Universal Health Services (UHS) 10-K risk factor changes: FY2019 vs FY2018

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

On a combined basis, these facilities contributed 16% [removed: in 2018, 15% in 2017 and 16% in 2016] of our consolidated net [removed: revenues.][added: revenues during each of 2019 and 2018 and 15% in 2017.]

On a combined basis, after deducting an allocation for corporate overhead expense, these facilities generated [removed: 12%] [added: 14%] in [removed: 2018, 11%] [added: 2019, 12%] in [removed: 2017] [added: 2018] and [removed: 7%] [added: 11%] in [removed: 2016,] [added: 2017,] of our income from operations after net income attributable to noncontrolling interest.

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

On a combined basis, these facilities contributed [removed: 17%] [added: 18%] of our consolidated net revenues during [added: 2019 and 17% during] each of 2018 and [removed: 2017 and 16% in 2016.][added: 2017.]

On a combined basis, after deducting an allocation for corporate overhead expense, these facilities generated [removed: 24%] [added: 23%] in [removed: 2018, 20%] [added: 2019, 24%] in [removed: 2017] [added: 2018] and [removed: 13%] [added: 20%] in [removed: 2016,] [added: 2017,] of our income from operations after net income attributable to noncontrolling interest.

California: We own 5 inpatient acute care hospitals and 8 inpatient behavioral healthcare facilities as listed in [removed: Item] [added: *Item] 2.

On a combined basis, these facilities contributed 11% of our consolidated net revenues during each of [removed: 2018, 2017] [added: 2019, 2018] and [removed: 2016.][added: 2017.]

On a combined basis, after deducting an allocation for corporate overhead expense, these facilities generated [added: 17% in 2019,] 16% in [removed: 2018,] [added: 2018 and] 13% in 2017 [removed: and 15% in 2016,] of our income from operations after net income attributable to noncontrolling interest.

We are unable to predict the effect of recent and future policy changes on [removed: our operations.]

We receive Medicaid revenues in excess of $100 million annually from each of [removed: Texas,] California, [added: Texas, Nevada,] Washington, D.C., [removed: Nevada,] Pennsylvania and 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.

Please see [removed: Item] [added: *Item] 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations, Sources of [removed: Revenue-Medicare,] [added: Revenue-Medicare*,] for additional disclosure.

On March 23, 2010, President Obama signed into law the Patient Protection and Affordable Care Act (the [removed: “PPACA”).][added: “Legislation”).]

Two primary goals of the [removed: PPACA, combined with the Reconciliation Act (collectively referred to as the “Legislation”),] [added: Legislation] are to provide for increased access to coverage for healthcare and to reduce healthcare-related expenses.

[removed: 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.

[added: Certain Legislation provisions, such as that] creating the Medicare Shared Savings Program creates uncertainty in how healthcare may be reimbursed by federal programs in the future.

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 final rule in June, 2018 by the Department of Labor to enable the formation of association health plans that would be exempt from certain Legislation requirements such as the provision of essential health benefits; (iii) the issuance of a final rule in August, 2018 by the Department of Labor, Treasury, and Health and Human Services to expand the availability of short-term, limited duration health insurance, (iv) 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; (v) relaxing requirements for state innovation waivers that could reduce enrollment in the individual and small group markets and lead to additional enrollment in short-term, limited duration insurance and association health plans; and (vi) the issuance of a [removed: proposed] [added: final] rule by the Department of Labor, Treasury, and Health and Human Services that would incentivize the use of health reimbursement accounts by employers to permit employees to purchase health insurance in the individual market.

[removed: The uncertainty resulting from these Executive Branch policies has led to reduced Exchange] enrollment in [removed: 2018 and] [added: 2018,] 2019 and [added: 2020] is expected to further worsen the individual and small group market risk pools in future years.

While attempts to repeal the entirety of the [removed: ACA] [added: Legislation] have not been successful to date, a key provision of the [removed: ACA] [added: Legislation] was repealed as part of the Tax Cuts and Jobs Act and, on December 14, 2018, a federal U.S. District Court judge in Texas ruled the entire [removed: ACA] [added: Legislation] is unconstitutional.

If all or any parts of the [removed: ACA] [added: Legislation] are found to be unconstitutional, it could have a material adverse effect on [removed: the Company.][added: hospitals.]

[removed: We routinely review accounts] receivable balances in conjunction with these factors and other economic conditions that might ultimately affect the collectability of the patient accounts and make adjustments to our allowances as warranted.

[removed: If] [added: If] we fail to continue to meet [removed: the promoting interoperability criteria] [added: the promoting interoperability criteria] related to electronic health record systems (“EHR”), our operations could be [removed: harmed.][added: harmed.]

In addition, in some markets like California, there are [added: requirements to maintain specified nurse-staffing levels.]

A determination that we have violated one or more of these laws (see [removed: Item] [added: *Item] 3—Legal [removed: Proceedings),] [added: Proceedings*),] or the public announcement that we are being investigated for possible violations of one or more of these laws, could have a material adverse effect on our business, financial condition or results of operations and our business reputation could suffer significantly.

See [removed: Item] [added: *Item] 1 Business—Self-Referral and Anti-Kickback [removed: Legislation.][added: Legislation*.]

If we are deemed to have failed to comply with the anti-kickback statute, the Stark Law or other applicable laws and regulations, we could be subjected to liabilities, including criminal penalties, civil penalties (including the loss of our licenses to operate one or more facilities), and exclusion of one or more facilities from participation in the Medicare, Medicaid and other federal and state [added: healthcare programs.]

[removed: We] [added: We] may be subject to governmental investigations, regulatory actions and whistleblower [removed: lawsuits.][added: lawsuits.]

Please see [removed: Item] [added: *Item] 3.

Legal [removed: Proceedings] [added: Proceedings*] for disclosure of current related matters.

[removed: Integrating an acquisition could be] expensive and time consuming and could disrupt our ongoing business, negatively affect cash flow and distract management and other key personnel.

We, our subsidiaries, PSI, and its subsidiaries, are subject to pending legal actions, governmental investigations and regulatory actions (see [removed: Item] [added: *Item] 3-Legal [removed: Proceedings).][added: Proceedings*).]

[removed: State] [added: State] efforts to regulate the construction or expansion of health care facilities could impair our ability to [removed: expand.][added: expand.]

Controls designed to reduce inpatient services [added: and increasing rates of “denials”] may reduce our revenues.

Although we cannot predict the effect these [removed: changes] [added: factors] will have on our operations, significant limits on the scope [added: of services reimbursed, and reimbursements withheld due to denials, could have a material adverse effect on our business, financial position and results of operations.]

[added: If rates paid or the scope] of services [removed: reimbursed and on reimbursement rates and fees] [added: covered by government payers are reduced, there] could [removed: have] [added: be] a material adverse effect on our business, financial position and results of operations.

Our revenues and volume trends are dependent on many factors, including physicians’ clinical decisions and availability, payer programs shifting to a more outpatient-based environment, whether or not certain services are offered, seasonal and severe weather conditions, including the effects of extreme low temperatures, hurricanes and tornados, earthquakes, [added: climate change,] current local economic and demographic changes.

If a pandemic or other public health crisis were to affect our markets, [added: such as a major breakout of the Coronavirus in the United States or the United Kingdom,] our business could be adversely affected.

A worsening of [removed: the] economic and employment conditions in the United States could materially affect our business and future results of operations.

In addition, as of December 31, [removed: 2018,] [added: 2019,] we had approximately [removed: $3.8] [added: $3.9] billion of goodwill recorded on our consolidated balance sheet.

Properties*.

Properties*.

Properties*.

our operations.

The Budget Control Act of 2011 (the “*Budget Control Act*”) mandated significant reductions in federal spending for fiscal years 2012-2021, including a reduction of 2% on all Medicare payments during this period.

Subsequent legislation enacted by Congress extended these reductions through 2029.

There is a substantial risk that Congress could act to extend or increase these across-the-board reductions.

The proposed 2020 federal budget calls for an $845 billion reduction in Medicare spending and a $1.5 trillion reduction in Medicaid spending over the next decade.

It is impossible to predict what portion, if any, of these proposed federal health care spending reductions will be included in a Congressionally approved budget.

Beginning in 2020 and continuing through 2025, the Medicaid disproportionate share hospital (“DSH”) allotment to the states from federal funds will be reduced.

Such reductions have been delayed several times, most recently under the Further Consolidated Appropriations Act, 2020, which further delays the DSH through May 23, 2020.

Commencing in 2020 and continuing through 2025, a state’s Medicaid DSH allotment from federal funds will be reduced.

Initially, DSH payments will be reduced by $4 billion in 2020, and then $8 billion per year between 2021 and 2025.

Reductions are imposed on states based on percentage of uninsured individuals, Medicaid utilization, and uncompensated care.

It remains unclear what portions of that legislation may remain, or what any replacement or alternative programs may be created by future legislation.

CMS has granted, and is expected to grant additional, section 1115

CMS has also released guidance to states interested in receiving their Medicaid funding through a block grant mechanism.

The uncertainty resulting from these Executive Branch policies has led to reduced Exchange

The court concluded that the individual mandate is no longer permissible under Congress’s taxing power as a result of the Tax Cut and Jobs Act of 2017 reducing the individual mandate’s tax to $0 (i.e., it no longer produces revenue, which is an essential feature of a tax), rendering the Legislation unconstitutional.

The court also held that because the individual mandate is “essential” to the Legislation and is inseverable from the rest of the law, the entire Legislation is unconstitutional.

Because the court issued a declaratory judgment and did not enjoin the law, the Legislation remains in place pending its appeal.

The District Court for the Northern District of Texas ruling was appealed to the U.S. Court of Appeals for the Fifth Circuit.

On December 18, 2019, the 5th Circuit Court of Appeals’ three-judge panel voted 2-1 to strike down the Legislation individual mandate as unconstitutional.

The 5th Circuit Court also sent the case back to the Texas district court to determine which Legislation provisions should be stricken with the mandate or whether the entire law is unconstitutional without the individual mandate.

It is likely this matter will ultimately be appealed to the United States Supreme Court.

These rulings have caused greater uncertainty regarding the future status of the Legislation.

We routinely review accounts

Integrating an acquisition could be

In addition, we have been experiencing increasing rates of denied claims (“denials”) from managed care payers which have reduced our net revenues and increased our operating costs as we devote additional resources to enhanced documentation and collection efforts.

the number of uninsured patients treated at our facilities, we may incur future charges to recognize impairment in the carrying value of our goodwill and other intangible assets, which could have a material adverse effect on our financial results.

On January 31, 2020 the United Kingdom formally exited the European Union.

The United Kingdom and European Union will now enter into a transition period in which the terms of the future relationship must be negotiated.

The outcome of these negotiations is uncertain, and we do not know to what extent Brexit will ultimately impact the business and regulatory environment in the United Kingdom, the European Union, or other countries.

The United Kingdom will continue to follow European Union rules through at least December 31, 2020 (the “Transition Period”).

The Transition Period may be extended through December 31, 2022.

Brexit could also lead to increased legal and regulatory complexity as national laws and regulations in the United Kingdom start to diverge from European Union laws and regulations.

cannot provide assurance that we are or will be in compliance with all potentially applicable corporate regulations.

The phase-out of LIBOR may result in the establishment of one or more alternative benchmark rates, but at this time it is uncertain what alternative benchmark rates would replace LIBOR.

In the event a holder of Class C or Class D Common Stock holds a number of shares of Class A or Class B Common Stock, respectively, less than ten times the number of shares of Class C or Class D Common Stock that holder holds, then that holder will be

Properties.

On January 3, 2013, President Obama signed into law the American Taxpayer Relief Act of 2012 (the “2012 Act”).

The 2012 Act postponed for two months sequestration cuts mandated under the Budget Control Act of 2011.

The postponed sequestration cuts include a 2% annual reduction over ten years in Medicare spending to providers.

Medicaid is exempt from sequestration.

In order to offset the costs of the legislation, the 2012 Act reduces payments to other providers totaling almost $26 billion over ten years.

Approximately half of those funds will come from reductions in Medicare reimbursement to hospitals.

Although the Bipartisan Budget Act of 2013 has reduced certain sequestration-related budgetary cuts, spending reductions related to the Medicare program remain in place.

On December 26, 2013, President Obama signed into law H.J. Res.

59, the Bipartisan Budget Act of 2013, which includes the Pathway for SGR Reform Act of 2013 (“the Act”).

In addition, on February 15, 2014, Public Law 113-082 was enacted.

The 2012 Act and subsequent federal legislation achieves new savings by extending sequestration for mandatory programs—including Medicare— through 2027.

The 2012 Act includes a document and coding (“DCI”) adjustment and a reduction in Medicaid disproportionate share hospital (“DSH”) payments.

Expected to save $10.5 billion over 10 years, the DCI adjustment decreases projected Medicare hospital payments for inpatient and overnight care through a downward adjustment in annual base payment increases.

These reductions are meant to recoup what Medicare authorities consider to be “overpayments” to hospitals that occurred as a result of the transition to Medicare Severity Diagnosis Related Groups.

The reduction in Medicaid DSH payments was expected to save $4.2 billion over 10 years.

This provision extends the changes regarding DSH payments established by the Legislation and determines future allotments off of the rebased level.

On February 9, 2018, President Trump signed into law 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.

The Healthcare and Education Reconciliation Act of 2010 (the “Reconciliation Act”), which contains a number of amendments to the PPACA, was signed into law on March 30, 2010.

The Legislation provides for decreases in the annual market basket update for federal fiscal years 2010 through 2019, a productivity offset to the market basket update beginning October 1, 2011 for Medicare Part B reimbursable items and services and beginning October 1, 2012 for Medicare inpatient hospital services.

The Legislation and subsequent revisions provide for reductions to both Medicare DSH and Medicaid DSH payments.

The Medicare DSH reductions began in October, 2013 while the Medicaid DSH reductions are scheduled to begin in 2020.

Certain Legislation provisions, such as that

While that ruling is stayed and has been appealed, it has caused greater uncertainty regarding the future status of the ACA.

requirements to maintain specified nurse-staffing levels.

healthcare programs.

In November 2018, the United Kingdom and the European Union agreed upon a draft Withdrawal Agreement that set out the terms of the United Kingdom’s departure, including commitments on citizen rights after Brexit, a financial settlement from the United Kingdom, and a transition period from March 29, 2019 through December 31, 2020 to allow time for a future trade deal to be agreed.

On January 15, 2019, the draft Withdrawal Agreement was rejected by the British legislature, creating significant uncertainty about the terms and timing under which the United Kingdom will leave the European Union.

If the United Kingdom leaves the European Union with no agreement (a “hard Brexit”), it will likely have an adverse impact on labor and trade in addition to creating further currency volatility.

The actual exit of the United Kingdom from the European Union could cause disruptions to and create uncertainty surrounding our business.

shares of Class B Common Stock available for trading in the public market place would increase substantially and the current holders of Class B Common Stock would own a smaller percentage of that class.

As of February [removed: 27, 2019,] [added: 26, 2020,] we owned and/or operated [removed: 350] [added: 354] inpatient facilities and [removed: 37] [added: 42] outpatient and other facilities including the following located in 37 states, Washington, D.C., the United Kingdom and Puerto Rico:

| | • | [removed: 9] [added: 14] free-standing emergency departments, and; |

Behavioral health care facilities [removed: (324] [added: (328] inpatient facilities and 21 outpatient facilities):

| | • | [removed: 188] [added: 185] inpatient behavioral health care facilities, and; |

| | • | [removed: 133] [added: 140] inpatient behavioral health care facilities, and; |

As a percentage of our consolidated net revenues, net revenues from our acute care hospitals, outpatient facilities and commercial health insurer accounted for [added: 54% during 2019 and] 53% during each of 2018 and [removed: 2017 and 52% during 2016.][added: 2017.]

Net revenues from our behavioral health care facilities and commercial health insurer accounted for [removed: 47%] [added: 46%] of our consolidated net revenues during [added: 2019 and 47% during] each of 2018 and [removed: 2017 and 48% during 2016.][added: 2017.]

Our behavioral health care facilities located in the U.K. generated net revenues of approximately [removed: $505] [added: $554] million in [removed: 2018, $429] [added: 2019, $505] million in [removed: 2017] [added: 2018] and [removed: $241] [added: $429] million in [removed: 2016.][added: 2017.]

Total assets at our U.K. behavioral health care facilities were approximately [removed: $1.224] [added: $1.270] billion as of December 31, [removed: 2018, $1.098] [added: 2019, $1.224] billion as of December 31, [removed: 2017] [added: 2018] and [removed: $965 million] [added: $1.098 billion] as of December 31, [removed: 2016.][added: 2017.]

In evaluating those statements, you should specifically consider various factors, including the risks related to healthcare industry trends and those set forth herein in [removed: Item] [added: *Item] 1A.

| | • | 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. Legislation has already been enacted that has eliminated the penalty for failing to maintain health coverage that was part of the original [removed: Legislation.] [added: Patient Protection and Affordable Care Act (the “Legislation”).] 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 final rule in June, 2018 by the Department of Labor to enable the formation of association health plans that would be exempt from certain Legislation requirements such as the provision of essential health benefits; (iii) the issuance of a final rule in August, 2018 by the Department of Labor, Treasury, and Health and Human Services to expand the availability of short-term, limited duration health insurance, (iv) 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; (v) relaxing requirements for state innovation waivers that could reduce enrollment in the individual and small group markets and lead to additional enrollment in short-term, limited duration insurance and association health plans; [removed: and] (vi) the issuance of a [removed: proposed] [added: final] rule [added: in June, 2019] by the [removed: Department] [added: Departments] of Labor, Treasury, and Health and Human Services that would [removed: be] incentivize the use of health reimbursement [removed: accounts] [added: arrangements] by employers to permit employees to purchase health insurance in the individual [removed: market.] [added: market, and; (vii) directing the issuance of federal rulemaking by executive agencies to increase transparency of healthcare price and quality information.] The uncertainty resulting from these Executive Branch policies has led to reduced Exchange enrollment in [removed: 2018 and] [added: 2018,] 2019 and [added: 2020 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, including ours. In addition, while attempts to repeal the entirety of the [removed: Affordable Care Act (“ACA”)] [added: Legislation] have not been successful to date, a key provision of the [removed: ACA] [added: Legislation] was repealed as part of the Tax Cuts and Jobs Act and on December 14, 2018, a federal U.S. District Court Judge in Texas ruled the entire [removed: ACA] [added: Legislation] is unconstitutional. [removed: While that] [added: That] ruling [removed: is] [added: was] stayed and has been [removed: appealed, it] [added: appealed. On December 18, 2019, the 5th Circuit Court of Appeals voted 2-1 to strike down the Legislation individual mandate as unconstitutional and sent the case back to the U.S. District Court in Texas to determine which Legislation provisions should be stricken with the mandate or whether the entire law is unconstitutional without the individual mandate. It is likely this matter will ultimately be appealed to the U.S. Supreme Court. We are unable to predict the final outcome of this matter which] has caused greater uncertainty regarding the future status of the [removed: ACA.] [added: Legislation.] If all or any parts of the [removed: ACA] [added: Legislation] are [added: ultimately] found to be unconstitutional, it could have a material adverse effect on our business, financial condition and results of operations. See below in [removed: Sources] [added: *Sources] of Revenue and Health Care [removed: Reform] [added: Reform*] for additional disclosure; |

| | • | the outcome of known and unknown litigation, government investigations, false [removed: claim] [added: claims] act allegations, and liabilities and other claims asserted against us and other matters as disclosed in [removed: Item] [added: *Item] 3. Legal [removed: Proceedings,] [added: Proceedings,*] and the effects of adverse publicity relating to such [removed: matters;] [added: matters*;*] |

| | • | the impact of severe weather conditions, including the effects of [removed: hurricanes;] [added: hurricanes and climate change;] |

| | • | as discussed below in [removed: Sources] [added: *Sources] of [removed: Revenue,] [added: 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 [removed: Texas,] California, [added: Texas, Nevada,] Washington, D.C., [removed: Nevada,] Pennsylvania and 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; |

| | • | in August, 2011, the Budget Control Act of 2011 (the “2011 Act”) was enacted into law. The 2011 Act imposed annual spending limits for most federal agencies and programs aimed at reducing budget deficits by $917 billion between 2012 and 2021, according to a report released by the Congressional Budget Office. Among its other provisions, the law established a bipartisan Congressional committee, known as the Joint Select Committee on Deficit Reduction (the “Joint Committee”), which was tasked with making recommendations aimed at reducing future federal budget deficits by an additional $1.5 trillion over 10 years. The Joint Committee was unable to reach an agreement by the November 23, 2011 deadline and, as a result, across-the-board cuts to discretionary, national defense and Medicare spending were implemented on March 1, 2013 resulting in Medicare payment reductions of up to 2% per fiscal year with a uniform percentage reduction across all Medicare programs. The Bipartisan Budget Act of 2015, enacted on November 2, 2015, continued the 2% reductions to Medicare reimbursement imposed under the 2011 Act. [added: Subsequent legislation enacted by Congress extended reductions through 2029.] We cannot predict whether Congress will restructure the implemented Medicare payment reductions or what other federal budget deficit reduction initiatives may be proposed by Congress going forward; |

| | • | in June, 2016, the United Kingdom affirmatively voted in a non-binding referendum in favor of the exit of the United Kingdom [removed: from] [added: (“U.K.”)from] the European Union (the “Brexit”) and it [removed: has been] [added: was] approved by vote of the British legislature. On March 29, 2017, the United Kingdom triggered Article 50 of the Lisbon Treaty, formally starting negotiations regarding its exit from the European [removed: Union, scheduled for March 29, 2019. The actual exit of] [added: Union. On January 31, 2020,] the [removed: United Kingdom from] [added: U.K. formally exited] the European [added: Union. The U.K. and the European] Union [removed: could cause disruptions] [added: will now enter into a transition period in which the terms of the future relationship must be negotiated. The outcome of these negotiations is uncertain, and we do not know] to [added: what extent Brexit will ultimately impact the business] and [removed: create uncertainty surrounding our business.] [added: regulatory environment in the U.K., the European Union, or other countries. The U.K. will continue to follow European Union rules through at least December 31, 2020 (the “Transition Period”). The Transition Period may be extended through December 31, 2022.] Any of these effects of [removed: Brexit (and the announcement thereof),] [added: Brexit,] and others we cannot anticipate, could harm our business, financial condition and results of operations; |

See [removed: Note] [added: *Note] 10 to the Consolidated Financial Statements-Revenue [removed: Recognition,] [added: Recognition*,] for additional disclosure related to our revenues including a disaggregation of our consolidated net revenues by major source for each of the periods presented herein.

Payment arrangements include [removed: prospectively determined] rates per discharge, reimbursed costs, discounted charges and per diem payments.

Adjustments related to the final settlement of these retrospectively determined amounts did not materially impact our results in [removed: 2018, 2017] [added: 2019, 2018] or [removed: 2016.][added: 2017.]

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: 2018,] [added: 2019,] would change our after-tax net income by approximately $1 million.

[removed: We estimate our] revenue adjustments for implicit price concessions based on general factors such as payer mix, the [removed: agings] [added: aging] of the receivables and historical collection experience, consistent with our estimates for provisions for doubtful accounts under ASC 605.

[added: Under ASC 606, while similar processes and] methodologies are considered, these revenue adjustments are considered at the time the services are provided in determination of the transaction price.

Patients treated at our hospitals for non-elective services, who have gross income [removed: less than] [added: of various amounts, dependent upon the state, ranging from 200% to] 400% of the federal poverty guidelines, are deemed eligible for charity care.

When the patient’s ultimate eligibility is determined, reclassifications may occur which impacts net revenues in future [removed: periods .][added: periods.]

Although the patient’s ultimate eligibility determination may result in adjustments to net revenues, these adjustments do not have a material impact on our results of operations in [removed: 2018, 2017] [added: 2019, 2018] or [removed: 2016] [added: 2017] since our facilities make estimates at each financial reporting period to adjust revenue based on historical collections.

The following table shows the amounts recorded at our acute care hospitals for charity care and uninsured discounts, based on charges at established rates, for the years ended December 31, [removed: 2018, 2017] [added: 2019, 2018] and [removed: 2016:][added: 2017:]

| | | [removed: 2018] [added: 2019] | | | | | | | | [removed: 2017] [added: 2018] | | | | | | | | [removed: 2016] [added: 2017] | | | | | | |

| Charity care | | $ | [removed: 761,783] [added: 672,326] | | | | [removed: 40] [added: 31] | % | | $ | [removed: 887,136] [added: 761,783] | | | | [removed: 50] [added: 40] | % | | $ | [removed: 733,585] [added: 887,136] | | | | 50 | % |

| Uninsured discounts | | | [removed: 1,132,811] [added: 1,511,738] | | | | [removed: 60] [added: 69] | % | | | [removed: 881,265] [added: 1,132,811] | | | | [removed: 50] [added: 60] | % | | | [removed: 720,205] [added: 881,265] | | | | 50 | % |

| Total uncompensated care | | $ | [removed: 1,894,594] [added: 2,184,064] | | | | 100 | % | | $ | [removed: 1,768,401] [added: 1,894,594] | | | | 100 | % | | $ | [removed: 1,453,790] [added: 1,768,401] | | | | 100 | % |

[removed: The] [added: The] estimated cost of providing uncompensated [removed: care:][added: care:]

| | | [removed: 2018] [added: 2019] | | | | [removed: 2017] [added: 2018] | | | | [removed: 2016] [added: 2017] | | |

| Estimated cost of providing charity care | | $ | [removed: 94,088] [added: 77,886] | | | $ | [removed: 120,208] [added: 94,088] | | | $ | [removed: 107,887] [added: 120,208] | |

| Estimated cost of providing uninsured discounts related care | | | [removed: 139,913] [added: 175,128] | | | | [removed: 119,412] [added: 139,913] | | | | [removed: 105,920] [added: 119,412] | |

| Estimated cost of providing uncompensated care | | $ | [removed: 234,001] [added: 253,014] | | | $ | [removed: 239,620] [added: 234,001] | | | $ | [removed: 213,807] [added: 239,620] | |

Our estimated liability for self-insured professional and general liability claims is based on a number of factors including, among other things, the number of asserted claims and reported incidents, [added: estimates of losses for these claims based on recent and historical settlement amounts, estimate of incurred but not reported claims based on historical experience, and estimates of amounts recoverable under our commercial insurance policies.]

See [removed: Note] [added: *Note] 8 to the Consolidated Financial Statements-Commitments and [removed: Contingencies,] [added: Contingencies*,] for additional disclosure related to our professional and general liability, workers’ compensation liability and property insurance.

We performed an impairment assessment as of October 1, [removed: 2018] [added: 2019] which indicated no impairment of goodwill.

There were also no goodwill impairments during [removed: 2017] [added: 2018] or [removed: 2016.][added: 2017.]

[removed: See] [added: Please see] below in [removed: Provision] [added: *Provision] for [removed: Intangible Assets Impairment] [added: Asset Impairment-Foundations Recovery Network*] for additional information.

Risk Factors*.

Those factors may cause our actual results to differ materially from any of our forward-looking statements.

| | • | our ability to enter into managed care provider agreements on acceptable terms and the ability of our competitors to do the same, including contracts with United/Sierra Healthcare in Las Vegas, Nevada. Effective January, 2020, United/Sierra Healthcare in Las Vegas, entered into an agreement with a competitor health system that was previously excluded from their contractual network in the area. As a result, we believe that our 6 acute care hospitals in the Las Vegas, Nevada market, will likely experience a decrease in patient volumes. However, we have entered into an amended agreement with United/Sierra Healthcare related to our hospitals in the Las Vegas market that provide for various rate increases beginning in January, 2020. Although we estimate that the unfavorable impact of the projected decreases in patient volumes should be largely offset by the favorable impact of the increased rates, we can provide no assurance that these developments will not have a material adverse impact on our future results of operations; |

We estimate our

Our 2019 and 2018 financial results included aggregate pre-tax provisions for asset impairments of $98 million and $49 million, respectively, recorded in connection with Foundations Recovery Network, L.L.C. (“Foundations”), which was acquired by us in 2015.

These pre-tax provisions for asset impairments include: (i) a $124 million impairment provision to write-off the carrying value of the Foundations’ tradename intangible asset ($75 million recorded during 2019 and $49 million recorded during 2018), and; (ii) a $23 million impairment provision recorded during 2019 to reduce the carrying value of real property assets of certain Foundations’ facilities.

We

Net revenues increased 5.6%, or $606 million, to $11.38 billion during 2019 as compared to $10.77 billion during 2018.

| | • | $23 million of other combined net revenue increases due primarily to the revenues generated at 25 behavioral health facilities located in the U.K. acquired during the third quarter of 2018 in connection with our acquisition of The Danshell Group. |

Income before income taxes increased $32 million to $1.07 billion during 2019 as compared to $1.03 billion during 2018.

| | • | an increase of $34 million as discussed below in Behavioral Health Services, excluding the asset impairment charges recorded during 2019 and 2018 related to Foundations Recovery Network, LLC, as discussed below; |

| | • | a net increase of $91 million due to a favorable change in the pre-tax increases recorded during 2019 and 2018 to the reserve established in connection with the civil aspects of the government’s investigation of certain of our behavioral health care facilities ($11 million pre-tax reserve increase recorded during 2019 as compared to a $102 million pre-tax increase recorded during 2018), see *Item 3 – Legal Proceedings* for additional disclosure; |

| | • | a net decrease of $49 million from an increase in the asset impairment charges recorded during 2019 ($98 million) and 2018 ($49 million) in connection with Foundations Recovery Network, LLC which was acquired by us during 2015 (see *Other Operating Results-Provision for Asset Impairment-Foundations Recovery Network* below for additional disclosure); |

| | • | $41 million of other combined net decreases. |

| | • | an increase of $5 million due to a decrease in the income attributable to noncontrolling interests, and; |

| | • | a decrease of $2 million resulting from a net increase in the provision for income taxes resulting primarily from: (i) an increase in the provision for income taxes due to the $32 million increase in pre-tax income; (ii) a $6 million increase in the provision for income taxes recorded during 2019 resulting from the net estimated federal and state income taxes due on the portion of the reserve established in connection with the civil aspects of the government’s investigation of certain of our behavioral health care facilities that is estimated to be non-deductible for income tax purposes, partially offset by; (iii) a decrease in the provision for income taxes of $11 million resulting from our adoption of ASU 2016-09 which decreased our provision for income taxes by approximately $12 million during 2019, as compared to a decrease of approximately $1 million during 2018. Please see additional disclosure below in *Other Operating Results-Provision for Income Taxes and Effective Tax Rates.* |

| | | December 31, 2019 | | | | | | | | December 31, 2018 | | | | | | |

| Net revenues | | $ | 6,053,228 | | | | 100.0 | % | | $ | 5,621,338 | | | | 100.0 | % |

| Salaries, wages and benefits | | | 2,556,383 | | | | 42.2 | % | | | 2,366,985 | | | | 42.1 | % |

| Other operating expenses | | | 1,364,735 | | | | 22.5 | % | | | 1,242,521 | | | | 22.1 | % |

| Supplies expense | | | 1,048,639 | | | | 17.3 | % | | | 968,067 | | | | 17.2 | % |

| Depreciation and amortization | | | 304,206 | | | | 5.0 | % | | | 278,661 | | | | 5.0 | % |

| Subtotal-operating expenses | | | 5,334,287 | | | | 88.1 | % | | | 4,913,469 | | | | 87.4 | % |

| Income from operations | | | 718,941 | | | | 11.9 | % | | | 707,869 | | | | 12.6 | % |

| Other (income) expense, net | | | (32 | ) | | | 0.0 | % | | | (2,498 | ) | | | 0.0 | % |

| Income before income taxes | | $ | 717,643 | | | | 11.9 | % | | $ | 708,709 | | | | 12.6 | % |

| | | December 31, 2019 | | | | | | | | December 31, 2018 | | | | | | |

| Salaries, wages and benefits | | | 2,559,682 | | | | 41.5 | % | | | 2,367,014 | | | | 41.4 | % |

| Other operating expenses | | | 1,474,674 | | | | 23.9 | % | | | 1,341,088 | | | | 23.4 | % |

| Supplies expense | | | 1,049,747 | | | | 17.0 | % | | | 968,067 | | | | 16.9 | % |

| Depreciation and amortization | | | 305,264 | | | | 5.0 | % | | | 278,661 | | | | 4.9 | % |

| Subtotal-operating expenses | | | 5,449,852 | | | | 88.4 | % | | | 5,012,065 | | | | 87.6 | % |

| Income from operations | | | 714,708 | | | | 11.6 | % | | | 707,840 | | | | 12.4 | % |

| Other (income) expense, net | | | (32 | ) | | | 0.0 | % | | | (2,498 | ) | | | 0.0 | % |

| Income before income taxes | | $ | 713,410 | | | | 11.6 | % | | $ | 708,680 | | | | 12.4 | % |

Year Ended December 31, 2019 as compared to the Year Ended December 31, 2018

| | | December 31, 2019 | | | | | | | | December 31, 2018 | | | | | | |

| Net revenues | | $ | 5,058,199 | | | | 100.0 | % | | $ | 4,907,002 | | | | 100.0 | % |

| Salaries, wages and benefits | | | 2,687,677 | | | | 53.1 | % | | | 2,577,411 | | | | 52.5 | % |

| Other operating expenses | | | 947,073 | | | | 18.7 | % | | | 939,220 | | | | 19.1 | % |

Risk Factors.

| | • | our ability to enter into managed care provider agreements on acceptable terms and the ability of our competitors to do the same, including contracts with United/Sierra Healthcare in Las Vegas, Nevada; |

Under ASC 606, while similar processes and

estimates of losses for these claims based on recent and historical settlement amounts, estimate of incurred but not reported claims based on historical experience, and estimates of amounts recoverable under our commercial insurance policies.

For our indefinite-lived intangible assets, consisting primarily of a tradename initially valued at $124 million recorded in connection with our 2015 acquisition of Foundation Recovery Network, L.L.C. (“Foundations”), we recorded a pre-tax $49 million provision for asset impairment during the fourth quarter of 2018.

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 during a measurement period not to extend beyond one year of the enactment date.

amounts and the tax basis of assets and liabilities under the provisions of the enacted laws.

The decrease in our effective tax rate for the year ended December 31, 2018, as compared to 2017 and 2016, is due to the net favorable impact of the enactment of the TCJA-17 as discussed above, the tax benefit resulting from our January 1, 2017, adoption of ASU 2016-09, and the tax effects of our foreign operations in connection with our acquisition of Danshell Group (acquired in July 2018).

| Electronic health records incentive income | | | 0 | | | | 0.0 | % | | | 0 | | | | 0.0 | % | | | (5,339 | ) | | | \-0.1 | % |

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. |

Income before income taxes (before deduction for income attributable to noncontrolling interests) decreased $21 million to $1.14 billion during 2017 as compared to $1.16 billion during 2016.

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

| | • | $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; |

| | • | an increase of $45 million resulting from a decrease in the provision for income taxes resulting from: |

| | 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; |

| | o | a decrease caused by lower effective rates applicable to the income generated during 2017 in connection with our acquisition of Cambian Group, PLC’s adult services division. |

impact on income before income taxes, and; (iv) certain other amounts that were included in our results of operations that relate to prior years, as discussed below.

| Electronic health records incentive income | | | 0 | | | | 0.0 | % | | | 0 | | | | 0.0 | % |

Included in these results are the following:

| | | December 31, 2017 | | | | | | | | December 31, 2016 | | | | | | |

| Net revenues before provision for doubtful accounts | | $ | 5,983,425 | | | | | | | $ | 5,649,163 | | | | | |

| Less: Provision for doubtful accounts | | | 728,438 | | | | | | | | 627,827 | | | | | |

| Net revenues | | | 5,254,987 | | | | 100.0 | % | | | 5,021,336 | | | | 100.0 | % |

| Salaries, wages and benefits | | | 2,187,390 | | | | 41.6 | % | | | 2,083,357 | | | | 41.5 | % |

| Other operating expenses | | | 1,225,494 | | | | 23.3 | % | | | 1,215,144 | | | | 24.2 | % |

| Supplies expense | | | 886,829 | | | | 16.9 | % | | | 836,399 | | | | 16.7 | % |

| Depreciation and amortization | | | 252,365 | | | | 4.8 | % | | | 237,658 | | | | 4.7 | % |

| Subtotal-operating expenses | | | 4,607,993 | | | | 87.7 | % | | | 4,425,140 | | | | 88.1 | % |

| Income from operations | | | 646,994 | | | | 12.3 | % | | | 596,196 | | | | 11.9 | % |

| Interest expense, net | | | 2,683 | | | | 0.1 | % | | | 3,277 | | | | 0.1 | % |

| Income before income taxes | | $ | 644,311 | | | | 12.3 | % | | $ | 592,919 | | | | 11.8 | % |

| Net revenues before provision for doubtful accounts | | $ | 6,240,302 | | | | | | | $ | 5,740,777 | | | | | |

| Less: Provision for doubtful accounts | | | 755,619 | | | | | | | | 627,827 | | | | | |

| Net revenues | | | 5,484,683 | | | | 100.0 | % | | | 5,112,950 | | | | 100.0 | % |

| Salaries, wages and benefits | | | 2,241,527 | | | | 40.9 | % | | | 2,086,986 | | | | 40.8 | % |

| Other operating expenses | | | 1,350,741 | | | | 24.6 | % | | | 1,308,293 | | | | 25.6 | % |

We account for our derivative and hedging activities using the Financial Accounting Standard Board’s [removed: (“FASB”)] guidance which requires all derivative instruments, including certain derivative instruments embedded in other contracts, to be carried at fair value on the balance sheet.

[removed: We] [added: From time to time, we] use interest rate derivatives in our cash flow hedge transactions.

We performed periodic assessments of the cash flow hedge instruments during [removed: 2018] [added: 2019] and [removed: 2017] [added: 2018] and determined the hedges to be highly effective.

[removed: The] [added: Although we do not anticipate nonperformance by our] counterparties to [removed: the] interest rate swap [removed: agreements] [added: agreements, the counterparties] expose us to credit risk in the event of nonperformance.

During 2015, we entered into nine forward starting interest rate swaps whereby we [removed: pay] [added: paid] a fixed rate on a total notional amount of $1.0 billion and [removed: receive] [added: received] one-month LIBOR.

The average fixed rate payable on these swaps, [added: all of] which [removed: are scheduled to mature] [added: matured] on April 15, 2019, [removed: is] [added: was] 1.31%.

The table below presents information about our long-term financial instruments that are sensitive to changes in interest rates as of December 31, [removed: 2018.][added: 2019.]

| | | [removed: 2019 | | | |] 2020 | | | | 2021 | | | | 2022 | | | | 2023 | | | | [added: 2024 | | | |] Thereafter | | | | Total | | |

| Average interest rates | | | [removed: 5.0] [added: 4.9] | % | | | [removed: 5.0] [added: 4.9] | % | | | 4.9 | % | | | [removed: 4.9] [added: 5.2] | % | | | [removed: 5.2] [added: 5.1] | % | | | [removed: 3.7] [added: 4.7] | % | | | [removed: 4.8] [added: 5.0] | % |

| Average interest rates | | | [removed: 1.3] [added: 3.2] | % | | | [added: 3.2] | [added: %] | | | [added: 3.2] | [added: %] | | | [added: 3.2] | [added: %] | | | [added: 3.6] | [added: %] | | | [added: 3.6] | [added: %] | | | [removed: 1.3] [added: 3.3] | % |

As calculated based upon our variable rate debt outstanding as of December 31, [removed: 2018] [added: 2019] that is subject to interest rate fluctuations, each 1% change in interest rates would impact our pre-tax income by approximately [removed: $19] [added: $29] million.

Although we can provide no assurance that we will ultimately do so, we are currently monitoring the interest rate environment and evaluating the terms of potential replacement interest rate swaps that we may enter into for a large portion, or potentially all, of the $1 billion total notional amount that expired on April 15, 2019.

(dollar amounts in thousands)

| Debt | | $ | 1,650 | | | $ | 1,696 | | | $ | 700,266 | | | $ | 2,475 | | | $ | 2,823 | | | $ | 408,005 | | | $ | 1,116,915 | |

| Debt | | $ | 85,900 | | | $ | 454,659 | | | | 105,000 | | | | 1,751,150 | | | | 5,000 | | | | 465,503 | | | $ | 2,867,212 | |

For derivative instruments designated as cash flow hedges, the ineffective portion of the change in expected cash flows of the hedged item are recognized currently in the income statement.

We also determined that any portion of the hedges deemed to be ineffective was de minimis and therefore there was no material effect on our consolidated financial position, operations or cash flows.

We do not anticipate nonperformance by our counterparties.

These interest rates swaps consist of:

- Four forward starting interest rate swaps, entered into during the second quarter of 2015, whereby we pay a fixed rate on a total notional amount of $500 million and receive one-month LIBOR.

Each of the four swaps became effective on July 15, 2015 and are scheduled to mature on April 15, 2019.

The average fixed rate payable on these swaps is 1.40%;

- Four forward starting interest rate swaps, entered into during the third quarter of 2015, whereby we pay a fixed rate on a total notional amount of $400 million and receive one-month LIBOR.

One swap on a notional amount of $100 million became effective on July 15, 2015, two swaps on a total notional amount of $200 million became effective on September 15, 2015 and another swap on a notional amount of $100 million became effective on December 15, 2015.

All of these swaps are scheduled to mature on April 15, 2019.

The average fixed rate payable on these four swaps is 1.23%, and;

- One interest rate swap, entered into during the fourth quarter of 2015, whereby we pay a fixed rate on a total notional amount of $100 million and receive one-month LIBOR.

The swap became effective on December 15, 2015 and is scheduled to mature on April 15, 2019.

The fixed rate payable on this swap is 1.21%.

On or before the April 15, 2019 expiration of the $1.0 billion of interest rate swaps, as outlined above, we intend to enter into new interest rate swap agreements on a similar total notional amount.

We measure our interest rate swaps at fair value on a recurring basis.

The fair value of our interest rate swaps is based on quotes from our counterparties.

We consider those inputs to be “level 2” in the fair value hierarchy as outlined in the authoritative guidance for disclosures in connection with derivative instruments and hedging activities.

At December 31, 2018, the fair value of our interest rate swaps was a net asset of $4 million which is included in net accounts receivable on the accompanying balance sheet.

At December 31, 2017, the fair value of our interest rate swaps was a net asset of $7 million, $4 million of which is included in net accounts receivable and $3 million of which is included in other assets on the accompanying balance sheet.

(dollars in thousands)

| Debt | | $ | 2,146 | | | $ | 1,650 | | | $ | 1,696 | | | $ | 699,550 | | | $ | 2,476 | | | $ | 405,613 | | | $ | 1,113,131 | |

| Debt | | $ | 61,300 | | | $ | 55,000 | | | | 494,400 | | | | 105,000 | | | | 1,700,079 | | | | 469,727 | | | $ | 2,885,506 | |

| Average interest rates | | | 3.9 | % | | | 3.9 | % | | | 3.9 | % | | | 4.0 | % | | | 4.0 | % | | | 2.7 | % | | | 3.7 | % |

| Interest rate swaps: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |

| Notional amount | | $ | 1,000,000 | | | | | | | | | | | | | | | | | | | | | | | $ | 1,000,000 | |

As of February [removed: 27, 2019,] [added: 26, 2020,] we owned and/or operated [removed: 350] [added: 354] inpatient facilities and [removed: 37] [added: 42] outpatient and other facilities including the following located in 37 states, Washington, D.C., the United Kingdom and Puerto Rico:

| | • | [removed: 9] [added: 14] free-standing emergency departments, and; |

Behavioral health care facilities [removed: (324] [added: (328] inpatient facilities and 21 outpatient facilities):

| | • | [removed: 188] [added: 185] inpatient behavioral health care facilities, and; |

| | • | [removed: 133] [added: 140] inpatient behavioral health care facilities, and; |

As a percentage of our consolidated net revenues, net revenues from our acute care hospitals, outpatient facilities and commercial health insurer accounted for [added: 54% during 2019 and] 53% during each of 2018 and [removed: 2017 and 52% during 2016.][added: 2017.]

Net revenues from our behavioral health care facilities and commercial health insurer accounted for [removed: 47%] [added: 46%] of our consolidated net revenues during [added: 2019 and 47% during] each of 2018 and [removed: 2017 and 48% during 2016.][added: 2017.]

Our behavioral health care facilities located in the U.K. generated net revenues of approximately [removed: $505] [added: $554] million in [removed: 2018, $429] [added: 2019, $505] million in [removed: 2017] [added: 2018] and [removed: $241] [added: $429] million in [removed: 2016.][added: 2017.]

Total assets at our U.K. behavioral health care facilities were approximately [removed: $1.224] [added: $1.270] billion as of December 31, [removed: 2018, $1.098] [added: 2019, $1.224] billion as of December 31, [removed: 2017] [added: 2018] and [removed: $965 million] [added: $1.098 billion] as of December 31, [removed: 2016.][added: 2017.]

[added: Our] Board of Directors’ committee charters (Audit Committee, Compensation Committee and Nominating & Governance Committee), Code of Business Conduct and Corporate Standards applicable to all employees, Code of Ethics for Senior Financial Officers, Corporate Governance Guidelines and our Code of Conduct, Corporate Compliance Manual and Compliance Policies and Procedures are available free of charge on our website.

In accordance with Section 303A.12(a) of the New York Stock Exchange Listed Company Manual, we submitted our CEO’s certification to the New York Stock Exchange in [removed: 2018.][added: 2019.]

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 [removed: efficient billing and collection procedures.]

| | | [removed: 2018] [added: 2019] | | | | [removed: 2017] [added: 2018] | | | | [removed: 2016] [added: 2017] | | | | [removed: 2015] [added: 2016] | | | | [removed: 2014] [added: 2015] | | |

| Acute Care Hospitals | | | [removed: 6,232] [added: 6,379] | | | | [removed: 6,127] [added: 6,232] | | | | [removed: 5,934] [added: 6,127] | | | | [removed: 5,832] [added: 5,934] | | | | [removed: 5,776] [added: 5,832] | |

| Behavioral Health Centers | | | [removed: 23,509] [added: 23,812] | | | | [removed: 23,151] [added: 23,509] | | | | [removed: 21,829] [added: 23,151] | | | | [removed: 21,202] [added: 21,829] | | | | [removed: 20,231] [added: 21,202] | |

| Acute Care Hospitals | | | [removed: 6,056] [added: 6,205] | | | | [removed: 5,954] [added: 6,056] | | | | [removed: 5,759] [added: 5,954] | | | | [removed: 5,656] [added: 5,759] | | | | [removed: 5,571] [added: 5,656] | |

| Behavioral Health Centers | | | [removed: 23,425] [added: 23,711] | | | | [removed: 23,068] [added: 23,425] | | | | [removed: 21,744] [added: 23,068] | | | | [removed: 21,116] [added: 21,744] | | | | [removed: 20,131] [added: 21,116] | |

| Acute Care Hospitals | | | [removed: 303,985] [added: 317,983] | | | | [removed: 297,390] [added: 303,985] | | | | [removed: 274,074] [added: 297,390] | | | | [removed: 261,727] [added: 274,074] | | | | [removed: 251,165] [added: 261,727] | |

| Behavioral Health Centers | | | [removed: 482,658] [added: 488,367] | | | | [removed: 467,822] [added: 482,658] | | | | [removed: 456,052] [added: 467,822] | | | | [removed: 447,007] [added: 456,052] | | | | [removed: 426,510] [added: 447,007] | |

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

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

| Acute Care Hospitals (1) | | | [removed: 1,376,988] [added: 1,451,847] | | | | [removed: 1,312,265] [added: 1,376,988] | | | | [removed: 1,251,511] [added: 1,312,265] | | | | [removed: 1,218,969] [added: 1,251,511] | | | | [removed: 1,167,726] [added: 1,218,969] | |

| Behavioral Health Centers | | | [removed: 6,418,334] [added: 6,487,707] | | | | [removed: 6,381,756] [added: 6,418,334] | | | | [removed: 6,004,066] [added: 6,381,756] | | | | [removed: 5,835,134] [added: 6,004,066] | | | | [removed: 5,518,660] [added: 5,835,134] | |

| Acute Care Hospitals | | | [removed: 61] [added: 62] | % | | | [removed: 59] [added: 61] | % | | | [removed: 58] [added: 59] | % | | | [removed: 57] [added: 58] | % | | | [removed: 55] [added: 57] | % |

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

| Acute Care Hospitals | | | [removed: 62] [added: 64] | % | | | [removed: 60] [added: 62] | % | | | [removed: 59] [added: 60] | % | | | 59 | % | | | [removed: 57] [added: 59] | % |

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

See [removed: Item 7.][added: *Item 7.*]

[removed: Management’s] [added: *Management’s] Discussion and Analysis of Financial Condition and Results of Operations—Sources of [removed: Revenue] [added: Revenue*] for additional disclosure.

Other information related to our revenues, income and other operating information for each reporting segment of our business is provided in Note 12 to our Consolidated Financial Statements, [removed: Segment Reporting.][added: *Segment Reporting.*]

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

PROs may deny payment for services provided, assess fines and also have the authority to recommend to the Department of Health and Human Services (“HHS”) that a provider that is in substantial non-compliance with the standards of the PRO be excluded [removed: from participating in the Medicare program.]

These types of referrals are known as “self-referrals.” Sanctions for violating the Stark Law include civil penalties up to [removed: $24,748] [added: $25,820] for each violation, and up to [removed: $164,992] [added: $172,137] for sham arrangements.

However, changes to the anti-kickback statute have reduced the intent required for violation; one is no longer required to [removed: “have] [added: have] actual knowledge or specific intent to commit a violation [removed: of”] [added: of] the anti-kickback statute in order to be found in violation of such law.

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

Civil money penalties may include fines of up to [removed: $100,000] [added: $102,522] per violation and damages of up to three times the total amount of the remuneration and/or exclusion from participation in Medicare and Medicaid.

[removed: Similar] [added: Similar] State [removed: Laws:] [added: Laws:] Many of the states in which we operate have adopted laws that prohibit payments to physicians in exchange for referrals similar to the anti-kickback statute and the Stark Law, some of which apply regardless of the source of payment for care.

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: $11,181] [added: $11,463] to [removed: $22,363] [added: $22,927] for each separate false claim.

The Fraud Enforcement and Recovery Act of 2009 (“FERA”) [removed: has] [added: amended and] expanded the number of actions for which liability may attach under the False Claims Act, eliminating requirements that false claims be presented to federal officials or directly involve federal funds.

[removed: Recent changes to the] [added: The] False Claims Act require that federal healthcare program overpayments be returned within 60 days from the date the overpayment was identified, or by the date any corresponding cost report was due, whichever is later.

efficient billing and collection procedures.

from participating in the Medicare program.

The HIPAA security regulations require health care providers to implement

The government also has expressed its intent to

On January 30, 2020, the National Labor Relations Board issued a decision regarding the 2017 withdrawals of recognition of the SEIU for three bargaining units at Valley Hospital Medical Center (registered nurses) and Desert Springs Hospital (registered nurses and Technical employees) located in Las Vegas, Nevada.

The National Labor Relations Board held that the evidence supporting the withdrawals was not sufficient.

The Valley Hospital Medical Center and Desert Springs Hospital have chosen not to appeal this decision and have, instead, recognized the union and are resuming negotiations.

to maintain specified nurse-staffing levels.

During the third quarter of 2019, the Trust commenced construction on a new 75,000 rentable square feet MOB that will be located on the campus of Texoma Medical Center, a hospital that is owned and operated by one of our subsidiaries.

In connection with this MOB, a master flex lease has been executed between a wholly-owned subsidiary of ours and a Trust limited partnership that owns the MOB.

Pursuant to the terms of this master flex lease, our subsidiary will master lease approximately 50% of the rentable square feet of the MOB, which could be reduced during the term if certain conditions are met, for a ten-year term at an initial minimum annual rent of $644,000.

During the third quarter of 2019, a joint-venture agreement between us and a non-related third-party was finalized in connection with the development of a newly constructed behavioral health care facility located in Clive, Iowa.

Pursuant to the terms of the agreement, we hold a majority ownership interest in the venture and will act as manager of the facility when completed and opened.

This joint-venture also entered into an agreement with the Trust whereby a wholly-owned subsidiary of the Trust will construct the 108-bed behavioral health care hospital and, upon completion and issuance of the certificate of occupancy, the joint venture will lease the facility from the Trust pursuant to a 20-year, triple net lease with five, 10-year renewal options.

Construction of the approximately 80,000 square foot hospital, for which a wholly-owned subsidiary of ours will act as project manager for an aggregate fee of approximately $750,000, is expected to be completed in late 2020.

The approximate cost of the project is estimated at $37.5 million and the initial annual rent is estimated at approximately $2.7 million.

| Matthew J. Peterson (50) | | Executive Vice President, President of Behavioral Health Division |

He has served in various

Mr. Peterson’s employment with us commenced in September, 2019 as Executive Vice President and President of our Behavioral Health Division.

He was formerly employed at UnitedHealth Group for 11 years serving in various capacities including Chief Operating Officer for OptumGovernment, a health services and technology company, as well as various other Senior Vice President/Vice President roles.

In addition to his civilian business career, Mr. Peterson has served for nearly 30 years as a member of the United States Military, currently a Colonel and hospital/healthcare administrator in the Air National Guard.

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

2018 Acquisitions of Assets and Businesses:

2018 Acquisitions:

During 2018 we spent $110 million to acquire businesses and property consisting primarily of:

| | • | The Danshell Group, consisting of 25 behavioral health facilities located in the U.K. (acquired during the third quarter of 2018), and; |

| | • | A 109-bed behavioral health care facility located in Gulfport, Mississippi (acquired during the first quarter of 2018). |

Our

community involvement.

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

fraud and abuse in Medicare.

treatment.

During 2018, 2017 and 2016, the advisory fee was computed at 0.70% of the Trust’s average invested real estate assets.

Included in our share of the Trust’s income for 2018, is income realized by the Trust in connection with hurricane-related insurance proceeds received in connection with the damage sustained from Hurricane Harvey in August, 2017.

additional or bonus rental, as discussed below.

During the second quarter of 2018, we exercised our 5-year renewal option on McAllen Medical Center which extended the lease term on this facility, at the existing lease rate, through December, 2026.

He was formerly employed

Further, the federal False [removed: Claim] [added: Claims] Act allows private individuals to bring lawsuits (qui tam actions) against healthcare providers that submit claims for payments to the government.

Health care providers that are found to violate the False Claims Act may be subject to substantial monetary fines/penalties as well as face potential exclusion from participating in government health care programs or be required to comply with Corporate Integrity Agreements as a condition of a settlement of a False [removed: Claim] [added: Claims] Act matter.

[removed: In the event a facility is found to be out of] compliance with a Condition of Participation and unable to remedy the alleged deficiency(s), the facility faces termination from the Medicare and Medicaid programs or compliance with a System Improvement Agreement to remedy deficiencies and ensure compliance.

Further, the [removed: Affordable Care Act] [added: Legislation] has added additional obligations on healthcare providers to report and refund overpayments by government healthcare programs and authorizes the suspension of Medicare and Medicaid payments “pending an investigation of a credible allegation of fraud.” We monitor our business and have developed an ethics and compliance program with respect to these complex laws, rules and regulations.

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

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, El Paso Behavioral Health System, Newport News Behavioral Health [removed: Center and] [added: Center,] The Hughes [removed: Center.][added: Center, Forest View Hospital and Havenwyck Hospital.]

[removed: Since that time, we have been] [added: We were subsequently] notified that the Criminal Frauds section [removed: has] [added: had] opened investigations of National Deaf Academy, Hartgrove Hospital and UHS as a corporate entity.

From inception through December 31, [removed: 2018,] [added: 2019,] the aggregate funds withheld from us in connection with the River Point Behavioral Health payment suspension amounted to approximately [removed: $9] [added: $8.6] million.

Although the operating results of River Point Behavioral Health did not have a material impact on our consolidated results of operations during [removed: 2018, 2017] [added: 2019, 2018] or [removed: 2016,] [added: 2017,] the payment suspension has had a material adverse effect on the facility’s results of operations and financial condition.

[removed: While there have] been various matters raised by DOJ during the pendency of this investigation, DOJ Civil has advised that the focus of their investigation is on medical necessity issues and billing for services not eligible for payment due to non-compliance with regulatory requirements relating to, among other things, admission eligibility, discharge decisions, length of stay and patient care issues.

It is our understanding that the DOJ Criminal Fraud Section [removed: is] [added: was] investigating [removed: issues] similar [added: issues prior] to [removed: those focused on by] the [removed: DOJ Civil Division and the other related agencies involved in this matter.][added: closure of their investigation.]

We [removed: cannot predict the ultimate resolution of these matters and] therefore can provide no assurance that final amounts paid in settlement or otherwise, [removed: if any,] or associated costs, [removed: as well as] [added: or] the income tax deductibility of [added: such] payments, will not differ materially from our established reserve and assumptions related to income tax deductibility.

During the fourth quarter of 2018, we were notified that the DOJ Civil Division in conjunction with the U.S. Attorney’s Office for the Northern District of Georgia and the Georgia Attorney General’s Office [removed: have] opened an investigation of Turning Point Hospital in Moultrie, GA.

The U.S. Attorney’s Office and the [added: Massachusetts Attorney General’s Office initially declined to intervene.]

We [removed: are defending] [added: have defended] this case vigorously.

The case was originally filed as [removed: Heed v.]

In [removed: December] [added: December,] 2017, we filed a motion to dismiss the amended complaint.

In late September, 2015, many hospitals in Pennsylvania, including [removed: seven] [added: certain] of our behavioral health care hospitals located in the state, received letters from the Pennsylvania Department of Human Services (the “Department”) demanding repayment of allegedly excess Medicaid Disproportionate Share Hospital payments [removed: (“DSH”)] [added: (“DSH”), primarily consisting of managed care payments characterized as DSH payments,] for the federal fiscal year (“FFY”) 2011 amounting to approximately $4 million in the aggregate.

Since that time, [removed: we] [added: certain of our behavioral health care hospitals in Pennsylvania] have received similar requests for repayment for alleged DSH overpayments for FFYs [removed: 2012, 2013 and 2014.][added: 2012 through 2015.]

For FFY 2014, the claimed overpayments were approximately $7 [added: million and for FFY 2015, the claimed overpayments were approximately $5] million.

We filed administrative appeals for all of our facilities contesting the recoupment efforts for FFYs 2011 through [removed: 2014] [added: 2015] as we believe the Department’s calculation methodology is inaccurate and conflicts with applicable federal and state laws and regulations.

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

In the event a facility is found to be out of

We have recently been advised that the investigations being conducted by the DOJ’s Criminal Frauds Section and corresponding U.S. Attorneys’ Offices, of UHS and the above referenced facilities, have been closed.

We anticipate a resolution of the payment suspension will be part of the overall settlement agreement(s) to be drafted and finalized.

While there have

UHS denies any fraudulent billings were submitted to government payers.

In July 2019, we reached an agreement in principle with the DOJ’s Civil Division, and on behalf of various states’ attorneys general offices, to resolve the civil aspects of the government’s investigation of our behavioral health care facilities for $127 million subject to requisite approvals and preparation and execution of definitive settlement and related agreements.

We are also negotiating a corporate integrity agreement with the Office of Inspector General for the United States Department of Health and Human Services (“OIG”) which we expect will be part of the overall settlement of this matter.

In connection with this agreement in principle, during 2019, we recorded a pre-tax increase of approximately $11 million to the reserve established in connection with the civil aspects of these matters (“DOJ Reserve”), which includes related fees and costs due to or on behalf of third-parties.

The aggregate pre-tax DOJ Reserve amounted to $134 million as of December 31, 2019 and $123 million as of December 31, 2018 (including $102 million recorded during 2018).

In late August, 2019, we received the initial draft of the settlement agreement from the DOJ’s Civil Division.

Negotiations regarding the terms and conditions of the settlement agreement continue.

Based upon the terms and provisions included in the draft settlement agreement, and related subsequent discussions, our 2019 financial statements include an unfavorable provision for income taxes of approximately $6 million resulting from the net estimated federal and state income taxes due on the portion of the pre-tax DOJ Reserve that is estimated to be non-deductible for income tax purposes.

Since the agreement in principle with the DOJ’s Civil Division is subject to certain required approvals and negotiation and execution of definitive settlement agreements, as well as negotiation and execution of a corporate integrity agreement with the OIG, we can provide no assurance that definitive agreements will ultimately be finalized.

In September, 2019, we reached a settlement in principle of this matter pending negotiation, finalization and execution of definitive settlement agreements.

As of December 31, 2019, our financial statements include an estimated reserve in connection with the potential settlement of this matter, which did not have material impact on our results of operations and financial condition.

This matter is included in the above-mentioned agreement in principle reached with the DOJ’s Civil Division, and on behalf of various states’ attorneys general offices, to resolve the civil aspects of the government’s investigation of our behavioral health care facilities, subject to requisite approvals and preparation and execution of definitive settlement and related agreements.

Heed v.

In August, 2019, the court granted our motion to dismiss.

Plaintiffs have filed a motion with the court seeking leave to file a second amended complaint.

Should the court deny plaintiffs’ motion, we anticipate an appeal of the dismissal of the case.

In August, 2019, the court granted our motion to dismiss.

Plaintiffs have filed a motion with the court seeking leave to file a second amended complaint.

Should the court deny plaintiffs’ motion, we anticipate an appeal of the dismissal of the case.

The George Washington University v.

In December 2019, The George Washington University (“University”) filed a lawsuit in the Superior Court for the District of Columbia against Universal Health Services, Inc. as well as certain subsidiaries and individuals associated with the ownership and management of The George Washington University Hospital (“GW Hospital”) in Washington, D.C. (case No. 2019 CA 008019 B).

The lawsuit claims that UHS failed to provide sufficient financial compensation to the University under the terms of various agreements entered into in 1997 between the University and UHS for the joint venture ownership of GW Hospital.

The lawsuit includes claims for breach of contract, breach of fiduciary duty, and unjust enrichment.

We deny liability and intend to defend this matter vigorously.

The

We understand that starting in FFY 2016, the first full fiscal year after the January 1, 2015 effective date of Medicaid expansion in Pennsylvania, the Department will no longer characterize managed care payments received by the hospitals as DSH payments.

Attorneys’ General Offices are also involved in this matter.

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

UHS denies any fraudulent billings were submitted to government payers; however, we are involved in settlement discussions with the DOJ Civil Division in an attempt to resolve this matter.

During 2018, we recorded pre-tax increases to the reserve established in connection with the civil aspects of these matters amounting to $102 million increasing the aggregate pre-tax reserve to $123 million as of December 31, 2018 from $22 million as of December 31, 2017.

Changes in the reserve may be required in future periods as discussions with the DOJ continue and additional information becomes available.

At this time, we are unable to assess potential liability or damages, if any.

Massachusetts Attorney General’s Office initially declined to intervene.

Chowdary v.

This is a lawsuit filed in 1999 in state court in Hidalgo County, Texas by a physician and his professional associations alleging tortious interference with contractual relationships and retaliation against McAllen Medical Center in McAllen, Texas as well as Universal Health Services, Inc. The state court had entered a summary judgment order awarding plaintiff $3.85 million in damages.

With prejudgment interest, the total amount of the order amounted to approximately $9 million, for which a corresponding reserve had previously been included in our financial statements.

The case was removed to federal court.

During the first quarter of 2019, the federal court entered an order vacating the state court’s summary judgment.

The parties have reached a preliminary settlement of this matter, pending finalization of settlement documentation, for an amount that did not have a material impact on our consolidated financial statements.

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 FFYs 2011 through 2014 is applicable to reimbursements received for Medicaid services provided after January 1, 2015 by our behavioral health care facilities located in Pennsylvania.

Matters Relating to Psychiatric Solutions, Inc. (“PSI”):

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, 2010:

Department of Justice Investigation of Riveredge Hospital

In 2008, Riveredge Hospital in Chicago, Illinois received a subpoena from the DOJ requesting certain information from the facility.

Additional requests for documents were also received from the DOJ in 2009 and 2010.

The requested documents have been provided to the DOJ.

All documents requested and produced pertained to the operations of the facility while under PSI’s ownership prior to our acquisition.

We have recently been notified by the DOJ that there is no longer an investigation pending against Riveredge Hospital that is separate from the UHS Behavioral Health matter referenced above.

Department of Justice Investigation of Friends Hospital

In October, 2010, Friends Hospital in Philadelphia, Pennsylvania, received a subpoena from the DOJ requesting certain documents from the facility.

The requested documents were collected and provided to the DOJ for review and examination.

Another subpoena was issued to the facility in July, 2011 requesting additional documents, which have also been delivered to the DOJ.

We have recently been notified by the DOJ that there is no longer an investigation pending against Friends Hospital that is separate from the UHS Behavioral Health matter referenced above.

| ☒ | [added: |] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |

For the fiscal year ended December 31, [removed: 2018][added: 2019]

| ☐ | [added: |] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |

[removed: UNIVERSAL] [added: UNIVERSAL] HEALTH SERVICES, [removed: INC.][added: INC.]

| Title of each [removed: Class] [added: class] | [added: Trading Symbol(s)] | Name of each exchange on which registered |

| Class B Common Stock, [removed: $.01] [added: $0.01] par value | [added: UHS] | New York Stock Exchange |

The aggregate market value of voting stock held by non-affiliates at June 30, [removed: 2018] [added: 2019] was [removed: $9.4] [added: $10.3] 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: 2019,] [added: 2020,] were 6,577,100; [removed: 83,527,315;] [added: 79,473,042;] 661,688 and [removed: 18,653,] [added: 18,411,] respectively.

Portions of the registrant’s definitive proxy statement for our [removed: 2019] [added: 2020] Annual Meeting of Stockholders, which will be filed with the Securities and Exchange Commission within 120 days after December 31, [removed: 2018] [added: 2019] (incorporated by reference under Part III).

[removed: 2018] [added: 2019] FORM 10-K ANNUAL REPORT

| Item 1B | | [Unresolved Staff Comments](#ITEM_1B_UNRESOLVED_STAFF_COMMENTS) | [removed: 24] [added: 25] |

| Item 4 | | [Mine Safety Disclosure](#ITEM_4_MINE_SAFETY_DISCLOSURES) | [removed: 37] [added: 38] |

| Item 5 | | [Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](#ITEM_5_MARKET_FOR_REGISTRANTS_COMMON_EQU) | [removed: 38] [added: 39] |

| Item 6 | | [Selected Financial Data](#ITEM_6_SELECTED_FINANCIAL_DATA) | [removed: 41] [added: 42] |

| Item 7 | | [Management’s Discussion and Analysis of Financial Condition and Results of Operations](#ITEM_7_MANAGEMENTS_DISCUSSION_ANALYSIS_F) | [removed: 42] [added: 43] |

| Item 7A | | [Quantitative and Qualitative Disclosures About Market Risk](#ITEM_7A_QUANTITATIVE_QUALITATIVE_DISCLOS) | [removed: 79] [added: 81] |

| Item 8 | | [Financial Statements and Supplementary Data](#ITEM_8_FINANCIAL_STATEMENTS_SUPPLEMENTAR) | [removed: 80] [added: 82] |

| Item 9 | | [Changes in and Disagreements with Accountants on Accounting and Financial Disclosure](#ITEM_9_CHANGES_IN_DISAGREEMENTS_WITH_ACC) | [removed: 80] [added: 82] |

| Item 9A | | [Controls and Procedures](#ITEM_9A_CONTROLS_PROCEDURES) | [removed: 80] [added: 82] |

| Item 9B | | [Other Information](#ITEM_9B_OR_INFORMATION) | [removed: 81] [added: 83] |

| Item 10 | | [Directors, Executive Officers and Corporate Governance](#ITEM_10_DIRECTORS_EXECUTIVE_FICERS_CORPO) | [removed: 82] [added: 84] |

| Item 11 | | [Executive Compensation](#ITEM_11_EXECUTIVE_COMPENSATION) | [removed: 82] [added: 84] |

| Item 12 | | [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](#ITEM_12_SECURITY_OWNERSHIP_CERTAIN_BENEF) | [removed: 82] [added: 84] |

| Item 13 | | [Certain Relationships and Related Transactions, and Director Independence](#ITEM_13_CERTAIN_RELATIONSHIPS_RELATED_TR) | [removed: 82] [added: 84] |

| Item 14 | | [Principal Accountant Fees and Services](#ITEM_14_PRINCIPAL_ACCOUNTANT_FEES_SERVIC) | [removed: 82] [added: 84] |

| Item 15 | | [Exhibits and Financial Statement Schedules](#ITEM_15_EXHIBITS_FINANCIAL_STATEMENT_SCH) | [removed: 83] [added: 85] |

| Item 16 | | [Form 10-K Summary](#ITEM_16_FORM_10_K_SUMMARY) | [removed: 87] [added: 89] |

| [SIGNATURES](#SIGNATURES) | | | [removed: 88] [added: 90] |

This Annual Report on Form 10-K is for the year ended December 31, [removed: 2018.][added: 2019.]

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

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

| | | | | | | |

10-K 1 uhs-10k_20181231.htm 10-K

| --- | --- |

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.

| Centennial Hills Hospital Medical Center | Las Vegas, Nevada | [removed: 250] [added: 262] | Owned |

| The George Washington University Hospital (1) | Washington, D.C. | [removed: 385] [added: 395] | Leased |

| Henderson Hospital | Henderson, Nevada | [removed: 166] [added: 170] | Owned |

| Northern Nevada Medical Center | Sparks, Nevada | [removed: 108] [added: 124] | Owned |

| Texoma Medical Center | Denison, Texas | [removed: 266] [added: 354] | Owned |

| Wellington Regional Medical Center (2) | West Palm Beach, Florida | [removed: 233] [added: 235] | Leased |

| Alhambra Hospital | Rosemead, California | [removed: 109] [added: 115] | Owned |

| Brentwood Hospital | Shreveport, Louisiana | [removed: 200] [added: 260] | Owned |

| Cedar Creek | St. Johns, Michigan | [removed: 34] [added: 54] | Owned |

| Cedar Hills Hospital (8) | Beaverton, Oregon | [removed: 94] [added: 98] | Owned |

| Coastal Harbor Treatment Center | Savannah, Georgia | [removed: 147] [added: 141] | Owned |

| Fort Lauderdale Hospital | Fort Lauderdale, Florida | 182 | [removed: Leased] [added: Owned] |

| Gulf Coast Youth Services | Fort Walton Beach, Florida | [removed: 24] [added: 28] | Owned |

| Inland Northwest Behavioral Health [removed: (12)] [added: (10)] | Spokane, Washington | 100 | Owned |

| Lancaster Behavioral Health Hospital [removed: (11)] [added: (9)] | Lancaster, Pennsylvania | 126 | Owned |

| Laurel Heights Hospital | Atlanta, Georgia | [removed: 112] [added: 124] | Owned |

| Lighthouse Care Center of Conway | Conway, South Carolina | [removed: 96] [added: 105] | Owned |

| Mesilla Valley Hospital | Las Cruces, New Mexico | [removed: 104] [added: 119] | Owned |

| West Oaks Hospital | Houston, Texas | [removed: 160] [added: 176] | Owned |

| Windsor—Laurelwood Center | Willoughby, Ohio | [removed: 159] [added: 160] | Leased |

| Wyoming Behavioral Institute | Casper, Wyoming | [removed: 146] [added: 129] | Owned |

| Acer Clinic [removed: (9)] | Chestherfield, UK | 14 | Owned |

| Acer Clinic 2 [removed: (9)] | Chestherfield, UK | 14 | Owned |

| Albert Ward [removed: (9)] | Darlington, UK | [removed: 8] [added: 25] | Owned |

| Amberwood Lodge [removed: (9)] | Dorset, UK | 9 | Owned |

| Ashfield House [removed: (9)] | Huddersfield, UK | 6 | Owned |

| Aspen House [removed: (9)] | South Yorkshire, UK | 20 | Owned |

| Aspen Lodge [removed: (9)] | Rotherham, UK | 16 | Owned |

| Beacon Lower [removed: (9)] | Bradford, UK | 8 | Owned |

| Beacon Upper [removed: (9)] | Bradford, UK | 8 | Owned |

| Beckly House [removed: (9)] | Halifax, UK | 12 | Owned |

| Bostall House [removed: (10)] | London, UK | 6 | Owned |

| Broughton House [removed: (9)] | Lincolnshire, UK | 34 | Owned |

| Broughton Lodge [removed: (9)] | Cheshire, UK | 20 | Owned |

| Cambian Alders [removed: (9)] | Gloucester, UK | 20 | Owned |

| Cambian Ansel Clinic [removed: (9)] | Nottingham, UK | 24 | Owned |

| Cambian Appletree [removed: (9)] | Durham, UK | 26 | Owned |

| Cambian Beeches [removed: (9)] | Nottinghamshire, UK | 12 | Owned |

| Cambian Birches [removed: (9)] | Notts, UK | 6 | Owned |

| Cambian Cedars [removed: (9)] | Birmingham, UK | 24 | Owned |

| Doctor’s Hospital Emergency Room Saunders | Laredo, Texas | — | Owned |

| NWTX Georgia FED | Amarillo, Texas | — | Owned |

| Spring Valley FED | Las Vegas, Nevada | — | Owned |

| Texoma Sherman ER | Sherman, Texas | — | Owned |

| Westlake FED | West Palm Beach, Florida | — | Leased |

| Cygnet Lodge – Salford | Manchester, UK | 24 | Owned |

| Dove Valley | Wombwell, UK | 10 | Owned |

| Lindsay House | Dundee, UK | 2 | Owned |

| Morgan House | Stoke on Trent, UK | 5 | Owned |

| Oakwood Gardens (SL) | Wolverhampton, UK | 9 | Leased |

| St. Williams | Darlington, UK | 12 | Owned |

| | | | |

| Woodrow House | Stockport, UK | 9 | Owned |

| | | | |

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

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

| --- | --- |

| Palmetto Pee Dee Behavioral Health | Florence, South Carolina | 59 | Leased |

| Shadow Mountain Behavioral Health System | Tulsa, Oklahoma | 249 | Owned |

| Crescent Pines | Stockbridge, Georgia | 50 | Owned |

| | | |

| (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”). |

| (10) | These facilities were acquired in late July, 2018, upon our completion of the acquisition of The Danshell Group. |

The number of stockholders of record as of January 31, [removed: 2019,] [added: 2020,] were as follows:

| Class A Common | | | [removed: 14] [added: 17] | |

| Class [removed: B] [added: D] Common | | | [removed: 806] [added: 95] | |

| Class [removed: D] [added: B] Common | | | [removed: 98] [added: 818] | |

In [removed: December of 2018,] [added: July, 2019,] our Board of Directors authorized a [removed: $500 million] [added: $1.0 billion] increase to our stock repurchase program, which increased the aggregate authorization to [removed: $1.7] [added: $2.7] billion from the previous [removed: $1.2] [added: $1.7] billion authorization approved [removed: during 2017, 2016 and] [added: in various increments since] 2014.

Pursuant to this program, [removed: we may purchase] [added: which had an aggregate available repurchase authorization of $756.1 million as of December 31, 2019,] shares of our Class B Common [removed: Stock,] [added: Stock may be repurchased,] from time to time as conditions allow, on the open market or in negotiated private transactions.

As reflected below, during the three-month period ended December 31, [removed: 2018,] [added: 2019,] we have repurchased approximately [removed: 1.2] [added: 1.3] million shares at an aggregate cost of approximately [removed: $149.3] [added: $181.2] million [added: (approximately $141 per share)] pursuant to the terms of our stock repurchase program.

In addition, [removed: 26,198] [added: 9,377] 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: 2018] [added: 2019] through December 31, [removed: 2018,] [added: 2019,] we repurchased the following shares:

Our Credit Agreement contains covenants that include limitations on, among other things, dividends and stock repurchases (see below in [removed: Capital] [added: *Capital] Resources-Credit Facilities and Outstanding Debt [removed: Securities).][added: Securities*).]

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: 2018.][added: 2019.]

The graph assumes an investment of $100 made in our common stock and each Index as of January 1, [removed: 2014] [added: 2015] 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: Acadia Healthcare [removed: Co.,] [added: Company,] Inc., Community Health Systems, Inc., HCA Healthcare, Inc., [removed: Health Management Associates, Inc. (included in January, 2014 when it was acquired by Community Health Systems, Inc.),] LifePoint Health, Inc. (included until November, 2018, when it was acquired by Apollo Management) and Tenet Healthcare Corporation.

[removed: ][added: | |  | | | | | | | |]

| Company Name / Index | | [removed: 2013 Base | | | |] 2014 [added: Base] | | | | 2015 | | | | 2016 | | | | 2017 | | | | 2018 | | | [added: | 2019 | | |]

| October, 2019 | | | — | | | | 400,469 | | | | 3,589 | | | $ | 0.01 | | | | 400,000 | | | $ | 138.38 | | | $ | 55,353 | | | $ | 881,949 | |

| November, 2019 | | | — | | | | 338,970 | | | | 863 | | | $ | 0.01 | | | | 337,521 | | | $ | 139.90 | | | | 47,220 | | | $ | 834,729 | |

| December, 2019 | | | — | | | | 557,459 | | | | 1,535 | | | $ | 0.01 | | | | 550,000 | | | $ | 142.92 | | | $ | 78,606 | | | $ | 756,123 | |

| Total October through December | | $ | \- | | | | 1,296,898 | | | | 5,987 | | | $ | 0.01 | | | | 1,287,521 | | | $ | 140.72 | | | $ | 181,179 | | | | | |

We have a history of paying quarterly cash dividends to our shareholders and it is our intention at this time to pay comparable dividends in the future.

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| Universal Health Services, Inc. | | $ | 100.00 | | | $ | 107.74 | | | $ | 96.24 | | | $ | 102.90 | | | $ | 106.16 | | | $ | 131.23 | |

| S&P 500 Index | | $ | 100.00 | | | $ | 101.38 | | | $ | 113.51 | | | $ | 138.29 | | | $ | 132.23 | | | $ | 173.86 | |

| Peer Group | | $ | 100.00 | | | $ | 84.91 | | | $ | 76.50 | | | $ | 86.85 | | | $ | 117.80 | | | $ | 146.47 | |

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, 2018 and 2017:

| | | 2018 | | 2017 |

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

| | | High-Low Sales Price | | High-Low Sales Price |

| Quarter: | | | | |

| 1st | | $127.27-$110.15 | | $126.65-$106.71 |

| 2nd | | $122.04-$111.44 | | $125.07-$112.33 |

| 3rd | | $130.16-$110.98 | | $125.00-$105.37 |

| 4th | | $137.99-$113.42 | | $115.06-$95.77 |

| October, 2018 | | | — | | | | 1,006 | | | | 795 | | | $ | 0.01 | | | | — | | | N/A | | | | | — | | | $ | 111,618 | |

| November, 2018 | | | — | | | | 21,561 | | | | 796 | | | $ | 0.01 | | | | — | | | N/A | | | | | — | | | $ | 111,618 | |

| December, 2018 | | $ | 500,000 | | | | 1,224,852 | | | | 1,458 | | | $ | 0.01 | | | | 1,221,221 | | | $ | 122.23 | | | $ | 149,274 | | | $ | 462,344 | |

| Total October through December | | $ | 500,000 | | | | 1,247,419 | | | | 3,049 | | | $ | 0.01 | | | | 1,221,221 | | | $ | 122.23 | | | $ | 149,274 | | | | | |

During the two years ending December 31, 2018, dividends per share were declared and paid as follows:

| | | 2018 | | | | 2017 | | |

| First quarter | | $ | .10 | | | $ | .10 | |

| Second quarter | | $ | .10 | | | $ | .10 | |

| Third quarter | | $ | .10 | | | $ | .10 | |

| Fourth quarter | | $ | .10 | | | $ | .10 | |

| Total | | $ | .40 | | | $ | .40 | |

| Universal Health Services, Inc. | | $ | 100.00 | | | $ | 137.33 | | | $ | 147.96 | | | $ | 132.16 | | | $ | 141.32 | | | $ | 145.79 | |

| S&P 500 Index | | $ | 100.00 | | | $ | 113.69 | | | $ | 115.26 | | | $ | 129.05 | | | $ | 157.22 | | | $ | 150.33 | |

| Peer Group | | $ | 100.00 | | | $ | 140.92 | | | $ | 119.66 | | | $ | 107.88 | | | $ | 122.47 | | | $ | 166.09 | |

The following table contains our selected financial data for, or as of the end of, each of the five years ended December 31, [removed: 2018.][added: 2019.]

You should read this table in conjunction with the consolidated financial statements and related notes included elsewhere in this report and in Part II, [removed: Item] [added: *Item] 7, Management’s Discussion and Analysis of Financial Condition and Results of [removed: Operations.][added: Operations.*]

| | | [removed: 2018] [added: 2019] | | | | [removed: 2017] [added: 2018] | | | | [removed: 2016] [added: 2017] | | | | [removed: 2015] [added: 2016] | | | | [removed: 2014] [added: 2015] | | |

| Net revenues | | $ | [removed: 10,772,278] [added: 11,378,259] | | | $ | [removed: 10,409,865] [added: 10,772,278] | | | $ | [removed: 9,766,210] [added: 10,409,865] | | | $ | [removed: 9,043,451] [added: 9,766,210] | | | $ | [removed: 8,205,088] [added: 9,043,451] | |

| Income before income taxes | | $ | [removed: 1,034,525] [added: 1,066,337] | | | $ | [removed: 1,135,009] [added: 1,034,525] | | | $ | [removed: 1,156,358] [added: 1,135,009] | | | $ | [removed: 1,145,901] [added: 1,156,358] | | | $ | [removed: 929,667] [added: 1,145,901] | |

| Net income attributable to UHS | | $ | [removed: 779,705] [added: 814,854] | | | $ | [removed: 752,303] [added: 779,705] | | | $ | [removed: 702,409] [added: 752,303] | | | $ | [removed: 680,528] [added: 702,409] | | | $ | [removed: 545,343] [added: 680,528] | |

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

| Return on average equity | | | [removed: 14.7] [added: 15.0] | % | | | [removed: 15.5] [added: 14.6] | % | | | [removed: 16.0] [added: 15.5] | % | | | [removed: 16.6] [added: 16.0] | % | | | [removed: 15.3] [added: 16.6] | % |

| Capital expenditures, net (1) | | $ | [removed: 664,962] [added: 634,095] | | | $ | [removed: 557,506] [added: 664,962] | | | $ | [removed: 519,939] [added: 557,506] | | | $ | [removed: 379,321] [added: 519,939] | | | $ | [removed: 391,150] [added: 379,321] | |

| Total assets | | $ | [removed: 11,265,480] [added: 11,668,250] | | | $ | [removed: 10,761,828] [added: 11,265,480] | | | $ | [removed: 10,317,802] [added: 10,761,828] | | | $ | [removed: 9,615,444] [added: 10,317,802] | | | $ | [removed: 8,974,443] [added: 9,615,444] | |

| Current maturities of long-term debt | | $ | [removed: 63,446] [added: 87,550] | | | $ | [removed: 545,619] [added: 63,446] | | | $ | [removed: 105,895] [added: 545,619] | | | $ | [removed: 62,722] [added: 105,895] | | | $ | [removed: 68,319] [added: 62,722] | |

| Long-term debt | | $ | [removed: 3,935,187] [added: 3,896,577] | | | $ | [removed: 3,494,390] [added: 3,935,187] | | | $ | [removed: 4,030,230] [added: 3,494,390] | | | $ | [removed: 3,368,634] [added: 4,030,230] | | | $ | [removed: 3,210,215] [added: 3,368,634] | |

| UHS’s common stockholders’ equity | | $ | [removed: 5,389,262] [added: 5,504,105] | | | $ | [removed: 4,989,514] [added: 5,389,262] | | | $ | [removed: 4,533,220] [added: 4,989,514] | | | $ | [removed: 4,249,647] [added: 4,533,220] | | | $ | [removed: 3,735,946] [added: 4,249,647] | |

| Percentage of total debt to total capitalization | | | [removed: 43] [added: 42] | % | | | [removed: 45] [added: 43] | % | | | [removed: 48] [added: 45] | % | | | [removed: 45] [added: 48] | % | | | [removed: 47] [added: 45] | % |

| Average licensed beds | | | [removed: 6,232] [added: 6,379] | | | | [removed: 6,127] [added: 6,232] | | | | [removed: 5,934] [added: 6,127] | | | | [removed: 5,832] [added: 5,934] | | | | [removed: 5,776] [added: 5,832] | |

| Average available beds | | | [removed: 6,056] [added: 6,205] | | | | [removed: 5,954] [added: 6,056] | | | | [removed: 5,759] [added: 5,954] | | | | [removed: 5,656] [added: 5,759] | | | | [removed: 5,571] [added: 5,656] | |

| Inpatient admissions | | | [removed: 303,985] [added: 317,983] | | | | [removed: 297,390] [added: 303,985] | | | | [removed: 274,074] [added: 297,390] | | | | [removed: 261,727] [added: 274,074] | | | | [removed: 251,165] [added: 261,727] | |

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

| Patient days | | | [removed: 1,376,988] [added: 1,451,847] | | | | [removed: 1,312,265] [added: 1,376,988] | | | | [removed: 1,251,511] [added: 1,312,265] | | | | [removed: 1,218,969] [added: 1,251,511] | | | | [removed: 1,167,726] [added: 1,218,969] | |

| Occupancy rate for licensed beds | | | [removed: 61] [added: 62] | % | | | [removed: 59] [added: 61] | % | | | [removed: 58] [added: 59] | % | | | [removed: 57] [added: 58] | % | | | [removed: 55] [added: 57] | % |

| Occupancy rate for available beds | | | [removed: 62] [added: 64] | % | | | [removed: 60] [added: 62] | % | | | [removed: 59] [added: 60] | % | | | 59 | % | | | [removed: 57] [added: 59] | % |

| Average licensed beds | | | [removed: 23,509] [added: 23,812] | | | | [removed: 23,151] [added: 23,509] | | | | [removed: 21,829] [added: 23,151] | | | | [removed: 21,202] [added: 21,829] | | | | [removed: 20,231] [added: 21,202] | |

| Average available beds | | | [removed: 23,425] [added: 23,711] | | | | [removed: 23,068] [added: 23,425] | | | | [removed: 21,744] [added: 23,068] | | | | [removed: 21,116] [added: 21,744] | | | | [removed: 20,131] [added: 21,116] | |

| Inpatient admissions | | | [removed: 482,658] [added: 488,367] | | | | [removed: 467,822] [added: 482,658] | | | | [removed: 456,052] [added: 467,822] | | | | [removed: 447,007] [added: 456,052] | | | | [removed: 426,510] [added: 447,007] | |

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

| Patient days | | | [removed: 6,418,334] [added: 6,487,707] | | | | [removed: 6,381,756] [added: 6,418,334] | | | | [removed: 6,004,066] [added: 6,381,756] | | | | [removed: 5,835,134] [added: 6,004,066] | | | | [removed: 5,518,660] [added: 5,835,134] | |

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

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

| Net income attributable to UHS—basic | | $ | [removed: 8.35] [added: 9.16] | | | $ | [removed: 7.86] [added: 8.35] | | | $ | [removed: 7.22] [added: 7.86] | | | $ | [removed: 6.89] [added: 7.22] | | | $ | [removed: 5.52] [added: 6.89] | |

| Net income attributable to UHS—diluted | | $ | [removed: 8.31] [added: 9.13] | | | $ | [removed: 7.81] [added: 8.31] | | | $ | [removed: 7.14] [added: 7.81] | | | $ | [removed: 6.76] [added: 7.14] | | | $ | [removed: 5.42] [added: 6.76] | |

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

| Weighted average number of shares outstanding—basic | | | [removed: 93,276] [added: 88,762] | | | | [removed: 95,652] [added: 93,276] | | | | [removed: 97,208] [added: 95,652] | | | | [removed: 98,797] [added: 97,208] | | | | [removed: 98,826] [added: 98,797] | |

| Weighted average number of shares and share equivalents outstanding—diluted | | | [removed: 93,750] [added: 89,040] | | | | [removed: 96,325] [added: 93,750] | | | | [removed: 98,380] [added: 96,325] | | | | [removed: 100,694] [added: 98,380] | | | | [removed: 100,544] [added: 100,694] | |

| Cash provided by operating activities | | $ | 1,438,469 | | | $ | 1,274,742 | | | $ | 1,247,585 | | | $ | 1,254,509 | | | $ | 1,045,310 | |

| Cash provided by operating activities | | $ | 1,340,893 | | | $ | 1,183,252 | | | $ | 1,333,842 | | | $ | 1,068,262 | | | $ | 1,069,788 | |

As of December 31, [removed: 2018,] [added: 2019,] 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 [added: other] changes in our internal control over financial reporting or in other factors during the fourth quarter of [removed: 2018] [added: 2019] that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

In order to evaluate the effectiveness of internal control over financial reporting, as required by Section 404 of the Sarbanes-Oxley Act, management has conducted an assessment, including testing, using the criteria on [removed: Internal] [added: *Internal] Control—Integrated Framework [added: (2013)*, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).]

[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: 2018,] [added: 2019,] based on criteria in [removed: Internal] [added: *Internal] Control—Integrated Framework [removed: (2013),] [added: (2013)*,] issued by the COSO.

The effectiveness of the Company’s internal control over financial reporting as of December 31, [removed: 2018] [added: 2019] has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm as stated in its report which appears herein.

On January 1, 2019, we adopted ASC 842.

In connection with our adoption of ASC 842 we did implement changes to our internal controls relating to leases.

These changes included the development of new policies, enhanced contract review requirements and other ongoing monitoring activities.

These controls were designed to provide assurance at a reasonable level of the fair presentation of our condensed consolidated financial statements and related disclosures.

Also, projections

(2013), issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

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: 2018.][added: 2019.]

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: 2018.][added: 2019.]

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: 2018.][added: 2019.]

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: 2018.][added: 2019.]

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: 2018.][added: 2019.]

| 10.3 | | [Advisory Agreement dated as of December 24, 1986, and amended and restated effective as of January 1, 2019 between Universal Health Realty Income Trust and UHS of Delaware, [removed: Inc.](https://www.sec.gov/Archives/edgar/data/352915/000156459019004919/uhs-ex103_37.htm)] [added: Inc.](https://www.sec.gov/Archives/edgar/data/352915/000156459020006793/uhs-ex103_9.htm)] |

| [removed: 10.4] [added: 10.5] | | 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 reference (P). |

| [removed: 10.5] [added: 10.6] | | 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 reference (P). |

| [removed: 10.6] [added: 10.7] | | [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 reference.](http://www.sec.gov/Archives/edgar/data/0000352915/000093176303000570/dex107.txt) |

| [removed: 10.7] [added: 10.9] | | 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 reference (P). |

| [removed: 10.8] [added: 10.10] | | 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 reference (P). |

| [removed: 10.9] [added: 10.11] | | 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 reference (P). |

| [removed: 10.10] [added: 10.12*] | | [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 reference.](http://www.sec.gov/Archives/edgar/data/0000352915/000093176303000570/dex1029.txt) |

| [removed: 10.11*] [added: 10.13*] | | [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 reference.](http://www.sec.gov/Archives/edgar/data/0000352915/000119312505009505/dex41.htm) |

| [removed: 10.12*] [added: 10.14*] | | [Universal Health Services, Inc. Third Amended and Restated 2005 Stock Incentive Plan as Amended, previously filed as Exhibit 99.1 to the Company’s Registration Statement on Form S-8 (File No.333-218359), dated May 31, 2017, is incorporated herein by reference.](http://www.sec.gov/Archives/edgar/data/0000352915/000119312517188941/d514264dex991.htm) |

| [removed: 10.13*] [added: 10.15*] | | [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 reference.](http://www.sec.gov/Archives/edgar/data/0000352915/000119312505121907/dex104.htm) |

| [removed: 10.14*] [added: 10.16*] | | [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 reference.](http://www.sec.gov/Archives/edgar/data/0000352915/000119312505195725/dex102.htm) |

| [removed: 10.15] [added: 10.17] | | [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 reference.](http://www.sec.gov/Archives/edgar/data/0000352915/000119312507042808/dex1029.htm) |

| [removed: 10.16*] [added: 10.18*] | | [Amended and Restated Universal Health Services, Inc. 2010 Employees’ Restricted Stock Purchase Plan, previously filed as Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q filed on August 7, 2015, is incorporated herein by reference.](http://www.sec.gov/Archives/edgar/data/0000352915/000119312515281740/d941004dex102.htm) |

| [removed: 10.17*] [added: 10.19*] | | [Universal Health Services, Inc. 2010 Executive Incentive Plan, previously filed as Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q filed on August 7, 2015, is incorporated herein by reference.](http://www.sec.gov/Archives/edgar/data/0000352915/000119312515281740/d941004dex103.htm) |

| [removed: 10.18] [added: 10.20] | | [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 reference.](http://www.sec.gov/Archives/edgar/data/0000352915/000119312510243987/dex101.htm) |

| [removed: 10.19] [added: 10.21] | | [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 reference.](http://www.sec.gov/Archives/edgar/data/0000352915/000119312510243987/dex102.htm) |

| [removed: 10.20] [added: 10.22] | | [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 reference.](http://www.sec.gov/Archives/edgar/data/0000352915/000119312513417091/d619136dex101.htm) |

| [removed: 10.21] [added: 10.23] | | [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 reference.](http://www.sec.gov/Archives/edgar/data/0000352915/000119312514293450/d768656dex101.htm) |

| [removed: 10.22] [added: 10.24] | | [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 reference](http://www.sec.gov/Archives/edgar/data/0000352915/000119312515416088/d106645dex101.htm). |