | Minimum | Target | Maximum | |||||||||||||
Marc D. Miller | Chief Executive Officer and President | $ | — | $ | 78,003 | $ | 1,950,075 | $ | 3,900,150 | |||||||||
Steve G. Filton | Executive Vice President and Chief Financial Officer | $ | — | $ | 31,463 | $ | 786,574 | $ | 1,573,148 | |||||||||
Marvin G. Pember | Former Executive Vice President and President-Acute Care | $ | — | $ | 90,856 | $ | 790,053 | $ | 1,580,106 | |||||||||
Matthew J. Peterson | Executive Vice President and President-Behavioral Health Care | $ | — | $ | 76,696 | $ | 666,922 | $ | 1,333,844 | |||||||||
Mr. Alan B. Miller, our Executive Chairman, receives compensation pursuant to his employment agreement which provided for a base salary of $1.0 million in 2022, and the potential for a discretionary cash bonus, as determined by our Board of Directors. No discretionary cash bonus was paid to Mr. Alan B. Miller for the year ended December 31, 2022.
The performance goals related to the Executive Incentive Plan, as outlined above, are generally based upon the achievement of our business plan financial objectives. Performance goals are established at reasonably aggressive levels to encourage and motivate executive performance and attainment of our financial objectives.
For a further description of the cash incentives and other elements of compensation granted to our named executive officers for 2022, 2021 and 2020, please refer to the Summary Compensation Table in this Proxy Statement.
Long-Term Incentives
The Compensation Committee believes that the grant of equity-based, long-term compensation, primarily in the form of stock options and restricted shares, to our named executive officers is appropriate to attract and retain such individuals and to motivate them to enhance stockholder value.
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Universal Health Services, Inc. 2023 Proxy Statement
Executive Compensation
Further, long-term incentive awards reward individuals for their performance and achievement of business goals. The Compensation Committee believes that our best interests will be advanced by enabling our named executive officers, who are responsible for our management, growth and success, to receive compensation in the form of long-term incentive awards that may increase in value in conjunction with an increase in the value of our common stock.
As is the case with respect to base salaries, a number of factors are taken into account in calibrating grants of long-term incentive awards, including an individual’s performance in light of his or her position, responsibilities and contribution to our financial performance. In addition, the Compensation Committee takes into account an individual’s potential contribution to our growth and productivity. In determining appropriate long-term incentive grants, there is no other predetermined formula, factors or specified list of criteria that is followed.
For a description of the long-term incentive awards granted to our named executive officers for 2022, please read the Summary Compensation Table and the Grants of Plan-Based Awards Table included in this Proxy Statement.
2020 Stock Incentive Plan:
In May, 2020, at our Annual Meeting, the stockholders approved the 2020 Omnibus Stock and Incentive Plan (“2020 Stock Incentive Plan”), and as a result, as of that date, no additional awards were granted under our previous plan and the reserve for shares that were remaining for future issuance under the previous plan was canceled. The 2020 Stock Incentive Plan provides for the issuance of incentive stock options and non-qualified stock options to purchase shares of our Class B Common Stock, including awards of performance-based stock options with premium exercise prices. Additionally, the 2020 Stock Incentive Plan authorizes awards of restricted stock and restricted stock units, as discussed below, stock appreciation rights and restricted stock units and awards intended to be performance-based awards. The 2020 Stock Incentive Plan is intended to provide a flexible vehicle through which we may offer equity-based compensation incentives to our named executive officers and other eligible personnel in support of our compensation objectives. On March 23, 2022, the Board of Directors adopted an amendment and restatement of our 2020 Omnibus Stock and Incentive Plan, which was approved by our stockholders at our 2022 Annual Meeting, which among other things increased the numbers of shares of our Class B Common Stock that may be issued under the 2020 Stock Incentive Plan by 6.0 million (to 12.1 million shares from 6.1 million shares).
Subject to the provisions of the 2020 Stock Incentive Plan, the Compensation Committee has the responsibility and full power and authority to select the persons to whom awards will be made, to prescribe the terms and conditions of each award and make amendments thereto, to construe, interpret and apply the provisions of the Stock Incentive Plan and of any agreement or other instrument evidencing an award and to make any and all determinations and take any and all other actions as it deems necessary or desirable in order to carry out the terms of the Stock Incentive Plan.
Stock Options: Typically, option awards under the 2020 Stock Incentive Plan are granted by the Compensation Committee on specific dates that are scheduled in advance, which generally coincide with regularly scheduled meetings of the Compensation Committee and the Board of Directors. There is no separate policy with respect to the timing of option awards to our named executive officers. Typically, option awards are granted to our named executive officers at the same time as option awards are granted to our other employees. In certain circumstances, such as new hires or promotions, option awards are granted separately by the Compensation Committee or our Chief Executive Officer and Chief Financial Officer who are duly authorized by the Compensation Committee.
Stock options have such vesting and other terms and conditions as the Compensation Committee, acting in its discretion, may determine. Generally, grants of stock options vest in equal amounts over four years, are scheduled to expire on the fifth anniversary of the date of grant and, unless otherwise determined, employees must be employed by us for such options to vest. We do not have any plan to select option grant dates for our named executive officers in coordination with the release of material non-public information. The exercise price per share of Class B Common Stock covered by an option shall be any price determined by the Compensation Committee, but may not be less than 100% of the fair market value of the underlying Class B Common Stock on the date of grant. The exercise price of incentive stock options shall not be less than 110% of the fair market value on the date of grant if the optionee owns, directly or indirectly, stock possessing more than 10% of the voting power of all classes of our stock. For purposes of the 2020 Stock Incentive Plan, unless otherwise determined by the Compensation Committee, the fair market
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Universal Health Services, Inc. 2023 Proxy Statement
Executive Compensation
value of a share of Class B Common Stock as of any given date is the closing sale price per share reported on a consolidated basis for securities listed on the principal stock exchange or market on which the Class B Common Stock is traded on the date as of which such value is being determined or, if there is no sale on that day, then on the next day on which a sale was reported.
Restricted Stock and Restricted Stock Units: The 2020 Stock Incentive Plan provides for the grant of shares or units of our Class B Common Stock to eligible personnel for a purchase price equal to par value. Shares of our Class B Common Stock could be granted under the 2020 Incentive Plan to any of our employees or consultants. Historically, our restricted grants have had a scheduled vesting period ranging from one to five years.
Vesting conditions on shares or units issued under the 2020 Incentive Plan may consist of continuing employment for a specified period of time following the purchase date. Alternatively, or in addition, vesting may be tied to the satisfaction of specific performance objectives established by the Compensation Committee based upon any one or more of the business criteria used in determining the bonuses for our named executive officers, as mentioned above. We have the right to repurchase the shares for the same purchase price (par value) if specified vesting conditions are not met.
The Compensation Committee believes restricted stock awards and restricted stock units, at times, can be effective in achieving our compensation objectives because it provides employees with a strong retention incentive and aligns the value of the award or unit with our stock price performance. The Compensation Committee may provide that Restricted Stock Awards and Restricted Stock Units shall earn dividends or dividend equivalents (payable in cash or additional shares, or a combination of cash and shares), however, dividends or dividend equivalents may not be paid with respect to any award or unit until vesting requirements are satisfied. Generally, holders of restricted stock and restricted stock units receive dividend equivalents which are subject to vesting in line with the underlying award to which they relate. We do not have any plan to select restricted stock award or restricted stock unit grant dates for our named executive officers in coordination with the release of material non-public information.
2022 Stock-Based Compensation Awards:
To further enhance our equity awards program toward performance-based equity awards, as discussed below, stock appreciation rights and restricted stock units and awards intended to be performance-based awards. The 2020 Stock Incentive Plan is intended to provide a flexible vehicle through which we may offer equity-based compensation incentives to our names executive officers and other eligible personnel in support of our compensation objectives.
Typically, option awards are granted by the Compensation Committee on specific dates that are scheduled in advance, which generally coincide with regularly scheduled meetings of the Compensation Committee and the Board of Directors. There is no separate policy with respect to the timing of option awards to our named executive officers. Typically, option awards are granted to our named executive officers at the same time as option awards are granted to our other employees. In certain circumstances, such as new hires or promotions, option awards are granted separately by the Compensation Committee or our Chief Executive Officer and Chief Financial Officer who are duly authorized by the Compensation Committee.
Subject to the provisions of the 2020 Stock Incentive Plan, the Compensation Committee has the responsibility and full power and authority to select the persons to whom awards will be made, to prescribe the terms and conditions of each award and make amendments thereto, to construe, interpret and apply the provisions of the Stock Incentive Plan and of any agreement or other instrument evidencing an award and to make any and all determinations and take any and all other actions as it deems necessary or desirable in order to carry out the terms of the Stock Incentive Plan.
Stock options have such vesting and other terms and conditions as the Compensation Committee, acting in its discretion, may determine. Generally, grants of stock options vest in equal amounts over four years, are scheduled to expire on the fifth anniversary of the date of grant and, unless otherwise determined, employees must be employed by us for such options to vest. We do not have any plan to select option grant dates for our named executive officers in coordination with the release of material non-public information. The exercise price per share of Class B Common Stock covered by an option shall be any price determined by the Compensation Committee, but may not be less than 100% of the fair market value of the underlying Class B Common Stock on the date of grant. The exercise price of incentive stock options shall not be less than 110% of the fair market value on the date of grant if the optionee owns, directly or indirectly, stock possessing more than 10% of the voting power of all classes of our stock. For purposes of the 2020 Stock Incentive Plan, unless otherwise determined by the Compensation Committee, the fair market value of a share of Class B Common Stock as of any given date is the closing sale price per share reported on a consolidated basis for securities listed on the principal stock exchange or market on which the Class B Common Stock is traded on the date as of which such value is being determined or, if there is no sale on that day, then on the next day on which a sale was reported.
2021 Stock-Based Compensation Awards: After giving consideration to comments received from investors that our equity award program could be enhanced by including performance-based equity awards, and after undertaking a comprehensive review with our third-party compensation consultant (FW Cook) to identify potential performance-based equity award design alternatives, we decided to modify our stock option award program in 2020. As determined by our Compensation Committee, although not required by the terms of the 2020 Stock Incentive Plan, that a portion of the options awarded to the named executive officers of the Company will be exercisable at 110% of the fair market value on the date of grant. In March of 2021 and March of 2020, we have delivered 50% of the award value to our named executive officers, including Mr. Alan B. Miller (our Chief Executive Officer prior to January 1, 2021) and Mr. Marc D. Miller (our Chief Executive Officer effective as of January 1, 2021), in stock options with a premium exercise price of 10% above grant date market value.
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Universal Health Services, Inc. 2022 Proxy Statement
Executive Compensation
To further enhance our equity awards program toward performance-based equity awards, as discussed above, in March of 2022, our CEO and NEOs, with the exception of Mr. Edward H. Sim who was hired in December, 2022, each received: (i) 50% of their annual target stock-based compensation awards in the form of options to purchase shares of our Class B Common Stock at the grant date market value, and; (ii) 50% of their annual target stock-based compensation awards in the form of performance-based restricted stock units that will be earned based on the three-year growth in our earnings before interest, taxes, depreciation and amortization, the impacts of other income/expense and net income attributable to noncontrolling interests, as compared to a range of pre-established three-year growth thresholds.
On March 23, 2022, our Compensation Committee awarded to our named executive officers:
| • | Stock options, issued at $143.81 representing the grant date value, which are scheduled to vest in four equal installments on the first, second, third and fourth anniversaries of the grant date and will expire on March 22, 2027, and; |
| • | Performance-based restricted stock units that will be earned based upon the achievement of a pre-established specified range of target levels based on the three-year growth in our earnings before interest, taxes, depreciation and amortization, and the impacts of other income/expense and net income attributable to noncontrolling interests. |
The number of stock options and target awards of performance-based restricted stock units awarded to each of our named executive officers on March 23, 2022 were as follows:
| • | Marc D. Miller - 104,001 stock options and 33,058 performance-based restricted stock units. |
| • | Alan B. Miller - 54,691 stock options and 17,384 performance-based restricted stock units. |
| • | Steve G. Filton - 26,471 stock options and 8,414 performance-based restricted stock units. |
| • | Marvin G. Pember - 25,213 stock options and 8,014 performance-based restricted stock units (these performance based-restricted stock units were canceled upon Mr. Pember’s retirement on December 31, 2022). |
| • | Matthew J. Peterson - 21,745 stock options and 6,912 performance-based restricted stock units. |
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Executive Compensation
In January, 2023, related to the commencement of his employment in December, 2022, Mr. Edward H. Sim was awarded 50,000 stock options, issued at $145.65 representing the grant date value. The stock options are scheduled to vest ratably on each of the first four anniversaries of the grant date and are scheduled to expire on the fifth anniversary.
Mr. Marvin G. Pember retired from the Company effective as of December 31, 2022. Pursuant to his Separation Agreement and General Release: (i) all of Mr. Pember’s performance based restricted stock units awarded on March 23, 2022 with a grant date fair value of $1.2 million, which were scheduled to be earned based on the three-year growth in certain Company financial metrics, were canceled on December 31, 2022, and; (ii) all of Mr. Pember’s unvested stock options granted prior to his termination date will continue to vest until April 1, 2023 and all stock options scheduled to remain unvested as of April 1, 2023 were canceled as of December 31, 2022, (including 75% of options awarded on March 23, 2022).
In determining the number of options to award to our named executive officers, the Compensation Committee reviewed the compensation data and competitive performance data prepared by FW Cook in early 2022, including stock-based compensation, and reviewed historical company practices with respect to stock option and long-term incentive awards. The Committee also considered individual performance in light of a named executive officer’s position, responsibilities and contribution to our financial performance as well as his potential contribution to our growth and productivity.
2021 Stock-Based Compensation Awards
After giving consideration to comments received from investors that our equity award program could be enhanced by including performance-based equity awards, and after undertaking a comprehensive review with our third-party compensation consultant (FW Cook) to identify potential performance-based equity award design alternatives, we decided to modify our stock option award program in 2020. As determined by our Compensation Committee, although not required by the terms of the 2020 Stock Incentive Plan, that a portion of the options awarded to the named executive officers of the Company will be exercisable at 110% of the fair market value on the date of grant. In March of 2021 and March of 2020, we have delivered 50% of the award value to our named executive officers, including Mr. Alan B. Miller (our Chief Executive Officer prior to January 1, 2021) and Mr. Marc D. Miller (our Chief Executive Officer effective as of January 1, 2021), in stock options with a premium exercise price of 10% above grant date market value.
Deferred Compensation
Our Deferred Compensation Plan, which is subject to the applicable provisions of Internal Revenue Code Section 409A, provides that eligible employees may elect to defer a portion of their base salary and bonus award into deferred compensation accounts that accrue earnings based upon the selection of available investment options. Under the Deferred Compensation Plan, an employee is deemed eligible if their base compensation for 2022 was $135,000 or higher and they are performing duties in a qualified position. The base compensation threshold is adjusted from time-to-time for cost-of-living increases. Pursuant to the terms of the Deferred Compensation Plan, the minimum annual amount that can be deferred is 1% of an employee’s base salary. No more than 50% of an employee’s base salary or 95% of an employee’s annual bonus may be deferred under the Deferred Compensation Plan in any calendar year. Employees may allocate a portion of their deferred compensation to be distributed in a lump sum or installments to begin at retirement or a scheduled distribution date. The available investment options consist of certain mutual funds which include: (i) conservative (e.g. money markets or bonds); (ii) moderately conservative (e.g. balanced funds), and; (iii) aggressive (e.g. domestic and international equity).
Our obligation to make payments of amounts credited to participants’ deferred compensation accounts is a general unsecured obligation. In addition, under the Deferred Compensation Plan, we may make discretionary contributions on behalf of an eligible employee. Since inception of the Deferred Compensation Plan, we have not made any discretionary contributions on behalf of employees. Two of our named executive officers deferred a portion of their base salary and/or bonus paid during 2022 to the Deferred Compensation Plan. The Compensation Committee believes that, by offering an alternative savings vehicle for our named executive officers, the Deferred Compensation Plan supports our objectives to attract, retain and motivate talented personnel.
For a further description of the Deferred Compensation Plan, please refer to the Nonqualified Deferred Compensation table and the narrative discussion included in this Proxy Statement.
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Universal Health Services, Inc. 2023 Proxy Statement
Executive Compensation
Retirement Benefits
Our retirement benefits consist of our Executive Retirement Income Plan, Supplemental Executive Retirement Income Plan and a 401(k) plan. These plans are designed in combination to provide an appropriate level of replacement income upon retirement. The Compensation Committee believes that these retirement benefits provide a balanced and competitive retirement program and support our objectives to attract, retain and motivate talented personnel.
Supplemental Executive Retirement Income Plan (“SERIP”).
In July 2018, the Board of Directors adopted the SERIP. Pursuant to the terms of this plan, a select group of management or other highly compensated employees may be designated as plan participants. Our SERIP, which is subject to the applicable provisions of Internal Revenue Code Section 409A, provides eligible employees with annual employer contributions which are entirely at the Company’s discretion. Generally, each annual contribution vests on the earlier of: (i) the 5th anniversary of the date of funding to the participant’s account, or; (ii) the participant attaining the qualified age of retirement (either age 62 or 65, as stipulated in the SERIP). The SERIP also provides for discretionary alternative vesting schedules for certain supplemental discretionary contributions made on an individual basis. Upon attaining the plan’s qualified age of retirement, distributions are paid in 10 annual installments to the participant. Distributions due to events other than retirement are paid in a lump sum. Our obligation to fund payments to participants’ accounts pursuant to the SERIP is a general unsecured obligation. Four of our named executive officers are participants in the SERIP.
In 2018, upon commencement of the SERIP, certain participants of the ERIP, who had not yet approached their qualified age of retirement, were given the option to remain in the ERIP or convert their participation into the SERIP. ERIP participants that elected to convert to the SERIP have been provided with an unfunded, lump sum conversion balance that was credited to the participant’s SERIP account. The unfunded ERIP conversion balances transferred to the SERIP, which were computed based upon the participant’s 2017 salary and will remain permanently unchanged after conversion, are payable over 60 monthly installments, if the participant attains their qualified age of retirement, as previously stipulated in the ERIP. If the participant does not attain their qualified age of retirement, the ERIP conversion balance is forfeited unless the Board of Directors, in its full discretion, determines otherwise. For ERIP participants who elected to convert to the SERIP, their participation in the ERIP was terminated upon conversion and no future benefits will be earned pursuant to the ERIP. SERIP participants who converted from the ERIP are entitled to future benefits pursuant to the terms of the SERIP.
Executive Retirement Income Plan (“ERIP”).
In October 1993, the Board of Directors adopted the ERIP, which was subsequently closed to new participants effective January 1, 2015. Pursuant to the terms of the ERIP, certain management or other highly compensated employees, who had been previously designated as plan participants by our Board of Directors prior to December 31, 2014, and who had completed at least 10 years of active employment with us, may receive retirement income benefits.
Subject to certain conditions, the monthly benefit is payable to a participant who retires after he or she reaches age 62 (applicable to participants added to the ERIP before 2008) or age 65 (applicable to participants added to the ERIP after January 1, 2008). The benefit is equal to 3% of the employee’s average monthly base salary over the three years preceding retirement multiplied by the number of qualified years (not to exceed 10) of the participant’s employment with us. Payment of the benefit will be made in 60 monthly installments following the participant’s retirement date. If a participant’s employment with us is terminated prior to their qualified age of retirement, no ERIP benefits will be payable unless the Board of Directors, in its full discretion, determines otherwise. In 2018, certain participants were transferred to the SERIP and were provided with an unfunded, lump sum conversion balance pursuant to the SERIP, as discussed above. One of our named executive officers remains a participant in the ERIP.
For a further description of the SERIP and ERIP, please refer to the Pension Benefits included in this Proxy Statement.
401(k) Plan.
We maintain a 401(k) plan for all employees, including our named executive officers, as an additional source of retirement income. Pursuant to the 401(k) plan, in 2022, we made matching contributions (subject to highly compensated employee limits set by the
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Universal Health Services, Inc. 2023 Proxy Statement
Executive Compensation
Internal Revenue Code) to the 401(k) plan of approximately $72 million. All of the named executive officers with the exception of Mr. Edward H. Sim, participated in the 401(k) plan in 2022. Accordingly, we made matching contributions equal to $9,150 to the 401(k) plan for each of the participating named executives.
Benefits
Our named executive officers are eligible to participate in the benefit plans generally available to all of our employees, which include health, dental, life insurance, vision and disability plans, all of which the Compensation Committee believes are commensurate with plans of other similarly situated public companies in the hospital management industry.
Company Aircraft. We have a partial ownership interest in a fixed wing aircraft that is available for business purpose use by members of our management team, including our named executive officers, and for personal use by Messrs. Marc Miller and Alan Miller. When the aircraft is utilized for personal purposes by either individual and/or their family members, the incremental costs incurred, including the regular hourly charges, variable fuel charges and associated fees and taxes, are directly reimbursed to us by Messrs. Marc Miller and/or Alan Miller and therefore no imputed amounts are included in the Summary Compensation Table.
Automobile. Commencing in 2022, Mr. Marc D. Miller was provided with an auto allowance as reflected on the Summary Compensation Table in “All other compensation”.
During 2019, we purchased a new vehicle which is utilized by Mr. Alan B. Miller. Included in the Summary Compensation Table in “All other compensation” are the amounts related to his personal use of this vehicle.
Reimbursement of Relocation Expenses. In the normal course of business, in an effort to satisfy our staffing needs with high-quality personnel and/or support the career development of an employee by enabling them to assume a position of broader scope and complexity, we may need to place an executive in a position in a geographic location which differs from that in which the individual resides. The relocation benefits for our executives are patterned on standard industry practices and are competitive in design. The provisions for relocation benefits are the same for several of the top layers of management and consistently administered. Included in the relocation benefits are reimbursements or direct payment to vendors for expenses that include items like a short duration house hunting trip, movement of household goods and personal items, short duration of interim living expenses and certain closing costs for the sale and purchase of a house. Relocation reimbursement that is taxable to the individual is typically grossed-up to cover the resulting incremental income tax expense. During 2020, we paid certain relocation expenses, including income tax gross-ups, for Mr. Peterson as disclosed on the Summary Compensation Table contained in this proxy statement.
Other Perquisites. From time to time, we make tickets to cultural and sporting events available to our employees, including our named executive officers, for business purposes. If not utilized for business purposes, the tickets are made available to our employees, including our named executive officers, for personal use.
Split-Dollar Life Insurance Agreements.In December 2010, our Board of Directors approved the Company’s entering into supplemental life insurance plans and agreements on the lives of our Executive Chairman and his wife. As a result of these agreements, as amended in October 2016, based on actuarial tables and other assumptions, during the life expectancies of the insureds, we would pay approximately $28 million in premiums, and certain trusts owned by our Executive Chairman, would pay approximately $9 million in premiums. Based on the projected premiums mentioned above, and assuming the policies remain in effect until the death of the insureds, we will be entitled to receive death benefit proceeds of no less than approximately $37 million representing the $28 million of aggregate premiums paid by us as well as the $9 million of aggregate premiums paid by the trusts. In connection with these policies, we paid approximately $1.0 million in premium payments during each of 2022 and 2021.
Based on these projections, which are subject to the achievement of certain investment income and life expectancy assumptions, the total economic pre-tax cost to the Company (which includes the projected cost of capital net of the income resulting from the Company’s expected future receipt of the $9 million of premiums paid by the Trusts) would be approximately $10 million over the life expectancies of the insureds. We estimate that our share of the premium payments due on these policies will approximate $900,000 in 2023 and decrease annually to approximately $200,000 over the life expectancies of the insureds. Our aggregate premium payments (as well as the Trust’s) are expected to be repaid to us utilizing the death benefit proceeds.
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Universal Health Services, Inc. 2023 Proxy Statement
Executive Compensation
The Compensation Committee has determined to offer the above-described fringe benefits and perquisites in order to attract and retain our named executive officers by offering compensation opportunities that are competitive. In determining the total compensation payable to our named executive officers, for a given fiscal year, the Compensation Committee considers such fringe benefits and perquisites. However, with the exception of the above-mentioned split dollar life insurance agreements related to Mr. Alan B. Miller, given the fact that such other fringe benefits and perquisites, which are available to our named executive officers, represent a relatively insignificant portion of their total compensation, they do not materially influence the decisions made by the Compensation Committee with respect to other elements of each individual’s total compensation. For a further description of the fringe benefits and perquisites received by our named executive officers during 2022, please refer to the All Other Compensation table included in this Proxy Statement.
Rewards/Compensation Risk Analysis: As part of its oversight of the Company’s executive compensation program, the Compensation Committee considers the impact of the Company’s executive compensation program, and the incentives created by the compensation awards that it administers, on the Company’s risk profile. In addition, the Company reviews all of its compensation policies and procedures, including the incentives that they create and factors that may reduce the likelihood of excessive risk taking, to determine whether they present a significant risk to the Company. The review found that there were no excessive risks encouraged by the Company’s reward programs and the rewards programs do not produce payments that have a material impact on the financial performance of the organization. Approximately 850 employees (including the named executive officers) of our approximate 59,660 full-time employees in the U.S. and U.K. (comprising approximately 1.4% of our full-time employees) have incentive plans that entitle those individuals to larger bonus awards if profitability increases. However, although the plans are based on profitability, the bonus awards for these employees are capped at specific award levels (typically at 125% or less of base salary). Therefore, should our profitability increase, even by significant amounts, we do not believe the additional aggregate bonus awards would have a material unfavorable impact on our future results of operations
Summary
The foregoing discussion describes the compensation objectives and policies that were utilized with respect to our named executive officers during 2022. In the future, as the Compensation Committee continues to review each element of the executive compensation program with respect to our named executive officers, the objectives of our executive compensation program, as well as the methods that the Compensation Committee utilizes to determine both the types and amounts of compensation to award to our named executive officers, may change.
Compensation Committee Report
The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis with management; and based on the review and discussions, the Compensation Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this Proxy Statement.
COMPENSATION COMMITTEE
Eileen C. McDonnell (Chairperson)
Elliot J. Sussman, M.D.
Compensation Committee Interlocks and Insider Participation
The Compensation Committee of the Board of Directors is currently composed of Eileen C. McDonnell and Elliot J. Sussman, M.D. All the members of the Compensation Committee are independent directors and no member has ever been one of our officers or employees or had a relationship with us that required disclosure.
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Universal Health Services, Inc. 2023 Proxy Statement
SUMMARY COMPENSATION TABLE
The following table sets forth certain compensation information for our Chief Executive Officer, our Chief Financial Officer and the other most highly compensated executive officers for services rendered to UHS and its subsidiaries during the past three fiscal years. We refer to these officers collectively as our named executive officers:
Name and principal position | Year | Salary(6.) ($) | Bonus ($) | Grant Date Fair Value Stock Awards(1.) ($) | Grant Date Fair Value Option Awards(2.) ($) | Non-Equity Incentive Plan Compensation(3.) ($) | Change in Pension Value and Nonqualified Deferred Compensation Earnings(4.) ($) | All other compensation(10.) ($) | Total ($) | |||||||||||||||||||||||||||
Marc D. Miller, Chief Executive Officer and President(7.) | 2022 | $ | 1,300,050 | $ | 0 | $ | 4,754,071 | $ | 4,754,007 | $ | 0 | $ | 66,003 | $ | 45,845 | $ | 10,919,976 | |||||||||||||||||||
| 2021 | 1,100,042 | 0 | 0 | 10,104,427 | 2,750,105 | 52,002 | 14,366 | 14,020,942 | ||||||||||||||||||||||||||||
| 2020 | 823,020 | 0 | 0 | 1,458,238 | 0 | 49,519 | 15,220 | 2,345,997 | ||||||||||||||||||||||||||||
Alan B. Miller, Executive Chairman(7.) | 2022 | $ | 1,000,038 | $ | 0 | $ | 2,499,993 | $ | 2,499,990 | $ | 0 | $ | 0 | $ | 1,138,603 | $ | 7,138,624 | |||||||||||||||||||
| 2021 | 1,000,038 | 1,000,000 | (5.) | — | 10,104,427 | 0 | 0 | 1,092,036 | 13,196,501 | |||||||||||||||||||||||||||
| 2020 | 1,446,473 | 1,000,000 | (5.) | 1,000,052 | 8,603,615 | 0 | 44,826 | 1,151,248 | 13,246,214 | |||||||||||||||||||||||||||
Steve G. Filton, Executive Vice President and Chief Financial Officer | 2022 | $ | 786,574 | $ | 0 | $ | 1,210,017 | $ | 1,210,020 | $ | 0 | $ | 42,881 | $ | 18,612 | $ | 3,268,104 | |||||||||||||||||||
| 2021 | 714,681 | 0 | 0 | 3,168,736 | 893,351 | 41,232 | 18,162 | 4,836,162 | ||||||||||||||||||||||||||||
| 2020 | 652,613 | 0 | 0 | 1,020,766 | 0 | 39,656 | 18,043 | 1,731,078 | ||||||||||||||||||||||||||||
Marvin G. Pember, Former Executive Vice President and President, Acute Care(8.) | 2022 | $ | 809,364 | $ | 0 | $ | 1,152,493 | $ | 1,152,516 | $ | 0 | $ | 44,194 | $ | 18,011 | $ | 3,176,578 | |||||||||||||||||||
| 2021 | 736,568 | 0 | 0 | 3,180,879 | 782,604 | 42,907 | 14,134 | 4,757,092 | ||||||||||||||||||||||||||||
| 2020 | 679,177 | 0 | 0 | 1,020,766 | 0 | 41,621 | 17,549 | 1,759,113 | ||||||||||||||||||||||||||||
Matthew J. Peterson, Executive Vice President and President, Behavioral Health | 2022 | $ | 666,922 | $ | 0 | $ | 994,015 | $ | 993,990 | $ | 0 | $ | 37,402 | $ | 19,216 | $ | 2,711,545 | |||||||||||||||||||
| 2021 | 623,364 | 0 | 0 | 2,724,166 | 545,444 | 36,408 | 18,351 | 3,947,733 | ||||||||||||||||||||||||||||
| 2020 | 576,397 | 0 | 0 | 729,119 | 0 | 10,247 | 150,492 | 1,466,255 | ||||||||||||||||||||||||||||
Edward H. Sim, Executive Vice President and President, Acute Care(9.) | 2022 | $ | 59,120 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 59,120 | |||||||||||||||||||
| 2021 | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | ||||||||||||||||||||||||||||
| 2020 | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | ||||||||||||||||||||||||||||
| (1) | In 2022, performance-based restricted stock units were issued under our 2020 Omnibus Stock and Incentive Plan. In 2022, our CEO and NEOs each received 50% of their annual target stock-based compensation awards in the form of performance-based restricted stock units. The 2022 values represent 100% of the target, with a grant date value of $143.81 per unit. The performance-based restricted stock units
|
| (2) | In 2022, our CEO and NEOs each received 50% of their annual target stock-based compensation awards in the form of options to purchase shares of our Class B Common Stock at the grant date market value. Amounts in 2022 represent the aggregate fair value of options granted at the market price on the date of grant (grant date fair value of $45.71). Amounts in 2021 represent the aggregate fair value of options granted at the market price on the date of grant (grant date fair value of $40.42) and options granted at 110% of the market price on the date of grant (grant date fair value of $35.98). Options granted in 2022 and 2021 were awarded pursuant to our 2020 Omnibus Stock and Incentive Plan. Amounts in 2020 represent the aggregate fair value of options granted at the market price on the date of grant (grant date fair value of $14.58) and options granted at 110% of the market price on the date of grant (grant date fair value of $12.31). All options granted in 2020 were awarded pursuant to our Amended and Restated 2005 Stock Incentive Plan. For the assumptions used for the fair value valuations, please refer to Note 5—Common Stock, to the Consolidated Financial Statements included in our Annual Report on Form 10-K for the years ended December 31, 2022, 2021 and 2020. |
36
Universal Health Services, Inc. 2023 Proxy Statement
Summary Compensation Table
| (3) |
|
| (4) | These amounts represent the aggregate change in pension value for each named executive
|
| (6) | In June of 2020, in response to the COVID-19 pandemic, the Compensation Committee approved reductions to the 2020 base salaries of our
|
| (7) | Mr. Alan B. Miller was appointed Executive Chairman of the Board effective January 1, 2021. He had been Chairman of the Board and Chief Executive Officer |
| (8) | Mr. Marvin G. Pember retired from
|
| (9) | Mr. |
| (10) | Components of All Other Compensation are as follows: |
37
Universal Health Services, Inc. 2023 Proxy Statement
ALL OTHER COMPENSATION TABLE
Name | Year | Perquisites and Other Personal Benefits ($)(1.) | Tax Reimbursements ($)(2.) | Insurance Premiums ($)(3.) | Company Contributions to Retirement and 401(k) Plans ($) | Dividends Paid on Unvested Stock | Total ($) | |||||||||||||||||||||
Marc D. Miller | 2022 | $ | 31,029 | $ | 0 | $ | 5,666 | $ | 9,150 | $ | 0 | $ | 45,845 | |||||||||||||||
| 2021 | 0 | 0 | 5,666 | 8,700 | 0 | 14,366 | ||||||||||||||||||||||
| 2020 | 973 | 0 | 5,697 | 8,550 | 0 | 15,220 | ||||||||||||||||||||||
Alan B. Miller | 2022 | $ | 140,172 | $ | 0 | $ | 987,804 | $ | 9,150 | $ | 1,477 | $ | 1,138,603 | |||||||||||||||
| 2021 | 49,064 | 0 | 1,022,750 | 8,700 | 11,522 | 1,092,036 | ||||||||||||||||||||||
| 2020 | 64,819 | 0 | 1,071,393 | 8,550 | 6,486 | 1,151,248 | ||||||||||||||||||||||
Steve G. Filton | 2022 | $ | 0 | $ | 0 | $ | 9,462 | $ | 9,150 | $ | 0 | $ | 18,612 | |||||||||||||||
| 2021 | 0 | 0 | 9,462 | 8,700 | 0 | 18,162 | ||||||||||||||||||||||
| 2020 | 0 | 0 | 9,493 | 8,550 | 0 | 18,043 | ||||||||||||||||||||||
Marvin G. Pember | 2022 | $ | 4,327 | $ | 0 | $ | 4,534 | $ | 9,150 | $ | 0 | $ | 18,011 | |||||||||||||||
| 2021 | 900 | 0 | 4,534 | 8,700 | 0 | 14,134 | ||||||||||||||||||||||
| 2020 | 900 | 0 | 8,099 | 8,550 | 0 | 17,549 | ||||||||||||||||||||||
Matthew J. Peterson | 2022 | $ | 2,979 | $ | 0 | $ | 7,087 | $ | 9,150 | $ | 0 | $ | 19,216 | |||||||||||||||
| 2021 | 2,564 | 0 | 7,087 | 8,700 | 0 | 18,351 | ||||||||||||||||||||||
| 2020 | 96,130 | 38,695 | 7,117 | 8,550 | 0 | 150,492 | ||||||||||||||||||||||
Edward H. Sim | 2022 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | |||||||||||||||
| 2021 | N/A | N/A | N/A | N/A | N/A | N/A | ||||||||||||||||||||||
| 2020 | N/A | N/A | N/A | N/A | N/A | N/A | ||||||||||||||||||||||
| (1) | 2022: |
Amounts for Mr. Marc Miller consists of the following: (i) $19,602 for payment of country club dues and expenses; (ii) $9,937 auto allowance, and; (iii) $1,490 for sporting event tickets paid for by us.
Amounts for Mr. Alan Miller consists of the following: (i) $75,000 for professional tax services; (ii) $3,986 for accounting services; (iii) $3,687 for maintenance on personal residence, and; (iv) $57,499 for the lease value, fuel, and repairs and maintenance charges incurred in connection with his company-owned automobile.
Amount for Mr. Marvin G. Pember consists of $900 for cell phone stipend and $3,427 in token gifts, grossed up for taxes.
Amount for Mr. Matthew J. Peterson consists of the following: (i) $900 for cell phone stipend; (ii) $1,334 related to the Employee Stock Purchase Plan discount, and; (iii) $745 for sporting event tickets paid for by us.
2021:
Amounts for Mr. Alan Miller consists of the following: (i) $25,000 for professional tax services; (ii) $5,260 for payment of country club dues; (iii) $1,546 for accounting services; (iv) $3,113 for maintenance on personal residence, and; (v) $14,145 for the lease value, fuel and maintenance charges incurred in connection with his company-owned automobile.
Amount for Mr. Marvin G. Pember consists of $900 for cell phone stipend.
Amount for Mr. Matthew J. Peterson consists of the following: (i) $900 for cell phone stipend; (ii) $1,334 related to the Employee Stock Purchase Plan discount, and; (iii) $330 for sporting event tickets paid for by us.
2020:
Amounts for Mr. Alan Miller consists of the following: (i) $25,000 for professional tax services; (ii) $10,789 for payment of country club dues; (iii) $2,573 for accounting services; (iv) $3,022 for maintenance on personal residence; (v) $23,075 for the lease value, fuel and maintenance charges incurred in connection with his company-owned automobile, and; (vi) $360 wireless stipend.
Amount for Mr. Marc D. Miller consists $768 for sporting event tickets paid for by us and $205 for a token gift provided by the Company.
Amount for Mr. Marvin G. Pember consists of $900 for cell phone stipend.
Amount for Mr. Matthew J. Peterson consists of the following: (i) $94,025 of relocation expenses paid for by the Company; (ii) $1,000 related to the Employee Stock Purchase Plan discount; (iii) $900 for cell phone stipend, and; (iv) $205 for a token gift provided by the Company.
| (2) | Amount represents reimbursement of income taxes incurred by Mr. Peterson in connection with relocation expenses paid by us during 2020. |
| (3) | Amounts for Messrs. Marc. D. Miller, Steve G. Filton, Marvin G. Pember and Matthew J. Peterson consist of premiums paid in connection with long term disability coverage. |
Amounts for Mr. Alan B. Miller consist of: (i) $978,296 in 2022, $1,013,242 in 2021 and $1,061,667 in 2020, of premium payments made in connection with split-dollar-life insurance agreements, as discussed in Split Dollar Life Insurance Agreement, included herein, and; (ii) $9,508 in each of 2022 and 2021 and $9,726 in 2020 of premiums paid in connection with long term disability coverage.
38
Universal Health Services, Inc. 2023 Proxy Statement
GRANTS OF PLAN-BASED AWARDS
The following table provides information regarding plan-based awards granted during fiscal year 2022 to our named executive officers who were employed on the grant date of March 23, 2022.
| Approval/ Grant Date | Estimated Future Payouts Under Non-Equity Incentive Plan Awards(1.) | Estimated Future Payouts Under Equity Incentive Plan Awards(3.) | All Other Stock Awards: Number of Shares of Stock or Units(5.) (#) | All Other Option Awards: Number of Securities Underlying Options(6.) (#) | Exercise or Base Price of Option Awards ($ /Sh) | Grant Date Fair Value of Stock and Option Awards(7.) ($) | Grant Date Fair Value of Maximum Stock and Option Awards(8.) ($) | Closing Price on Grant Date ($ / Sh) | ||||||||||||||||||||||||||||||||||||||||||||
Name | Threshold ($)(2.) | Target ($)(2.) | Maximum ($)(2.) | Threshold (#)(4.) | Target (#)(4.) | Maximum (#)(4.) | ||||||||||||||||||||||||||||||||||||||||||||||
Marc D. Miller | 3/23/2022 | $ | 78,003 | $ | 1,950,075 | $ | 3,900,150 | — | 104,001 | $ | 143.81 | $ | 4,754,007 | $ | 143.81 | |||||||||||||||||||||||||||||||||||||
| 3/23/2022 | 16,529 | 33,058 | 49,587 | $ | 4,754,071 | $ | 7,131,106 | $ | 143.81 | |||||||||||||||||||||||||||||||||||||||||||
Alan B. Miller | 3/23/2022 | $ | — | $ | — | $ | — | 54,691 | $ | 143.81 | $ | 2,499,990 | $ | 143.81 | ||||||||||||||||||||||||||||||||||||||
| 3/23/2022 | 8,692 | 17,384 | 26,076 | — | $ | 2,499,993 | $ | 3,749,990 | $ | 143.81 | ||||||||||||||||||||||||||||||||||||||||||
Steve G. Filton | 3/23/2022 | $ | 31,463 | $ | 786,574 | $ | 1,573,148 | 26,471 | $ | 143.81 | $ | 1,210,020 | $ | 143.81 | ||||||||||||||||||||||||||||||||||||||
| 3/23/2022 | 4,207 | 8,414 | 12,621 | — | $ | 1,210,017 | $ | 1,815,026 | $ | 143.81 | ||||||||||||||||||||||||||||||||||||||||||
Marvin G. Pember | 3/23/2022 | $ | 90,856 | $ | 790,053 | $ | 1,580,106 | 25,213 | $ | 143.81 | $ | 1,152,516 | $ | 143.81 | ||||||||||||||||||||||||||||||||||||||
| 3/23/2022 | 4,007 | 8,014 | 12,021 | — | $ | 1,152,493 | $ | 1,728,740 | $ | 143.81 | ||||||||||||||||||||||||||||||||||||||||||
Matthew J. Peterson | 3/23/2022 | $ | 76,696 | $ | 666,922 | $ | 1,333,844 | 21,745 | $ | 143.81 | $ | 993,990 | $ | 143.81 | ||||||||||||||||||||||||||||||||||||||
| 3/23/2022 | 3,456 | 6,912 | 10,368 | — | $ | 994,015 | $ | 1,491,022 | $ | 143.81 | ||||||||||||||||||||||||||||||||||||||||||
| (1) | Pursuant to the 2022 Executive Incentive Plan and the formula approved by the Compensation Committee, each named executive officer other than Mr. Alan B. Miller
|
| (2) | Estimates calculated based upon 2022 salaries. |
| (3) | Pursuant to
|
| (4) | Performance-based restricted stock units issued on March 23, 2022 were issued under our 2020 Omnibus Stock and Incentive Plan. In 2022, our CEO and NEOs each received 50% of their annual target stock-based compensation awards in the form of performance-based restricted stock units. |
| (5) |
|
| (6) | Stock option awards issued on March 23, 2022 were issued under our 2020 Omnibus Stock and Incentive Plan issued with an exercise price equal to the
|
| (7) | Represents the full grant date fair value |
| (8) | Represents the maximum performance-based restricted stock |
| (9) | Mr. Edward H. Sim was hired by the Company in December, 2022 to succeed Mr. Marvin G. Pember. He was awarded stock options in January, 2023 related to the commencement of his employment, which are scheduled to vest ratably over four years. |
Marc D. Miller’s Employment Agreement as Chief Executive Officer
Mr. Marc D. Miller was appointed Chief Executive Officer (“CEO”) and President effective January 1, 2021. He has served as President since May, 2009 and prior thereto served as Senior Vice President and co-head of our Acute Care Hospitals since 2007.
39
Universal Health Services, Inc. 2023 Proxy Statement
Grants of Plan-Based Awards
Certain elements of Mr. Marc D. Miller’s compensation for 2021 were determined by the terms of his employment agreement that was entered into on December 23, 2020, with an effective date of January 1, 2021. Pursuant to the terms of the employment agreement, Mr. Marc D. Miller will serve as CEO with a term scheduled to end on January 1, 2026, subject, however, to earlier termination, and subject further to automatic renewal for additional one-year periods unless either party elects otherwise. On March 23, 2022, we entered into an amendment to the employment agreement with Mr. Marc D. Miller which increased his annual bonus opportunity and annual base salary, as discussed below.
Pursuant to the terms of his employment agreement, as amended on March 23, 2022, Marc Miller’s salary as our CEO will be $1,352,000 for 2023 which is a 4.0% increase over his 2022 base salary. Mr. Marc D. Miller is also entitled to an annual bonus opportunity target equal to 150% of his salary. Mr. Marc Miller’s Agreement was also amended to narrow the circumstances under which Mr. Marc D. Miller can resign from employment with good reason and receive acceleration of future long-term incentive awards, including his Performance Based Restricted Stock Units. The amount of the annual bonus for any year may be more or less than the target amount and will be determined by the Board of Directors in accordance with pre-established performance measures. Additionally, Mr. Marc D. Miller may also be paid during the term of his employment agreement, bonuses and other compensation as may from time to time be determined by the Board of Directors.
Mr. Marc D. Miller participates in benefit plans and programs that are made available to other employees and will be eligible to receive annual awards under the Company’s long-term incentive plan(s) (“LTIP”) as in effect from time to time, which will be subject to conditions as are consistent with terms and conditions applicable to LTIP awards made to other senior executives of the Company, subject to certain acceleration rights upon a qualifying termination of employment as set forth in his employment agreement.
For a further description of the employment agreement, please refer to the Potential Payments Upon Termination or Change-in-Control section below. For a further description of the compensation setting process with respect to Mr. Marc D. Miller, please refer to the Compensation Discussion and Analysis section above. For a further description of Mr. Marc D. Miller’s benefits under the Company’s Supplemental Executive Retirement Income Plan, please refer to the Pension Benefits section below.
Alan B. Miller’s Employment Agreement as Executive Chairman
Mr. Alan B. Miller was appointed Executive Chairman of the Board effective January 1, 2021. He had been Chairman of the Board and Chief Executive Officer since our inception in 1978 and also served as President from inception until 2009.
Certain elements of Mr. Alan B. Miller’s compensation for 2022 were determined by the terms of his employment agreement that was entered into on December 23, 2020, with an effective date of January 1, 2021. Pursuant to the terms of the employment agreement, as amended on March 23, 2022, Alan B. Miller will serve as Executive Chairman with a term scheduled to end on January 1, 2025, subject, however, to earlier termination, and subject further to automatic renewal for additional one year periods unless either party elects otherwise.
Mr. Alan B. Miller’s salary as our Executive Chairman will be $1,040,000 for 2023 which is a 4.0% increase over his 2022 base salary. Additionally, Mr. Alan Miller may also be entitled to bonuses and other compensation as may from time to time be determined by the Board of Directors. Mr. Alan B. Miller will also be eligible to receive annual awards under the Company’s LTIP as in effect from time to time, which will be subject to conditions as are consistent with terms and conditions applicable to LTIP awards made to other senior executives of the Company, subject to certain acceleration rights upon a qualifying termination of employment as set forth in his employment agreement. Mr. Alan Miller’s Agreement was amended to narrow the circumstances under which Mr. Alan B. Miller can resign from employment with good reason and receive acceleration of future long-term incentive awards, including his Performance Based Restricted Stock Units.
Mr. Alan B. Miller participates in benefit plans and programs that are made available to other employees and he receives certain executive perquisites, including, but not limited to, split dollar life insurance benefits, payment of certain automobile costs, payment of country club dues, tax and accounting services, use of a private plane for personal purposes for up to 60 hours per year, subject to reimbursement by Mr. Alan B. Miller of the incremental costs incurred at market rates, and such other fringe benefits as the Compensation Committee of our Board of Directors may determine (as discussed in the Compensation Discussion and Analysis).
40
Universal Health Services, Inc. 2023 Proxy Statement
Grants of Plan-Based Awards
For a further description of the employment agreement, please refer to the Potential Payments Upon Termination or Change-in-Control section below. For a further description of the compensation setting process with respect to Mr. Alan B. Miller, please refer to the Compensation Discussion and Analysis section above. For a further description of Mr. Alan B. Miller’s benefits under the Company’s Executive Retirement Income Plan, please refer to the Pension Benefits section below.
Restricted Stock Grants in 2020
Pursuant to the terms of Mr. Alan B. Miller’s 2013 Employment Agreement (which has since been replaced by the above-mentioned employment agreement as Executive Chairman), in March of 2020, while Mr. Alan B. Miller was serving as CEO, the Compensation Committee approved the March 18, 2020 issuance of 14,774 restricted shares of our Class B Common Stock pursuant to the Amended and Restated 2010 Employees’ Restricted Stock Purchase Plan. The restricted shares issued in March of 2020, which had a grant date market value of $67.69 per share or $1.0 million in the aggregate, vested ratably at 50% in each of March of 2021 and 2022.
41
Universal Health Services, Inc. 2023 Proxy Statement
OUTSTANDING EQUITY AWARDS AT DECEMBER 31, 2022
The following table provides information about the number of outstanding equity awards held by our named executive officers at December 31, 2022.
| Option Awards(1.) | Stock Awards(2.) | |||||||||||||||||||||||||||||||||
| Number of Securities Underlying Unexercised Options (#) | Number of Securities Underlying Unexercised Options (#) | Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#) | Option Exercise Price ($) | Option Expiration Date | Number of Shares or Units of Stock That Have Not Vested (#) | Market Value of Shares or Units of Stock That Have Not Vested ($) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)(5.) | ||||||||||||||||||||||||||
Name | Exercisable | Unexercisable | ||||||||||||||||||||||||||||||||
Marc D. Miller | 33,058 | $ | 4,657,542 | |||||||||||||||||||||||||||||||
| 100,000 | 0 | 0 | $ | 119.64 | 04/12/2023 | 0 | 0 | 0 | 0 | |||||||||||||||||||||||||
| 75,000 | 25,000 | 0 | $ | 134.02 | 03/19/2024 | 0 | 0 | 0 | 0 | |||||||||||||||||||||||||
| 25,000 | 25,000 | 0 | $ | 67.69 | 03/17/2025 | 0 | 0 | 0 | 0 | |||||||||||||||||||||||||
| 29,610 | 29,610 | 0 | $ | 74.46 | 03/17/2025 | 0 | 0 | 0 | 0 | |||||||||||||||||||||||||
| 31,250 | 93,750 | 0 | $ | 138.80 | 03/16/2026 | 0 | 0 | 0 | 0 | |||||||||||||||||||||||||
| 35,106 | 105,319 | 0 | $ | 152.68 | 03/16/2026 | 0 | 0 | 0 | 0 | |||||||||||||||||||||||||
| 0 | 104,001 | 0 | $ | 143.81 | 03/22/2027 | 0 | 0 | 0 | 0 | |||||||||||||||||||||||||
Alan B. Miller | 0 | 0 | 17,384 | $ | 2,449,232 | |||||||||||||||||||||||||||||
| 390,000 | 0 | 0 | $ | 119.64 | 04/12/2023 | 0 | 0 | 0 | 0 | |||||||||||||||||||||||||
| 442,500 | 147,500 | 0 | $ | 134.02 | 03/19/2024 | 0 | 0 | 0 | 0 | |||||||||||||||||||||||||
| 147,500 | 147,500 | 0 | $ | 67.69 | 03/17/2025 | 0 | 0 | 0 | 0 | |||||||||||||||||||||||||
| 174,700 | 174,699 | 0 | $ | 74.46 | 03/17/2025 | 0 | 0 | 0 | 0 | |||||||||||||||||||||||||
| 31,250 | 93,750 | 0 | $ | 138.80 | 03/16/2026 | 0 | 0 | 0 | 0 | |||||||||||||||||||||||||
| 35,106 | 105,319 | 0 | $ | 152.68 | 03/16/2026 | 0 | 0 | 0 | 0 | |||||||||||||||||||||||||
| 0 | 54,691 | 0 | $ | 143.81 | 03/22/2027 | 0 | 0 | 0 | 0 | |||||||||||||||||||||||||
Steve G. Filton | 0 | 0 | 8,414 | $ | 1,185,448 | |||||||||||||||||||||||||||||
| 70,000 | — | 0 | $ | 119.64 | 04/12/2023 | 0 | 0 | 0 | 0 | |||||||||||||||||||||||||
| 52,500 | 17,500 | 0 | $ | 134.02 | 03/19/2024 | 0 | 0 | 0 | 0 | |||||||||||||||||||||||||
| 17,500 | 17,500 | 0 | $ | 67.69 | 03/17/2025 | 0 | 0 | 0 | 0 | |||||||||||||||||||||||||
| 20,727 | 20,727 | 0 | $ | 74.46 | 03/17/2025 | 0 | 0 | 0 | 0 | |||||||||||||||||||||||||
| 9,800 | 29,400 | 0 | $ | 138.80 | 03/16/2026 | 0 | 0 | 0 | 0 | |||||||||||||||||||||||||
| 11,009 | 33,028 | 0 | $ | 152.68 | 03/16/2026 | 0 | 0 | 0 | 0 | |||||||||||||||||||||||||
| 0 | 26,471 | 0 | $ | 143.81 | 03/22/2027 | 0 | 0 | 0 | 0 | |||||||||||||||||||||||||
42
Universal Health Services, Inc. 2023 Proxy Statement
Outstanding Equity Awards at December 31, 2022
| Option Awards(1.) | Stock Awards(2.) | |||||||||||||||||||||||||||||||||
| Number of Securities Underlying Unexercised Options (#) | Number of Securities Underlying Unexercised Options (#) | Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#) | Option Exercise Price ($) | Option Expiration Date | Number of Shares or Units of Stock That Have Not Vested (#) | Market Value of Shares or Units of Stock That Have Not Vested ($)(5.) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($) | ||||||||||||||||||||||||||
Name | Exercisable | Unexercisable | ||||||||||||||||||||||||||||||||
Marvin G. Pember | 0 | 0 | 0 | $ | 0 | |||||||||||||||||||||||||||||
| 52,500 | — | 0 | $ | 119.64 | 04/12/2023 | 0 | 0 | 0 | 0 | |||||||||||||||||||||||||
| 52,500 | 17,500 | 0 | $ | 134.02 | 03/19/2024 | 0 | 0 | 0 | 0 | |||||||||||||||||||||||||
| 17,500 | 8,750 | 0 | $ | 67.69 | 04/01/2024 | 0 | 0 | 0 | 0 | |||||||||||||||||||||||||
| 20,727 | 10,364 | 0 | $ | 74.46 | 04/01/2024 | 0 | 0 | 0 | 0 | |||||||||||||||||||||||||
| 9,838 | 9,837 | 0 | $ | 138.80 | 04/01/2024 | 0 | 0 | 0 | 0 | |||||||||||||||||||||||||
| 11,052 | 11,051 | 0 | $ | 152.68 | 04/01/2024 | 0 | 0 | 0 | 0 | |||||||||||||||||||||||||
| 0 | 6,303 | 0 | $ | 143.81 | 04/01/2024 | 0 | 0 | 0 | 0 | |||||||||||||||||||||||||
Matthew J. Peterson(3.) | 0 | 0 | 6,912 | $ | 973,832 | |||||||||||||||||||||||||||||
| 33,334 | 16,666 | 0 | $ | 151.99 | 09/17/2024 | 0 | 0 | 0 | 0 | |||||||||||||||||||||||||
| 6,250 | 12,500 | 0 | $ | 67.69 | 03/17/2025 | 0 | 0 | 0 | 0 | |||||||||||||||||||||||||
| 7,402 | 14,805 | 0 | $ | 74.46 | 03/17/2025 | 0 | 0 | 0 | 0 | |||||||||||||||||||||||||
| 8,425 | 25,275 | 0 | $ | 138.80 | 03/16/2026 | 0 | 0 | 0 | 0 | |||||||||||||||||||||||||
| 9,465 | 28,394 | 0 | $ | 152.68 | 03/16/2026 | 0 | 0 | 0 | 0 | |||||||||||||||||||||||||
| 0 | 21,745 | 0 | $ | 143.81 | 03/22/2027 | 0 | 0 | 0 | 0 | |||||||||||||||||||||||||
Edward H. Sim(4.) | 0 | 0 | 0 | N/A | N/A | 0 | 0 | 0 | N/A | |||||||||||||||||||||||||
| 1. | Stock option awards. Except for Mr. Peterson’s stock options issued on |
The applicable grant dates for the options indicated above are set forth below:
14,774 restricted shares of our Class B Common Stock issued on March 18, 2020 (grant date market value of $67.69 per share).
7,462 restricted shares of our Class B Common Stock issued on March 20, 2019 (grant date market value of $134.02 per share).
50
Universal Health Services, Inc. 2022 Proxy Statement
OUTSTANDING EQUITY AWARDS AT DECEMBER 31, 2021
The following table provides information about the number of outstanding equity awards held by our named executive officers at December 31, 2021.
| Option Awards(1.) | Stock Awards(2.) | |||||||||||||||||||||||||||||
| Number of Securities Underlying Unexercised Options (#) | Number of Securities Underlying Unexercised Options (#) | Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#) | Option Exercise Price ($) | Option Expiration Date | Number of Shares or Units of Stock That Have Not Vested (#) | Market Value of Shares or Units of Stock That Have Not Vested ($)(4.) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($) | ||||||||||||||||||||||
Name | Exercisable | Unexercisable | ||||||||||||||||||||||||||||
Marc D. Miller | 103,000 | 0 | 0 | $ | 124.56 | 03/28/2022 | 0 | 0 | 0 | 0 | ||||||||||||||||||||
| 75,000 | 25,000 | 0 | $ | 119.64 | 04/12/2023 | 0 | 0 | 0 | 0 | |||||||||||||||||||||
| 50,000 | 50,000 | 0 | $ | 134.02 | 03/19/2024 | 0 | 0 | 0 | 0 | |||||||||||||||||||||
| 12,500 | 37,500 | 0 | $ | 67.69 | 03/17/2025 | 0 | 0 | 0 | 0 | |||||||||||||||||||||
| 14,805 | 44,415 | 0 | $ | 74.46 | 03/17/2025 | 0 | 0 | 0 | 0 | |||||||||||||||||||||
| 0 | 125,000 | 0 | $ | 138.80 | 03/16/2026 | 0 | 0 | 0 | 0 | |||||||||||||||||||||
| 0 | 140,425 | 0 | $ | 152.68 | 03/16/2026 | 0 | 0 | 0 | 0 | |||||||||||||||||||||
Alan B. Miller | 10,619 | 1,376,860 | 0 | 0 | ||||||||||||||||||||||||||
| 590,000 | — | 0 | $ | 124.56 | 03/28/2022 | 0 | 0 | 0 | 0 | |||||||||||||||||||||
| 442,500 | 147,500 | 0 | $ | 119.64 | 04/12/2023 | 0 | 0 | 0 | 0 | |||||||||||||||||||||
| 295,000 | 295,000 | 0 | $ | 134.02 | 03/19/2024 | 0 | 0 | 0 | 0 | |||||||||||||||||||||
| 73,750 | 221,250 | 0 | $ | 67.69 | 03/17/2025 | 0 | 0 | 0 | 0 | |||||||||||||||||||||
| 87,350 | 262,049 | 0 | $ | 74.46 | 03/17/2025 | 0 | 0 | 0 | 0 | |||||||||||||||||||||
| 0 | 125,000 | 0 | $ | 138.80 | 03/16/2026 | 0 | 0 | 0 | 0 | |||||||||||||||||||||
| 0 | 140,425 | 0 | $ | 152.68 | 03/16/2026 | 0 | 0 | 0 | 0 | |||||||||||||||||||||
Steve G. Filton | 70,000 | — | 0 | $ | 124.56 | 03/28/2022 | 0 | 0 | 0 | 0 | ||||||||||||||||||||
| 52,500 | 17,500 | 0 | $ | 119.64 | 04/12/2023 | 0 | 0 | 0 | 0 | |||||||||||||||||||||
| 35,000 | 35,000 | 0 | $ | 134.02 | 03/19/2024 | 0 | 0 | 0 | 0 | |||||||||||||||||||||
| 8,750 | 26,250 | 0 | $ | 67.69 | 03/17/2025 | 0 | 0 | 0 | 0 | |||||||||||||||||||||
| 10,364 | 31,090 | 0 | $ | 74.46 | 03/17/2025 | 0 | 0 | 0 | 0 | |||||||||||||||||||||
| 0 | 39,200 | 0 | $ | 138.80 | 03/16/2026 | 0 | 0 | 0 | 0 | |||||||||||||||||||||
| 0 | 44,037 | 0 | $ | 152.68 | 03/16/2026 | 0 | 0 | 0 | 0 | |||||||||||||||||||||
Marvin G. Pember | 30,000 | 0 | 0 | $ | 124.56 | 03/28/2022 | 0 | 0 | 0 | 0 | ||||||||||||||||||||
| 35,000 | 17,500 | 0 | $ | 119.64 | 04/12/2023 | 0 | 0 | 0 | 0 | |||||||||||||||||||||
| 35,000 | 35,000 | 0 | $ | 134.02 | 03/19/2024 | 0 | 0 | 0 | 0 | |||||||||||||||||||||
| 8,750 | 26,250 | 0 | $ | 67.69 | 03/17/2025 | 0 | 0 | 0 | 0 | |||||||||||||||||||||
| 10,364 | 31,090 | 0 | $ | 74.46 | 03/17/2025 | 0 | 0 | 0 | 0 | |||||||||||||||||||||
| 0 | 39,350 | 0 | $ | 138.80 | 03/16/2026 | 0 | 0 | 0 | 0 | |||||||||||||||||||||
| 0 | 44,206 | 0 | $ | 152.68 | 03/16/2026 | 0 | 0 | 0 | 0 | |||||||||||||||||||||
51
Universal Health Services, Inc. 2022 Proxy Statement
Outstanding Equity Awards at December 31, 2021
| Option Awards(1.) | Stock Awards(2.) | |||||||||||||||||||||||||||||
| Number of Securities Underlying Unexercised Options (#) | Number of Securities Underlying Unexercised Options (#) | Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#) | Option Exercise Price ($) | Option Expiration Date | Number of Shares or Units of Stock That Have Not Vested (#) | Market Value of Shares or Units of Stock That Have Not Vested ($)(4.) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($) | ||||||||||||||||||||||
Name | Exercisable | Unexercisable | ||||||||||||||||||||||||||||
Matthew J. Peterson(3.) | 16,667 | 33,333 | 0 | $ | 151.99 | 09/17/2024 | 0 | 0 | 0 | 0 | ||||||||||||||||||||
| 0 | 18,750 | 0 | $ | 67.69 | 03/17/2025 | 0 | 0 | 0 | 0 | |||||||||||||||||||||
| 0 | 22,207 | 0 | $ | 74.46 | 03/17/2025 | 0 | 0 | 0 | 0 | |||||||||||||||||||||
| 0 | 33,700 | 0 | $ | 138.80 | 03/16/2026 | 0 | 0 | 0 | 0 | |||||||||||||||||||||
| 0 | 37,859 | 0 | $ | 152.68 | 03/16/2026 | 0 | 0 | 0 | 0 | |||||||||||||||||||||
On April 13, 2018, stock options were granted with an exercise price of $119.64. |
| • | On March 20, 2019, stock options were granted with an exercise price of $134.02. |
| • | On September 18, 2019, stock options were granted with an exercise price of $151.99. |
| • | On March 18, 2020, stock options were granted with an exercise price of $67.69. |
| • | On March 18, 2020, stock premium stock options were granted with a 10% premium exercise price of $74.46. |
| • | On March 17, 2021, stock options were granted with an exercise price of $138.80. |
| • | On March 17, 2021, stock premium stock options were granted with a 10% premium exercise price of $152.68. |
| • | On March 23, 2022, stock options were granted with an exercise price of $143.81.
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