Universal Health Services (UHS) 10-K risk factor changes: FY2017 vs FY2016

Texas: We own 7 inpatient acute care hospitals and [removed: 24] [added: 22] inpatient behavioral healthcare facilities as listed in Item 2.

On a combined basis, these facilities contributed [added: 15% in 2017,] 16% in [removed: 2016,] [added: 2016 and] 17% in 2015 [removed: and 18% in 2014] of our consolidated net revenues.

On a combined basis, after deducting an allocation for corporate overhead expense, these facilities generated [removed: 7% in 2016,] 11% in [removed: 2015] [added: 2017, 7% in 2016] and [removed: 17%] [added: 11%] in [removed: 2014,] [added: 2015,] of our income from operations after net income attributable to noncontrolling interest.

Nevada: We own [removed: 7] [added: 8] inpatient acute care hospitals and 4 inpatient behavioral healthcare facilities as listed in Item 2.

On a combined basis, these facilities contributed [removed: 16%] [added: 17%] in [removed: 2016, 15%] [added: 2017, 16%] in [removed: 2015] [added: 2016] and [removed: 16%] [added: 15%] in [removed: 2014,] [added: 2015,] of our consolidated net revenues.

On a combined basis, after deducting an allocation for corporate overhead expense, these facilities generated [removed: 13%] [added: 20%] in [removed: 2016, 10%] [added: 2017, 13%] in [removed: 2015] [added: 2016] and [removed: 11%] [added: 10%] in [removed: 2014,] [added: 2015,] of our income from operations after net income attributable to noncontrolling interest.

On a combined basis, these facilities contributed 11% in [removed: 2016,] [added: 2017,] 11% in [removed: 2015] [added: 2016] and [removed: 10%] [added: 11%] in [removed: 2014,] [added: 2015,] of our consolidated net revenues.

On a combined basis, after deducting an allocation for corporate overhead expense, these facilities generated [removed: 15%] [added: 13%] in [removed: 2016, 11%] [added: 2017, 15%] in [removed: 2015] [added: 2016] and [removed: 8%] [added: 11%] in [removed: 2014,] [added: 2015,] of our income from operations after net income attributable to noncontrolling interest.

In addition, the uncertainty and fiscal pressures placed upon federal and state governments as a result of, among other things, [removed: the substantial] deterioration in general economic conditions and the funding requirements from the federal healthcare reform legislation, may affect the availability of taxpayer funds for Medicare and Medicaid programs.

[added: If the] rates paid or the scope of services covered by governmental payors in the United States or United Kingdom are reduced, there could be a material adverse effect on our business, financial position and results of operations.

We receive Medicaid revenues in excess of $100 million annually from each of Texas, California, [added: Nevada,] Washington, D.C., [removed: Nevada, Pennsylvania, Illinois, Virginia] [added: Pennsylvania] and [removed: Massachusetts,] [added: Illinois,] making us particularly sensitive to reductions in Medicaid and other state based revenue programs as well as regulatory, economic, environmental and competitive changes in those states.

Reductions or changes in Medicare [added: and Medicaid] funding could have a material adverse effect on our future results of operations.

The [added: 2012] Act and subsequent federal legislation achieves new savings by extending sequestration for mandatory programs—including [removed: Medicare—for another three years,] [added: Medicare—] through [removed: 2024.][added: 2027.]

The reduction in Medicaid DSH payments [removed: is] [added: was] expected to save $4.2 billion over 10 years.

Although it [removed: is] [added: was] expected that as a result of the Legislation there [removed: may] [added: would] be a reduction in uninsured patients, which [removed: should] [added: would] reduce our expense from uncollectible accounts receivable, the Legislation makes a number of other changes to Medicare and Medicaid which we believe may have an adverse impact on us.

The Medicare DSH reductions began in October, 2013 while the Medicaid DSH reductions are scheduled to begin in [removed: 2018.][added: 2020.]

Certain Legislation provisions, such as [removed: those] [added: that] creating the Medicare Shared Savings Program [removed: and the Independent Payment Advisory Board, create] [added: creates] uncertainty in how healthcare may be reimbursed by federal programs in the future.

Initiatives to repeal the Legislation, in whole or in part, to delay elements of implementation or funding, and to offer amendments or supplements to modify its provisions have been [removed: persistent and may increase as a result of the 2016 election.][added: persistent.]

We also operate health care facilities in the United Kingdom where the National Health Service (the “NHS”) is the principal provider of healthcare [removed: services in the United Kingdom.][added: services.]

The Foreign Corrupt Practices Act regulates U.S. companies in their dealings with foreign officials, prohibiting bribes and similar practices, and requires that they maintain records that fairly and accurately reflect transactions and appropriate [added: internal accounting controls.]

Our operations in the United Kingdom are also subject to a high level of regulation relating to [removed: o] registration and licensing requirements employee regulation, clinical standards, environmental rules as well as other areas.

The economies in the [removed: non-urban] communities in which our hospitals operate are often dependent on a small number of large employers.

We believe that all of our healthcare facilities are in material compliance with [added: applicable federal, state, local and other relevant regulations and standards.]

[removed: The ACA also] prohibits the use of federal funds under the Medicaid program to reimburse providers for treating certain provider-preventable conditions.

Many of the states in which we operate hospitals have enacted Certificates of Need, or [removed: CON,] [added: (“CON”),] laws as a condition prior to hospital capital expenditures, construction, expansion, modernization or initiation of major new services.

[removed: Although we cannot predict the effect these changes will have on our operations, significant limits on the scope] of services reimbursed and on reimbursement rates and fees could have a material adverse effect on our business, financial position and results of operations.

In addition, as of December 31, [removed: 2016,] [added: 2017,] we had approximately $3.8 billion of goodwill recorded on our consolidated balance sheet.

[removed: Negotiations have commenced to determine the] [added: The] future [removed: terms of] [added: relationship between] the United [removed: Kingdom’s relationship with] [added: Kingdom and] the European [removed: Union,] [added: Union remains uncertain,] including the terms of trade between the United Kingdom and the European Union.

At December 31, [removed: 2016, 21.8] [added: 2017, 26.1] million shares of Class B Common Stock were reserved for issuance upon conversion of shares of Class A, C and D Common Stock outstanding, for issuance upon exercise of options to purchase Class B Common Stock and for issuance of stock under other incentive plans.

As of March [removed: 22, 2016,] [added: 21, 2017,] the shares of Class A and Class C Common Stock constituted 7.5% of the aggregate outstanding shares of our Common Stock, had the right to elect five members of the Board of Directors and constituted [removed: 86.4%] [added: 86.5%] of our general voting power as of that date.

As of March [removed: 22, 2016,] [added: 21, 2017,] the shares of Class B and Class D Common Stock (excluding shares issuable upon exercise of options) constituted 92.5% of the outstanding shares of our Common Stock, had the right to elect two members of the Board of Directors and constituted [removed: 13.6%] [added: 13.5%] of our general voting power as of that date.

On February 9, 2018, President Trump signed into law H.R. 1892, the Bipartisan Budget Act of 2018, which eliminated the DSH cuts scheduled for 2018 and 2019 but added additional DSH reductions of $4 billion in 2020 and $8 billion a year between 2021 and 2025.

CMS has granted, and is expected to grant additional, section 1115 demonstration waivers providing for work and community engagement requirements for certain Medicaid eligible individuals.

It is anticipated this will lead to reductions in coverage, and likely increases in uncompensated care, in states where these demonstration waivers are granted.

Legislation has already been enacted that has repealed the individual mandate to obtain health insurance penalty that was part of the original Legislation.

In addition, Congress is considering legislation that would, in material part: (i) eliminate the large employer mandate to obtain or provide health insurance coverage, respectively; (ii) permit insurers to impose a surcharge up to 30 percent on individuals who go uninsured for more than two months and then purchase coverage; (iii) provide tax credits towards the purchase of health insurance, with a phase-out of tax credits accordingly to income level; (iv) expand health savings accounts; (v) impose a per capita cap on federal funding of state Medicaid programs, or, if elected by a state, transition federal funding to block grants, and; (vi) permit states to seek a waiver of certain federal requirements that would allow such state to define essential health benefits differently from federal standards and that would allow certain commercial health plans to take health status, including pre-existing conditions, into account in setting premiums.

In addition to legislative changes, the Legislation can be significantly impacted by executive branch actions.

In relevant part, President Trump has already taken executive actions: (i) requiring all federal agencies with authorities and responsibilities under the Legislation to “exercise all authority and discretion available to them to waiver, defer, grant exemptions from, or delay” parts of the Legislation that place “unwarranted economic and regulatory burdens” on states, individuals or health care providers; (ii) the issuance of a proposed rule by the Department of Labor to enable the formation of health plans that would be exempt from certain Legislation essential health benefits requirements, and; (iii) eliminating cost-sharing reduction payments to insurers that would otherwise offset deductibles and other out-of-pocket expenses for health plan enrollees at or below 250 percent of the federal poverty level.

The uncertainty resulting from these Executive Branch policies has led to reduced Exchange enrollment in 2018 and is expected to further

worsen the individual and small group market risk pools in future years.

It is also anticipated that these and future policies may create additional cost and reimbursement pressures on hospitals.

The ACA also

Although we cannot predict the effect these changes will have on our operations, significant limits on the scope

On March 29, 2017, the United Kingdom triggered Article 50 of the Lisbon Treaty formally starting negotiations regarding its exit from the European Union.

The United Kingdom has two years from that date to complete these negotiations.

If the

In addition, in King vs. Burwell, the Supreme Court decided in favor of the federal government’s ability to subsidize premiums paid by certain eligible individuals that obtain health insurance policies through federally facilitated exchanges.

A number of our hospitals operate in states that utilize federally facilitated exchanges.

The Supreme Court’s decision in this case ultimately preserved the viability of federally facilitated exchanges.

A different decision by the Supreme Court could have resulted in an increased number of uninsured patients generally, including an increase of uninsured patients treated at our hospitals located in these states.

Results of recent Congressional elections and the change of Presidential administrations beginning in 2017 could create a political environment in which substantial portions of the Legislation are repealed or revised.

Specifically, President Donald Trump’s 100 Day Action Plan called for full repeal of the Legislation and its replacement with health savings accounts, cross-states sales of health insurance, and modifications to state-managed Medicaid programs.

Nevertheless, prospects for rapid enactment of radical change in the health care regulatory landscape are not clear, and President Donald Trump has already indicated that popular provisions of the Legislation should be preserved.

internal accounting controls.

applicable federal, state, local and other relevant regulations and standards.

As of February 28, [removed: 2017,] [added: 2018,] we owned and/or operated [removed: 319] [added: 326] inpatient facilities and [removed: 33] [added: 32] outpatient and other facilities including the following located in 37 states, Washington, D.C., the United Kingdom, Puerto Rico and the U.S. Virgin Islands:

Behavioral health care facilities [removed: (293] [added: (300] inpatient facilities and [removed: 24] [added: 23] outpatient facilities):

| | • | [removed: 189] [added: 188] inpatient behavioral health care facilities, and; |

| | • | [removed: 100] [added: 108] inpatient behavioral health care facilities, and; |

| | • | [removed: 2] [added: 1] outpatient behavioral health care facility. |

As a percentage of our consolidated net revenues, net revenues from our acute care hospitals, outpatient facilities and commercial health insurer accounted for [added: 53% during 2017,] 52% during 2016 and 51% during [removed: each of 2015 and 2014.][added: 2015.]

Net revenues from our behavioral health care facilities and commercial health insurer accounted for [removed: 48%] [added: 47%] of our consolidated net revenues during [added: 2017, 48% during] 2016 and 49% during [removed: each of 2015 and 2014.][added: 2015.]

Words such as “may,” “will,” “should,” “could,” “would,” “predicts,” “potential,” “continue,” “expects,” “anticipates,” “future,” “intends,” “plans,” “believes,” “estimates,” “appears,” [added: “projects” and similar expressions, as well as statements in future tense, identify forward-looking statements.]

| | • | an increasing number of legislative initiatives have been passed into law that may result in major changes in the health care delivery system on a national or state level. No assurances can be given that the implementation of these laws will not have a material adverse effect on our business, financial condition or results of [removed: operations;] [added: operations. See below in Sources of Revenue and Health Care Reform for additional disclosure;] |

| | • | as discussed below in Sources of Revenue, we receive revenues from various state and county based programs, including Medicaid in all the states in which we operate (we receive Medicaid revenues in excess of $100 million annually from each of Texas, California, [added: Nevada,] Washington, D.C., [removed: Nevada, Pennsylvania, Illinois, Virginia] [added: Pennsylvania] and [removed: Massachusetts);] [added: Illinois);] CMS-approved Medicaid supplemental programs in certain states including Texas, Mississippi, Illinois, Oklahoma, Nevada, Arkansas, California and Indiana, and; state Medicaid disproportionate share hospital payments in certain states including Texas and South Carolina. We are therefore particularly sensitive to potential reductions in Medicaid and other state based revenue programs as well as regulatory, economic, environmental and competitive changes in those states. We can provide no assurance that reductions to revenues earned pursuant to these programs, particularly in the above-mentioned states, will not have a material adverse effect on our future results of operations; |

Medicare and Medicaid revenues represented [removed: 32%] [added: 30%] of our net patient revenues during [removed: 2016, 34%] [added: 2017, 32%] during [removed: 2015] [added: 2016] and [removed: 38%] [added: 34%] during [removed: 2014.][added: 2015.]

Revenues from managed care entities, including health maintenance organizations and managed Medicare and Medicaid programs accounted for 56% of our net patient revenues during [removed: 2016, 54% during 2015] [added: each of 2017] and [removed: 52%] [added: 2016 and 54%] during [removed: 2014.][added: 2015.]

The funding of both federal Medicare and state Medicaid programs are subject to legislative and [removed: regulatory changes.]

Adjustments related to the final settlement of these retrospectively determined amounts did not materially impact our results in [removed: 2016, 2015] [added: 2017, 2016] or [removed: 2014.][added: 2015.]

If it were to occur, each 1% adjustment to our estimated net Medicare revenues that are subject to retrospective review and settlement as of December 31, [removed: 2016,] [added: 2017,] would change our after-tax net income by approximately $1 million.

Generally, patients treated at our hospitals for non-elective services, who have gross income less than 400% of the federal [added: poverty guidelines, are deemed eligible for charity care.]

Although the patient’s ultimate eligibility determination may result in amounts being reclassified among these accounts from period to period, these reclassifications did not have a material impact on our results of operations in [removed: 2016, 2015] [added: 2017, 2016] or [removed: 2014] [added: 2015] since our facilities make estimates at each financial reporting period to reserve for amounts that are deemed to be uncollectible.

Our accounts receivable are recorded net of allowance for doubtful accounts of [removed: $410] [added: $480] million and [removed: $399] [added: $410] million at December 31, [removed: 2016] [added: 2017] and [removed: 2015,] [added: 2016,] respectively.

Approximately [added: 87% during 2017 and] 85% during [removed: each of] 2016 [removed: and 2015] of our consolidated provision for doubtful accounts, was incurred by our acute care hospitals.

Shown below is our [removed: payer] [added: payor] mix concentrations and related aging of our billed accounts receivable, net of contractual allowances, for our acute care hospitals as of December 31, [removed: 2016] [added: 2017] and [removed: 2015:][added: 2016:]

| [removed: Payer] [added: Payor] | | 0-60 | | | | 61-120 | | | | 121-180 | | | | over 180 | | |

Since the annual Medicare cost report periods for each of our acute care hospitals ends on December 31st, we [removed: have recognized] [added: will recognize] Medicare EHR incentive income for each hospital during the fourth quarter of the year in which the facility meets the “meaningful use” [removed: criteria.][added: criteria and during the fourth quarter of each applicable subsequent year.]

We have designated October 1st as our annual impairment assessment date and performed an impairment assessment as of October 1, [removed: 2016] [added: 2017] which indicated no impairment of goodwill or indefinite-lived intangible assets.

There were also no impairments during [removed: 2015] [added: 2016] or [removed: 2014.][added: 2015.]

[removed: Future changes in the] estimates used to conduct the impairment review, including profitability and market value projections, could indicate impairment in future periods potentially resulting in a write-off of a portion or all of our goodwill or indefinite-lived intangible assets.

We believe that future income will enable us to realize our deferred tax assets net of recorded valuation allowances relating to state [added: and foreign] net operating loss carry-forwards.

Recent Accounting Pronouncements: For a summary of recent accounting pronouncements, please see Note 1 to the Consolidated Financial Statements-Accounting Standards as included in this Report on Form 10-K for the year ended December 31, [removed: 2016.][added: 2017.]

The following table summarizes our results of operations, and is used in the discussion below, for the years ended December 31, [removed: 2016, 2015] [added: 2017, 2016] and [removed: 2014] [added: 2015] (dollar amounts in thousands):

| | | [removed: 2016] [added: 2017] | | | | | | | | [removed: 2015] [added: 2016] | | | | | | | | [removed: 2014] [added: 2015] | | | | | | |

| Net revenues before provision for doubtful accounts | | $ | [removed: 10,507,788] [added: 11,278,942] | | | | | | | $ | [removed: 9,784,724] [added: 10,507,788] | | | | | | | $ | [removed: 8,904,071] [added: 9,784,724] | | | | | |

| Less: Provision for doubtful accounts | | | [removed: 741,578] [added: 869,077] | | | | | | | | [removed: 741,273] [added: 741,578] | | | | | | | | [removed: 698,983] [added: 741,273] | | | | | |

| Net revenues | | | [removed: 9,766,210] [added: 10,409,865] | | | | 100.0 | % | | | [removed: 9,043,451] [added: 9,766,210] | | | | 100.0 | % | | | [removed: 8,205,088] [added: 9,043,451] | | | | 100.0 | % |

| Salaries, wages and benefits | | | [removed: 4,585,530] [added: 4,980,637] | | | | [removed: 47.0] [added: 47.8] | % | | | [removed: 4,212,387] [added: 4,585,530] | | | | [removed: 46.6] [added: 47.0] | % | | | [removed: 3,845,461] [added: 4,212,387] | | | | [removed: 46.9] [added: 46.6] | % |

| Other operating expenses | | | [removed: 2,359,339] [added: 2,493,062] | | | | [removed: 24.2] [added: 23.9] | % | | | [removed: 2,119,805] [added: 2,359,339] | | | | [removed: 23.4] [added: 24.2] | % | | | [removed: 1,922,743] [added: 2,119,805] | | | | 23.4 | % |

| Supplies expense | | | [removed: 1,031,337] [added: 1,105,096] | | | | 10.6 | % | | | [removed: 974,088] [added: 1,031,337] | | | | [removed: 10.8] [added: 10.6] | % | | | [removed: 895,693] [added: 974,088] | | | | [removed: 10.9] [added: 10.8] | % |

| Depreciation and amortization | | | [removed: 416,608] [added: 447,765] | | | | 4.3 | % | | | [removed: 398,618] [added: 416,608] | | | | [removed: 4.4] [added: 4.3] | % | | | [removed: 375,624] [added: 398,618] | | | | [removed: 4.6] [added: 4.4] | % |

| Lease and rental expense | | | [removed: 97,324] [added: 103,127] | | | | 1.0 | % | | | [removed: 94,973] [added: 97,324] | | | | [removed: 1.1] [added: 1.0] | % | | | [removed: 93,993] [added: 94,973] | | | | 1.1 | % |

| Electronic health records incentive income | | | [removed: (5,339] [added: 0] | [removed: )] | | | [removed: \-0.1] [added: 0.0] | % | | | [removed: (15,815] [added: (5,339] | ) | | | [removed: \-0.2] [added: \-0.1] | % | | | [removed: (27,902] [added: (15,815] | ) | | | [removed: \-0.3] [added: \-0.2] | % |

| Subtotal-operating expenses | | | [removed: 8,484,799] [added: 9,129,687] | | | | [removed: 86.9] [added: 87.7] | % | | | [removed: 7,784,056] [added: 8,484,799] | | | | [removed: 86.1] [added: 86.9] | % | | | [removed: 7,141,783] [added: 7,784,056] | | | | [removed: 87.0] [added: 86.1] | % |

| Income from operations | | | [removed: 1,281,411] [added: 1,280,178] | | | | [removed: 13.1] [added: 12.3] | % | | | [removed: 1,259,395] [added: 1,281,411] | | | | [removed: 13.9] [added: 13.1] | % | | | [removed: 1,063,305] [added: 1,259,395] | | | | [removed: 13.0] [added: 13.9] | % |

Our behavioral health care facilities located in the U.K. generated net revenues amounting to approximately $429 million in 2017, $241 million in 2016 and $203 million in 2015.

Total assets at our U.K. behavioral health care facilities were approximately $1.098 billion as of December 31, 2017, $965 million as of December 31, 2016 and $521 million as of December 31, 2015.

| | • | the impact of severe weather conditions, including the effects of hurricanes; |

regulatory changes.

As of December 31, 2017:

| Medicare | | $ | 86,024 | | | $ | 5,884 | | | $ | 1,776 | | | $ | 5,632 | |

| Medicaid | | | 15,951 | | | | 5,746 | | | | 2,858 | | | | 7,108 | |

| Commercial insurance and other | | | 373,386 | | | | 120,497 | | | | 60,637 | | | | 135,917 | |

| Private pay | | | 136,473 | | | | 86,375 | | | | 29,399 | | | | 63,664 | |

| Total | | $ | 611,834 | | | $ | 218,502 | | | $ | 94,670 | | | $ | 212,321 | |

| Payor | | 0-60 | | | | 61-120 | | | | 121-180 | | | | over 180 | | |

Future changes in the

On December 22, 2017, the President of the United States signed into law comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act of 2017 (the “TCJA-17”).

The TCJA-17 makes broad and complex changes to the U.S. tax code, including, but not limited to, (1) reducing the U.S. federal corporate tax rate from 35 percent to 21 percent; (2) requiring companies to pay a one-time transition tax on certain unrepatriated earnings of foreign subsidiaries; (3) generally eliminating U.S. federal income taxes on dividends from foreign subsidiaries; (4) requiring a current inclusion in U.S. federal taxable income of certain earnings of controlled foreign corporations through the implementation of a territorial tax system; and (5) creating a new limitation on deductible interest expense.

The SEC staff issued Staff Accounting Bulletin No. 118 (“SAB 118”) to address the application of U.S. GAAP in situations when a registrant has not obtained, prepared, or analyzed (including computations) all of the information needed in order to complete the accounting for certain income tax effects of the TCJA-17.

To the extent that a company’s accounting for certain income tax effects of the TCJA-17 is incomplete, a reasonable estimate should be recorded as a provisional amount in the financial statements.

We were able to make reasonable estimates of the effects of elements for which our analysis is not yet complete.

We recorded the following provisional adjustments:

Reduction of U.S. federal corporate tax rate: The TCJA-17 reduces the corporate tax rate to 21 percent, effective January 1, 2018.

Deferred income taxes are based on the estimated future tax effects of differences between the financial statement carrying amounts and the tax bases of assets and liabilities under the provisions of the enacted laws.

For certain of our deferred tax assets and deferred tax liabilities, we have recorded a provisional decrease of $97 million and $127 million, respectively, with a corresponding net adjustment to deferred tax benefit of $30 million for the year ended December 31, 2017.

While we are able to make a reasonable estimate of the impact of the reduction in corporate rate, it may be affected by other analyses related to the TCJA-17, including, but not limited to, our calculation of deemed repatriation of deferred foreign income and the state tax effect of adjustments made to federal temporary differences.

Deemed Repatriation Transition Tax: The Deemed Repatriation Transition Tax (“Transition Tax”) is a tax on previously untaxed accumulated and current earnings and profits (“E&P”) of certain of our foreign subsidiaries.

To determine the amount of the Transition Tax, we must determine, in addition to other factors, the amount of post-1986 E&P of the relevant subsidiaries, as well as the amount of non-U.S. income taxes paid on such earnings.

We are able to make a reasonable estimate of the Transition Tax and recorded a provisional Transition Tax obligation of $11.3 million.

However, we are continuing to gather additional information to more precisely compute the amount of the Transition Tax.

Valuation allowances: We must assess whether valuation allowance analyses are affected by various aspects of the TCJA-17 (e.g., deemed repatriation of deferred foreign income).

Since, as discussed herein, we have recorded provisional amounts related to certain portions of the TCJA-17, any corresponding determination of the need for or change in valuation allowances is also provisional.

The accounting for the above provisional amounts is expected to be complete when our 2017 U.S. Corporate Income Tax return is filed in 2018.

The decrease in our effective tax rate for the year ended December 31, 2017, as compared to 2016 and 2015, is due to the tax benefit resulting from our January 1, 2017 adoption of ASU 2016-09, the net favorable impact of the enactment of the TCJA-17 as discussed above, and the tax effects of our foreign operations in connection with our acquisition of Cambian Group, PLC’s adult services division (acquired in late December, 2016).

We expect our 2018 effective tax rate to be significantly lower than our current year effective tax rate, excluding the impacts of the new federal tax reform legislation, attributable to the reduction of the federal corporate income tax rate included in the TCJA-17.

Net revenues increased 6.6% or $644 million to $10.41 billion during 2017 as compared to $9.77 billion during 2016.

| | • | $331 million of other combined revenue consisting primarily of the revenues generated at the facilities acquired in December, 2016 in connection with our acquisition of Cambian Adult Services, and the revenues generated at Henderson Hospital, a newly constructed acute care hospital that was completed and opened during the fourth quarter of 2016. |

| | • | a decrease of $62 million as discussed below in Behavioral Health Services; |

| | • | a decrease of $20 million resulting from an increase in interest expense, as discussed below in Other Operating Results, and; |

| | • | $23 million of other combined net decreases, including an aggregate of approximately $20 million recording during 2017 in connection certain matters as discussed in Item 3 – Legal Proceedings. |

| | • | an increase of $26 million resulting from a decrease in the income attributable to noncontrolling interests due primarily to the May, 2016, purchase of the minority ownership interests held by a third-party in six acute care hospitals located in Las Vegas, Nevada, and; |

| | o | a decrease of $30 million due to a reduction in our net deferred income tax liability resulting from a lower federal income tax rate beginning January 1, 2018 pursuant to the Tax Cuts and Jobs Act of 2017; |

| | o | an increase of $11 million due to the repatriation tax incurred pursuant to the Tax Cuts and Jobs Act of 2017 (in connection with our behavioral health care facilities located in the U.K.); |

| | o | a decrease of $22 million resulting from our January 1, 2017 adoption of ASU 2016-09, as discussed herein; |

| --- | --- |

| --- | --- | --- |

In late December, 2016, we completed the acquisition of Cambian Group, PLC’s adult services’ division (the “Cambian Adult Services”) for a total purchase price of approximately $473 million.

The Cambian Adult Services division consists of 79 inpatient and 2 outpatient behavioral health facilities located in the U.K. The Competition and Markets Authority (“CMA”) in the U.K. is currently reviewing our acquisition of the Cambian Adult Services.

We estimate that the CMA’s review of our acquisition will be completed during the second quarter of 2017.

However, until such review is completed, we are not permitted to integrate the Cambian Adult Services business into our existing businesses located in the U.K. Further, we can provide no assurance that the CMA will not require us to divest certain parts of the Cambian Adults Services division or certain parts of our existing business located in the U.K.

“projects” and similar expressions, as well as statements in future tense, identify forward-looking statements.

| | • | in March, 2010, the Health Care and Education Reconciliation Act of 2010 and the Patient Protection and Affordable Care Act (the “ACA”) were enacted into law and created significant changes to health insurance coverage for U.S. citizens as well as material revisions to the federal Medicare and state Medicaid programs. The two combined primary goals of these acts are to provide for increased access to coverage for healthcare and to reduce healthcare-related expenses. Medicare, Medicaid and other health care industry changes are scheduled to be implemented at various times during this decade. |

| | | Initiatives to repeal the ACA, in whole or in part, to delay elements of implementation or funding, and to offer amendments or supplements to modify its provisions, have been persistent and may increase as a result of the 2016 election. The ultimate outcomes of legislative attempts to repeal or amend the ACA and legal challenges to the ACA are unknown. Results of recent Congressional elections and the change of Presidential administrations beginning in 2017 could create a political environment in which substantial portions of the ACA are repealed or revised. Specifically, President Donald Trump’s 100 Day Action Plan called for full repeal of the ACA and its replacement with health savings accounts, cross-states sales of health insurance, and modifications to state-managed Medicaid programs. Nevertheless, prospects for rapid enactment of radical change in the health care regulatory landscape are not clear, and President Donald Trump has already indicated that popular provisions of the ACA should be preserved. It remains unclear what portions of the ACA may remain, or what any replacement or alternative programs may be created by any future legislation. Any such future repeal or replacement may have significant impact on the reimbursement for healthcare services generally, and may create reimbursement for services competing with the services offered by our hospitals. Accordingly, there can be no assurance that the adoption of any future federal or state healthcare reform legislation will not have a negative financial impact on our hospitals, including their ability to compete with alternative healthcare services funded by such potential legislation, or for our facilities to receive payment for services; |

| | • | the Department of Health and Human Services (“HHS”) published final regulations in July, 2010 implementing the health information technology (“HIT”) provisions of the American Recovery and Reinvestment Act (referred to as the “HITECH Act”). The final regulation defines the “meaningful use” of Electronic Health Records (“EHR”) and establishes the requirements for the Medicare and Medicaid EHR payment incentive programs. The implementation period for these new Medicare and Medicaid incentive payments started in federal fiscal year 2011 and can end as late as 2016 for Medicare and 2021 for the state Medicaid programs. Hospitals that do not qualify as a meaningful user of EHR by 2015 are subject to a reduced market basket update to the inpatient prospective payment system (“IPPS”) standardized amount in 2015 and each subsequent fiscal year. We believe that all of our acute care hospitals have met the applicable meaningful use criteria and therefore were not subject to a reduced market basked update to the IPPS standardized amount in federal fiscal year 2015. However, under the HITECH Act, hospitals must continue to meet the applicable meaningful use criteria in each fiscal year or they will be subject to a market basket update reduction in a subsequent fiscal year. Failure of our acute care hospitals to continue to meet the applicable meaningful use criteria would have an adverse effect on our future net revenues and results of operations; |

poverty guidelines, are deemed eligible for charity care.

As of December 31, 2015:

| Medicare | | $ | 71,364 | | | $ | 5,189 | | | $ | 1,837 | | | $ | 4,743 | |

| Medicaid | | | 11,817 | | | | 7,630 | | | | 3,418 | | | | 8,419 | |

| Commercial insurance and other | | | 315,674 | | | | 120,896 | | | | 59,765 | | | | 143,736 | |

| Private pay | | | 101,927 | | | | 62,356 | | | | 22,000 | | | | 25,437 | |

| Total | | $ | 500,782 | | | $ | 196,071 | | | $ | 87,020 | | | $ | 182,335 | |

Accounting for Medicare and Medicaid Electronic Health Records Incentive Payments: In July 2010, the Department of Health and Human Services published final regulations implementing the health information technology provisions of the American Recovery and Reinvestment Act.

The regulation defines the “meaningful use” of Electronic Health Records (“EHR”) and established the requirements for the Medicare and Medicaid EHR payment incentive programs.

The implementation period for these new Medicare and Medicaid incentive payments started in federal fiscal year 2011 and ended as late as 2016 for Medicare and can end as late as 2021 for the state Medicaid programs.

We recognize income related to Medicare and Medicaid incentive payments using a gain contingency model that is based upon when our eligible hospitals have demonstrated “meaningful use” of certified EHR technology

for the applicable period and the cost report information for the full cost report year that will determine the final calculation of the incentive payment is available.

Medicare EHR incentive payments: Federal regulations require that Medicare EHR incentive payments be computed based on the Medicare cost report that begins in the federal fiscal period in which a hospital meets the applicable “meaningful use” requirements.

Medicaid EHR incentive payments: Medicaid EHR incentive payments are determined based upon prior period cost report information available at the time our hospitals met the “meaningful use” criteria.

Therefore, the majority of the Medicaid EHR incentive income recognition occurred in the period in which the applicable hospitals were deemed to have met initial “meaningful use” criteria.

| Costs related to extinguishment of debt | | | 0 | | | | 0.0 | % | | | 0 | | | | 0.0 | % | | | 36,171 | | | | 0.4 | % |

Net revenues increased 10% or $838 million to $9.04 billion during 2015 as compared to $8.21 billion during 2014.

| | • | other combined net increase of $286 million consisting primarily of: (i) the revenues generated at 21 behavioral health care facilities acquired in the U.K. between September, 2014 and December, 2015; (ii) a full year of revenues generated at a commercial health insurer headquartered in Reno, Nevada, that was acquired in June, 2014, and; (iii) the revenues generated at the behavioral health care facilities acquired during the third and fourth quarters of 2015 in connection with the Alpha and Foundations transactions. |

| | a. | an increase of $77 million as discussed below in Acute Care Hospital Services, excluding the EHR impact (as mentioned in g. below) and excluding the change resulting from the reduction to our prior year professional and general liability self-insurance reserves recorded during 2014 (as mentioned in c. below); |

| | b. | an increase of $86 million as discussed below in Behavioral Health Services, excluding the change resulting from the reduction to our prior year professional and general liability self-insurance reserves during 2014 (as mentioned in c. below); |

| | c. | a net decrease of $20 million resulting from the reduction recorded during 2014 to our professional and general liability self-insurance reserves based upon a reserve analysis, as discussed in Note 8 to the Consolidated Financial Statements-Commitments and Contingencies ($11 million of which was applicable to our acute care hospitals and $9 million was applicable to our behavioral health care facilities); |

| | d. | an increase of $20 million resulting from a reduction in interest expense due primarily to decreases in interest rate swap expense and amortization of financing fees; |

| | e. | an increase of $48 million resulting from a charge incurred during 2014 in connection with the settlement of the Garden City Employees’ Retirement System v. Psychiatric Solutions, Inc. legal matter; |

| | f. | an increase of $36 million resulting from a charge incurred during the third quarter of 2014 in connection with the costs related to extinguishment of debt resulting from various financing transactions that occurred at that time; |

| | g. | a decrease of $12 million related to the incentive income ($16 million in 2015 and $28 million in 2014), net of related depreciation and amortization expense ($37 million in each of 2015 and 2014), recorded during each year in connection with the implementation of EHR applications at our acute care hospitals; |

| | h. | a decrease of $10 million due to the pre-tax gain realized during 2014 resulting from the divestiture of a non-operating investment, and; |

| | • | a decrease of $71 million resulting from an increase in the provision for income taxes resulting primarily from the income tax provision on the $206 million increase in pre-tax income ($216 million increase in income before income taxes less the $10 million decrease in income resulting from an increase in the income attributable to noncontrolling interests). |

during 2015.

An increase in the level of uninsured patients to our facilities and the resulting adverse trends in the provision for doubtful accounts and uncompensated care provided could have a material unfavorable impact on our future operating results.

| | | December 31, 2015 | | | | | | | | December 31, 2014 | | | | | | |

We performed periodic assessments of the cash flow hedge instruments during [removed: 2016] [added: 2017] and [removed: 2015] [added: 2016] and determined the hedges to be highly effective.

[removed: At December 31, 2016, the fair value of our interest rate swaps was de minimis on] a net basis comprised of a $4 million asset which is included in other assets offset by a $4 million liability which in included in other current liabilities on the accompanying consolidated balance sheet.

At December 31, [removed: 2015,] [added: 2017,] the fair value of our interest rate swaps was a net [removed: liability] [added: asset] of [removed: $1] [added: $7 million, $4] million [removed: comprised] of [removed: a $5 million asset] which is included in [removed: other assets offset by a $6] [added: net accounts receivable and $3] million [removed: liability] [added: of] which is included in other [removed: current liabilities.][added: assets on the accompanying balance sheet.]

The table below presents information about our long-term financial instruments that are sensitive to changes in interest rates as of December 31, [removed: 2016.][added: 2017.]

| | | [removed: 2017 | | | |] 2018 | | | | 2019 | | | | 2020 | | | | 2021 | | | | [added: 2022 | | | |] Thereafter | | | | Total | | |

| Average interest rates | | | 4.7 | % | | | 4.7 | % | | | [removed: 4.7] [added: 5.0] | % | | | 5.0 | % | | | [removed: 5.0] [added: 4.9] | % | | | [removed: 5.1] [added: 4.0] | % | | | [removed: 4.9] [added: 4.7] | % |

| Average interest rates | | | [removed: 2.2] [added: 2.9] | % | | | [removed: 2.2] [added: 3.0] | % | | | [removed: 2.2] | [removed: %] | | | | | | | | | | | | | | | 2.2 | % |

| Notional amount | | | | | | [added: $] | [added: 1,000,000] | | | [removed: $] | [removed: 1,000,000] | | | | | | | | | | | | | | | $ | 1,000,000 | |

| Average interest rates | | | | | | | [added: 1.3] | [added: %] | | | [removed: 1.3] | [removed: %] | | | | | | | | | | | | | | | 1.3 | % |

As calculated based upon our variable rate debt outstanding as of December 31, [removed: 2016] [added: 2017] that is subject to interest rate fluctuations, each 1% change in interest rates would impact our pre-tax income by approximately [removed: $17] [added: $16] million.

At December 31, 2016, the fair value of our interest rate swaps was de minimis on

| Debt | | $ | 2,636 | | | $ | 300,286 | | | $ | 1,650 | | | $ | 1,696 | | | $ | 698,835 | | | $ | 407,491 | | | $ | 1,412,594 | |

| Debt | | $ | 542,983 | | | $ | 2,084,432 | | | | | | | | | | | | | | | | | | | $ | 2,627,415 | |

| Debt | | $ | 2,445 | | | $ | 2,646 | | | $ | 298,991 | | | $ | 1,650 | | | $ | 1,696 | | | $ | 1,104,961 | | | $ | 1,412,389 | |

| Debt | | $ | 103,450 | | | $ | 487,082 | | | $ | 2,133,204 | | | | | | | | | | | | | | | $ | 2,723,736 | |

As of February 28, [removed: 2017,] [added: 2018,] we owned and/or operated [removed: 319] [added: 326] inpatient facilities and [removed: 33] [added: 32] outpatient and other facilities including the following located in 37 states, Washington, D.C., the United Kingdom, Puerto Rico and the U.S. Virgin Islands:

Behavioral health care facilities [removed: (293] [added: (300] inpatient facilities and [removed: 24] [added: 23] outpatient facilities):

| | • | [removed: 189] [added: 188] inpatient behavioral health care facilities, and; |

| | • | [removed: 100] [added: 108] inpatient behavioral health care facilities, and; |

| | • | [removed: 2] [added: 1] outpatient behavioral health care facility. |

As a percentage of our consolidated net revenues, net revenues from our acute care hospitals, outpatient facilities and commercial health insurer accounted for [added: 53% during 2017,] 52% during 2016 and 51% during [removed: each of 2015 and 2014.][added: 2015.]

Net revenues from our behavioral health care facilities and commercial health insurer accounted for [removed: 48%] [added: 47%] of our consolidated net revenues during [added: 2017, 48% during] 2016 and 49% during [removed: each of 2015 and 2014.][added: 2015.]

[removed: 2016] [added: 2017 and 2018] Acquisitions of Assets and Businesses:

[added: In addition, in response to cost] containment pressures, we continue to implement programs at our facilities designed to improve financial performance and efficiency while continuing to provide quality care, including more efficient use of professional and paraprofessional staff, monitoring and adjusting staffing levels and equipment usage, improving patient management and reporting procedures and implementing more efficient billing and collection procedures.

In addition, [removed: hospital operations are] [added: our acute care services business is typically] subject to certain seasonal fluctuations, such as higher patient volumes and net patient service revenues in the first and fourth quarters of the year.

| | | [removed: 2016] [added: 2017] | | | | [removed: 2015] [added: 2016] | | | | [removed: 2014] [added: 2015] | | | | [removed: 2013] [added: 2014] | | | | [removed: 2012] [added: 2013] | | |

| Acute Care Hospitals | | | [removed: 5,934] [added: 6,127] | | | | [removed: 5,832] [added: 5,934] | | | | [removed: 5,776] [added: 5,832] | | | | [removed: 5,652] [added: 5,776] | | | | [removed: 5,682] [added: 5,652] | |

| Behavioral Health Centers | | | [removed: 21,829] [added: 23,151] | | | | [removed: 21,202] [added: 21,829] | | | | [removed: 20,231] [added: 21,202] | | | | [removed: 19,975] [added: 20,231] | | | | [removed: 19,362] [added: 19,975] | |

| Acute Care Hospitals | | | [removed: 5,759] [added: 5,954] | | | | [removed: 5,656] [added: 5,759] | | | | [removed: 5,571] [added: 5,656] | | | | [removed: 5,429] [added: 5,571] | | | | [removed: 5,457] [added: 5,429] | |

| Behavioral Health Centers | | | [removed: 21,744] [added: 23,068] | | | | [removed: 21,116] [added: 21,744] | | | | [removed: 20,131] [added: 21,116] | | | | [removed: 19,876] [added: 20,131] | | | | [removed: 19,282] [added: 19,876] | |

| Acute Care Hospitals | | | [removed: 274,074] [added: 297,390] | | | | [removed: 261,727] [added: 274,074] | | | | [removed: 251,165] [added: 261,727] | | | | [removed: 246,160] [added: 251,165] | | | | [removed: 251,099] [added: 246,160] | |

| Behavioral Health Centers | | | [removed: 456,052] [added: 467,822] | | | | [removed: 447,007] [added: 456,052] | | | | [removed: 426,510] [added: 447,007] | | | | [removed: 402,088] [added: 426,510] | | | | [removed: 374,865] [added: 402,088] | |

| Acute Care Hospitals | | | [removed: 4.6] [added: 4.4] | | | | [removed: 4.7] [added: 4.6] | | | | [removed: 4.6] [added: 4.7] | | | | [removed: 4.5] [added: 4.6] | | | | 4.5 | |

| Behavioral Health Centers | | | [removed: 13.2] [added: 13.6] | | | | [removed: 13.1] [added: 13.2] | | | | [removed: 12.9] [added: 13.1] | | | | [removed: 13.3] [added: 12.9] | | | | [removed: 14.0] [added: 13.3] | |

| Acute Care Hospitals (1) | | | [removed: 1,251,511] [added: 1,312,265] | | | | [removed: 1,218,991] [added: 1,251,511] | | | | [removed: 1,167,726] [added: 1,218,991] | | | | [removed: 1,112,541] [added: 1,167,726] | | | | [removed: 1,122,557] [added: 1,112,541] | |

| Behavioral Health Centers | | | [removed: 6,004,066] [added: 6,381,756] | | | | [removed: 5,835,134] [added: 6,004,066] | | | | [removed: 5,518,660] [added: 5,835,134] | | | | [removed: 5,365,734] [added: 5,518,660] | | | | [removed: 5,245,499] [added: 5,365,734] | |

| Acute Care Hospitals | | | [removed: 58] [added: 59] | % | | | [removed: 57] [added: 58] | % | | | [removed: 55] [added: 57] | % | | | [removed: 54] [added: 55] | % | | | 54 | % |

| Behavioral Health Centers | | | [removed: 75] [added: 76] | % | | | 75 | % | | | 75 | % | | | [removed: 74] [added: 75] | % | | | 74 | % |

| Acute Care Hospitals | | | [removed: 59] [added: 60] | % | | | 59 | % | | | [removed: 57] [added: 59] | % | | | [removed: 56] [added: 57] | % | | | 56 | % |

| Behavioral Health Centers | | | [removed: 75] [added: 76] | % | | | [removed: 76] [added: 75] | % | | | [removed: 75] [added: 76] | % | | | [removed: 74] [added: 75] | % | | | [removed: 75] [added: 74] | % |

These laws generally require prior approval from the attorney general, advance notification and [removed: community involvement.]

[added: The law and regulations require Peer Review] Organizations (“PROs”) to review the appropriateness of Medicare and Medicaid patient admissions and discharges, the quality of care provided, the validity of diagnosis related group (“DRG”) classifications and the appropriateness of cases of extraordinary length of stay.

These types of referrals are known as “self-referrals.” Sanctions for violating the Stark Law include civil penalties up to [removed: $15,000] [added: $24,253] for each violation, [added: and] up to [removed: $100,000] [added: $161,692] for sham [removed: arrangements, up to $10,000 for each day an entity fails to report required information and exclusion from the federal health care programs.][added: arrangements.]

These activities, which must meet certain requirements, include (but are not limited to) the following: investment interests, space rental, equipment rental, practitioner recruitment, personnel services and management contracts, sale of practice, referral services, warranties, discounts, employees, group purchasing organizations, waiver of beneficiary coinsurance and deductible amounts, managed care arrangements, obstetrical malpractice insurance subsidies, investments in group practices, freestanding [removed: surgery centers, donation of technology for electronic health records and referral agreements for specialty services.]

When a defendant is determined by a court of law to have violated the False Claims Act, the defendant may be liable for up to three times the actual damages sustained by the government, plus mandatory civil penalties of between [removed: $10,781] [added: $11,181] to [removed: $21,563] [added: $22,363] for each separate false claim.

HIPAA also introduced enforcement mechanisms to prevent [removed: fraud and abuse in Medicare.]

HIPAA Administrative Simplification and Privacy Requirements: The administrative simplification provisions of HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act (“HITECH”), require the use of uniform [added: electronic data transmission standards for health care claims and payment transactions submitted or received electronically.]

[removed: There are severe penalties] under EMTALA if a hospital fails to screen or appropriately stabilize or transfer a patient or if the hospital delays appropriate treatment in order to first inquire about the patient’s ability to pay.

[added: Financial arrangements with] physicians and other referral sources, including compliance with anti-kickback and Stark laws and emergency department treatment and transfer requirements are also the focus of policy and training, standardized documentation requirements, and review and audit.

Our facilities located in the U.S. had approximately [removed: 75,325] [added: 76,600] employees as of December 31, [removed: 2016,] [added: 2017,] of whom approximately [removed: 54,800] [added: 55,000] were employed full-time.

In addition, our facilities located in the U.K. had approximately [removed: 5,800] [added: 6,500] employees as of December 31, [removed: 2016.][added: 2017.]

Within our acute care division, approximately [removed: 190] [added: 240] physicians are employed by physician practice management subsidiaries of ours either directly or through contracts with affiliated group practices structured as 501A corporations.

In addition, within our behavioral health division, approximately [removed: 440] [added: 490] psychiatrists are employed by subsidiaries of ours either directly or through contracts with affiliated group practices structured as 501A corporations.

Approximately [removed: 1,000] [added: 765] of our employees at six of our hospitals are unionized.

[removed: Nurses, technicians and engineers] [added: Engineers] at Desert Springs Hospital are represented by the [removed: Service Employees] International Union [removed: (“SEIU”) and the International Union] of Operating Engineers.

Our behavioral health care facilities located in the U.K. generated net revenues amounting to approximately $429 million in 2017, $241 million in 2016 and $203 million in 2015.

Total assets at our U.K. behavioral health care facilities were approximately $1.098 billion as of December 31, 2017, $965 million as of December 31, 2016 and $521 million as of December 31, 2015.

2017 Acquisitions:

During 2017 we spent $23 million to acquire various property assets.

2018 Acquisitions:

In January, 2018, we acquired Gulfport Behavioral Health System, a 109-bed behavioral health care facility located in Gulfport, Mississippi.

Our company mission is:

To provide superior quality healthcare services that

PATIENTS recommend to families and friends,

PHYSICIANS prefer for their patients,

PURCHASERS select for their clients,

EMPLOYEES are proud of, and

INVESTORS seek for long-term returns.

community involvement.

surgery centers, donation of technology for electronic health records and referral agreements for specialty services.

fraud and abuse in Medicare.

There are severe penalties

In addition, some of our hospitals face competition from hospitals or surgery centers that are physician owned.

facilities.

Included in our share of the Trust’s income was approximately $1.7 million in 2017 related to our share of a gain recorded resulting from a property transaction, as well as insurance proceeds in excess of damaged Trust property.

We received dividends from the Trust amounting to $2.1 million during 2017 and $2.0 million during each of 2016 and 2015.

The base rents are paid monthly and the bonus rents are computed and paid on a

| --- | --- | --- |

In late December, 2016, we completed the acquisition of Cambian Group, PLC’s adult services’ division (the “Cambian Adult Services”) for a total purchase price of approximately $473 million.

The Cambian Adult Services division consists of 79 inpatient and 2 outpatient behavioral health facilities located in the U.K. The Competition and Markets Authority (“CMA”) in the U.K. is currently reviewing our acquisition of the Cambian Adult Services.

We estimate that the CMA’s review of our acquisition will be completed during the second quarter of 2017.

However, until such review is completed, we are not permitted to integrate the Cambian Adult Services business into our existing businesses located in the U.K. Further, we can provide no assurance that the CMA will not require us to divest certain parts of the Cambian Adults Services division or certain parts of our existing business located in the U.K.

During 2016 we spent $614 million to:

| | • | acquire the adult services division of Cambian Group, PLC consisting of 79 inpatient and 2 outpatient behavioral health facilities located in the U.K. (acquired late in the fourth quarter); |

| | • | acquire Desert View Hospital, a 25-bed acute care facility located in Pahrump, Nevada (acquired during the third quarter), and; |

| | • | acquire various other businesses and real property assets. |

Our mission and objective is to provide superior quality healthcare services that patients recommend to families and friends, physicians prefer for their patients, purchasers select for their clients, employees are proud of, and investors seek for long-term returns.

In addition, in response to cost

The law and regulations require Peer Review

The Recovery Audit Prepayment Review demonstration program will enable RACs to review claims before they are paid to ensure that the provider complied with all Medicare payment rules.

Currently, the demonstration program is targeting states with high populations of fraud- and error-prone providers.

electronic data transmission standards for health care claims and payment transactions submitted or received electronically.

Financial arrangements with

Our acute care and behavioral health care facilities are

Total rent expense under the operating leases on the four hospital facilities with the Trust during 2014 (as discussed below) was $16.8 million.

In June, 2016, we provided the required notice to the Trust, exercising the 5-year renewal options on McAllen Medical Center, Wellington Regional Medical Center and Southwest Healthcare System, Inland Valley Campus.

The renewals extend the lease terms on these facilities, at existing lease rates, through December, 2021.

In December, 2014, upon the expiration of the lease term, we elected to purchase from the Trust for $17.3 million, the real property of The Bridgeway, a 103-bed behavioral health care facility located in North Little Rock, Arkansas.

Pursuant to the terms of the lease, we and the Trust were both required to obtain appraisals of the property to determine its fair market value/purchase price.

The rent expense paid by us to the Trust, prior to our purchase of The Bridgeway’s real property in December, 2014, was approximately $1.1 million annually.

See Note 9 to the Consolidated Financial Statements-Relationship with Universal Health Realty

In February, 2013, the Office of Inspector General for the United States Department of Health and Human Services (“OIG”) served a subpoena requesting various documents from January, 2008 to the date of the subpoena directed at Universal Health Services, Inc. (“UHS”) concerning it and UHS of Delaware, Inc., and certain UHS owned behavioral health facilities including: Keys of [added: Carolina, Old Vineyard Behavioral Health, The Meadows Psychiatric Center, Streamwood Behavioral Health, Hartgrove Hospital, Rock River Academy and Residential Treatment Center, Roxbury Treatment Center, Harbor Point Behavioral Health Center, f/k/a The Pines Residential Treatment Center, including the Crawford, Brighton and Kempsville campuses, Wekiva Springs Center and River Point Behavioral Health.]

The Florida Agency for Health Care Administration [added: (“AHCA”)] subsequently issued a Medicaid payment suspension for the facility.

River Point Behavioral Health provided additional information to CMS in an effort to obtain relief from the payment suspension but the [added: Medicare] suspension remains in effect.

We cannot predict if and/or when the facility’s [added: remaining] suspended payments will [removed: resume.][added: resume in total.]

Although the operating results of River Point Behavioral Health did not have a material impact on our consolidated results of operations during [removed: the years ended December 31,] [added: 2017,] 2016 or 2015, the payment suspension has had a material adverse effect on the facility’s results of operations and financial condition.

At present, we are uncertain as to [removed: potential] [added: the focus, scope or extent of the investigation,] liability [removed: and/or financial exposure] of the [removed: Company] [added: facility] and/or [removed: named facilities,] [added: potential financial exposure,] if any, in connection with [removed: these matters.][added: this matter.]

Universal Health Services, [removed: Inc., et al.][added: Inc. et.al.]

[removed: Although we have not been served with the complaint at this time, we] [added: We] deny liability and intend to defend ourselves vigorously.

We filed administrative appeals for all of our facilities contesting the recoupment efforts for FFYs 2011 [removed: and 2012] [added: through 2013] as we believe the Department’s calculation methodology is inaccurate and conflicts with applicable federal and state laws and regulations.

The Department has agreed to postpone the recoupment of the state’s share of the DSH payments until all hospital appeals are resolved but [removed: recently] started recoupment of the federal share.

Due to a change in the Pennsylvania Medicaid State Plan and implementation of a CMS-approved Medicaid Section 1115 Waiver, we do not believe the methodology applied by the Department to [removed: FFY2011 and FFY2012] [added: FFYs 2011 through 2013] is applicable to reimbursements received for Medicaid services provided after January 1, 2015 by our behavioral health care facilities located in Pennsylvania.

The following matters pertain to PSI or former PSI facilities (owned by subsidiaries of PSI) which were in existence prior to the acquisition of PSI and for which we have assumed the defense as a result of our acquisition which was completed in November, [removed: 2010.][added: 2010:]

Department of Justice Investigation of Friends [removed: Hospital:][added: Hospital]

Department of Justice Investigation of Riveredge [removed: Hospital:][added: Hospital]

In September 2014, the Criminal Division of the [removed: DOJ,] [added: Department of Justice (“DOJ”)] announced that all qui tam cases will be shared with their Division to determine if a parallel criminal investigation should be opened.

[removed: In addition, health care facilities are subject to monitoring by] state and federal surveyors to ensure compliance with program Conditions of Participation.

No estimate of the possible loss or range of loss in excess of amounts accrued, if any, can be made at this time regarding the matters [removed: specifically] described above [added: or that are otherwise pending] because the inherently unpredictable nature of legal proceedings may be exacerbated by various factors, including, but not limited to: (i) the damages sought in the proceedings are unsubstantiated or indeterminate; (ii) discovery is not complete; (iii) the [removed: proceeding] [added: matter] is in its early stages; (iv) the matters present legal uncertainties; (v) there are significant facts in dispute; (vi) there are a large number of parties, or; (vii) there is a wide range of potential outcomes.

In addition, health care facilities are subject to monitoring by

Certain legal matters are described below:

Government Investigations:

UHS Behavioral Health

Prior to receipt of this subpoena, some of these facilities had received independent subpoenas from state or federal agencies.

Subsequent to the February 2013 subpoenas, some of the facilities above have received additional, specific subpoenas or other document and information requests.

In addition to the OIG, the DOJ and various U.S. Attorneys’ and state Attorneys’ General Offices are also involved in this matter.

Since February 2013, additional facilities have also received subpoenas and/or document and information requests or we have been notified are included in the omnibus investigation.

Those facilities include: National Deaf Academy, Arbour-HRI Hospital, Behavioral Hospital of Bellaire, St. Simons By the Sea, Turning Point Care Center, Salt Lake Behavioral Health, Central Florida Behavioral Hospital, University Behavioral Center, Arbour Hospital, Arbour-Fuller Hospital, Pembroke Hospital, Westwood Lodge, Coastal Harbor Health System, Shadow Mountain Behavioral Health, Cedar Hills Hospital, Mayhill Hospital, Southern Crescent Behavioral Health (Anchor Hospital and Crescent Pines campuses), Valley Hospital (AZ), Peachford Behavioral Health System of Atlanta, University Behavioral Health of Denton, and El Paso Behavioral Health System.

Since that time, we have been notified that the Criminal Frauds section has opened investigations of National Deaf Academy, Hartgrove Hospital and UHS as a corporate entity.

In April 2017, the DOJ’s Criminal Division issued a subpoena requesting documentation from Shadow Mountain Behavioral Health.

In August 2017, Kempsville Center of Behavioral Health (a part of Harbor Point Behavioral Health previously identified above) received a subpoena requesting documentation.

In June 2017, AHCA advised that while they were maintaining the suspension for dual eligible and cross-over Medicare beneficiaries, the Medicaid payment suspension was lifted effective June 27, 2017.

From inception through December 31, 2017, the aggregate funds withheld from us in connection with the River Point Behavioral Health payment suspension amounted to approximately $10 million.

Based upon our initial discussions with the DOJ, our financial statements as of December 31, 2017 include a $22 million reserve established in

connection with the civil aspects of these matters.

However, changes in the reserve may be required in future periods as discussions continue and additional information becomes available.

We cannot predict the ultimate resolution of these matters and therefore can provide no assurance that final amounts paid in settlement or otherwise, if any, or associated costs, will not differ materially from our established reserve.

The Massachusetts Attorney General’s Office subsequently filed its motion to intervene which was granted and, in April 2017, filed their Complaint in Intervention.

Shareholder Class Action

The case was originally filed as Heed v.

(Case No. 2:16-CV-09499-PSG-JC).

The court subsequently appointed Teamsters Local 456 Pension Fund and Teamsters Local 456 Annuity Fund to serve as lead plaintiffs.

The case has been transferred to the U.S. District Court for the Eastern District of Pennsylvania and the style of the case has been changed to Teamsters Local 456 Pension Fund, et.

al.

v.

Universal Health Services, Inc. et.

al.

(Case No. 2:17-CV-02817-LS).

In September, 2017, Teamsters Local 456 Pension Fund filed an amended complaint.

In December 2017, we filed a motion to dismiss the amended complaint.

Shareholder Derivative Cases

In March 2017, a shareholder derivative suit was filed by plaintiff David Heed in the Court of Common Pleas of Philadelphia County.

A notice of removal to the United States District Court for the Eastern District of Pennsylvania was filed (Case No. 2:17-cv-01476-LS).

Plaintiff filed a motion to remand.

In December 2017, the Court denied plaintiff’s motion to remand and has retained the case in federal court.

The suit alleges breaches of fiduciary duties and other allegedly wrongful conduct by the members of the Board of Directors and certain officers of Universal Health Services, Inc. relating to practices at our behavioral health facilities.

UHS has been named as a nominal defendant in the case.

In May, June and July 2017, additional shareholder derivative suits were filed in the United States District Court for the Eastern District of Pennsylvania.

The plaintiffs in those cases are: Central Laborers’ Pension Fund (Case No. 17-cv-02187-LS); Firemen’s Retirement System of St. Louis (Case No. 17—cv-02317-LS); Waterford Township Police & Fire Retirement System (Case No. 17-cv-02595-LS); and Amalgamated Bank Longview Funds (Case No. 17-cv-03404-LS).

We are subject to claims and suits in the ordinary course of business, including those arising from care and treatment afforded by our hospitals and are party to various government investigations, regulatory matters and litigation, as outlined below.

Office of Inspector General (“OIG”) and Government Investigations:

Carolina, Old Vineyard Behavioral Health, The Meadows Psychiatric Center, Streamwood Behavioral Health, Hartgrove Hospital, Rock River Academy and Residential Treatment Center, Roxbury Treatment Center, Harbor Point Behavioral Health Center, f/k/a The Pines Residential Treatment Center, including the Crawford, Brighton and Kempsville campuses, Wekiva Springs Center and River Point Behavioral Health.

Prior to receiving this subpoena: (i) the Keys of Carolina and Old Vineyard received notification during the second half of 2012 from the DOJ of its intent to proceed with an investigation following requests for documents for the period of January, 2007 to the date of the subpoenas from the North Carolina state Attorney General’s Office; (ii) Harbor Point Behavioral Health Center received a subpoena in December, 2012 from the Attorney General of the Commonwealth of Virginia requesting various documents from July, 2006 to the date of the subpoena, and; (iii) The Meadows Psychiatric Center received a subpoena from the OIG in February, 2013 requesting certain documents from 2008 to the date of the subpoena.

Unrelated to these matters, the Keys of Carolina was closed and the real property was sold in January, 2013.

We were advised that a qui tam action had been filed against Roxbury Treatment Center but the government declined to intervene and the case was dismissed.

In April, 2013, the OIG served facility specific subpoenas on Wekiva Springs Center and River Point Behavioral Health requesting various documents from January, 2005 to the date of the subpoenas.

In July, 2013, another subpoena was issued to Wekiva Springs Center and River Point Behavioral Health requesting additional records.

Subsequent subpoenas have since been issued to River Point Behavioral Health and Wekiva Springs Center requesting additional documentation.

In June, 2013, the OIG served a subpoena on Coastal Harbor Health System in Savannah, Georgia requesting documents from January, 2009 to the date of the subpoena.

In February, 2014, we were notified that the investigation conducted by the Criminal Frauds Section had been expanded to include the National Deaf Academy.

In March, 2014, a Civil Investigative Demand (“CID”) was served on the National Deaf Academy requesting documents and information from the facility from January 1, 2008 through the date of the CID.

We have been advised by the government that the National Deaf Academy has been added to the facilities which are the subject of the coordinated investigation referenced above.

In March, 2014, CIDs were served on Hartgrove Hospital, Rock River Academy and Streamwood Behavioral Health requesting documents and information from those facilities from January, 2008 through the date of the CID.

In September, 2014, the DOJ Civil Division advised us that they were expanding their investigation to include four additional facilities and were requesting production of documents from these facilities.

These facilities are Arbour-HRI Hospital, Behavioral Hospital of Bellaire, St. Simons by the Sea, and Turning Point Care Center.

In December, 2014, the DOJ Civil Division requested that Salt Lake Behavioral Health produce documents responsive to the original subpoenas issued in February, 2013.

In March, 2015, the OIG issued subpoenas to Central Florida Behavioral Hospital and University Behavioral Center requesting certain documents from January, 2008 to the date of the subpoena.

In late March, 2015, we were notified that the investigation conducted by the Criminal Frauds Section had been expanded to include UHS as a corporate entity arising out of the coordinated investigation of the facilities described above and, in particular, Hartgrove Hospital.

In December, 2015, we were notified by the DOJ Civil Division that the civil investigation also includes Arbour Hospital, Arbour-Fuller Hospital, Pembroke Hospital and Westwood Lodge located in Massachusetts.

To date, these facilities have not received any requests for documentation or other information.

In December, 2015, we were advised that the DOJ opened an investigation involving the El Paso Behavioral Health System in El Paso, Texas.

The DOJ was investigating potential Stark law violations relating to arrangements between the facility and physician(s) at the facility.

These agreements were entered into before we acquired the facility as a part of our acquisition of Ascend

Health Corporation in October, 2012.

To our knowledge, this matter is not a part of the omnibus investigation referenced above.

We have reached a settlement with the DOJ, which did not have a material impact on our consolidated financial statements, concluding this matter.

In January, 2016, we were notified that the Department of Justice opened an investigation of the South Texas Health System of a potential False Claim Act case regarding compensation paid to cardiologists pursuant to employment agreements entered into in 2005.

In February, 2017, we were notified that the Department of Justice decided not to intervene in an under seal qui tam case and filed a notice of declination.

Further, we have been informed that the relator is dismissing the case.

Heed v.

In September, 2016, we received similar requests for repayment for alleged DSH overpayments for FFY2012.

If the Department is ultimately successful in its demand related to FFY2011 and FFY2012, it could take similar action with regards to FFY2013 and FFY2014.

At

present, we are uncertain as to the focus, scope or extent of the investigation, liability of the facility and/or potential financial exposure, if any, in connection with this matter.

General:

In addition, various suits and claims arising against us in the ordinary course of business are pending.

In the opinion of management, the outcome of such claims and litigation will not materially affect our consolidated financial position or results of operations.

10-K 1 [removed: uhs-10k_20161231.htm] [added: uhs-10k_20171231.htm] 10-K

For the fiscal year ended December 31, [removed: 2016][added: 2017]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, [removed: or] a smaller reporting [added: company or an emerging growth] company.

See the definitions of “large accelerated filer,” “accelerated [removed: filer” and] [added: filer”,] “smaller reporting company” [added: and “emerging growth company”] in Rule 12b-2 of the Exchange Act (check one):

The aggregate market value of voting stock held by non-affiliates at June 30, [removed: 2016] [added: 2017] was [removed: $11.9] [added: $10.6] billion.

The number of shares of the registrant’s Class A Common Stock, $.01 par value, Class B Common Stock, $.01 par value, Class C Common Stock, $.01 par value, and Class D Common Stock, $.01 par value, outstanding as of January 31, [removed: 2017,] [added: 2018,] were 6,595,308; [removed: 89,315,389;] [added: 86,990,759;] 663,940 and [removed: 22,100,] [added: 20,616,] respectively.

Portions of the registrant’s definitive proxy statement for our [removed: 2017] [added: 2018] Annual Meeting of Stockholders, which will be filed with the Securities and Exchange Commission within 120 days after December 31, [removed: 2016] [added: 2017] (incorporated by reference under Part III).

[removed: 2016] [added: 2017] FORM 10-K ANNUAL REPORT

| Item 3 | | [Legal Proceedings](#ITEM_3_LEGAL_PROCEEDINGS) | [removed: 32] [added: 33] |

| Item 7A | | [Quantitative and Qualitative Disclosures About Market Risk](#ITEM_7A_QUANTITATIVE_QUALITATIVE_DISCLOS) | [removed: 75] [added: 76] |

| Item 8 | | [Financial Statements and Supplementary Data](#ITEM_8_FINANCIAL_STATEMENTS_SUPPLEMENTAR) | [removed: 76] [added: 77] |

| Item 9B | | [Other Information](#ITEM_9B_OR_INFORMATION) | [removed: 77] [added: 78] |

| Item 10 | | [Directors, Executive Officers and Corporate Governance](#ITEM_10_DIRECTORS_EXECUTIVE_FICERS_CORPO) | [removed: 78] [added: 79] |

| Item 11 | | [Executive Compensation](#ITEM_11_EXECUTIVE_COMPENSATION) | [removed: 78] [added: 79] |

| Item 12 | | [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](#ITEM_12_SECURITY_OWNERSHIP_CERTAIN_BENEF) | [removed: 78] [added: 79] |

| Item 13 | | [Certain Relationships and Related Transactions, and Director Independence](#ITEM_13_CERTAIN_RELATIONSHIPS_RELATED_TR) | [removed: 78] [added: 79] |

| Item 14 | | [Principal Accountant Fees and Services](#ITEM_14_PRINCIPAL_ACCOUNTANT_FEES_SERVIC) | [removed: 78] [added: 79] |

| Item 15 | | [Exhibits and Financial Statement Schedules](#ITEM_15_EXHIBITS_FINANCIAL_STATEMENT_SCH) | [removed: 79] [added: 80] |

| [SIGNATURES](#SIGNATURES) | | | [removed: 83] [added: 85] |

This Annual Report on Form 10-K is for the year ended December 31, [removed: 2016.][added: 2017.]

| | | | | Emerging growth company | | ☐ |

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

| Item 16 | | [Form 10-K Summary](#ITEM_16_FORM_10_K_SUMMARY) | 84 |

| | | | |

Exhibit Index

| Aiken Regional Medical Centers | Aiken, South Carolina | [removed: 183] [added: 197] | Owned |

| Centennial Hills Hospital Medical Center | Las Vegas, Nevada | [removed: 226] [added: 250] | Owned |

| The George Washington University Hospital (1) | Washington, D.C. | 385 | [removed: Owned] [added: Leased] |

| Manatee Memorial Hospital | Bradenton, Florida | [removed: 319] [added: 295] | Owned |

| Palmdale Regional Medical Center | Palmdale, California | [removed: 157] [added: 184] | Owned |

| Edinburg Regional Medical Center/Children’s Hospital | Edinburg, Texas | [removed: 213] [added: 235] | Owned |

| Inland Valley Campus (2) | Wildomar, California | [removed: 132] [added: 130] | Leased |

| Texoma Medical Center | Denison, Texas | [removed: 326] [added: 266] | Owned |

| Arbour-Fuller Hospital | South Attleboro, Massachusetts | [removed: 118] [added: 102] | Owned |

| Boulder Creek Academy | Bonners Ferry, Idaho | [removed: 96] [added: 105] | Owned |

| Brentwood Behavioral Health of Mississippi | Flowood, Mississippi | [removed: 105] [added: 121] | Owned |

| Cedar Hills Hospital (8) | Beaverton, Oregon | [removed: 89] [added: 94] | Owned |

| Centennial Peaks [added: (8)] | Louisville, Colorado | [removed: 72] [added: 104] | Owned |

| Cypress Creek Hospital | Houston, Texas | [removed: 96] [added: 128] | Owned |

| La Amistad Behavioral Health Services | Maitland, Florida | [removed: 80] [added: 85] | Owned |

| Millwood Hospital | Arlington, Texas | [removed: 122] [added: 128] | Leased |

| Mountain Youth Academy | Mountain City, Tennessee | [removed: 84] [added: 90] | Owned |

| Natchez Trace Youth Academy | Waverly, Tennessee | [removed: 117] [added: 115] | Owned |

| North Spring Behavioral Healthcare | Leesburg, Virginia | [removed: 102] [added: 103] | Leased |

| Northwest Academy | Bonners Perry, Idaho | [removed: 82] [added: 102] | Owned |

| Okaloosa Youth Academy | Crestview, Florida | [removed: 163] [added: 75] | Leased |

| Old Vineyard Behavioral Health | Winston-Salem, North Carolina | [removed: 104] [added: 164] | Owned |

| The Pavilion | Champaign, Illinois | [removed: 103] [added: 106] | Owned |

| Provo Canyon School | Provo, Utah | [removed: 290] [added: 274] | Owned |

| Psychiatric Institute of Washington | Washington, D.C. | [removed: 124] [added: 130] | Owned |

| Rolling Hills Hospital | Franklin, Tennessee | [removed: 120] [added: 130] | Owned |

| Skywood Recovery | [removed: Brentwood, Tennessee] [added: Augusta, Michigan] | 100 | Owned |

| SummitRidge | Lawrenceville, Georgia | [removed: 86] [added: 96] | Owned |

| Three Rivers Behavioral Health | West Columbia, South Carolina | [removed: 118] [added: 122] | Owned |

| Three Rivers Residential Treatment-Midlands Campus | West Columbia, South Carolina | [removed: 59] [added: 64] | Owned |

| Turning Point Hospital | Moultrie, Georgia | [removed: 59] [added: 69] | Owned |

| Valle Vista Hospital | Greenwood, Indiana | [removed: 120] [added: 132] | Owned |

| Cygnet Hospital—Derby | Derby, UK | [removed: 47] [added: 50] | Owned |

| Cygnet Hospital—Harrow | Harrow, UK | [removed: 44] [added: 61] | Owned |

| Cygnet Lodge—Lewisham | Lewisham, UK | [removed: 20] [added: 17] | Owned |

| [removed: Kirklees – LD Rehad Yorkshire] Gledholt (9) | Huddersfield, UK | 9 | Owned |

| [removed: Leeds Home – Woodleigh] The Outwood (9) | Leeds, UK | 10 | Owned |

| [added: Surgical Hospitals,] Ambulatory Surgery [removed: &] [added: Centers and] Radiation Oncology Centers [removed: and Surgical Hospital] | | |

| (5) | We own minority interests in an LLC that owns and operates this center which is managed by [removed: a third-party.] [added: us.] |

The aggregate lease payments on facilities leased by us were [removed: $74] [added: $80] million in [removed: 2016, $69] [added: 2017, $74] million in [removed: 2015] [added: 2016] and [removed: $66] [added: $69] million in [removed: 2014.][added: 2015.]

| Cedar Creek | St. Johns, Michigan | 34 | Owned |

| Coral Shores | Stuart, Florida | 80 | Owned |

| Fairfax | | | |

| Gulfport Behavioral Health System | Gulfport, Mississippi | 109 | Owned |

| Southern Crescent Behavioral Health | | | |

| Acer Clinic 2 (9) | Chestherfield, UK | 14 | Owned |

| CAS Brunel (9) | Henbury, UK | 32 | Owned |

| Chaseways | Sawbridgeworth, UK | 6 | Owned |

| Coventry | Coventry, UK | 56 | Owned |

| Farm Lodge | Rainham, UK | 5 | Owned |

| Meadows Mews (9) | Tipton, UK | 10 | Owned |

| Shear Meadow (9) | Hemel Hempstead, UK | 4 | Owned |

| Walkern Lodge (9) | Stevenage, UK | 4 | Owned |

| (1) | We hold an 80% ownership interest in this facility through a general partnership interest in a limited partnership. The remaining 20% ownership interest is held by an unaffiliated third-party which leases the property to the partnership for nominal rent. The term of the partnership is scheduled to expire in July, 2047, and we have five, five-year extension options. The term of the lease is coterminous with the partnership term with a fair market value rental of the property during the extension term. |

| (9) | These facilities were acquired in late December, 2016, upon our completion of the acquisition of Cambian Group, PLC’s adult services’ division (the “Cambian Adult Services”). At the time of acquisition, the Cambian Adult Services consisted of 79 inpatient and 2 outpatient behavioral health facilities located in the U.K. The Competition and Markets Authority (“CMA”) in the U.K. reviewed our acquisition of the Cambian Adult Services. In April, 2017, the CMA notified us that they identified potential competition concerns in certain markets and announced its decision to refer our acquisition of Cambian Group, PLC’s Adult Services division for a Phase 2 investigation. In October, 2017, the CMA provided the final ruling regarding the Phase 2 investigation requiring us to divest a facility which was subsequently designated to be The Limes, an 18-bed facility which generates less than $1 million in annual income before income taxes. |

| | | | |

| --- | --- | --- | --- |

| Name of Facility | Location | Number of Beds | Real Property Ownership Interest |

| Atlantic Shores Hospital | Fort Lauderdale, Florida | 72 | Owned |

| Lake Bridge Behavioral Health | Macon, Georgia | 70 | Owned |

| Timberlawn Mental Health System | Dallas, Texas | 144 | Owned |

| Westwood Lodge Hospital | Westwood, Massachusetts | 130 | Owned |

| | | |

| Name of Facility | Location | Real Property Ownership Interest |

| United Kingdom: | | |

| First Health System, Inc. | San Juan, Puerto Rico | Leased |

| (1) | We hold an 80% ownership interest in this facility through a general partnership interest in a limited partnership. The remaining 20% ownership interest is held by an unaffiliated third-party. |

| (9) | In late December, 2016, we completed the acquisition of Cambian Group, PLC’s adult services’ division (the “Cambian Adult Services”). The Cambian Adult Services division consists of 79 inpatient and 2 outpatient behavioral health facilities located in the U.K. The Competition and Markets Authority (“CMA”) in the U.K. is currently reviewing our acquisition of the Cambian Adult Services. We estimate that the CMA’s review of our acquisition will be completed during the second quarter of 2017. However, until such review is completed, we are not permitted to integrate the Cambian Adult Services business into our existing businesses located in the U.K. Further, we can provide no assurance that the CMA will not require us to divest certain parts of the Cambian Adults Services division or certain parts of our existing business located in the U.K. |

The table below sets forth, for the quarters indicated, the high and low reported closing sales prices per share reported on the New York Stock Exchange for our Class B Common Stock for the years ended December 31, [removed: 2016] [added: 2017] and [removed: 2015:][added: 2016:]

| 1st | | [removed: $125.33-$101.65] [added: $126.65-$106.71] | | [removed: $121.33-$102.53] [added: $125.33-$101.65] |

| 2nd | | [removed: $138.74-$121.74] [added: $125.07-$112.33] | | [removed: $142.69-$112.96] [added: $138.74-$121.74] |

| 3rd | | [removed: $138.28-$118.82] [added: $125.00-$105.37] | | [removed: $146.24-$121.16] [added: $138.28-$118.82] |

| 4th | | [removed: $128.06-$101.55] [added: $115.06-$95.77] | | [removed: $130.32-$111.73] [added: $128.06-$101.55] |

| Class B Common | | | [removed: 231] [added: 222] | |

| Class D Common | | | [removed: 105] [added: 102] | |

As reflected below, during the three-month period ended December 31, [removed: 2016,] [added: 2017,] we have repurchased [removed: 475,000] [added: approximately 1.0 million] shares at an aggregate cost of [removed: $51.8 million ($8.0] [added: approximately $100.8] million [removed: of which was paid in early January, 2017)] pursuant to the terms of our stock repurchase program.

In addition, [removed: 119,438] [added: 193,806] shares were repurchased in connection with income tax withholding obligations resulting from the exercise of stock options and the vesting of restricted stock grants.

During the period of October 1, [removed: 2016] [added: 2017] through December 31, [removed: 2016,] [added: 2017,] we repurchased the following shares:

| | | Additional Dollars Authorized For Repurchase (in thousands) | | | | Total number of shares purchased | | | | Total number of shares cancelled | | | | Average price paid per share for forfeited restricted shares | | [added: | |] Total Number of shares purchased as part of publicly announced programs | | | | Average price paid per share for shares purchased as part of publicly announced program | | | | Aggregate purchase price paid (in thousands) | | | | Maximum number of dollars that may yet be purchased under the program (in thousands) | | |

During the two years ending December 31, [removed: 2016,] [added: 2017,] dividends per share were declared and paid as follows:

The following graph compares the cumulative total stockholder return on our common stock with the cumulative total return on the stock included in the Standard & Poor’s 500 Index and a Peer Group Index during the five year period ended December 31, [removed: 2016.][added: 2017.]

The graph assumes an investment of $100 made in our common stock and each Index as of January 1, [removed: 2012] [added: 2013] and has been weighted based on market capitalization.

Companies in the peer group, which consist of companies in the S&P 500 Index or S&P MidCap 400 Index are as follows: Community Health Systems, Inc., Health Management Associates, Inc. (included until January, 2014 when it was acquired by Community Health Systems, Inc.), LifePoint [removed: Hospitals,] [added: Health,] Inc., Tenet Healthcare [removed: Corporation] [added: Corporation, Acadia Healthcare Company, Inc.] and HCA [removed: Holdings,] [added: Healthcare,] Inc. [removed: (included from March, 2011 at which time the company’s stock began publicly trading).]

[removed: ][added: ]

| Company Name / Index | | [removed: 2011 | | | |] 2012 [added: Base] | | | | 2013 | | | | 2014 | | | | 2015 | | | | 2016 | | | [added: | 2017 | | |]

| | | 2017 | | 2016 |

In November, 2017, our Board of Directors authorized an additional $400 million increase to our stock repurchase program, which increased the aggregate authorization to $1.2 billion from the previous $800 million authorization approved in 2016 and 2014 as mentioned above.

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| October, 2017 | | | — | | | | 63,009 | | | | — | | | N/A | | | | | 60,000 | | | $ | 102.27 | | | $ | 6,136 | | | $ | 58,305 | |

| November, 2017 | | $ | 400,000 | | | | 877,923 | | | | — | | | N/A | | | | | 778,482 | | | $ | 99.10 | | | $ | 77,147 | | | $ | 381,158 | |

| December, 2017 | | | — | | | | 255,869 | | | | 4,666 | | | $ | 0.01 | | | | 164,513 | | | $ | 106.36 | | | $ | 17,498 | | | $ | 363,660 | |

| Total October through December | | $ | 400,000 | | | | 1,196,801 | | | | 4,666 | | | $ | 0.01 | | | | 1,002,995 | | | $ | 100.48 | | | $ | 100,781 | | | | | |

| | | 2017 | | | | 2016 | | |

| Universal Health Services, Inc. | | $ | 100.00 | | | $ | 168.56 | | | $ | 231.48 | | | $ | 249.41 | | | $ | 222.77 | | | $ | 238.21 | |

| S&P 500 Index | | $ | 100.00 | | | $ | 132.39 | | | $ | 150.51 | | | $ | 152.59 | | | $ | 170.84 | | | $ | 208.14 | |

| Peer Group | | $ | 100.00 | | | $ | 149.80 | | | $ | 211.11 | | | $ | 179.26 | | | $ | 161.61 | | | $ | 183.46 | |

| | | 2016 | | 2015 |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| October, 2016 | | | — | | | | 1,569 | | | | — | | | N/A | | | — | | | N/A | | | | $ | 194 | | | $ | 337,690 | |

| November, 2016 | | | — | | | | 5,540 | | | | — | | | N/A | | | — | | | N/A | | | | $ | 703 | | | $ | 337,690 | |

| December, 2016 | | | — | | | | 587,329 | | | | — | | | N/A | | | 475,000 | | | $ | 109.05 | | | $ | 51,799 | | | $ | 285,891 | |

| Total October through December | | | — | | | | 594,438 | | | | — | | | N/A | | | 475,000 | | | $ | 120.91 | | | $ | 52,696 | | | | | |

| | | 2016 | | | | 2015 | | |

| Universal Health Services, Inc. | | $ | 100.00 | | | $ | 126.05 | | | $ | 212.47 | | | $ | 291.79 | | | $ | 314.38 | | | $ | 280.81 | |

| S&P 500 Index | | $ | 100.00 | | | $ | 116.00 | | | $ | 153.57 | | | $ | 174.60 | | | $ | 177.01 | | | $ | 198.18 | |

| Peer Group | | $ | 100.00 | | | $ | 157.70 | | | $ | 232.26 | | | $ | 329.14 | | | $ | 275.01 | | | $ | 260.33 | |

The following table contains our selected financial data for, or as of the end of, each of the five years ended December 31, [removed: 2015.][added: 2017.]

| | | [removed: 2016] [added: 2017] | | | | [removed: 2015] [added: 2016] | | | | [removed: 2014] [added: 2015] | | | | [removed: 2013] [added: 2014] | | | | [removed: 2012] [added: 2013] | | |

| Net revenues | | $ | [removed: 9,766,210] [added: 10,409,865] | | | $ | [removed: 9,043,451] [added: 9,766,210] | | | $ | [removed: 8,205,088] [added: 9,043,451] | | | $ | [removed: 7,367,873] [added: 8,205,088] | | | $ | [removed: 7,054,182] [added: 7,367,873] | |

| Income before income taxes | | $ | [removed: 1,156,358] [added: 1,135,009] | | | $ | [removed: 1,145,901] [added: 1,156,358] | | | $ | [removed: 929,667] [added: 1,145,901] | | | $ | [removed: 869,332] [added: 929,667] | | | $ | [removed: 763,663] [added: 869,332] | |

| Net income attributable to UHS | | $ | [removed: 702,409] [added: 752,303] | | | $ | [removed: 680,528] [added: 702,409] | | | $ | [removed: 545,343] [added: 680,528] | | | $ | [removed: 510,733] [added: 545,343] | | | $ | [removed: 443,446] [added: 510,733] | |

| Net margin | | | 7.2 | % | | | [removed: 7.5] [added: 7.2] | % | | | [removed: 6.6] [added: 7.5] | % | | | [removed: 6.9] [added: 6.6] | % | | | [removed: 6.3] [added: 6.9] | % |

| Return on average equity | | | [removed: 16.0] [added: 15.5] | % | | | [removed: 16.6] [added: 16.0] | % | | | [removed: 15.3] [added: 16.6] | % | | | [removed: 16.8] [added: 15.3] | % | | | [removed: 17.2] [added: 16.8] | % |

| Capital expenditures, net (1) | | $ | [removed: 519,939] [added: 557,506] | | | $ | [removed: 379,321] [added: 519,939] | | | $ | [removed: 391,150] [added: 379,321] | | | $ | [removed: 358,493] [added: 391,150] | | | $ | [removed: 363,192] [added: 358,493] | |

| Total assets | | $ | [removed: 10,317,802] [added: 10,761,828] | | | $ | [removed: 9,615,444] [added: 10,317,802] | | | $ | [removed: 8,974,443] [added: 9,615,444] | | | $ | [removed: 8,311,723] [added: 8,974,443] | | | $ | [removed: 8,200,843] [added: 8,311,723] | |

| Long-term [removed: borrowings] [added: debt] | | $ | [removed: 4,030,230] [added: 3,494,390] | | | $ | [removed: 3,368,634] [added: 4,030,230] | | | $ | [removed: 3,210,215] [added: 3,368,634] | | | $ | [removed: 3,209,762] [added: 3,210,215] | | | $ | [removed: 3,727,431] [added: 3,209,762] | |

| UHS’s common stockholders’ equity | | $ | [removed: 4,533,220] [added: 4,989,514] | | | $ | [removed: 4,249,647] [added: 4,533,220] | | | $ | [removed: 3,735,946] [added: 4,249,647] | | | $ | [removed: 3,249,979] [added: 3,735,946] | | | $ | [removed: 2,713,345] [added: 3,249,979] | |

| Percentage of total debt to total capitalization | | | [removed: 48] [added: 45] | % | | | [removed: 45] [added: 48] | % | | | [removed: 47] [added: 45] | % | | | [removed: 51] [added: 47] | % | | | [removed: 58] [added: 51] | % |

| Average licensed beds | | | [removed: 5,934] [added: 6,127] | | | | [removed: 5,832] [added: 5,934] | | | | [removed: 5,776] [added: 5,832] | | | | [removed: 5,652] [added: 5,776] | | | | [removed: 5,563] [added: 5,652] | |

| Average available beds | | | [removed: 5,759] [added: 5,954] | | | | [removed: 5,656] [added: 5,759] | | | | [removed: 5,571] [added: 5,656] | | | | [removed: 5,429] [added: 5,571] | | | | [removed: 5,338] [added: 5,429] | |

| Inpatient admissions | | | [removed: 274,074] [added: 297,390] | | | | [removed: 261,727] [added: 274,074] | | | | [removed: 251,165] [added: 261,727] | | | | [removed: 246,160] [added: 251,165] | | | | [removed: 245,234] [added: 246,160] | |

| Average length of patient stay | | | [removed: 4.6] [added: 4.4] | | | | [removed: 4.7] [added: 4.6] | | | | [removed: 4.6] [added: 4.7] | | | | [removed: 4.5] [added: 4.6] | | | | 4.5 | |

| Patient days | | | [removed: 1,251,511] [added: 1,312,265] | | | | [removed: 1,218,969] [added: 1,251,511] | | | | [removed: 1,167,726] [added: 1,218,969] | | | | [removed: 1,112,541] [added: 1,167,726] | | | | [removed: 1,095,790] [added: 1,112,541] | |

| Occupancy rate for licensed beds | | | [removed: 58] [added: 59] | % | | | [removed: 57] [added: 58] | % | | | [removed: 55] [added: 57] | % | | | [removed: 54] [added: 55] | % | | | 54 | % |

| Occupancy rate for available beds | | | [removed: 59] [added: 60] | % | | | 59 | % | | | [removed: 57] [added: 59] | % | | | [removed: 56] [added: 57] | % | | | 56 | % |

| Average licensed beds | | | [removed: 21,829] [added: 23,151] | | | | [removed: 21,202] [added: 21,829] | | | | [removed: 20,231] [added: 21,202] | | | | [removed: 19,940] [added: 20,231] | | | | [removed: 19,258] [added: 19,940] | |

| Average available beds | | | [removed: 21,744] [added: 23,068] | | | | [removed: 21,116] [added: 21,744] | | | | [removed: 20,131] [added: 21,116] | | | | [removed: 19,841] [added: 20,131] | | | | [removed: 19,178] [added: 19,841] | |

| Inpatient admissions | | | [removed: 456,052] [added: 467,822] | | | | [removed: 447,007] [added: 456,052] | | | | [removed: 426,510] [added: 447,007] | | | | [removed: 401,565] [added: 426,510] | | | | [removed: 373,437] [added: 401,565] | |

| Average length of patient stay | | | [removed: 13.2] [added: 13.6] | | | | [removed: 13.1] [added: 13.2] | | | | [removed: 12.9] [added: 13.1] | | | | [removed: 13.3] [added: 12.9] | | | | [removed: 14.0] [added: 13.3] | |

| Patient days | | | [removed: 6,004,066] [added: 6,381,756] | | | | [removed: 5,835,134] [added: 6,004,066] | | | | [removed: 5,518,660] [added: 5,835,134] | | | | [removed: 5,354,334] [added: 5,518,660] | | | | [removed: 5,212,800] [added: 5,354,334] | |

| Occupancy rate for licensed beds | | | [removed: 75] [added: 76] | % | | | 75 | % | | | 75 | % | | | [removed: 74] [added: 75] | % | | | 74 | % |

| Occupancy rate for available beds | | | [removed: 75] [added: 76] | % | | | [removed: 76] [added: 75] | % | | | [removed: 75] [added: 76] | % | | | [removed: 74] [added: 75] | % | | | 74 | % |

| Net income attributable to UHS—basic | | $ | [removed: 7.22] [added: 7.86] | | | $ | [removed: 6.89] [added: 7.22] | | | $ | [removed: 5.52] [added: 6.89] | | | $ | [removed: 5.21] [added: 5.52] | | | $ | [removed: 4.57] [added: 5.21] | |

| Net income attributable to UHS—diluted | | $ | [removed: 7.14] [added: 7.81] | | | $ | [removed: 6.76] [added: 7.14] | | | $ | [removed: 5.42] [added: 6.76] | | | $ | [removed: 5.14] [added: 5.42] | | | $ | [removed: 4.53] [added: 5.14] | |

| Dividends declared | | $ | 0.40 | | | $ | 0.40 | | | $ | [removed: 0.30] [added: 0.40] | | | $ | [removed: 0.20] [added: 0.30] | | | $ | [removed: 0.60] [added: 0.20] | |

| Weighted average number of shares outstanding—basic | | | [removed: 97,208] [added: 95,652] | | | | [removed: 98,797] [added: 97,208] | | | | [removed: 98,826] [added: 98,797] | | | | [removed: 98,033] [added: 98,826] | | | | [removed: 96,821] [added: 98,033] | |

| Weighted average number of shares and share equivalents outstanding—diluted | | | [removed: 98,380] [added: 96,325] | | | | [removed: 100,694] [added: 98,380] | | | | [removed: 100,544] [added: 100,694] | | | | [removed: 99,361] [added: 100,544] | | | | [removed: 97,711] [added: 99,361] | |

| Cash provided by operating activities | | $ | 1,182,581 | | | $ | 1,333,693 | | | $ | 1,068,262 | | | $ | 1,069,788 | | | $ | 904,362 | |

| Current maturities of long-term debt | | $ | 545,619 | | | $ | 105,895 | | | $ | 62,722 | | | $ | 68,319 | | | $ | 99,312 | |

| Cash provided by operating activities | | $ | 1,288,474 | | | $ | 1,020,898 | | | $ | 1,035,876 | | | $ | 884,241 | | | $ | 799,231 | |

As of December 31, [removed: 2016,] [added: 2017,] under the supervision and with the participation of our management, including our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), we performed an evaluation of the effectiveness of our disclosure controls and procedures as defined in Rule 13a-15(e) or Rule 15d-15(e) of the Securities Exchange Act of 1934, as amended.

There have been no changes in our internal control over financial reporting or in other factors during the fourth quarter of [removed: 2016] [added: 2017] that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

[removed: Also, projections] of any evaluation of effectiveness of internal control over financial reporting to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Based on its assessment, management has concluded that we maintained effective internal control over financial reporting as of December 31, [removed: 2016,] [added: 2017,] based on criteria in Internal Control—Integrated Framework (2013), issued by the COSO.

The effectiveness of the Company’s internal control over financial reporting as of December 31, [removed: 2016] [added: 2017] has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm as stated in its report which appears herein.

Also, projections

We have excluded our 2016 acquisition of Cambian Group, PLC’s adult services division from the assessment of internal control over financial reporting as of December 31, 2016 because it was acquired by us in a purchase business combination in late December, 2016.

The acquisition of the Cambian Group, PLC’s adult services division had no impact on our consolidated net revenues for the year ended December 31, 2016, and, excluding property & equipment, goodwill and intangible and other assets, represented 0.4% of our consolidated total assets as of December 31, 2016.

There is hereby incorporated by reference the information to appear under the captions “Election of Directors”, “Section 16(a) Beneficial Ownership Reporting Compliance” and “Corporate Governance” in our Proxy Statement, to be filed with the Securities and Exchange Commission within 120 days after December 31, [removed: 2016.][added: 2017.]

There is hereby incorporated by reference the information to appear under the caption “Executive Compensation” in our Proxy Statement to be filed with the Securities and Exchange Commission within 120 days after December 31, [removed: 2016.][added: 2017.]

There is hereby incorporated by reference the information to appear under the caption “Security Ownership of Certain Beneficial Owners and Management” and “Executive Compensation” in our Proxy Statement, to be filed with the Securities and Exchange Commission within 120 days after December 31, [removed: 2016.][added: 2017.]

There is hereby incorporated by reference the information to appear under the captions “Certain Relationships and Related Transactions” and “Corporate Governance” in our Proxy Statement, to be filed with the Securities and Exchange Commission within 120 days after December 31, [removed: 2016.][added: 2017.]

There is hereby incorporated by reference the information to appear under the caption “Relationship with Independent Auditors” in our Proxy Statement, to be filed with the Securities and Exchange Commission within 120 days after December 31, [removed: 2016.][added: 2017.]

[added: |] 3.1 [added: | |] Registrant’s Restated Certificate of Incorporation, and Amendments thereto, previously filed as Exhibit 3.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 1997, are incorporated herein by [removed: reference.][added: reference (P). |]

[added: |] 3.2 [added: | |] Bylaws of Registrant, as amended, previously filed as Exhibit 3.2 to the Company’s Annual Report on Form 10-K for the year ended December 31, 1987, is incorporated herein by [removed: reference.][added: reference (P). |]

[added: |] 3.3 [removed: Amendment] [added: | | [Amendment] to the Registrant’s Restated Certificate of Incorporation previously filed as Exhibit 3.1 to the Company’s Current Report on Form 8-K dated July 3, 2001 is incorporated herein by [removed: reference.][added: reference.](http://www.sec.gov/Archives/edgar/data/352915/000095013001502858/dex31.txt) |]

[added: |] 4.1 [removed: Indenture,] [added: | | [Indenture,] dated as of August 7, 2014, among Universal Health Services, Inc., its subsidiaries specified therein, MUFG Union Bank, N.A., as Trustee, JPMorgan Chase Bank, N.A., as Collateral Agent (including forms of the 3.750% Senior Secured Notes due 2019 and the 4.750% Senior Secured Notes due 2022), previously filed as Exhibit 4.1 to the Company’s Current Report on Form 8-K dated August 12, 2014, is incorporated herein by [removed: reference.][added: reference.](http://www.sec.gov/Archives/edgar/data/352915/000119312514306618/d773872dex41.htm) |]

[added: |] 4.2 [removed: Supplemental] [added: | | [Supplemental] Indenture, dated as of June 3, 2016, to Indenture, dated as of August 7, 2014, by and among the Company, the subsidiary guarantors party thereto, MUFG Union Bank, N.A., as trustee, and JPMorgan Chase Bank, N.A., as collateral agent, previously filed as Exhibit 4.1 to the Company’s Current Report on Form 8-K dated June 8, 2016, is incorporated herein by [removed: reference.][added: reference.](http://www.sec.gov/Archives/edgar/data/0000352915/000119312516616699/d200774dex41.htm) |]

[added: |] 4.3 [removed: Indenture,] [added: | | [Indenture,] dated as of June 3, 2016, between the Company, the subsidiary guarantors party thereto, MUFG Union Bank, N.A., as trustee, and JPMorgan Chase Bank, N.A., as collateral agent, previously filed as Exhibit 4.2 to the Company’s Current Report on Form 8-K dated June 8, 2016, is incorporated herein by [removed: reference.][added: reference.](http://www.sec.gov/Archives/edgar/data/0000352915/000119312516616699/d200774dex42.htm) |]

[added: |] 4.4 [removed: Additional] [added: | | [Additional] Authorized Representative Joinder Agreement, dated as of June 3, 2016, among the Company, the subsidiary guarantors party thereto and JPMorgan Chase Bank, N.A., as collateral agent, previously filed as Exhibit 4.3 to the Company’s Current Report on Form 8-K dated June 8, 2016, is incorporated herein by [removed: reference.][added: reference.](http://www.sec.gov/Archives/edgar/data/0000352915/000119312516616699/d200774dex43.htm) |]

[added: | 10.1* | | [Employment Agreement, dated as of July 24, 2013, by and between Universal Health Services, Inc. and Alan B.] Miller, previously filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K dated July 26, 2013, is incorporated herein by [removed: reference.][added: reference.](http://www.sec.gov/Archives/edgar/data/0000352915/000119312513303584/d575993dex101.htm) |]

[added: |] 10.2 [added: | |] Advisory Agreement, dated as of December 24, 1986, between Universal Health Realty Income Trust and UHS of Delaware, Inc., previously filed as Exhibit 10.2 to the Company’s Current Report on Form 8-K dated December 24, 1986, is incorporated herein by [removed: reference.][added: reference (P). |]

[added: |] 10.3 [removed: Agreement,] [added: | | [Agreement,] dated December [removed: 1, 2016,] [added: 6, 2017,] to renew Advisory Agreement, dated as of December 24, 1986, between Universal Health Realty Income Trust and UHS of Delaware, [removed: Inc.][added: Inc.](https://www.sec.gov/Archives/edgar/data/352915/000156459018003808/uhs-ex103_12.htm) |]

[added: |] 10.4 [added: | |] Form of Leases, including Form of Master Lease Document for Leases, between certain subsidiaries of the Company and Universal Health Realty Income Trust, filed as Exhibit 10.3 to Amendment No. 3 of the Registration Statement on Form S-11 and Form S-2 of Registrant and Universal Health Realty Income Trust (Registration No. 33-7872), is incorporated herein by [removed: reference.][added: reference (P). |]

[added: |] 10.5 [added: | |] Corporate Guaranty of Obligations of Subsidiaries Pursuant to Leases and Contract of Acquisition, dated December 24, 1986, issued by the Company in favor of Universal Health Realty Income Trust, previously filed as Exhibit 10.5 to the Company’s Current Report on Form 8-K dated December 24, 1986, is incorporated herein by [removed: reference.][added: reference (P). |]

[removed: 10.6* Universal] [added: | 10.6 | | [Universal] Health Services, Inc. Executive Retirement Income Plan dated January 1, 1993, previously filed as Exhibit 10.7 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2002, is incorporated herein by [removed: reference.][added: reference.](http://www.sec.gov/Archives/edgar/data/0000352915/000093176303000570/dex107.txt) |]

[added: |] 10.7 [added: | |] Asset Purchase Agreement dated as of February 6, 1996, among Amarillo Hospital District, UHS of Amarillo, Inc. and Universal Health Services, Inc., previously filed as Exhibit 10.28 to the Company’s Annual Report on Form 10-K for the year ended December 31, 1995, is incorporated herein by [removed: reference.][added: reference (P). |]

[added: |] 10.8 [added: | |] Agreement of Limited Partnership of District Hospital Partners, L.P. (a District of Columbia limited partnership) by and among UHS of D.C., Inc. and The George Washington University, previously filed as Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarters ended March 30, 1997, and June 30, 1997, is incorporated herein by [removed: reference.][added: reference (P). |]

[added: |] 10.9 [added: | |] Contribution Agreement between The George Washington University (a congressionally chartered institution in the District of Columbia) and District Hospital Partners, L.P. (a District of Columbia limited partnership), previously filed as Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 1997, is incorporated herein by [removed: reference.][added: reference (P). |]

[removed: 10.10* Amended] [added: | 10.10 | | [Amended] and Restated Universal Health Services, Inc. Supplemental Deferred Compensation Plan dated as of January 1, 2002, previously filed as Exhibit 10.29 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2002, is incorporated herein by [removed: reference.][added: reference.](http://www.sec.gov/Archives/edgar/data/0000352915/000093176303000570/dex1029.txt) |]

[added: |] 10.11* [removed: Universal] [added: | | [Universal] Health Services, Inc. Employee Stock Purchase Plan, previously filed as Exhibit 4.1 to the Company’s Registration Statement on Form S-8 (File No. 333-122188), dated January 21, 2005 is incorporated herein by [removed: reference.][added: reference.](http://www.sec.gov/Archives/edgar/data/0000352915/000119312505009505/dex41.htm) |]

[removed: 10.12*] [added: | 10.16* | | [Amended and Restated] Universal Health Services, Inc. [removed: Third Amended and Restated 2005] [added: 2010 Employees’ Restricted] Stock [removed: Incentive] [added: Purchase] Plan, previously filed as Exhibit [removed: 10.1] [added: 10.2] to the Company’s Quarterly Report on Form 10-Q filed on August 7, 2015, is incorporated herein by [removed: reference.][added: reference.](http://www.sec.gov/Archives/edgar/data/0000352915/000119312515281740/d941004dex102.htm) |]

[added: |] 10.13* [removed: Form] [added: | | [Form] of Stock Option Agreement, previously filed as Exhibit 10.4 to the Company’s Current Report on Form 8-K, dated June 8, 2005, is incorporated herein by [removed: reference.][added: reference.](http://www.sec.gov/Archives/edgar/data/0000352915/000119312505121907/dex104.htm) |]

[added: |] 10.14* [removed: Form] [added: | | [Form] of Stock Option Agreement for Non-Employee Directors, previously filed as Exhibit 10.2 to the Company’s Current Report on Form 8-K, dated October 3, 2005, is incorporated herein by [removed: reference.][added: reference.](http://www.sec.gov/Archives/edgar/data/0000352915/000119312505195725/dex102.htm) |]

[added: |] 10.15 [removed: Amendment] [added: | | [Amendment] No. 1 to the Master Lease Document, between certain subsidiaries of Universal Health Services, Inc. and Universal Health Realty Income Trust, dated April 24, 2006, previously filed as Exhibit 10.29 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2006, is incorporated herein by [removed: reference.][added: reference.](http://www.sec.gov/Archives/edgar/data/0000352915/000119312507042808/dex1029.htm) |]

[removed: 10.16* Amended and Restated Universal] [added: | 10.17* | | [Universal] Health Services, Inc. 2010 [removed: Employees’ Restricted Stock Purchase] [added: Executive Incentive] Plan, previously filed as Exhibit [removed: 10.2] [added: 10.3] to the Company’s Quarterly Report on Form 10-Q filed on August 7, 2015, is incorporated herein by [removed: reference][added: reference.](http://www.sec.gov/Archives/edgar/data/0000352915/000119312515281740/d941004dex103.htm) |]

[added: |] 10.18 [removed: Omnibus] [added: | | [Omnibus] Amendment to Receivables Sale Agreements, dated as of October 27, 2010, previously filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K dated November 2, 2010, is incorporated herein by [removed: reference.][added: reference.](http://www.sec.gov/Archives/edgar/data/0000352915/000119312510243987/dex101.htm) |]

[added: |] 10.19 [removed: Amended] [added: | | [Amended] and Restated Credit and Security Agreement, dated as of October 27, 2010, previously filed as Exhibit 10.2 to the Company’s Current Report on Form 8-K dated November 2, 2010, is incorporated herein by [removed: reference.][added: reference.](http://www.sec.gov/Archives/edgar/data/0000352915/000119312510243987/dex102.htm) |]

[added: |] 10.20 [removed: Second] [added: | | [Second] Amendment to Amended and Restated Credit and Security Agreement, dated as of October 25, 2013, previously filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K dated October 30, 2013, is incorporated herein by [removed: reference.][added: reference.](http://www.sec.gov/Archives/edgar/data/0000352915/000119312513417091/d619136dex101.htm) |]

[added: |] 10.21 [removed: Third] [added: | | [Third] Amendment to Amended and Restated Credit and Security Agreement, dated as of August 1, 2014, previously filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K dated August 4, 2014, is incorporated herein by [removed: reference.][added: reference.](http://www.sec.gov/Archives/edgar/data/0000352915/000119312514293450/d768656dex101.htm) |]

[added: |] 10.22 [removed: Fourth] [added: | | [Fourth] Amendment to Amended and Restated Credit and Security Agreement, dated as of December 22, 2015, previously filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K dated December 22, 2015, is incorporated herein by [removed: reference][added: reference](http://www.sec.gov/Archives/edgar/data/0000352915/000119312515416088/d106645dex101.htm). |]

[removed: 10.23 Assignment] [added: | 10.24 | | [Assignment] and Assumption Agreement, dated as of October 27, 2010, previously filed as Exhibit 10.3 to the Company’s Current Report on Form 8-K dated November 2, 2010, is incorporated herein by [removed: reference.][added: reference.](http://www.sec.gov/Archives/edgar/data/0000352915/000119312510243987/dex103.htm) |]

[removed: 10.24 Credit] [added: | 10.25 | | [Credit] Agreement, dated as of November 15, 2010, by and among Universal Health Services, Inc., JPMorgan Chase Bank, N.A. and the various financial institutions as are or may become parties thereto, as Lenders, SunTrust Bank, The Royal Bank of Scotland, Plc, Bank of Tokyo-Mitsubishi UFJ Trust Company and Credit Agricole Corporate and Investment Bank, as co-documentation agents, Deutsche Bank Securities Inc. and Bank of America N.A. as co-syndication agents, and JPMorgan Chase Bank, N.A., as administrative agent for the Lenders and as collateral agent for the secured parties, previously filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K dated November 17, 2010, is incorporated herein by [removed: reference.][added: reference.](http://www.sec.gov/Archives/edgar/data/0000352915/000095015710002042/ex10-1.htm) |]

[removed: 10.25 First] [added: | 10.26 | | [First] Amendment, dated as of March 15, 2011, to the Credit Agreement, dated as of November 15, 2010, by and among Universal Health Services, Inc., JPMorgan Chase Bank, N.A. and the various financial institutions as are or may become parties thereto, as Lenders, certain banks as co-documentation agents, and as co-syndication agents, and JPMorgan Chase Bank, N.A., as administrative agent for the Lenders and as collateral agent for the secured parties, previously filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K dated March 15, 2011, is incorporated herein by [removed: reference.][added: reference.](http://www.sec.gov/Archives/edgar/data/0000352915/000119312511067583/dex101.htm) |]

[removed: 10.26 Credit] [added: | 10.27 | | [Credit] Agreement, dated as of November 15, 2010 and amended and restated as of September 21, 2012, by and among Universal Health Services, Inc. (the borrower), the several lenders from time to time parties thereto, Credit Agricole Corporate and Investment Bank, Mizuho Corporate Bank LTD., Royal Bank of Canada and The Royal Bank of Scotland PLC (as co-documentation agents), Bank of Tokyo-Mitsubishi UFJ Trust Company, Bank of America N.A. and SunTrust Bank (as co-syndication agents), and JPMorgan Chase Bank, N.A. (as administrative agent), previously filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K dated September 26, 2012, is incorporated herein by [removed: reference.][added: reference.](http://www.sec.gov/Archives/edgar/data/0000352915/000119312512404549/d415922dex101.htm) |]

[removed: 10.27 Second] [added: | 10.28 | | [Second] Amendment, dated as of September 21, 2012, to the Credit Agreement, dated as of November 15, 2010 (as amended from time to time), among Universal Health Services, Inc., a Delaware corporation, the several banks and other financial institutions from time to time parties thereto, JPMorgan Chase Bank, N.A., as administrative agent and the other agents party thereto, previously filed as Exhibit 10.2 to the Company’s Current Report on Form 8-K dated September 26, 2012, is incorporated herein by [removed: reference.][added: reference.](http://www.sec.gov/Archives/edgar/data/0000352915/000119312512404549/d415922dex102.htm) |]

[removed: 10.28 Third] [added: | 10.29 | | [Third] Amendment, dated as of May 16, 2013, to the Credit Agreement, dated as of November 15, 2010, as amended from time to time, among Universal Health Services, Inc., a Delaware corporation, the several banks and other financial institutions from time to time parties thereto, JPMorgan Chase Bank, N.A., as administrative agent and the other agents party thereto, previously filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K dated May 17, 2013, is incorporated herein by [removed: reference.][added: reference.](http://www.sec.gov/Archives/edgar/data/0000352915/000119312513225260/d540638dex101.htm) |]

[removed: 10.29 Fourth] [added: | 10.30 | | [Fourth] Amendment, dated as of August 7, 2014, to the Credit Agreement, dated as of November 15, 2010, as previously amended from time to time, by and among Universal Health Services, Inc., the several banks and other financial institutions from time to time parties thereto, JPMorgan Chase Bank, N.A., as administrative agent and the other agents party thereto, previously filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K dated August 12, 2014, is incorporated herein by [removed: reference.][added: reference.](http://www.sec.gov/Archives/edgar/data/0000352915/000119312514306618/d773872dex101.htm) |]

[removed: 10.30 Fifth] [added: | 10.31 | | [Fifth] Amendment to the Credit Agreement, dated as of November 15, 2010, as amended on March 15, 2011, September 21, 2012, May 16, 2013 and August 7, 2014, among the Company, as borrower, the several banks and other [removed: financial] [added: financial](http://www.sec.gov/Archives/edgar/data/0000352915/000119312516616699/d200774dex101.htm)] institutions from time to time parties thereto, as lenders, JPMorgan Chase Bank, N.A., as administrative agent, and the other agents party thereto, previously filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K dated June 8, 2016, is incorporated herein by reference. [added: |]

[removed: 10.31 Credit] [added: | 10.32 | | [Credit] Agreement, dated as of November 15, 2010 and amended and restated as of August 7, 2014, by and among Universal Health Services, Inc., the several banks and other financial institutions from time to time parties thereto, JPMorgan Chase Bank, N.A., as administrative agent and the other agents party thereto, previously filed as Exhibit 10.2 to the Company’s Current Report on Form 8-K dated August 12, 2014, is incorporated herein by [removed: reference.][added: reference.](http://www.sec.gov/Archives/edgar/data/0000352915/000119312514306618/d773872dex102.htm) |]