filings.toolsItem 16. Form 10-K Summary
209K characters. Original on sec.gov · Markdown
Item 16. Form 10-K Summary
None.
SIGNAT****URES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| UNIVERSAL HEALTH SERVICES, INC. | ||
| By: | /s/ MARC D. MILLER | |
| Marc D. Miller Chief Executive Officer February 25, 2026 |
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
| Signatures | Title | Date | ||||||||
| /s/ ALAN B. MILLER Alan B. Miller | Executive Chairman of the Board | February 25, 2026 | ||||||||
| /s/ MARC D. MILLER Marc D. Miller | Director, President and Chief Executive Officer (Principal Executive Officer) | February 25, 2026 | ||||||||
| /s/ NINA CHEN-LANGENMAYR | Director | February 25, 2026 | ||||||||
| Nina Chen-Langenmayr | ||||||||||
| /s/ EILEEN C. MCDONNELL Eileen C. McDonnell | Director | February 25, 2026 | ||||||||
| /s/ WARREN J. NIMETZ Warren J. Nimetz | Director | February 25, 2026 | ||||||||
| /s/ MARIA SINGER Maria Singer | Director | February 25, 2026 | ||||||||
| /s/ ELLIOTT J. SUSSMAN M.D. Elliot J. Sussman M.D. | Director | February 25, 2026 | ||||||||
| /s/ STEVE FILTON Steve Filton | Executive Vice President, Chief Financial Officer and Secretary (Principal Financial and Accounting Officer) | February 25, 2026 |
UNIVERSAL HEALTH SERVICES, INC.
INDEX TO FINANCIAL STATEMENTS
AND FINANCIAL STATEMENT SCHEDULE
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Stockholders of Universal Health Services, Inc.
Opinions on the Financial Statements and Internal Control over Financial Reporting
We have audited the accompanying consolidated balance sheets of Universal Health Services, Inc. and its subsidiaries (the "Company") as of December 31, 2025 and 2024, and the related consolidated statements of income, of comprehensive income, of changes in equity and of cash flows for each of the three years in the period ended December 31, 2025, including the related notes and financial statement schedule listed in the accompanying index (collectively referred to as the "consolidated financial statements"). We also have audited the Company's internal control over financial reporting as of December 31, 2025, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2025 and 2024, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2025 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2025, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.
Basis for Opinions
The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in Management’s Report on Internal Control Over Financial Reporting appearing under Item 9A. Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company's internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.
Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness 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.
Critical Audit Matters
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Valuation of accounts receivable
As described in Notes 1 and 10 to the consolidated financial statements, the Company reports net patient service revenue at the estimated net realizable amounts from patients and third-party payers and others for services rendered. The Company has agreements with third-party payers that provide for payments to the Company at amounts different from established rates. Payment arrangements include rates per discharge, reimbursed costs, discounted charges and per diem payments. Estimates of contractual allowances, which represent explicit price concessions, under managed care plans are based upon the payment terms specified in the related contractual agreements. Management estimates Medicare and Medicaid revenues using the latest available financial information, patient utilization data, government provided data and in accordance with applicable Medicare and Medicaid payment rules and regulations. Management monitors the historical collection rates, as well as changes in applicable laws, rules and regulations and contract terms, to assure that provisions are made using the most accurate information available. In addition to explicit price concessions, management estimates revenue adjustments for implicit price concessions based on general factors such as payer mix, the aging of the receivables and historical collection experience. Management routinely reviews accounts receivable balances in conjunction with these factors and other economic conditions which might ultimately affect the collectability of the patient accounts and make adjustments to the allowances as warranted. As of December 31, 2025, the net accounts receivable balance was $2.6 billion.
The principal considerations for our determination that performing procedures relating to the valuation of accounts receivable is a critical audit matter are the significant judgment by management in estimating net accounts receivable, specifically as it relates to developing the estimate for explicit and implicit price concessions, which in turn led to significant auditor judgment, subjectivity and effort in performing procedures and evaluating audit evidence obtained related to the estimation of price concessions.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to the valuation of accounts receivable, including controls over management’s valuation approach, assumptions and data used to estimate the explicit and implicit price concessions. These procedures also included, among others, (i) testing management’s process for developing the estimate for price concessions, as well as the relevance of the historical billing and collection data as an input to the valuation approach; (ii) testing the accuracy of a sample of revenue transactions and a sample of cash collections from the historical billing data and historical collection data used in management’s estimation of price concessions; (iii) evaluating the historical accuracy of management’s process for developing the estimate of the amount which will ultimately be collected by comparing actual cash collections to the previously recorded net accounts receivable balance; and (iv) developing an independent expectation of the net accounts receivable balance. Developing an independent expectation involved calculating the percentage of cash collections as compared to the recorded net accounts receivable balance as of the end of the prior year, applying those calculated percentages to the recorded accounts receivable balance as of December 31, 2025, and comparing the calculated balance to management’s estimate of the net accounts receivable balance.
/s/ PricewaterhouseCoopers LLP
Philadelphia, Pennsylvania
February 25, 2026
We have served as the Company’s auditor since 2007.
UNIVERSAL HEALTH SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STAT****EMENTS OF INCOME
| Year Ended December 31, | ||||||||||||
| 2025 | 2024 | 2023 | ||||||||||
| (in thousands, except per share data) | ||||||||||||
| Net revenues | $ | 17,364,829 | $ | 15,827,935 | $ | 14,281,976 | ||||||
| Operating charges: | ||||||||||||
| Salaries, wages and benefits | 8,084,582 | 7,518,687 | 7,107,484 | |||||||||
| Other operating expenses | 4,860,246 | 4,308,384 | 3,757,216 | |||||||||
| Supplies expense | 1,659,009 | 1,587,786 | 1,532,828 | |||||||||
| Depreciation and amortization | 618,743 | 584,831 | 568,041 | |||||||||
| Lease and rental expense | 148,234 | 146,433 | 141,026 | |||||||||
| 15,370,814 | 14,146,121 | 13,106,595 | ||||||||||
| Income from operations | 1,994,015 | 1,681,814 | 1,175,381 | |||||||||
| Interest expense, net | 156,068 | 186,109 | 206,674 | |||||||||
| Other (income) expense, net | (134,194 | ) | (2,231 | ) | 28,281 | |||||||
| Income before income taxes | 1,972,141 | 1,497,936 | 940,426 | |||||||||
| Provision for income taxes | 460,959 | 334,827 | 221,119 | |||||||||
| Net income | 1,511,182 | 1,163,109 | 719,307 | |||||||||
| Less: Net income (loss) attributable to noncontrolling interests | 22,386 | 21,012 | 1,512 | |||||||||
| Net income attributable to UHS | $ | 1,488,796 | $ | 1,142,097 | $ | 717,795 | ||||||
| Basic earnings per share attributable to UHS | $ | 23.42 | $ | 17.16 | $ | 10.35 | ||||||
| Diluted earnings per share attributable to UHS | $ | 23.10 | $ | 16.82 | $ | 10.23 | ||||||
| Weighted average number of common shares—basic | 63,581 | 66,554 | 69,321 | |||||||||
| Add: Other share equivalents | 881 | 1,342 | 804 | |||||||||
| Weighted average number of common shares and equivalents—diluted | 64,462 | 67,896 | 70,125 |
The accompanying notes are an integral part of these consolidated financial statements.
UNIVERSAL HEALTH SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
| Year Ended December 31, | ||||||||||||
| 2025 | 2024 | 2023 | ||||||||||
| (Dollar amounts in thousands) | ||||||||||||
| Net income | $ | 1,511,182 | $ | 1,163,109 | $ | 719,307 | ||||||
| Other comprehensive income (loss): | ||||||||||||
| Minimum pension liability | 3,015 | 2,416 | 4,166 | |||||||||
| Foreign currency translation adjustment | 37,841 | (3,237 | ) | 15,271 | ||||||||
| Other | 0 | 17 | 0 | |||||||||
| Other comprehensive income (loss) before tax | 40,856 | (804 | ) | 19,437 | ||||||||
| Income tax expense related to items of other comprehensive income | 274 | 1,284 | 480 | |||||||||
| Total other comprehensive income (loss), net of tax | 40,582 | (2,088 | ) | 18,957 | ||||||||
| Comprehensive income | 1,551,764 | 1,161,021 | 738,264 | |||||||||
| Less: Comprehensive loss (income) attributable to noncontrolling interests | 22,386 | 21,012 | 1,512 | |||||||||
| Comprehensive income attributable to UHS | $ | 1,529,378 | $ | 1,140,009 | $ | 736,752 |
The accompanying notes are an integral part of these consolidated financial statements.
UNIVERSAL HEALTH SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED B****ALANCE SHEETS
| December 31, | ||||||||
| 2025 | 2024 | |||||||
| (Dollar amounts in thousands) | ||||||||
| Assets | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 137,797 | $ | 125,983 | ||||
| Accounts receivable, net | 2,602,434 | 2,177,751 | ||||||
| Supplies | 232,110 | 220,940 | ||||||
| Other current assets | 435,574 | 291,614 | ||||||
| Total current assets | 3,407,915 | 2,816,288 | ||||||
| Property and Equipment | ||||||||
| Land | 759,281 | 745,706 | ||||||
| Buildings and improvements | 8,076,327 | 7,671,206 | ||||||
| Equipment | 3,393,692 | 3,260,350 | ||||||
| Property under finance lease | 129,012 | 125,018 | ||||||
| 12,358,312 | 11,802,280 | |||||||
| Accumulated depreciation | (6,481,714 | ) | (6,071,058 | ) | ||||
| 5,876,598 | 5,731,222 | |||||||
| Construction-in-progress | 1,131,499 | 841,003 | ||||||
| 7,008,097 | 6,572,225 | |||||||
| Other assets: | ||||||||
| Goodwill | 3,990,213 | 3,932,879 | ||||||
| Deferred income taxes | 70,517 | 118,449 | ||||||
| Right of use assets-operating leases | 374,239 | 418,719 | ||||||
| Deferred charges | 9,272 | 9,404 | ||||||
| Other | 667,340 | 601,785 | ||||||
| 5,111,581 | 5,081,236 | |||||||
| Total Assets | $ | 15,527,593 | $ | 14,469,749 | ||||
| Liabilities and Stockholders’ Equity | ||||||||
| Current liabilities: | ||||||||
| Current maturities of long-term debt | $ | 748,158 | $ | 40,059 | ||||
| Accounts payable | 750,134 | 632,001 | ||||||
| Accrued liabilities | ||||||||
| Compensation and related benefits | 681,583 | 622,625 | ||||||
| Interest | 26,197 | 30,250 | ||||||
| Taxes other than income | 267,898 | 161,683 | ||||||
| Operating lease liabilities | 73,237 | 74,649 | ||||||
| Other | 690,464 | 634,920 | ||||||
| Current federal and state income taxes | 1,930 | 14,219 | ||||||
| Total current liabilities | 3,239,601 | 2,210,406 | ||||||
| Other noncurrent liabilities | 527,827 | 655,806 | ||||||
| Operating lease liabilities noncurrent | 340,715 | 376,239 | ||||||
| Deferred income taxes | 5,649 | 0 | ||||||
| Long-term debt | 4,004,393 | 4,464,482 | ||||||
| Commitments and contingencies (Note 8) | ||||||||
| Redeemable noncontrolling interest | 70,620 | 13,293 | ||||||
| Equity: | ||||||||
| Class A Common Stock, voting, $.01 par value; authorized 12,000,000 shares: issued and outstanding 6,574,600 shares in 2025 and 6,576,475 shares in 2024 | 66 | 66 | ||||||
| Class B Common Stock, limited voting, $.01 par value; authorized 150,000,000shares: issued and outstanding 53,815,223 shares in 2025 and 57,726,557 shares in 2024 | 538 | 577 | ||||||
| Class C Common Stock, voting, $.01 par value; authorized 1,200,000 shares: issued and outstanding 661,688 shares in 2025 and 661,688 shares in 2024 | 7 | 7 | ||||||
| Class D Common Stock, limited voting, $.01 par value; authorized 5,000,000 shares: issued and outstanding 12,497 shares in 2025 and 12,614 shares in 2024 | 0 | 0 | ||||||
| Cumulative dividends | (765,357 | ) | (713,705 | ) | ||||
| Retained earnings | 7,992,755 | 7,372,061 | ||||||
| Accumulated other comprehensive income | 47,783 | 7,201 | ||||||
| Universal Health Services, Inc. common stockholders’ equity | 7,275,792 | 6,666,207 | ||||||
| Noncontrolling interest | 62,996 | 83,316 | ||||||
| Total Equity | 7,338,788 | 6,749,523 | ||||||
| Total Liabilities and Stockholders’ Equity | $ | 15,527,593 | $ | 14,469,749 |
The accompanying notes are an integral part of these consolidated financial statements.
UNIVERSAL HEALTH SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 2025
(in thousands)
| Accumulated | UHS | |||||||||||||||||||||||||||||||||||||||||||
| Redeemable | Other | Common | ||||||||||||||||||||||||||||||||||||||||||
| Noncontrolling | Class A | Class B | Class C | Class D | Cumulative | Retained | Comprehensive | Stockholders' | Noncontrolling | |||||||||||||||||||||||||||||||||||
| Interest | Common | Common | Common | Common | Dividends | Earnings | Income (Loss) | Equity | Interest | Total | ||||||||||||||||||||||||||||||||||
| Balance, January 1, 2025 | $ | 13,293 | $ | 66 | $ | 577 | $ | 7 | $ | — | $ | (713,705 | ) | $ | 7,372,061 | $ | 7,201 | $ | 6,666,207 | $ | 83,316 | $ | 6,749,523 | |||||||||||||||||||||
| Common Stock | ||||||||||||||||||||||||||||||||||||||||||||
| Issued/(converted) including tax benefits from exercise of stock options | — | — | 11 | — | — | — | 16,897 | — | 16,908 | — | 16,908 | |||||||||||||||||||||||||||||||||
| Repurchased | — | — | (50 | ) | — | — | — | (975,747 | ) | — | (975,797 | ) | — | (975,797 | ) | |||||||||||||||||||||||||||||
| Restricted share-based compensation expense | — | — | — | — | — | — | 60,150 | — | 60,150 | — | 60,150 | |||||||||||||||||||||||||||||||||
| Dividends paid | — | — | — | — | — | (51,652 | ) | — | — | (51,652 | ) | — | (51,652 | ) | ||||||||||||||||||||||||||||||
| Stock option expense | — | — | — | — | — | — | 33,805 | — | 33,805 | — | 33,805 | |||||||||||||||||||||||||||||||||
| Reclass of noncontrolling interests to redeemable noncontrolling interests | 38,523 | — | — | — | — | — | — | — | — | (38,523 | ) | (38,523 | ) | |||||||||||||||||||||||||||||||
| Change in redemption amount of redeemable noncontrolling interest | 2,311 | — | — | — | — | — | (3,207 | ) | — | (3,207 | ) | 895 | (2,312 | ) | ||||||||||||||||||||||||||||||
| Distributions to noncontrolling interests | (2,396 | ) | — | — | — | — | — | — | — | — | (9,338 | ) | (9,338 | ) | ||||||||||||||||||||||||||||||
| Purchase (sale) of ownership interests by (from) minority members | 10,835 | — | — | — | — | — | — | — | — | 12,314 | 12,314 | |||||||||||||||||||||||||||||||||
| Comprehensive income: | ||||||||||||||||||||||||||||||||||||||||||||
| Net income to UHS / noncontrolling interests | 8,054 | — | — | — | — | — | 1,488,796 | — | 1,488,796 | 14,332 | 1,503,128 | |||||||||||||||||||||||||||||||||
| Other | — | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||
| Foreign currency translation adjustments (net of income tax effect of $450) | — | — | — | — | — | — | — | 38,291 | 38,291 | — | 38,291 | |||||||||||||||||||||||||||||||||
| Minimum pension liability (net of income tax effect of $724) | — | — | — | — | — | — | — | 2,291 | 2,291 | — | 2,291 | |||||||||||||||||||||||||||||||||
| Subtotal - comprehensive income | 8,054 | — | — | — | — | — | 1,488,796 | 40,582 | 1,529,378 | 14,332 | 1,543,710 | |||||||||||||||||||||||||||||||||
| Balance, December 31, 2025 | $ | 70,620 | $ | 66 | $ | 538 | $ | 7 | $ | — | $ | (765,357 | ) | $ | 7,992,755 | $ | 47,783 | $ | 7,275,792 | $ | 62,996 | $ | 7,338,788 |
The accompanying notes are an integral part of these consolidated financial statements.
UNIVERSAL HEALTH SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY—(Continued)
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 2024
(in thousands)
| Accumulated | UHS | |||||||||||||||||||||||||||||||||||||||||||
| Redeemable | Other | Common | ||||||||||||||||||||||||||||||||||||||||||
| Noncontrolling | Class A | Class B | Class C | Class D | Cumulative | Retained | Comprehensive | Stockholders' | Noncontrolling | |||||||||||||||||||||||||||||||||||
| Interest | Common | Common | Common | Common | Dividends | Earnings | Income (Loss) | Equity | Interest | Total | ||||||||||||||||||||||||||||||||||
| Balance, January 1, 2024 | $ | 5,191 | $ | 66 | $ | 599 | $ | 7 | $ | — | $ | (659,890 | ) | $ | 6,798,930 | $ | 9,289 | $ | 6,149,001 | $ | 47,714 | $ | 6,196,715 | |||||||||||||||||||||
| Common Stock | ||||||||||||||||||||||||||||||||||||||||||||
| Issued/(converted) including tax benefits from exercise of stock options | — | — | 12 | — | — | — | 15,226 | — | 15,238 | — | 15,238 | |||||||||||||||||||||||||||||||||
| Repurchased | — | — | (34 | ) | — | — | — | (674,946 | ) | — | (674,980 | ) | — | (674,980 | ) | |||||||||||||||||||||||||||||
| Restricted share-based compensation expense | — | — | — | — | — | — | 43,626 | — | 43,626 | — | 43,626 | |||||||||||||||||||||||||||||||||
| Dividends paid | — | — | — | — | — | (53,815 | ) | — | — | (53,815 | ) | — | (53,815 | ) | ||||||||||||||||||||||||||||||
| Stock option expense | — | — | — | — | — | — | 54,289 | — | 54,289 | — | 54,289 | |||||||||||||||||||||||||||||||||
| Change in redemption amount of redeemable noncontrolling interest | 7,144 | — | — | — | — | — | (7,144 | ) | — | (7,144 | ) | — | (7,144 | ) | ||||||||||||||||||||||||||||||
| Distributions to noncontrolling interests | (650 | ) | — | — | — | — | — | — | — | — | (5,860 | ) | (5,860 | ) | ||||||||||||||||||||||||||||||
| Purchase of ownership interests by minority members | — | — | — | — | — | — | — | — | — | 22,056 | 22,056 | |||||||||||||||||||||||||||||||||
| Comprehensive income: | ||||||||||||||||||||||||||||||||||||||||||||
| Net income to UHS / noncontrolling interests | 1,608 | — | — | — | — | — | 1,142,097 | — | 1,142,097 | 19,406 | 1,161,503 | |||||||||||||||||||||||||||||||||
| Other | — | — | — | — | — | — | (17 | ) | 17 | — | — | — | ||||||||||||||||||||||||||||||||
| Foreign currency translation adjustments (net of income tax effect of $704) | — | — | — | — | — | — | — | (3,941 | ) | (3,941 | ) | — | (3,941 | ) | ||||||||||||||||||||||||||||||
| Minimum pension liability (net of income tax effect of $580) | — | — | — | — | — | — | — | 1,836 | 1,836 | — | 1,836 | |||||||||||||||||||||||||||||||||
| Subtotal - comprehensive income | 1,608 | — | — | — | — | — | 1,142,080 | (2,088 | ) | 1,139,992 | 19,406 | 1,159,398 | ||||||||||||||||||||||||||||||||
| Balance, December 31, 2024 | $ | 13,293 | $ | 66 | $ | 577 | $ | 7 | $ | — | $ | (713,705 | ) | $ | 7,372,061 | $ | 7,201 | $ | 6,666,207 | $ | 83,316 | $ | 6,749,523 |
The accompanying notes are an integral part of these consolidated financial statements.
UNIVERSAL HEALTH SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY—(Continued)
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 2023
(in thousands)
| Accumulated | UHS | |||||||||||||||||||||||||||||||||||||||||||
| Redeemable | Other | Common | ||||||||||||||||||||||||||||||||||||||||||
| Noncontrolling | Class A | Class B | Class C | Class D | Cumulative | Retained | Comprehensive | Stockholders' | Noncontrolling | |||||||||||||||||||||||||||||||||||
| Interest | Common | Common | Common | Common | Dividends | Earnings | Income (Loss) | Equity | Interest | Total | ||||||||||||||||||||||||||||||||||
| Balance, January 1, 2023 | $ | 4,695 | $ | 66 | $ | 637 | $ | 7 | $ | 0 | $ | (604,127 | ) | $ | 6,533,667 | $ | (9,668 | ) | $ | 5,920,582 | $ | 44,768 | $ | 5,965,350 | ||||||||||||||||||||
| Common Stock | ||||||||||||||||||||||||||||||||||||||||||||
| Issued/(converted) including tax benefits from exercise of stock options | — | — | 3 | — | — | — | 13,760 | — | 13,763 | — | 13,763 | |||||||||||||||||||||||||||||||||
| Repurchased | — | — | (41 | ) | — | — | — | (552,567 | ) | — | (552,608 | ) | — | (552,608 | ) | |||||||||||||||||||||||||||||
| Restricted share-based compensation expense | — | — | — | — | — | — | 22,032 | — | 22,032 | — | 22,032 | |||||||||||||||||||||||||||||||||
| Dividends paid | — | — | — | — | — | (55,763 | ) | — | — | (55,763 | ) | — | (55,763 | ) | ||||||||||||||||||||||||||||||
| Stock option expense | — | — | — | — | — | — | 64,243 | — | 64,243 | — | 64,243 | |||||||||||||||||||||||||||||||||
| Distributions to noncontrolling interests | (1,050 | ) | — | — | — | — | — | — | — | — | (5,780 | ) | (5,780 | ) | ||||||||||||||||||||||||||||||
| Purchase of ownership interests by minority members | — | — | — | — | — | — | — | — | — | 8,760 | 8,760 | |||||||||||||||||||||||||||||||||
| Comprehensive income: | ||||||||||||||||||||||||||||||||||||||||||||
| Net income to UHS / noncontrolling interests | 1,546 | — | — | — | — | — | 717,795 | — | 717,795 | (34 | ) | 717,761 | ||||||||||||||||||||||||||||||||
| Foreign currency translation adjustments (net of income tax effect of $520) | — | — | — | — | — | — | — | 15,791 | 15,791 | — | 15,791 | |||||||||||||||||||||||||||||||||
| Minimum pension liability (net of income tax effect of $1,000) | — | — | — | — | — | — | — | 3,166 | 3,166 | — | 3,166 | |||||||||||||||||||||||||||||||||
| Subtotal - comprehensive income | 1,546 | — | — | — | — | — | 717,795 | 18,957 | 736,752 | (34 | ) | 736,718 | ||||||||||||||||||||||||||||||||
| Balance, December 31, 2023 | $ | 5,191 | $ | 66 | $ | 599 | $ | 7 | $ | — | $ | (659,890 | ) | $ | 6,798,930 | $ | 9,289 | $ | 6,149,001 | $ | 47,714 | $ | 6,196,715 |
The accompanying notes are an integral part of these consolidated financial statements.
UNIVERSAL HEALTH SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEM****ENTS OF CASH FLOWS
| Year Ended December 31, | ||||||||||||
| 2025 | 2024 | 2023 | ||||||||||
| (Amounts in thousands) | ||||||||||||
| Cash Flows from Operating Activities: | ||||||||||||
| Net income | $ | 1,511,182 | $ | 1,163,109 | $ | 719,307 | ||||||
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||||||
| Depreciation & amortization | 618,743 | 584,831 | 568,041 | |||||||||
| Stock-based compensation expense | 95,688 | 99,349 | 87,720 | |||||||||
| Unrealized gain on non-marketable securities | (93,291 | ) | 0 | 0 | ||||||||
| Loss (gain) on sales of assets and businesses | 7,968 | (9,920 | ) | (6,250 | ) | |||||||
| Costs related to extinguishment of debt | 0 | 3,158 | 0 | |||||||||
| Changes in assets & liabilities, net of effects from acquisitions and dispositions: | ||||||||||||
| Accounts receivable | (317,985 | ) | 67,355 | (182,444 | ) | |||||||
| Accrued interest | (4,053 | ) | 12,814 | 1,193 | ||||||||
| Accrued and deferred income taxes | (21,441 | ) | 12,651 | (43,450 | ) | |||||||
| Other working capital accounts | 99,189 | 61,897 | (32,321 | ) | ||||||||
| Other assets and deferred charges | (28,599 | ) | (12,163 | ) | 48,517 | |||||||
| Other, net | 19,700 | 21,811 | 39,133 | |||||||||
| Accrued insurance expense, net of commercial premiums paid | 236,771 | 254,394 | 183,462 | |||||||||
| Payments made in settlement of self-insurance claims, net of commercial insurance reimbursements | (259,475 | ) | (192,185 | ) | (118,089 | ) | ||||||
| Deferred grant revenue | 0 | 0 | 2,978 | |||||||||
| Net cash provided by operating activities | 1,864,397 | 2,067,101 | 1,267,797 | |||||||||
| Cash Flows from Investing Activities: | ||||||||||||
| Property and equipment additions | (1,015,152 | ) | (943,810 | ) | (743,055 | ) | ||||||
| Proceeds received from sales of assets and businesses | 15,863 | 38,563 | 24,187 | |||||||||
| Acquisition of businesses and property | (47,804 | ) | (18,998 | ) | (3,728 | ) | ||||||
| (Outflows) inflows from foreign exchange contracts that hedge our net U.K. investment | (52,213 | ) | 12,860 | (40,695 | ) | |||||||
| Costs incurred for purchase and development of enterprise resource planning application | (24,695 | ) | 0 | 0 | ||||||||
| Proceeds received from sale of marketable equity securities | 63,073 | 0 | 0 | |||||||||
| Investments in non-marketable securities | (9,831 | ) | 0 | 0 | ||||||||
| Decrease in capital reserves of commercial insurance subsidiary | 142 | 276 | 16 | |||||||||
| Net cash used in investing activities | (1,070,617 | ) | (911,109 | ) | (763,275 | ) | ||||||
| Cash Flows from Financing Activities: | ||||||||||||
| Repayments of long-term debt | (43,504 | ) | (2,640,001 | ) | (85,480 | ) | ||||||
| Additional borrowings | 285,536 | 2,210,248 | 185,100 | |||||||||
| Financing costs | (382 | ) | (12,566 | ) | (308 | ) | ||||||
| Repurchase of common shares | (967,951 | ) | (670,754 | ) | (547,363 | ) | ||||||
| Dividends paid | (51,267 | ) | (53,346 | ) | (55,480 | ) | ||||||
| Issuance of common stock | 16,729 | 15,070 | 13,654 | |||||||||
| Profit distributions to noncontrolling interests | (11,734 | ) | (6,508 | ) | (6,830 | ) | ||||||
| Purchase of ownership interests by minority members | 22,846 | 12,980 | 2,762 | |||||||||
| Net cash used in financing activities | (749,727 | ) | (1,144,877 | ) | (493,945 | ) | ||||||
| Effect of exchange rate changes on cash and cash equivalents | 2,517 | (833 | ) | 3,056 | ||||||||
| Increase in cash, cash equivalents and restricted cash | 46,570 | 10,282 | 13,633 | |||||||||
| Cash, cash equivalents and restricted cash, beginning of period | 224,752 | 214,470 | 200,837 | |||||||||
| Cash, cash equivalents and restricted cash, end of period | $ | 271,322 | $ | 224,752 | $ | 214,470 | ||||||
| Supplemental Disclosures of Cash Flow Information: | ||||||||||||
| Interest paid | $ | 156,041 | $ | 168,274 | $ | 200,446 | ||||||
| Income taxes paid, net of refunds | $ | 470,865 | $ | 325,430 | $ | 257,896 | ||||||
| Noncash purchases of property and equipment | $ | 74,423 | $ | 118,109 | $ | 66,899 |
The accompanying notes are an integral part of these consolidated financial statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1) BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Services provided by our hospitals, all of which are operated by subsidiaries of ours, include general and specialty surgery, internal medicine, obstetrics, emergency room care, radiology, oncology, diagnostic care, coronary care, pediatric services, pharmacy services and/or behavioral health services. We, through our subsidiaries, provide capital resources as well as a variety of management services to our facilities, including central purchasing, information services, finance and control systems, facilities planning, physician recruitment services, administrative personnel management, marketing and public relations.
Principles of Consolidation: The consolidated financial statements include the accounts of our majority-owned subsidiaries and partnerships controlled by us or our subsidiaries as the managing general partner. All intercompany accounts and transactions have been eliminated.
Revenue Recognition:
Patient services provided in the U.S.: We report net patient service revenue at the estimated net realizable amounts from patients and third-party payers and others for services rendered. We have agreements with third-party payers that provide for payments to us at amounts different from our established rates. Payment arrangements include rates per discharge, reimbursed costs, discounted charges and per diem payments. Estimates of contractual allowances under managed care plans, which represent explicit price concessions, are based upon the payment terms specified in the related contractual agreements. We closely monitor our historical collection rates, as well as changes in applicable laws, rules and regulations and contract terms, to assure that provisions are made using the most accurate information available. However, due to the complexities involved in these estimations, actual payments from payers may be different from the amounts we estimate and record.
We estimate our Medicare and Medicaid revenues using the latest available financial information, patient utilization data, government provided data and in accordance with applicable Medicare and Medicaid payment rules and regulations. The laws and regulations governing the Medicare and Medicaid programs are extremely complex and subject to interpretation. Certain types of payments by the Medicare program and state Medicaid programs (e.g. Medicaid State Directed Payments, Medicare Disproportionate Share Hospital, Medicare Allowable Bad Debts and Inpatient Psychiatric Services) are subject to retroactive adjustment in future periods as a result of administrative review and audit and our estimates may vary from the final settlements. The funding of both federal Medicare and state Medicaid programs are subject to legislative and regulatory changes. As such, we cannot provide any assurance that future legislation and regulations, if enacted, will not have a material impact on our future Medicare and Medicaid reimbursements.
Behavioral health care services provided in the U.K.: The majority of the revenues generated by our behavioral health care facilities located in the U.K. are recorded pursuant to contracts with the National Health Service and other local governments for services including the following: behavioral health care services, rehabilitation services, residential homes, nursing homes, supported living services and specialist day services.
Commercial health insurer - certain acute care markets: The majority of the revenues generated by our commercial health insurer conducting business in certain acute care markets relate to Medicare Advantage premiums which are determined by the Centers for Medicare and Medicaid Services ("CMS") utilizing a risk adjustment model that apportions premiums paid to health plans according to health and geographic factors. Risk score adjustments result in retroactive premium adjustments. The revenue adjustments are recognized when the amount is determinable and collectability or liability is reasonably assured. CMS also uses a star rating system which is derived from comprehensive evaluations of member satisfaction, quality of care and operational efficiency. In addition, our insurer also generates revenues from premiums for coverage under membership contracts with employer groups and individuals.
See Note 10 - Revenue 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.
Charity Care, Uninsured Discounts and Other Adjustments to Revenue: Collection of receivables from third-party payers and patients is our primary source of cash and is critical to our operating performance. Our primary collection risks relate to uninsured patients and the portion of the bill which is the patient’s responsibility, primarily co-payments and deductibles. We estimate our revenue adjustments for implicit price concessions based on general factors such as payer mix, the aging of the receivables and historical collection experience. We routinely review accounts receivable balances in conjunction with these factors and other economic conditions which might ultimately affect the collectability of the patient accounts and make adjustments to our allowances as warranted. At our acute care hospitals, third party liability accounts are pursued until all payment and adjustments are posted to the patient account. For those accounts with a patient balance after third party liability is finalized or accounts for uninsured patients, the patient receives statements and collection letters.
Historically, a significant portion of the patients treated throughout our portfolio of acute care hospitals are uninsured patients which, in part, has resulted from patients who are employed but do not have health insurance or who have policies with relatively high deductibles. Patients treated at our hospitals for non-elective services, who have gross income of various amounts, dependent upon the state, ranging from 200% to 400% of the federal poverty guidelines, are deemed eligible for charity care. The federal poverty guidelines are established by the federal government and are based on income and family size. Because we do not pursue collection of amounts that qualify as charity care, the transaction price is fully adjusted and there is no impact in our net revenues or in our accounts receivable, net.
A portion of the accounts receivable at our acute care facilities are comprised of Medicaid accounts that are pending approval from third-party payers but we also have smaller amounts due from other miscellaneous payers such as county indigent programs in certain states. Our patient registration process includes an interview of the patient or the patient’s responsible party at the time of registration. At that time, an insurance eligibility determination is made and an insurance plan code is assigned. There are various pre-established insurance profiles in our patient accounting system which determine the expected insurance reimbursement for each patient based on the insurance plan code assigned and the services rendered. Certain patients may be classified as Medicaid pending at registration based upon a screening evaluation if we are unable to definitively determine if they are currently Medicaid eligible. When a patient is registered as Medicaid eligible or Medicaid pending, our patient accounting system records net revenues for services provided to that patient based upon the established Medicaid reimbursement rates, subject to the ultimate disposition of the patient’s Medicaid eligibility. When the patient’s ultimate eligibility is determined, reclassifications may occur which impacts net revenues in future 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 2025, 2024 or 2023 since our facilities make estimates at each financial reporting period to adjust revenue based on historical collections.
We also provide discounts to uninsured patients (included in “uninsured discounts” amounts below) who do not qualify for Medicaid or charity care. Because we do not pursue collection of amounts classified as uninsured discounts, the transaction price is fully adjusted and there is no impact in our net revenues or in our net accounts receivable. In implementing the discount policy, we first attempt to qualify uninsured patients for governmental programs, charity care or any other discount program. If an uninsured patient does not qualify for these programs, the uninsured discount is applied.
Uncompensated care (charity care and uninsured discounts):
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, 2025, 2024 and 2023:
| (dollar amounts in thousands) | ||||||||||||||||||||||||
| 2025 | 2024 | 2023 | ||||||||||||||||||||||
| Amount | % | Amount | % | Amount | % | |||||||||||||||||||
| Charity care | $ | 984,235 | 25 | % | $ | 819,681 | 23 | % | $ | 843,449 | 32 | % | ||||||||||||
| Uninsured discounts | 2,964,840 | 75 | % | 2,677,026 | 77 | % | 1,792,493 | 68 | % | |||||||||||||||
| Total uncompensated care | $ | 3,949,075 | 100 | % | $ | 3,496,707 | 100 | % | $ | 2,635,942 | 100 | % |
The estimated cost of providing uncompensated care:
The estimated cost of providing uncompensated care, as reflected below, were based on a calculation which multiplied the percentage of operating expenses for our acute care hospitals to gross charges for those hospitals by the above-mentioned total uncompensated care amounts. The percentage of cost to gross charges is calculated based on the total operating expenses for our acute care facilities divided by gross patient service revenue for those facilities. An increase in the level of uninsured patients to our facilities and the resulting adverse trends in the adjustments to net revenues and uncompensated care provided could have a material unfavorable impact on our future operating results.
| (amounts in thousands) | ||||||||||||
| 2025 | 2024 | 2023 | ||||||||||
| Estimated cost of providing charity care | $ | 87,756 | $ | 75,227 | $ | 83,383 | ||||||
| Estimated cost of providing uninsured discounts | 264,349 | 245,687 | 177,206 | |||||||||
| Estimated cost of providing uncompensated care | $ | 352,105 | $ | 320,914 | $ | 260,589 |
Concentration of Revenues: Our eight acute care hospitals and nine free-standing emergency departments in the Las Vegas, Nevada, market contributed, on a combined basis, 15% in both 2025 and 2024 and 14% in 2023 of our consolidated net revenues.
Cash, Cash Equivalents and Restricted Cash: We consider all highly liquid investments purchased with maturities of three months or less to be cash equivalents.
Cash, cash equivalents, and restricted cash as reported in the consolidated statements of cash flows are presented separately on our consolidated balance sheets as follow:
| (amounts in thousands) | ||||||||||||
| 2025 | 2024 | 2023 | ||||||||||
| Cash and cash equivalents | $ | 137,797 | $ | 125,983 | $ | 119,439 | ||||||
| Restricted cash (a) | 133,525 | 98,769 | 95,031 | |||||||||
| Total cash, cash equivalents and restricted cash | $ | 271,322 | $ | 224,752 | $ | 214,470 |
| (a) Restricted cash is included in other assets on the accompanying consolidated balance sheets and consists of statutorily required capital reserves related to our commercial insurance subsidiary. The fair value of our restricted cash was computed based upon quotes received from financial institutions. We consider these to be “level 1” in the fair value hierarchy as outlined in the authoritative guidance for disclosures in connection with financial securities. |
Property and Equipment: Property and equipment are stated at cost. Expenditures for renewals and improvements are charged to the property accounts. Replacements, maintenance and repairs which do not improve or extend the life of the respective asset are expensed as incurred. We remove the cost and the related accumulated depreciation from the accounts for assets sold or retired and the resulting gains or losses are included in the results of operations. Construction-in-progress includes both construction projects and equipment not yet placed into service.
We capitalized interest during the construction period of major construction projects and during the development and implementation of information technology applications amounting to $33.6 million during 2025, $38.9 million during 2024 and $24.4 million during 2023.
Depreciation is provided on the straight-line method over the estimated useful lives of buildings and improvements (twenty to forty years) and equipment (three to fifteen years). Depreciation expense was $594.0 million during 2025, $559.6 million during 2024 and $535.6 million during 2023.
Long-Lived Assets: We review our long-lived assets, including intangible assets, for impairment whenever events or circumstances indicate that the carrying value of these assets may not be recoverable. The assessment of possible impairment is based on our ability to recover the carrying value of our asset based on our estimate of its undiscounted future cash flows. If the analysis indicates that the carrying value is not recoverable from future cash flows, the asset is written down to its estimated fair value and an impairment loss is recognized. Fair values are determined based on estimated future cash flows using appropriate discount rates.
Goodwill: Goodwill is reviewed for impairment at the reporting unit level on an annual basis or sooner if the indicators of impairment arise. Our judgments regarding the existence of impairment indicators are based on market conditions and operational performance of each reporting unit. We have designated October 1st as our annual impairment assessment date and performed quantitative impairment assessments as of October 1, 2025 which indicated no impairment of goodwill. There were also no goodwill impairments during 2024 or 2023. Future changes in the estimates used to conduct the impairment reviews, including profitability and market value projections, could indicate impairment in future periods potentially resulting in a write-off of a portion or all of our goodwill.
Changes in the carrying amount of goodwill for the two years ended December 31, 2025 were as follows (in thousands):
| Acute Care Services | Behavioral Health Services | Total Consolidated | ||||||||||
| Balance, January 1, 2024 | $ | 516,628 | $ | 3,415,779 | $ | 3,932,407 | ||||||
| Goodwill acquired during the period | 13,252 | 0 | 13,252 | |||||||||
| Goodwill divested during the period | 0 | (5,298 | ) | (5,298 | ) | |||||||
| Adjustments to goodwill (a) | 0 | (7,482 | ) | (7,482 | ) | |||||||
| Balance, December 31, 2024 | 529,880 | 3,402,999 | 3,932,879 | |||||||||
| Goodwill acquired during the period | 0 | 21,786 | 21,786 | |||||||||
| Goodwill divested during the period | 0 | 0 | 0 | |||||||||
| Adjustments to goodwill (a) | 0 | 35,548 | 35,548 | |||||||||
| Balance, December 31, 2025 | $ | 529,880 | $ | 3,460,333 | $ | 3,990,213 |
(a)
The changes in the Behavioral Health Services’ goodwill consist of foreign currency translation adjustments.
Other Assets, Intangible Assets and Non-Marketable Securities: Other assets consist primarily of amounts related to: (i) intangible assets acquired in connection with our acquisitions of Cambian Group, PLC’s adult services’ division during 2015, Ascend Health Corporation during 2012 and Psychiatric Solutions, Inc. during 2010; (ii) prepaid fees for various software and other applications used by our hospitals; (iii) statutorily required capital reserves related to our commercial insurance subsidiary ($153 million and $118 million as of December 31, 2025 and 2024, respectively); (iv) deposits; (v) investments in various businesses, including Universal Health Realty Income Trust ($4 million and $6 million as of as of December 31, 2025 and 2024, respectively), Premier, Inc. ($47 million as of December 31, 2024; in November, 2025 we sold all of our remaining shares in Premier Inc.) and non-marketable securities of a healthcare generative artificial intelligence company ($115 million and $12 million as of December 31, 2025 and 2024, respectively); (vi) the invested assets related to a deferred compensation plan that is held by an independent trustee in a rabbi-trust and that has a related payable included in other noncurrent liabilities, and; (vii) other miscellaneous assets.
The non-marketable securities that we hold are accounted for under the measurement alternative pursuant to which the carrying value is measured at cost, less any impairment, plus or minus changes resulting from observable price changes in orderly transactions for identical or similar investments of the same issuer. Adjustments are determined primarily based on a market approach as of the transaction date and are recorded in other (income) expense, net. In connection with this investment, we recorded an unrealized pre-tax gain of $93 million during the year ended December 31, 2025.
Intangible assets are reviewed for impairment on an annual basis or more often if indicators of impairment arise. Our judgments regarding the existence of impairment indicators are based on market conditions and operational performance of each asset. We have designated October 1st as our annual impairment assessment date and performed impairment assessments as of October 1, 2025 which indicated no impairment. There were also no intangible asset impairments during 2024 or 2023.
The following table shows the amounts recorded as net intangible assets for the years ended December 31, 2025 and 2024:
| (amounts in thousands) | ||||||||
| 2025 | 2024 | |||||||
| Medicare licenses (a) | $ | 57,226 | $ | 57,226 | ||||
| Certificates of need | 7,973 | 7,987 | ||||||
| Contract relationships and other (net of $58,953 and $57,236 of accumulated amortization for 2025 and 2024, respectively) | 10,677 | 11,060 | ||||||
| Net Intangible Assets | $ | 75,876 | $ | 76,273 |
(a) Indefinite lives.
Supplies: Supplies, which consist primarily of medical supplies, are stated at the lower of cost (first-in, first-out basis) or market.
Self-Insured/Other Insurance Risks: We provide for self-insured risks, primarily general and professional liability claims, workers’ compensation claims and healthcare and dental claims. 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, estimates of losses for these claims based on recent and historical settlement amounts and jury verdicts, estimates of incurred but not reported claims based on historical experience, and estimates of amounts recoverable under our commercial insurance policies. All relevant information, including our own historical experience, applicable per occurrence and aggregate self-insured retentions, and limitations and exclusions pursuant to our commercial insurance policies, is used in estimating our expected liability for self-insured claims. While we continuously monitor these factors, our ultimate liability for professional and general liability claims could change materially from our current estimates due to inherent uncertainties involved in making this estimate. Our estimated self-insured reserves are reviewed and changed, if necessary, at each reporting date and changes are recognized currently as additional expense or as a reduction of expense. Given our significant exposure to professional and general liability claims, there can be no assurance that a sharp increase in the number and/or severity of claims asserted against us, and/or reductions in the amount of commercial coverage available to us, will not have a material adverse effect on our future results of operations.
In addition, we also: (i) own commercial health insurers headquartered in Nevada and Puerto Rico, and; (ii) maintain self-insured employee benefits programs for employee healthcare and dental claims. The ultimate costs related to these programs/operations include expenses for claims incurred and paid in addition to an accrual for the estimated expenses incurred in connection with claims incurred but not yet reported. See Note 8 - Commitments and Contingencies for additional disclosure related to our self-insured general and professional liability and workers’ compensation liability.
Income Taxes: Deferred tax assets and liabilities are recognized for the amount of taxes payable or deductible in future years as a result of differences between the tax bases of assets and liabilities and their reported amounts in the financial statements. We believe that future income will enable us to realize our deferred tax assets net of recorded valuation allowances relating to state and foreign net operating loss carry-forwards, tax credits, and interest deduction limitations.
We operate in multiple jurisdictions with varying tax laws. We are subject to audits by any of these taxing authorities. We believe that adequate accruals have been provided for federal, foreign and state taxes.
See Note 6-Income Taxes for additional disclosure.
Other Noncurrent Liabilities: Other noncurrent liabilities include the long-term portion of our professional and general liability, workers’ compensation reserves, pension and deferred compensation liabilities, and liabilities incurred in connection with split-dollar life insurance agreements on the lives of our executive chairman of the board and his wife.
Redeemable Noncontrolling Interests and Noncontrolling Interest: As of December 31, 2025, outside owners held noncontrolling, minority ownership interests of: (i) approximately 7% in an acute care facility located in Texas; (ii) 49%, 49%, 30%, 20%, 25%, and 48% in six behavioral health care facilities located in Arizona, Pennsylvania, Ohio, Washington, Missouri, and Iowa, respectively, (iii) 26% and 49% in two behavioral health care facilities located in Michigan and; (iv) approximately 5% in an acute care facility and 49% in a surgery center, located in Nevada. The noncontrolling interest and redeemable noncontrolling interest balances of $63 million and $71 million, respectively, as of December 31, 2025, consist primarily of the third-party ownership interests in these hospitals.
In connection with certain of the behavioral health care facilities mentioned above, the outside owners have “put options” to potentially put their entire ownership interest to us either in the future upon the occurrence of certain triggering events (as specified in the agreements), or at the present time. If exercised, the put option requires us to purchase the minority member’s interest at fair market value. Amounts recorded as redeemable noncontrolling interests on our condensed consolidated balance sheet as of December 31, 2025 reflect the estimated fair market value of the minority ownership interests that contain such put options.
Generally accepted accounting principles require that noncontrolling interests be classified as equity and we have presented noncontrolling interests in total equity. However, since certain of our noncontrolling interests have redemption rights outside of our control, those noncontrolling interests are classified outside of permanent equity. Noncontrolling interests with an estimated redemption amount of approximately $39 million has been reclassified from noncontrolling interest to redeemable noncontrolling interests as of December 31, 2025.
The minority owners of a 20% interest in a behavioral health care facility located in Pennsylvania had previously exercised their put option and we purchased their ownership interest in April, 2025
Accumulated Other Comprehensive Income: The accumulated other comprehensive income (“AOCI”) component of stockholders’ equity includes: net unrealized gains and losses on effective cash flow hedges, foreign currency translation adjustments and the net minimum pension liability of a non-contributory defined benefit pension plan which covers employees at one of our subsidiaries. See Note 11 - Pension Plan for additional disclosure regarding the defined benefit pension plan.
The amounts recognized in AOCI for the three years ended December 31, 2025 were as follows (in thousands):
| Net Unrealized Gains (Losses) on Effective Cash Flow Hedges | Foreign Currency Translation Adjustment | Minimum Pension Liability | Total AOCI | |||||||||||||
| Balance, January 1, 2023, net of income tax | $ | (17 | ) | $ | (4,255 | ) | $ | (5,396 | ) | $ | (9,668 | ) | ||||
| 2023 activity: | ||||||||||||||||
| Pretax amount | 0 | 15,271 | 4,166 | 19,437 | ||||||||||||
| Income tax effect | 0 | 520 | (1,000 | ) | (480 | ) | ||||||||||
| Change, net of income tax | 0 | 15,791 | 3,166 | 18,957 | ||||||||||||
| Balance, January 1, 2024, net of income tax | (17 | ) | 11,536 | (2,230 | ) | 9,289 | ||||||||||
| 2024 activity: | ||||||||||||||||
| Pretax amount | 17 | (3,237 | ) | 2,416 | (804 | ) | ||||||||||
| Income tax effect | 0 | (704 | ) | (580 | ) | (1,284 | ) | |||||||||
| Change, net of income tax | 17 | (3,941 | ) | 1,836 | (2,088 | ) | ||||||||||
| Balance, January 1, 2025, net of income tax | — | 7,595 | (394 | ) | 7,201 | |||||||||||
| 2025 activity: | ||||||||||||||||
| Pretax amount | 0 | 37,841 | 3,015 | 40,856 | ||||||||||||
| Income tax effect | 0 | 450 | (724 | ) | (274 | ) | ||||||||||
| Change, net of income tax | 0 | 38,291 | 2,291 | 40,582 | ||||||||||||
| Balance, December 31, 2025, net of income tax | $ | — | $ | 45,886 | $ | 1,897 | $ | 47,783 |
Accounting for Derivative Financial Investments and Hedging Activities and Foreign Currency Forward Exchange Contracts: We manage our ratio of fixed and floating rate debt with the objective of achieving a mix that management believes is appropriate. To manage this risk in a cost-effective manner, we, from time to time, enter into interest rate swap agreements in which
we agree to exchange various combinations of fixed and/or variable interest rates based on agreed upon notional amounts. We account for our derivative and hedging activities using the Financial Accounting Standard Board’s (“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. For derivative transactions designated as hedges, we formally document all relationships between the hedging instrument and the related hedged item, as well as its risk-management objective and strategy for undertaking each hedge transaction.
Derivative instruments designated in a hedge relationship to mitigate exposure to variability in expected future cash flows, or other types of forecasted transactions, are considered cash flow hedges. Cash flow hedges are accounted for by recording the fair value of the derivative instrument on the balance sheets as either an asset or liability, with a corresponding amount recorded in accumulated other comprehensive income (“AOCI”) within statements of changes in equity. Amounts are reclassified from AOCI to the income statement in the period or periods the hedged transaction affects earnings. From time to time, we use interest rate derivatives in our cash flow hedge transactions. Such derivatives are designed to be highly effective in offsetting changes in the cash flows related to the hedged liability.
For hedge transactions that do not qualify for the short-cut method, at the hedge’s inception and on a regular basis thereafter, a formal assessment is performed to determine whether changes in the fair values or cash flows of the derivative instruments have been highly effective in offsetting changes in cash flows of the hedged items and whether they are expected to be highly effective in the future.
We use forward exchange contracts to hedge our net investment in foreign operations against movements in exchange rates. The effective portion of the unrealized gains or losses on these contracts is recorded in foreign currency translation adjustment within accumulated other comprehensive income and remains there until either the sale or liquidation of the subsidiary.
Stock-Based Compensation: We have a number of stock-based employee compensation plans. Pursuant to the FASB’s guidance, we expense the grant-date fair value of restricted stock units and stock options (computed utilizing the Black-Scholes option-pricing model) pursuant to the straight-line method over the stated vesting period of the award. The expense associated with share-based compensation arrangements is a non-cash charge. In the consolidated statements of cash flows, share-based compensation expense is an adjustment to reconcile net income to cash provided by operating activities.
Earnings per Share: Basic earnings per share are based on the weighted average number of common shares outstanding during the year. Diluted earnings per share are based on the weighted average number of common shares outstanding during the year adjusted to give effect to common stock equivalents.
The following table sets forth the computation of basic and diluted earnings per share, for the periods indicated (in thousands, except per share data):
| Twelve Months Ended December 31, | ||||||||||||
| 2025 | 2024 | 2023 | ||||||||||
| Basic and diluted: | ||||||||||||
| Net Income | $ | 1,511,182 | $ | 1,163,109 | $ | 719,307 | ||||||
| Less: Net (income) loss attributable to noncontrolling interest ("NCI") | (22,386 | ) | (21,012 | ) | (1,512 | ) | ||||||
| Less: Net income attributable to unvested restricted share grants | — | (50 | ) | (308 | ) | |||||||
| Net income attributable to UHS—basic and diluted | $ | 1,488,796 | $ | 1,142,047 | $ | 717,487 | ||||||
| Basic earnings per share attributable to UHS: | ||||||||||||
| Weighted average number of common shares—basic | 63,581 | 66,554 | 69,321 | |||||||||
| Total basic earnings per share | $ | 23.42 | $ | 17.16 | $ | 10.35 | ||||||
| Diluted earnings per share attributable to UHS: | ||||||||||||
| Weighted average number of common shares | 63,581 | 66,554 | 69,321 | |||||||||
| Net effect of dilutive stock options and grants based on the treasury stock method | 881 | 1,342 | 804 | |||||||||
| Weighted average number of common shares and equivalents—diluted | 64,462 | 67,896 | 70,125 | |||||||||
| Total diluted earnings per share | $ | 23.10 | $ | 16.82 | $ | 10.23 |
The “Net effect of dilutive stock options and grants based on the treasury stock method”, for all years presented above, excludes certain outstanding stock options applicable to each year since the effect would have been anti-dilutive. The excluded weighted-average stock options totaled approximately 5,250 during 2025, 600,000 during 2024 and 5.1 million during 2023.
Fair Value of Financial Instruments: The fair values of our debt and investments are based on quoted market prices. The fair values of other long-term debt, including capital lease obligations, are estimated by discounting cash flows using period-end interest
rates and market conditions for instruments with similar maturities and credit quality. The carrying amounts reported in the balance sheets for cash, accounts receivable, accounts payable, and short-term borrowings approximates their fair values due to the short-term nature of these instruments. Accordingly, these items have been excluded from the fair value disclosures included elsewhere in these notes to consolidated financial statements.
Use of Estimates: The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Mergers and Acquisitions: The acquisition method of accounting for business combinations requires that the assets acquired and liabilities assumed be recorded at the date of acquisition at their respective fair values with limited exceptions. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Any excess of the purchase price (consideration transferred) over the estimated fair values of net assets acquired is recorded as goodwill. Transaction costs and costs to restructure the acquired company are expensed as incurred. The fair value of intangible assets, including Medicare licenses, certificates of need, tradenames and certain contracts, is based on significant judgments made by our management, and accordingly, for significant items we typically obtain assistance from third party valuation specialists.
GPO Agreement/Minority Ownership Interest: Note 9 - Relationship with Universal Health Realty Income Trust and Other Related Party Transactions includes disclosure related to our GPO agreement and minority ownership interest in Premier, Inc. ("Premier"), a healthcare performance improvement alliance. Pursuant to an agreement and plan of merger providing for the acquisition of Premier by Patient Square Capital, our minority ownership interest in Premier was sold in November, 2025.
Provider Taxes: We incur health-care related taxes (“Provider Taxes”) imposed by states in the form of a licensing fee, assessment or other mandatory payment which are related to: (i) healthcare items or services; (ii) the provision of, or the authority to provide, the health care items or services, or; (iii) the payment for the health care items or services. Such Provider Taxes are subject to various federal regulations that limit the scope and amount of the taxes that can be levied by states in order to secure federal matching funds as part of their respective state Medicaid programs. We derive a related Medicaid reimbursement benefit from assessed Provider Taxes in the form of Medicaid claims based payment increases and/or lump sum Medicaid supplemental payments.
Under these programs, including the impact of the Texas Uncompensated Care and Upper Payment Limit program, the Texas Delivery System Reform Incentive program, the Nevada State Directed Payment program, the Washington D.C State Directed Payment program and various other state programs, we earned revenues (before Provider Taxes) of approximately $1.914 billion during 2025, $1.499 billion during 2024 and $853 million during 2023. These revenues were offset by Provider Taxes of approximately $631 million during 2025, $536 million during 2024 and $297 million during 2023, which are recorded in other operating expenses on the consolidated statements of income as included herein. The aggregate net benefit from these programs was $1.283 billion during 2025, $963 million during 2024 and $556 million during 2023. The aggregate net benefit pursuant to these programs is earned from multiple states and therefore no particular state’s portion is individually material to our consolidated financial statements. In addition, under various disproportionate share hospital payment programs and state plan amendment programs, we earned revenues of $56 million in 2025, $53 million in 2024 and $73 million in 2023.
Recent Accounting Standards: During 2025 we adopted ASU 2023-09, “Improvements to Income Tax Disclosures (Topic 740)”. ASU 2023-09 requires enhanced disclosures on income taxes paid, adds disaggregation of continuing operations before income taxes between foreign and domestic earnings and defines specific categories for the reconciliation of jurisdictional tax rate to effective tax rate. The standard was adopted using the prospective transition method, and accordingly, prior period financial information has not been adjusted. See Note 6 - Income Taxes for the required disclosures.
During 2024, we adopted ASU 2023-07, “Improvements to Reportable Segment Disclosures (Topic 280)”. ASU 2023-07 modifies reportable segment disclosure requirements, primarily through enhanced disclosures about segment expenses categorized as significant or regularly provided to the Chief Operating Decision Maker (CODM). The standard was applied retrospectively to all periods presented in the financial statements. See Note 12 - Segment Reporting for the required disclosures.
In November 2025, the FASB issued ASU 2025-09, “Derivatives and Hedging (Topic 815), Hedging Accounting Improvements. ASU 2025-09 intends to more closely align hedge accounting with the economics of an entity's risk management activities. This ASU is effective for fiscal years beginning after December 15, 2026, including interim periods within those fiscal years. We are currently evaluating the impact this new standard will have on the consolidated financial statements.
In November 2024, the FASB issued ASU 2024-03, “Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures (subtopic 220-40)". ASU 2024-03 requires disclosures, in the notes to financial statements, of specified information about certain costs and expenses. This ASU is effective for fiscal years beginning after December 15, 2026, and interim
periods within those fiscal years beginning after December 15, 2027. We are currently evaluating the impact this new standard will have on the related disclosures in the consolidated financial statements.
From time to time, new accounting guidance is issued by the FASB or other standard setting bodies that is adopted by us as of the effective date or, in some cases where early adoption is permitted, in advance of the effective date. We have assessed the recently issued guidance that are not yet effective and, unless otherwise indicated above, we believe the new guidance will not have a material impact on our results of operations, cash flows or financial position.
Foreign Currency Translation: Assets and liabilities of our U.K. subsidiaries are denominated in pound sterling and translated into U.S. dollars at: (i) the rates of exchange at the balance sheet date, and; (ii) average rates of exchange prevailing during the year for revenues and expenses. The currency translation adjustments are reported as a component of accumulated other comprehensive income. See Note 3 - Financial Instruments and Fair Value Measurement for additional disclosure.
2) ACQUISITIONS AND DIVESTITURES
Years ended December 31, 2025:
2025 Acquisitions of Assets and Businesses:
During 2025, we spent $48 million on the acquisition of behavioral health care businesses and property located in the United Kingdom.
2025 Divestiture of Assets and Businesses:
During 2025, we received $16 million from the sale of assets and businesses.
Years ended December 31, 2024:
2024 Acquisitions of Assets and Businesses:
During 2024, we spent $19 million on the acquisition of businesses and properties.
2024 Divestiture of Assets and Businesses:
During 2024, we received $39 million from the sale of assets and businesses.
Year ended December 31, 2023:
2023 Acquisitions of Assets and Businesses:
During 2023, we spent $4 million on the acquisition of businesses and properties.
2023 Divestiture of Assets and Businesses:
During 2023, we received $24 million from the sale of assets and businesses.
3) FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENT
Cash Flow Hedges:
When applicable, 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. During the years ended December 31, 2025, 2024 and 2023, we had no cash flow hedges outstanding.
Foreign Currency Forward Exchange Contracts:
We use forward exchange contracts to hedge our net investment in foreign operations against movements in exchange rates. The effective portion of the unrealized gains or losses on these contracts is recorded in foreign currency translation adjustment within accumulated other comprehensive income and remains there until either the sale or liquidation of the subsidiary. In connection with these forward exchange contracts, we recorded net cash outflows of approximately $52 million during 2025, net cash inflows of approximately $13 million during 2024 and net cash outflows of approximately $41 million during 2023.
Derivatives Hedging Relationships:
The following table presents the effects of our foreign currency foreign exchange contracts on our results of operations for the three years ended December 31 (in thousands):
| Gain/(Loss) recognized in AOCI | ||||||||||||
| December 31, | December 31, | December 31, | ||||||||||
| 2025 | 2024 | 2023 | ||||||||||
| Net Investment Hedge relationships | ||||||||||||
| Foreign currency foreign exchange contracts | $ | (53,948 | ) | $ | 15,344 | $ | (45,748 | ) |
No other gains or losses were recognized in income related to derivatives in Subtopic 815-20.
Fair Value Measurement
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The following fair value hierarchy classifies the inputs to valuation techniques used to measure fair value into one of three levels:
Level 1: Unadjusted quoted prices in active markets for identical assets or liabilities.
Level 2: Inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly. These included quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active.
Level 3: Unobservable inputs that reflect the reporting entity’s own assumptions.
The following tables present the assets and liabilities recorded at fair value on a recurring basis:
| Balance at | Balance Sheet | Basis of Fair Value Measurement | |||||||||||
| (in thousands) | December 31, 2025 | Location | Level 1 | Level 2 | Level 3 | ||||||||
| Assets: | |||||||||||||
| Money market mutual funds | $ | 150,948 | Other noncurrent assets | $ | 150,948 | ||||||||
| Certificates of deposit | 2,200 | Other noncurrent assets | 2,200 | ||||||||||
| Non-marketable securities | 115,248 | Other noncurrent assets | 115,248 | ||||||||||
| Deferred compensation assets | 55,160 | Other noncurrent assets | 55,160 | ||||||||||
| Foreign currency forward exchange contracts | 1,163 | Other current assets | 1,163 | ||||||||||
| $ | 324,719 | $ | 206,108 | $ | 3,363 | $ | 115,248 | ||||||
| Liabilities: | |||||||||||||
| Deferred compensation liability | 55,160 | Other noncurrent liabilities | 55,160 | ||||||||||
| $ | 55,160 | $ | 55,160 | $ | - | $ | - | ||||||
| Balance at | Balance Sheet | Basis of Fair Value Measurement | |||||||||||
| (in thousands) | December 31, 2024 | Location | Level 1 | Level 2 | Level 3 | ||||||||
| Assets: | |||||||||||||
| Money market mutual funds | $ | 115,399 | Other noncurrent assets | $ | 115,399 | ||||||||
| Certificates of deposit | 2,206 | Other noncurrent assets | 2,206 | ||||||||||
| Equity securities | 47,333 | Other noncurrent assets | 47,333 | ||||||||||
| Deferred compensation assets | 49,222 | Other noncurrent assets | 49,222 | ||||||||||
| Foreign currency forward exchange contracts | 572 | Other current assets | 572 | ||||||||||
| $ | 214,732 | $ | 211,954 | $ | 2,778 | $ | - | ||||||
| Liabilities: | |||||||||||||
| Deferred compensation liability | 49,222 | Other noncurrent liabilities | 49,222 | ||||||||||
| $ | 49,222 | $ | 49,222 | $ | - | $ | - |
The fair value of our money market mutual funds, certificates of deposit and equity securities with a readily determinable fair value are computed based upon quoted market prices in an active market. The fair value of deferred compensation assets and the offsetting liability are computed based on market prices in an active market held in a rabbi trust. The fair value of our foreign
currency exchange contracts is valued using quoted forward exchange rates and spot rates at the reporting date. The fair value of the non-marketable securities that we hold are accounted for under the measurement alternative. Under the measurement alternative, the carrying value is measured at cost, less any impairment, plus or minus changes resulting from observable price changes in orderly transactions for identical or similar investments of the same issuer. Adjustments are determined primarily based on a market approach as of the transaction date and are recorded in other (income) expense, net.
4) LONG-TERM DEBT
A summary of long-term debt follows:
| December 31, | ||||||||
| 2025 | 2024 | |||||||
| (amounts in thousands) | ||||||||
| Long-term debt: | ||||||||
| Notes and Mortgages payable (including obligations under finance leases of $91,121 in 2025 and $92,530 in 2024) and term loans with varying maturities through 2099; weighted average interest rates of 4.0% in 2025 and 3.8% in 2024 (see Note 7 regarding finance leases) | $ | 200,810 | $ | 206,046 | ||||
| Tranche A term loan | 1,162,500 | 1,192,500 | ||||||
| Revolving credit facility | 408,400 | 130,000 | ||||||
| 2.65% Senior Secured Notes due 2030, net of unamortized discount of $1,065 in 2025 and $1,291 in 2024 | 798,935 | 798,709 | ||||||
| 1.65% Senior Secured Notes due 2026, net of unamortized discount of $113 in 2025 and $288 in 2024 | 699,887 | 699,712 | ||||||
| 2.65% Senior Secured Notes due 2032, net of unamortized discount of $734 in 2025 and $864 in 2024 | 499,266 | 499,136 | ||||||
| 4.625% Senior Secured Notes due 2029, net of unamortized discount of $161 in 2025 and net of unamortized discount of $204 in 2024 | 499,839 | 499,796 | ||||||
| 5.050% Senior Secured Notes due 2034, net of unamortized discount of $1,376 in 2025 and net of unamortized discount of $1,533 in 2024 | 498,624 | 498,467 | ||||||
| Total debt before unamortized financing costs | 4,768,261 | 4,524,366 | ||||||
| Less-Unamortized financing costs | (15,710 | ) | (19,825 | ) | ||||
| Total debt after unamortized financing costs | 4,752,551 | 4,504,541 | ||||||
| Less-Amounts due within one year | (748,158 | ) | (40,059 | ) | ||||
| Long-term debt | $ | 4,004,393 | $ | 4,464,482 |
Credit Facilities and Outstanding Debt Securities
In September 2024, we entered into a tenth amendment ("Tenth Amendment") to our credit agreement ("Credit Agreement"), dated as of November 15, 2010, as amended and restated at various times from March, 2011 to June, 2022, among UHS, as borrower, the several banks and other financial institutions or entities from time to time parties thereto, as lenders, and JPMorgan Chase Bank, N.A., as administrative agent. The Tenth Amendment provided for: (i) an extension of the maturity date to September 26, 2029; (ii) a new revolving credit facility of up to $1.3 billion (which as of December 31, 2025, had $889 million of aggregate available borrowing capacity, net of $408 million of borrowings outstanding and $3 million of letters of credit), and; (iii) a new replacement tranche A term loan facility ("Tranche A Term Loan") of up to $1.2 billion (which had $1.16 billion of outstanding borrowings as of December 31, 2025).
Pursuant to the terms of the Tenth Amendment, the Tranche A Term Loan provides for installment payments of $7.5 million per quarter commencing on December 31, 2024 through September 30, 2026, and $15.0 million per quarter commencing on December 31, 2026 through June 30, 2029. The unpaid principal balance at June 30, 2029 (scheduled to be $975.0 million) is payable on the September 26, 2029 scheduled maturity date of the Credit Agreement.
Revolving credit and Tranche A Term Loan borrowings under the Credit Agreement bear interest at our election at either (1) the ABR rate which is defined as the rate per annum equal to the greatest of (a) the lender’s prime rate, (b) the greater of the federal funds effective rate and the overnight bank funding rate, plus 0.5% and (c) one month term SOFR rate plus 1.1%, in each case, plus an applicable margin based upon our consolidated leverage ratio at the end of each quarter ranging from 0.25% to 0.625%, or (2) the one, three or six month term SOFR rate plus 0.1% (at our election), plus an applicable margin based upon our consolidated leverage ratio at the end of each quarter ranging from 1.25% to 1.625%. As of December 31, 2025, the applicable margins were 0.25% for ABR-based loans and 1.25% for SOFR-based loans under the revolving credit and term loan A facilities. The revolving credit facility includes a $125 million sub-limit for letters of credit. The Credit Agreement is secured by certain assets of the Company and our material
subsidiaries (which generally excludes asset classes such as substantially all of the patient-related accounts receivable of our acute care hospitals, if sold to a receivables facility pursuant to the Credit Agreement, and certain real estate assets and assets held in joint-ventures with third parties) and is guaranteed by our material subsidiaries.
The Credit Agreement includes a material adverse change clause that must be represented at each draw. The Credit Agreement also contains covenants that include a limitation on sales of assets, mergers, change of ownership, liens, indebtedness, transactions with affiliates, dividends and stock repurchases; and requires compliance with financial covenants including maximum leverage. We were in compliance with all required covenants as of December 31, 2025 and December 31, 2024.
As of December 31, 2025, we had combined aggregate principal of $3.0 billion from the following senior secured notes:
$700 million of aggregate principal amount of 1.65% senior secured notes due in September, 2026 ("2026 Notes") which were issued on August 24, 2021. Interest on the 2026 Notes is payable on March 1st and September 1st until the maturity date of September 1, 2026.
$500 million of aggregate principal amount of 4.625% senior secured notes due in October, 2029 ("2029 Notes") which were issued on September 26, 2024. Interest on the 2029 Notes is payable on April 15th and October 15th, commencing April 15, 2025 until the maturity date of October 15, 2029.
$800 million of aggregate principal amount of 2.65% senior secured notes due in October, 2030 ("2030 Notes") which were issued on September 21, 2020. Interest on the 2030 Notes is payable on April 15th and October 15th, until the maturity date of October 15, 2030.
$500 million of aggregate principal amount of 2.65% senior secured notes due in January, 2032 ("2032 Notes") which were issued on August 24, 2021. Interest on the 2032 Notes is payable on January 15th and July 15th until the maturity date of January 15, 2032.
$500 million of aggregate principal amount of 5.050% senior secured notes due in October, 2034 ("2034 Notes") which were issued on September 26, 2024. Interest on the 2034 Notes is payable on April 15th and October 15th, commencing on April 15, 2025 until the maturity date of October 15, 2034.
The 2026, 2029, 2030, 2032 and 2034 Notes (collectively "All the Notes") are guaranteed (the “Guarantees”) on a senior secured basis by all of our existing and future direct and indirect subsidiaries that guarantee our Credit Agreement, other first lien obligations, or any junior lien obligations (the "Subsidiary Guarantors"). All the Notes and the Guarantees are secured by first-priority liens, subject to permitted liens, on certain of the Company’s and the Subsidiary Guarantors’ assets now owned or acquired in the future by the Company or the Subsidiary Guarantors (other than real property, accounts receivable sold pursuant to a Company-related receivables facility (as defined in the Indenture pursuant to which All the Notes were issued (the “Indentures”), and certain other excluded assets). The Company’s obligations with respect to All the Notes, the obligations of the Subsidiary Guarantors under the Guarantees, and the performance of all of the Company’s and the Subsidiary Guarantors’ other obligations under the Indentures, are secured equally and ratably with the Company’s and the Subsidiary Guarantors’ obligations under the Credit Agreement. However, the liens on the collateral securing All the Notes and the Guarantees will be released if: (i) All the Notes have investment grade ratings; (ii) no default has occurred and is continuing, and; (iii) the liens on the collateral securing all first lien obligations (including the Credit Agreement and All the Notes) and any junior lien obligations are released or the collateral under the Credit Agreement, any other first lien obligations and any junior lien obligations is released or no longer required to be pledged. The liens on any collateral securing All the Notes and the Guarantees will also be released if the liens on that collateral securing the Credit Agreement, other first lien obligations and any junior lien obligations are released.
In connection with an asset purchase and sale agreement, and related lease agreements, completed with Universal Health Realty Income Trust ("Trust") in December 2021, our consolidated balance sheets at December 31, 2025 and December 31, 2024 reflect financial liabilities, which are included in debt, of approximately $70 million and $74 million, respectively. In connection with that transaction, as a result of our purchase option within the lease agreements related to two of our facilities, the asset purchase and sale transaction was accounted for as a failed sale leaseback in accordance with U.S. GAAP and we have accounted for the transaction as a financing arrangement. Our lease payments payable to the Trust are recorded to interest expense and as a reduction of the outstanding financial liability, and the amount allocated to interest expense is determined based upon our incremental borrowing rate and the outstanding financial liability.
At December 31, 2025, the carrying value and fair value of our debt were approximately $4.8 billion and $4.6 billion, respectively. At December 31, 2024, the carrying value and fair value of our debt were approximately $4.5 billion and $4.2 billion, respectively. The fair value of our debt was computed based upon quotes received from financial institutions. We consider these to be “level 2” in the fair value hierarchy as outlined in the authoritative guidance for disclosures in connection with debt instruments.
The aggregate scheduled maturities of our total debt outstanding as of December 31, 2025, before unamortized financing costs, are as follows:
| (000s) | ||||
| 2026 | $ | 748,975 | ||
| 2027 | 70,744 | |||
| 2028 | 71,535 | |||
| 2029 | 1,925,600 | |||
| 2030 | 812,167 | |||
| Later | 1,139,240 | |||
| Total maturities before unamortized financing costs | 4,768,261 | |||
| Less-Unamortized financing costs | (15,710 | ) | ||
| Total | $ | 4,752,551 |
5) COMMON STOCK
Dividends
We declared and paid cash dividends of $.80 per share during each of the last three years amounting to, in the aggregate, $51.3 million during 2025, $53.3 million during 2024 and $55.5 million during 2023. All classes of our common stock have similar economic rights.
Stock Repurchase Programs
As of January 1, 2025, we had an aggregate available repurchase authorization of $824.36 million under our stock repurchase program. In October, 2025, our Board of Directors authorized a $1.5 billion increase in our stock repurchase program. As of December 31, 2025, we had an aggregate available repurchase authorization of $1.43 billion. Pursuant to this program, shares of our Class B Common Stock may be repurchased, from time to time as conditions allow, on the open market or in negotiated private transactions. There is no expiration date for our stock repurchase programs.
The following schedule provides information related to our stock repurchase program for each of the three years ended December 31, 2025. During 2025, 4,650,318 shares ($899.3 million in the aggregate) were repurchased pursuant to the terms of the stock repurchase program and 369,891 shares ($68.7 million in the aggregate) were repurchased in connection with the income tax withholding obligations resulting from stock-based compensation programs. During 2024, 2,982,906 shares ($598.5 million in the aggregate) were repurchased pursuant to the terms of the stock repurchase program and 375,248 shares ($72.2 million in the aggregate) were repurchased in connection with the income tax withholding obligations resulting from stock-based compensation programs. During 2023, 3,855,046 shares ($524.5 million in the aggregate) were repurchased pursuant to the terms of the stock repurchase program and 164,649 shares ($22.9 million in the aggregate) were repurchased in connection with the income tax withholding obligations resulting from stock-based compensation programs.
| Additional dollars authorized for repurchase (in thousands) | Total number of shares purchased (a.) | Total number of shares cancelled | Average price paid per share for forfeited restricted shares | Total number of shares purchased as part of publicly announced programs | Average price paid per share for shares purchased as part of publicly announced program | Aggregate purchase price paid (in thousands) | Aggregate purchase price paid for shares purchased as part of publicly announced program | Maximum number of dollars that may yet be purchased under the program (in thousands) | ||||||||||||||||||||||||||||
| Balance as of Jan. 1, 2023 | $ | 947,368 | ||||||||||||||||||||||||||||||||||
| 2023 | $ | — | 4,022,051 | 2,356 | $ | 0.01 | 3,855,046 | $ | 136.05 | $ | 547,362 | $ | 524,485 | $ | 422,883 | |||||||||||||||||||||
| 2024 | $ | 1,000,000 | 3,358,261 | 107 | $ | 0.01 | 2,982,906 | $ | 200.65 | $ | 670,753 | $ | 598,522 | $ | 824,361 | |||||||||||||||||||||
| 2025 | $ | 1,500,000 | 5,020,209 | — | $ | 0.01 | 4,650,318 | $ | 193.38 | $ | 967,951 | $ | 899,275 | $ | 1,425,086 | |||||||||||||||||||||
| Total for three year period ended December 31, 2025 | $ | 2,500,000 | 12,400,521 | 2,463 | $ | 0.01 | 11,488,270 | $ | 176.03 | $ | 2,186,066 | $ | 2,022,282 |
(a.)
Includes 0, 107, and 2,356, of restricted shares that were forfeited by former employees pursuant to the terms of our restricted stock purchase plan during 2025, 2024 and 2023, respectively.
Stock-based Compensation Plans
At December 31, 2025, we have a number of stock-based employee compensation plans. Pursuant to the FASB’s guidance, we expense the grant-date fair value of restricted stock units and stock options (computed utilizing the Black-Scholes option-pricing model) and other equity-based compensation pursuant to the straight-line method over the stated vesting period of the awards. Prior to 2024, our annual stock-based compensation awards were generally issued as a blend restricted stock units and stock options.
Commencing in 2024, our annual stock-based compensation awards were issued fully in restricted stock units (and performance-based restricted stock units to our executive officers) and are expected to remain so in future years.
Pre-tax share-based compensation costs of $33.8 million during 2025, $54.3 million during 2024 and $64.2 million during 2023 were recognized related to outstanding stock options. In addition, pre-tax compensation costs of $61.9 million during 2025, $45.1 million during 2024 and $23.5 million during 2023 were recognized related to amortization of restricted stock units as well as discounts provided in connection with shares purchased pursuant to our 2005 Employee Stock Purchase Plan. As of December 31, 2025, there was approximately $147.1 million of unrecognized compensation cost related to unvested stock options and restricted stock which is expected to be recognized over the remaining average vesting period of 2.4 years.
The expense associated with stock-based compensation arrangements is a non-cash charge. In the consolidated statements of cash flows, stock-based compensation expense is an adjustment to reconcile net income to cash provided by operating activities and aggregated to $95.7 million in 2025, $99.3 million in 2024 and $87.7 million in 2023. In connection with ASU 2016-09, “Compensation-Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting”, our provision for income taxes and our net income attributable to UHS were favorably impacted by $4.2 million during 2025 and $15.9 million during 2024 (net of unfavorable impacts of $15.7 million during 2025 and $10.2 million during 2024 resulting from executive compensation limitations pursuant to IRC section 162(m)), and unfavorably impacted by $4.7 million during 2023.
In 2005, we adopted the 2005 Stock Incentive Plan (the “Stock Incentive Plan”) which was amended in 2008, 2010, 2015 and 2017 and was canceled in 2020, as discussed below. An aggregate of 35.6 million shares of Class B Common Stock had been reserved under the Stock Incentive Plan, the remaining balance of which was canceled in 2020. During 2020, stock options, net of cancellations of approximately 2.2 million were granted under the Stock Incentive Plan. Stock options to purchase Class B Common Stock have been granted to our officers, key employees and members of our Board of Directors. Upon adoption of the 2020 Omnibus Stock and Incentive Plan, as discussed below, no additional awards were granted under the 2005 Stock Incentive Plan or the 2010 Employees’ Restricted Stock Purchase Plan (discussed below), and reserves for future issuance pursuant to each plan were canceled.
In 2020, we adopted the 2020 Omnibus Stock and Incentive Plan (the “2020 Stock Incentive Plan”) which was amended in 2022 and 2024. An aggregate of 18.1 million shares of Class B Common Stock has been reserved for issuance under the 2020 Stock Incentive Plan. As of December 31, 2025, approximately 6.59 million shares of Class B Common Stock remain available for issuance pursuant to the 2020 Stock Incentive Plan. Under the 2020 Stock Incentive Plan, shares that are subject to stock options shall be counted as one share per stock option, and every share that is subject to restricted stock awards or restricted stock units shall be counted as four shares. Various other types of equity awards are also permitted under the 2020 Stock Incentive Plan.
During each of the last three years, the following were granted pursuant to the 2020 Stock Incentive Plan (net of cancellations):
2025: 0 stock options and 545,355 restricted stock units (including 61,251 performance based restricted stock units).
2024: 3,000 stock options and 480,489 restricted stock units (including 63,362 performance based restricted stock units).
2023: 1.6 million stock options and 247,241 restricted stock units (including 93,606 performance based restricted stock units).
Restricted stock units issued under the 2020 Stock Incentive Plan do not have rights to receive dividends on unvested awards, however, dividends on unvested restricted stock units are typically deferred and accumulated prior to vesting and paid in cash in the aggregate on the vesting date.
The weighted average grant-date fair values of the restricted stock units issued under the 2020 Stock Incentive Plan during each of the last three years, as reflected above, were $178.33 during 2025, $181.05 during 2024 and $118.14 during 2023. The fair value of each restricted stock unit was determined as the closing market price of our stock on the date of grant. Restricted stock units have been granted to our officers, key employees and members of our Board of Directors.
The per option weighted-average grant-date fair values for options granted under the 2020 Stock Incentive Plan were $44.58 during 2024 and $41.88 during 2023. No option grants were issued in 2025. All stock options issued in 2024 and 2023 were granted with an exercise price equal to the fair market value on the date of the grant. The majority of options are exercisable ratably over a four-year period beginning one year after the date of the grant. All outstanding options expire five years after the date of the grant.
The fair value of each option grant was estimated on the date of grant using the Black-Scholes option-pricing model. The following weighted average assumptions were derived from averaging the number of options granted during the most recent five-year period. The weighted-average assumptions reflected below were based upon nineteen option grants for the five-year period ending
December 31, 2025, twenty-two option grants for the five-year period ending December 31, 2024 and thirty option grants for the five-year period ending December 31, 2023.
| Year Ended December 31, | 2025 (b) | 2024 | 2023 | |||||||||
| Expected volatility | 42 | % | 39 | % | 36 | % | ||||||
| Risk free Interest rate | 2 | % | 2 | % | 2 | % | ||||||
| Expected life (years) | 3.6 | 3.5 | 3.5 | |||||||||
| Forfeiture rate | 7 | % | 7 | % | 7 | % | ||||||
| Dividend yield | 0.6 | % | 0.8 | % | 0.7 | % |
(b.)
Pursuant to the discussion above, commencing in 2024, our annual stock-based compensation awards were issued fully in restricted stock units.
The risk-free rate is based on the U.S. Treasury zero coupon four year yield curve in effect at the time of grant. The expected life of the stock options granted was estimated using the historical behavior of employees. Expected volatility was based on historical volatility for a period equal to the stock option’s expected life. Expected dividend yield is based on our dividend yield at the time of grant. The forfeiture rate is based upon the actual historical forfeitures utilizing the 5-year term of the option.
The table below summarizes our stock option activity during the year ended December 31, 2025:
| Outstanding Options | Number of Shares | Weighted Average Exercise Price | |||||||
| Balance, January 1, 2025 | 3,909,248 | $ | 124.91 | ||||||
| Granted | — | $ | — | ||||||
| Exercised | (1,753,871 | ) | $ | 117.05 | |||||
| Cancelled | (104,783 | ) | $ | 127.07 | |||||
| Balance, December 31, 2025 | 2,050,594 | $ | 131.53 | ||||||
| Outstanding options vested and exercisable as of December 31, 2025 | 1,013,751 | $ | 136.92 |
The following table provides information about unvested options for the year ended December 31, 2025:
| Shares | Weighted Average Grant Date Fair Value | |||||||
| Unvested options as of January 1, 2025 | 2,305,836 | $ | 42.56 | |||||
| Granted | — | $ | — | |||||
| Vested | (1,165,336 | ) | $ | 42.10 | ||||
| Cancelled | (103,657 | ) | $ | 43.23 | ||||
| Unvested options as of December 31, 2025 | 1,036,843 | $ | 43.01 |
The following table provides information regarding all options outstanding at December 31, 2025:
| Options Outstanding | Options Exercisable | |||||||
| Number of options outstanding | 2,050,594 | 1,013,751 | ||||||
| Weighted average exercise price | $ | 131.53 | $ | 136.92 | ||||
| Aggregate intrinsic value as of December 31, 2025 | $ | 177,349,737 | $ | 82,217,145 | ||||
| Weighted average remaining contractual life (years) | 1.5 | 1.1 |
The total in-the-money value of all stock options exercised during the years ended December 31, 2025, 2024 and 2023 were $137.0 million, $185.3 million and $57.1 million, respectively.
The weighted average remaining contractual life for options outstanding and weighted average exercise price per share for exercisable options at December 31, 2023, 2024 and 2025 were as follows:
| Year Ended: | Options Outstanding | Weighted Average Exercise Price Per Share | Weighted Average Remaining Contractual Life (in Years) | Exercisable Options | Weighted Average Exercise Price Per Share | Expected to Vest Options | Weighted Average Exercise Price Per Share | |||||||||||||||||||||
| Shares | Shares | Shares | ||||||||||||||||||||||||||
| 2023 | 6,794,794 | $ | 121.13 | 2.6 | 2,450,613 | $ | 114.96 | 4,178,237 | $ | 124.86 | ||||||||||||||||||
| 2024 | 3,909,248 | 124.91 | 2.0 | 1,603,412 | 116.94 | 1,838,407 | 130.20 | |||||||||||||||||||||
| 2025 | 2,050,594 | 131.53 | 1.5 | 1,013,751 | 136.92 | 808,871 | 126.11 |
We also have our 2005 Employee Stock Purchase Plan (the “Employee Stock Plan”), as amended during 2024, which allows eligible employees to purchase shares of Class B Common Stock at a 10% discount. There were 88,760, 81,146 and 100,507 shares issued pursuant to the Employee Stock Purchase Plan during 2025, 2024 and 2023, respectively. In connection with the Employee Stock Plan, we have reserved 3.0 million shares of Class B Common Stock for issuance and have issued approximately 2.0 million shares as of December 31, 2025. As of December 31, 2025, approximately 1.0 million shares of Class B Common Stock remain available for issuance pursuant to this plan.
At December 31, 2025, 21,317,419 shares of Class B Common Stock were reserved for issuance upon conversion of shares of Class A, C and D Common Stock outstanding, for issuance upon exercise of options to purchase Class B Common Stock and for issuance of stock under other incentive plans. Class A, C and D Common Stock are convertible on a share for share basis into Class B Common Stock.
6) INCOME TAXES
Components of income tax expense/(benefit) are as follows (amounts in thousands):
| Year Ended December 31, | ||||||||||||
| 2025 | 2024 | 2023 | ||||||||||
| Current | ||||||||||||
| Federal | $ | 344,265 | $ | 311,545 | $ | 202,895 | ||||||
| Foreign | 15,650 | 10,962 | 6,505 | |||||||||
| State | 50,303 | 45,780 | 29,677 | |||||||||
| 410,218 | 368,287 | 239,077 | ||||||||||
| Deferred | ||||||||||||
| Federal | 38,676 | (28,499 | ) | (19,716 | ) | |||||||
| Foreign | 6,018 | (1,318 | ) | 3,367 | ||||||||
| State | 6,047 | (3,643 | ) | (1,609 | ) | |||||||
| 50,741 | (33,460 | ) | (17,958 | ) | ||||||||
| Total | $ | 460,959 | $ | 334,827 | $ | 221,119 |
On July 4, 2025, the One Big Beautiful Bill Act (“OBBBA”), which includes a broad range of corporate income tax law changes, was signed into law in the United States. The OBBBA includes law changes related to bonus depreciation, the expensing of domestic research costs, certain U.S. international tax rules and other modifications. There is no material impact on our effective tax rate in 2025. Although the majority of the tax law changes will take effect starting in 2026, we do not believe the changes will have a material impact on our future provision for income taxes or results of operations.
Our provision for income taxes for the years ended December 31, 2025, 2024 and 2023 included tax benefits of $4 million and $16 million and tax expenses of $5 million, respectively, related to employee share-based payments. Excess tax benefits (when the deductible amount related to the settlement of employee equity awards for tax purposes exceeds the cumulative compensation cost recognized for financial reporting purposes) and deficiencies, if applicable, are recorded as a component of our tax provision.
The foreign provision for income taxes is based on foreign pre-tax earnings of $91 million in 2025 and $80 million during each of 2024 and 2023. In the future, we anticipate repatriating only previously taxed foreign earnings as well as any future earnings that would qualify for a full dividend received deduction for distributions post-December 31, 2017. As of December 31, 2025, the amount of previously taxed earnings and earnings that would qualify for a full dividend received deduction total $96 million. As of December 31, 2025, $24 million of the foreign earnings above is expected to be repatriated and generate future withholding taxes. As such, we have recognized a deferred tax liability of $2 million. At this time, there are no material tax effects related to the future cash repatriation of other undistributed earnings.
As described in Note 1, effective for the year ended December 31, 2025, we adopted ASU 2023-09, “Improvements to Income Tax Disclosures (Topic 740)" ("ASU 2023-09"), on a prospective basis. In accordance with prospective application, the prior period
disclosures were not adjusted. Below is a tabular rate reconciliation pursuant to the disclosure requirements of ASU 2023-09 for the year ended December 31, 2025 (amounts in thousands):
| Year Ended | |||||||
| December 31, 2025 | |||||||
| U.S. federal statutory tax rate | $ | 414,150 | 21.0 | % | |||
| State and local income taxes, net of federal income tax effect (a) | 44,914 | 2.3 | % | ||||
| Foreign tax effects | 2,501 | 0.1 | % | ||||
| Tax credits | (3,681 | ) | -0.2 | % | |||
| Changes in valuation allowances | (5 | ) | 0.0 | % | |||
| Nontaxable or nondeductible items | |||||||
| Noncontrolling interests | (4,697 | ) | -0.2 | % | |||
| Share-based payment awards | (3,741 | ) | -0.2 | % | |||
| Other nondeductible items | 11,915 | 0.6 | % | ||||
| Changes in unrecognized tax benefits | (397 | ) | 0.0 | % | |||
| Effective tax rate | $ | 460,959 | 23.4 | % | |||
(a) State taxes in California and the District of Columbia made up the majority (greater than 50 percent) of the tax effect in this category.
A reconciliation between the federal statutory rate and the effective tax rate is as follows for the year ended December 31, 2024 and 2023:
| Year Ended | ||||||||
| December 31, | ||||||||
| 2024 | 2023 | |||||||
| Federal statutory rate | 21.0 | % | 21.0 | % | ||||
| State, net of federal income tax benefit | 2.3 | % | 2.4 | % | ||||
| Tax effects of foreign operations | -0.5 | % | -0.7 | % | ||||
| Tax benefit from settlements of employee equity awards | -0.8 | % | 0.4 | % | ||||
| Other items | 0.7 | % | 0.4 | % | ||||
| Impact of income attributable to noncontrolling interests | -0.3 | % | 0.0 | % | ||||
| Effective tax rate | 22.4 | % | 23.5 | % |
Our effective tax rates were 23.4%, 22.4% and 23.5% for the years ended December 31, 2025, 2024 and 2023, respectively. The increase in our effective tax rate for the year ended December 31, 2025, as compared to 2024, is due to a $10 million increase in the provision for foreign tax effects and a $12 million decrease in the net tax benefit recorded pursuant to ASU 2016-09, net of the impact of executive compensation limitations pursuant to IRC section 162(m), during 2025 as compared to 2024. The decrease in our effective tax rate for the year ended December 31, 2024, as compared to 2023, is due primarily to a $16 million decrease in the provision for income taxes during 2024, as compared to 2023, from the net tax benefit recorded pursuant to ASU 2016-09, net of the impact of executive compensation limitations pursuant to IRC section 162(m).
The components of income taxes paid, net of refunds received, are as follows (amounts in thousands):
| Year Ended December 31, 2025 | ||||
| Federal | $ | 400,662 | ||
| State and local | 56,450 | |||
| Foreign | 13,753 | |||
| Total income taxes paid (net of refunds) | $ | 470,865 |
The amount of income taxes paid during the year does not meet the 5% disaggregation threshold for any state, local or foreign jurisdictions.
Income tax payments, net of refunds received, were $325 million and $258 million for the years ended December 31, 2024 and 2023, respectively. Included in “Other current assets” on our consolidated balance sheets are prepaid federal, state and foreign income taxes amounting to approximately $54 million and $3 million as of December 31, 2025 and 2024, respectively. Included in “Other long-term assets” on our consolidated balance sheets are federal taxes receivable amounting to approximately $4 million as of December 31, 2025.
The components of deferred taxes are as follows (amounts in thousands):
| Year Ended December 31, | |||||||||||||||||||
| 2025 | 2024 | ||||||||||||||||||
| Assets | Liabilities | Assets | Liabilities | ||||||||||||||||
| Self-insurance reserves | $ | 124,084 | $ | 131,945 | $ | ||||||||||||||
| Compensation accruals | 88,472 | 80,673 | |||||||||||||||||
| Doubtful accounts and other reserves | 139,513 | 136,067 | |||||||||||||||||
| Other currently non-deductible accrued liabilities | 19,812 | 19,492 | |||||||||||||||||
| Depreciable and amortizable assets | 336,937 | 278,412 | |||||||||||||||||
| Operating lease liabilities | 96,798 | 105,444 | |||||||||||||||||
| Right of use assets-operating leases | 87,516 | 97,925 | |||||||||||||||||
| Federal state and foreign net operating loss carryforwards and other federal, state and foreign deferred tax assets | 118,211 | 111,388 | |||||||||||||||||
| Net pension liabilities – OCI only | 600 | 121 | |||||||||||||||||
| Other liabilities | 10,088 | 7,654 | |||||||||||||||||
| $ | 586,890 | $ | 435,141 | $ | 585,130 | $ | 383,991 | ||||||||||||
| Valuation allowance | (86,881 | ) | 0 | (82,690 | ) | 0 | |||||||||||||
| Total deferred income taxes | $ | 500,009 | $ | 435,141 | $ | 502,440 | $ | 383,991 |
At December 31, 2025, state net operating loss carryforwards (expiring in years 2026 through 2044), and credit carryforwards available to offset future taxable income approximated $1 billion representing approximately $73 million in deferred state tax benefit (net of the federal benefit); and state related interest expense carryforwards approximated $160 million representing approximately $11 million in deferred state tax benefit (net of the federal benefit). At December 31, 2025, there were foreign net operating losses and interest expense carryforwards of approximately $105 million, most of which are carried forward indefinitely, representing approximately $28 million in deferred foreign tax benefit. At December 31, 2025, there were federal tax credits and net operating losses of approximately $9 million representing approximately $6 million in deferred federal tax benefits. Of the federal attributes above, $5 million will expire between 2027-2036 with the remaining federal attributes carried forward indefinitely.
A valuation allowance is required when it is more likely than not that some portion of the deferred tax assets will not be realized. Based on available evidence, it is more likely than not that certain of our state tax benefits will not be realized. Therefore, valuation allowances of approximately $78 million have been recorded during each of the periods ended December 31, 2025 and 2024. In addition, valuation allowances of approximately $9 million and $4 million have been recorded as of December 31, 2025 and 2024, related to federal and foreign net operating losses and credit carryforwards. During 2025, the valuation allowance on these federal and foreign tax benefits increased by $5 million due to an increase in foreign tax credits that are not expected to be realized.
During 2025 and 2024, the estimated liabilities for uncertain tax positions (including accrued interest and penalties) were increased less than $1 million due to tax positions taken in the current and prior years. The balance at each of the years ended December 31, 2025 and 2024, if subsequently recognized, that would favorably affect the effective tax rate and the provision for income taxes is approximately $2 million as of each date.
We recognize accrued interest and penalties associated with uncertain tax positions as part of the tax provision. As of December 31, 2025 and 2024, we have accrued interest and penalties of less than $1 million as of each date. The U.S. federal statute of limitations remains open for the 2022 and subsequent years. Foreign and U.S. state and local jurisdictions have statutes of limitations generally ranging for 3 to 4 years.
The tabular reconciliation of unrecognized tax benefits for the years ended December 31, 2025, 2024 and 2023 is as follows (amounts in thousands):
| As of December 31, | ||||||||||||
| 2025 | 2024 | 2023 | ||||||||||
| Balance at January 1, | $ | 2,862 | $ | 2,850 | $ | 2,727 | ||||||
| Additions based on tax positions related to the current year | 500 | 500 | 500 | |||||||||
| Additions for tax positions of prior years | 183 | 189 | 180 | |||||||||
| Reductions for tax positions of prior years | (686 | ) | (677 | ) | (557 | ) | ||||||
| Settlements | 0 | 0 | 0 | |||||||||
| Balance at December 31, | $ | 2,859 | $ | 2,862 | $ | 2,850 |
7) LEASE COMMITMENTS
We follow FASB ASU 2016-02 ("Topic 842") "Leases." Under Topic 842, lessees are required to recognize assets and liabilities on the balance sheets for most leases and provide enhanced disclosures. Leases will be classified as either finance or operating.
We have elected the policy exemption that allows lessees to choose to not separate lease and non-lease components by class of underlying asset and are applying this expedient to all relevant asset classes.
We determine if an arrangement is or contains a lease at inception of the contract. Our right-of-use assets represent our right to use the underlying assets for the lease term and our lease liabilities represent our obligation to make lease payments arising from the leases. Right-of-use assets and lease liabilities are recognized at commencement date based on the present value of lease payments over the lease term. We use the implicit rate noted within the contract if known or determinable. If the implicit rate is not readily available, we use our estimated incremental borrowing rate, which is derived using a collateralized borrowing rate for the same currency and term as the associated lease. A right-of-use asset and lease liability is not recognized for leases with an initial term of 12 months or less and we recognize lease expense for these leases on a straight-line basis over the lease term within lease and rental expense.
Our operating leases are primarily for real estate, including certain acute care facilities, off-campus outpatient facilities, medical office buildings, and corporate and other administrative offices. Our real estate lease agreements typically have initial terms of five to ten years. These real estate leases may include one or more options to renew, with renewals that can extend the lease term from five to ten years. The exercise of lease renewal options is at our sole discretion. When determining the lease term, we included options to extend or terminate the lease when it is reasonably certain that we will exercise that option.
Five of our hospital facilities are held under operating leases with Universal Health Realty Income Trust with two hospital terms expiring in 2026, two expiring in 2033, and one expiring in 2040 (see Note 9 for additional disclosure). We also lease the real property of certain facilities.
The components of lease expense for the years ended December 31, 2025, 2024 and 2023 are as follows (in thousands):
| Twelve months ended December 31, | |||||||||||
| 2025 | 2024 | 2023 | |||||||||
| Operating lease cost | $ | 101,977 | $ | 101,915 | $ | 99,812 | |||||
| Variable and short term lease cost (a) | 46,257 | 44,518 | 41,214 | ||||||||
| Total lease and rental expense | $ | 148,234 | $ | 146,433 | $ | 141,026 | |||||
| Finance lease cost: | |||||||||||
| Amortization of property under capital lease | $ | 8,287 | $ | 5,923 | $ | 4,998 | |||||
| Interest on debt of property under capital lease | 4,141 | 2,006 | 3,771 | ||||||||
| Total finance lease cost | $ | 12,428 | $ | 7,929 | $ | 8,769 |
(a)
Includes equipment, month-to-month and leases with a maturity of less than 12 months.
Supplemental cash flow information related to leases for the years ended December 31, 2025, 2024 and 2023 are as follows (in thousands):
| Twelve months ended December 31, | |||||||||||
| 2025 | 2024 | 2023 | |||||||||
| Cash paid for amounts included in the measurement of lease liabilities: | |||||||||||
| Operating cash flows from operating leases | $ | 138,519 | $ | 134,543 | $ | 129,299 | |||||
| Operating cash flows from finance leases | $ | 3,517 | $ | 3,652 | $ | 3,832 | |||||
| Financing cash flows from finance leases | $ | 2,370 | $ | 3,973 | $ | 3,817 | |||||
| Right-of-use assets obtained in exchange for lease obligations: | |||||||||||
| Operating leases | $ | 39,847 | $ | 68,029 | $ | 62,223 | |||||
| Finance leases | $ | 4,295 | $ | 23,700 | $ | 452 |
Supplemental balance sheets information related to leases as of December 31, 2025 and 2024 are as follows (in thousands):
| December 31, | December 31, | ||||||
| 2025 | 2024 | ||||||
| Operating Leases | |||||||
| Right of use assets-operating leases | $ | 374,239 | $ | 418,719 | |||
| Operating lease liabilities | $ | 73,237 | $ | 74,649 | |||
| Operating lease liabilities noncurrent | 340,715 | 376,239 | |||||
| Total operating lease liabilities | $ | 413,952 | $ | 450,888 | |||
| Finance Leases | |||||||
| Property and equipment | $ | 129,012 | $ | 125,018 | |||
| Accumulated depreciation | (52,326 | ) | (44,346 | ) | |||
| Property and equipment, net | $ | 76,686 | $ | 80,672 | |||
| Current maturities of long-term debt | $ | 5,738 | $ | 5,282 | |||
| Long-term debt | 85,383 | 87,248 | |||||
| Total finance lease liabilities | $ | 91,121 | $ | 92,530 | |||
| Weighted Average remaining lease term, years | |||||||
| Operating leases | 18.2 | 17.1 | |||||
| Finance leases | 18.8 | 19.6 | |||||
| Weighted Average discount rate | |||||||
| Operating leases | 5.5 | % | 5.4 | % | |||
| Finance leases | 5.5 | % | 5.5 | % |
Future maturities of lease liabilities as of December 31, 2025 are as follows (in thousands):
| Operating Leases | Finance Leases | ||||||
| Year ending December 31, | |||||||
| 2026 | $ | 86,261 | $ | 9,221 | |||
| 2027 | 68,430 | 10,700 | |||||
| 2028 | 58,586 | 11,042 | |||||
| 2029 | 49,541 | 11,207 | |||||
| 2030 | 37,115 | 11,377 | |||||
| Later years | 568,728 | 94,138 | |||||
| Total lease payments | 868,661 | 147,685 | |||||
| less imputed interest | (454,709 | ) | (56,564 | ) | |||
| Total | $ | 413,952 | $ | 91,121 |
We assumed approximately $4 million in finance lease obligations during 2025, $24 million during 2024, and $1 million in 2023. In the ordinary course of business, our facilities routinely lease equipment pursuant to new lease arrangements that will likely result in future lease and rental expense in excess of amounts indicated above.
8) COMMITMENTS AND CONTINGENCIES
Professional and General Liability, Workers’ Compensation Liability
The vast majority of our subsidiaries are self-insured for professional and general liability exposure up to: (i) $20 million for professional liability and $3 million for general liability per occurrence in 2025, 2024, 2023, 2022 and 2021; (ii) $10 million and $3 million per occurrence, respectively, in 2020; (iii) $5 million and $3 million per occurrence, respectively, during 2019, 2018 and 2017, and; (iv) $10 million and $3 million per occurrence, respectively, prior to 2017. For each of the years indicated above, through February 2025, for claims involving multiple plaintiffs, a single self-insured retention may apply, as stipulated in and subject to the terms and conditions of the applicable commercial policies, for claims qualifying as group related integrated occurrences and/or
medical incidents. As of March 1, 2025, the single self-insured retention no longer applies in connection with claims made by multiple plaintiffs against our behavioral health care facilities.
These subsidiaries are provided with several excess policies through commercial insurance carriers which provide for coverage in excess of the applicable per occurrence and aggregate self-insured retention or underlying policy limits up to approximately $110 million in 2025; $175 million in 2024; $165 million in 2023; $162 million in 2022; $155 million in 2021 and $250 million during each of 2014 through 2020. Effective March, 2025, our commercial insurance coverage contains less favorable terms than previous years including coverage exclusions for incidents involving sexual molestation or abuse, higher premiums and lower aggregate limitations.
In addition, from time to time based upon marketplace conditions, we may elect to purchase additional commercial coverage for certain of our facilities or businesses. Our behavioral health care facilities located in the U.K. have policies through a commercial insurance carrier located in the U.K. that provides for £20 million of professional liability coverage and £25 million of general liability coverage.
The commercial insurance limits indicated above for each policy year may have been reduced due to payment of covered claims or suits, subject to the policy terms and conditions.
As of December 31, 2025, the total net accrual for our self-insured professional and general liability claims was $449 million, of which $125 million was included in current liabilities. As of December 31, 2024, the total net accrual for our self-insured professional and general liability claims was $487 million, of which $85 million was included in current liabilities.
As a result of unfavorable trends experienced during the past several years, included in our results of operations were increases to our reserve for self-insured professional and general liability claims amounting to approximately $45 million during 2025, $79 million during 2024 and $25 million during 2023. All professional and general liability insurance we purchase is subject to policy limitations. 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, estimates of losses for these claims based on recent and historical settlement amounts and jury verdicts, estimates of incurred but not reported claims based on historical experience, and estimates of amounts recoverable under our commercial insurance policies. All relevant information, including our own historical experience, applicable per occurrence and aggregate self-insured retentions, and limitations and exclusions pursuant to our commercial insurance policies, is used in estimating our expected liability for self-insured claims. While we continuously monitor these factors, our ultimate liability for professional and general liability claims could change materially from our current estimates due to inherent uncertainties involved in making this estimate. Given our significant exposure to professional and general liability claims, there can be no assurance that a sharp increase in the number and/or severity of claims asserted against us, and/or reductions in the amount of commercial coverage available to us, will not have a material adverse effect on our future results of operations.
As of December 31, 2025, the total accrual for our workers’ compensation liability claims was $152 million, $64 million of which was included in current liabilities. As of December 31, 2024, the total accrual for our workers’ compensation liability claims was $137 million, $58 million of which was included in current liabilities.
Although we are unable to predict whether or not our future financial statements will require updates to estimates for our prior year reserves for self-insured general and professional and workers’ compensation claims, given the relatively unpredictable nature of these potential liabilities and the factors impacting these reserves, as discussed above, it is reasonably likely that our future financial results may include material adjustments to prior period reserves.
As disclosed below in Legal Proceedings, Cumberland Hospital for Children and Adolescents (“Cumberland”), an indirect subsidiary of the Company, is a defendant in multi-plaintiff lawsuits filed in the Circuit Court for Richmond, Virginia (the “Cumberland Litigation”), relating to allegations of inappropriate sexual contact during medical examinations by Dr. Daniel Davidow, an independent contractor and the former medical director for Cumberland. The Company and UHS of Delaware, Inc., our administrative services subsidiary (“UHS Delaware”), were also named as co-defendants in the Cumberland Litigation. Plaintiffs have asserted claims of negligence, assault and battery (against Dr. Davidow), false imprisonment, violations of the Virginia Consumer Protection Act (“VCPA”), and vicarious liability for Dr. Davidow’s conduct against Cumberland, the Company, and UHS Delaware. The Company and UHS Delaware were dismissed from the action during the trial of the first three plaintiffs, which occurred in September, 2024. On September 27, 2024, a jury entered a verdict finding Dr. Davidow and Cumberland liable and awarded these three plaintiffs combined compensatory damages of $60 million for all liability theories, an additional combined $180 million in trebled damages for violation of the VCPA, and an additional combined $120 million in punitive damages. Cumberland filed post-trial motions challenging this verdict, including the amounts awarded in the verdict. Based upon Virginia law, the Court reduced the punitive damage amount to a combined maximum of $1.05 million ($350,000 per plaintiff). Cumberland has filed a notice of appeal on the remaining verdict. Plaintiffs have separately filed a notice of appeal seeking to challenge the dismissal of the Company and UHS Delaware during trial, and the Court’s order reducing the punitive damages award against Cumberland. These appeals were recently dismissed by the appellate court without prejudice as premature because the judgments in favor of the first three plaintiffs are neither final nor enforceable at this time.
There are approximately 40 additional plaintiffs making similar allegations with claims pending in the Cumberland Litigation. The Company and UHS Delaware remain defendants with respect to the remaining plaintiffs. We expect that the trials for the
remaining plaintiffs, as well as any additional plaintiffs, will be scheduled at various times over the next several years. The next trial is tentatively planned to commence in August, 2026.
We can make no assurances regarding the ultimate financial exposure, timing, substance or outcome of the Cumberland matter (which related to occurrences in the 2020 policy year), or the amount of damages that may be ultimately held recoverable after post-judgment proceedings and appeals. As of December 31, 2025, without reduction for any potential amounts related to the Cumberland matter, the Company and its subsidiaries have aggregate insurance coverage of approximately $143 million remaining under commercial policies for matters applicable to the 2020 policy year (in excess of the applicable self-insured retention amounts of $10 million per single occurrence/$25 million for multi-plaintiff matters for professional liability claims and $3 million per occurrence for general liability claims). In the event the resolution of the Cumberland matter exhausts all or a significant portion of our/our subsidiaries' remaining commercial insurance coverage related to the 2020 policy year, or the Cumberland matter causes the posting of large bonds or other collateral during the appeal processes, our future results of operations and capital resources would be materially adversely impacted.
We have received lawsuits in various jurisdictions on behalf of numerous former patients spanning decades claiming to be the victims of sexual assaults while patients at our facilities. Many of these lawsuits have been brought in conjunction with various states extending their statute of limitations to allow alleged victims of sexual assaults or abuse to file claims many years after the alleged incidents occurred. We are uncertain as to potential liability in connection with these matters.
Below is a schedule showing the changes in our general and professional liability and workers’ compensation reserves during the three years ended December 31, 2025 (amount in thousands):
| General and | ||||||||||||
| Professional | Workers’ | |||||||||||
| Liability | Compensation | Total | ||||||||||
| Balance at January 1, 2023 | $ | 371,900 | $ | 124,516 | $ | 496,416 | ||||||
| Plus: Accrued insurance expense, net of commercial premiums paid | 127,445 | 56,017 | 183,462 | |||||||||
| Less: Payments made in settlement of self-insured claims | (67,860 | ) | (50,229 | ) | (118,089 | ) | ||||||
| Balance at January 1, 2024 | 431,485 | 130,304 | 561,789 | |||||||||
| Plus: Accrued insurance expense, net of commercial premiums paid | 184,110 | 70,284 | 254,394 | |||||||||
| Less: Payments made in settlement of self-insured claims | (128,707 | ) | (63,478 | ) | (192,185 | ) | ||||||
| Balance at January 1, 2025 | 486,888 | 137,110 | 623,998 | |||||||||
| Plus: Accrued insurance expense, net of commercial premiums paid | 155,462 | 81,309 | 236,771 | |||||||||
| Less: Payments made in settlement of self-insured claims | (193,395 | ) | (66,080 | ) | (259,475 | ) | ||||||
| Balance at December 31, 2025 | $ | 448,955 | $ | 152,339 | $ | 601,294 |
Property Insurance
We have commercial property insurance policies for our properties, covering the period of June 1, 2025 to June 1, 2026, providing property and business interruption coverage for losses in excess of $15 million per occurrence or per location (as applicable based upon the event) up to a $1 billion annual policy limitation for certain catastrophic events or perils. These commercial policies provide for coverage of up to $250 million of annual aggregate coverage for losses resulting from windstorm damage at all facilities except those in Puerto Rico where $100 million of annual aggregate coverage is provided. Losses resulting from named windstorms are subject to deductibles between 3% and 5% of the total insurable value of the property. In addition, we have commercial property insurance policies covering catastrophic losses resulting from earthquake and flood damage, each subject to aggregated loss limits (as opposed to per occurrence losses). Commercially insured earthquake coverage for our facilities is subject to various deductibles and limitations including: (i) $150 million limitation for our facilities located in California and Alaska; (ii) $100 million limitation for our facilities in New Madrid Seismic Zone, Pacific Northwest Seismic Zone, South Carolina, Utah and certain counties in Nevada; (iii) $40 million limitation for our facilities located in Puerto Rico, and; (iv) $250 million limitation for our facilities located in other states. Our commercially insured flood coverage has a limit of $100 million annually. There is also a $10 million sublimit for one of our facilities located in Houston, Texas, and a $1 million sublimit for our facilities located in Puerto Rico.
These commercial property policies are subject to a deductible of: (i) $5 million per location for damage resulting from earthquake, wind, hail and flood, and; (ii) $5 million per occurrence for all other events. For per location or per occurrence losses in excess of the applicable deductible, we are self-insured, through our wholly-owned captive insurance company, for up to $10 million of annual aggregate losses. Should the $10 million self-insured annual aggregate limitation be exhausted during the policy year, we have commercial reinsurance coverage for the next $30 million of annual aggregate losses in excess of the applicable deductible. In the event the $30 million of commercial reinsurance coverage is also exhausted, we are self-insured for all per location or per occurrence losses up to $25 million, including the $5 million deductible.
As of January 1, 2026, property insurance for our behavioral health facilities located in the U.K. are provided on an all-risk basis up to a £2.7 billion, with a coverage cap per location of £150 million for any one occurrence, that includes coverage for real and personal property as well as business interruption losses.
Commitment to Develop, Lease and Operate an Acute Care Hospital in Washington, D.C.
During 2020, we entered into various agreements with the District of Columbia (the “District”) related to the development, leasing and operation of an acute care hospital and certain other facilities/structures on land owned by the District (“District Facilities”). Pursuant to the agreements, on behalf of the District, we served as manager for development and construction of the District Facilities, which were funded entirely by the District. The District Facilities had an aggregate cost of approximately $417 million, substantially all of which has been incurred as of December 31, 2025. Construction of the acute care hospital (Cedar Hill Regional Medical Center) was completed and the hospital opened on April 15, 2025.
We are leasing the District Facilities for a nominal rental amount for a period of 75 years and are obligated to operate the District Facilities during the lease term. We have certain lease termination rights in connection with the District Facilities beginning on the tenth anniversary of the lease commencement date for various and decreasing amounts as provided for in the agreements. Additionally, any time after the 10th anniversary of the lease term, we have a right to purchase the District Facilities for a price equal to the greater of fair market value of the District Facilities or the amount necessary to defease the bonds issued by the District to fund the construction of the District Facilities. The lease agreement also entitles the District to participation rent should certain specified earnings before interest, taxes, depreciation and amortization thresholds be achieved by the acute care hospital.
Additionally, we have committed to expend no less than $75 million (approximately $21 million of which has been incurred as of December 31, 2025), over a projected 12-year period, in healthcare infrastructure including expenditures related to the District Facilities as well as other healthcare related expenditures in certain specified areas of Washington, D.C. Pursuant to the agreements, the District is entitled to certain termination fees and other amounts as specified in the agreements in the event we, within certain specified periods of time, cease to operate the acute care hospital or there is a transfer of control of us or our subsidiary operating the hospital.
Other Contractual Commitments:
In addition to our long-term debt obligations as discussed in Note 4 - Long-Term Debt and our operating lease obligations as discussed in Note 7 - Lease Commitments, we have various other contractual commitments outstanding as of December 31, 2025 as follows: (i) other combined estimated future purchase obligations of $353 million related to a long-term contract with third-parties consisting primarily of certain revenue cycle data processing services for our acute care facilities ($35 million), expected future costs to be paid to a third-party vendor in connection with the ongoing operation of an electronic health records application and purchase implementation of a revenue cycle and other applications for our acute care facilities ($159 million), healthcare infrastructure in Washington D.C. in connection with various agreements with the District of Columbia ($54 million), development, implementation and operation of an enterprise resource planning application ($70 million), administrative software applications ($24 million) and other software applications ($10 million); (ii) estimated construction commitment of $7 million representing our share of the remaining construction cost of two behavioral health care facilities which opened in 2025 that, subject to approval of certain regulatory conditions, we were required to build pursuant to joint-venture agreements with a third-party; (iii) combined estimated future payments of $154 million related to our non-contributory, defined benefit pension plan ($127 million consisting of estimated payments through 2080) and other retirement plan liabilities ($27 million), and; (iv) accrued and unpaid estimated claims expense incurred in connection with our commercial health insurers and self-insured employee benefit plans ($137 million).
Legal Proceedings
We operate in a highly regulated and litigious industry which subjects us to various claims and lawsuits in the ordinary course of business as well as regulatory proceedings and government investigations. These claims or suits include claims for damages for personal injuries, medical malpractice, commercial/contractual disputes, wrongful restriction of, or interference with, physicians’ staff privileges, and employment related claims. In addition, health care companies are subject to investigations and/or actions by various state and federal governmental agencies or those bringing claims on their behalf. Government action has increased with respect to investigations and/or allegations against healthcare providers concerning possible violations of fraud and abuse and false claims statutes as well as compliance with clinical and operational regulations. Currently, and from time to time, we and some of our facilities are subjected to inquiries in the form of subpoenas, Civil Investigative Demands, audits and other document requests from various federal and state agencies. These inquiries can lead to notices and/or actions including repayment obligations from state and federal government agencies associated with potential non-compliance with laws and regulations. Further, the federal False Claims Act allows private individuals to bring lawsuits (qui tam actions) against healthcare providers that submit claims for payments to the government. Various states have also adopted similar statutes. When such a claim is filed, the government will investigate the matter and decide if they are going to intervene in the pending case. These qui tam lawsuits are placed under seal by the court to comply with the False Claims Act’s requirements. If the government chooses not to intervene, the private individual(s) can proceed independently on behalf of 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 Claims Act matter. In September 2014, the Criminal Division of the Department of Justice (“DOJ”) announced that all qui tam cases will be shared with their Division to determine if a parallel criminal investigation should be opened. The DOJ has also announced an intention to pursue civil and criminal actions against individuals within a company as well as the corporate entity or entities. In addition, health care facilities are subject to monitoring by state and federal surveyors to ensure compliance with program Conditions of Participation. 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.
The laws and regulations governing the healthcare industry are complex covering, among other things, government healthcare participation requirements, licensure, certification and accreditation, privacy of patient information, reimbursement for patient services as well as fraud and abuse compliance. These laws and regulations are constantly evolving and expanding. Further, the original Patient Protection and Affordable Care Act, as amended by the Health and Education Reconciliation Act, 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. Although we believe our policies, procedures and practices comply with government regulations, there is no assurance that we will not be faced with the sanctions referenced above which include fines, penalties and/or substantial damages, repayment obligations, payment suspensions, licensure revocation, and expulsion from government healthcare programs. Even if we were to ultimately prevail in any action brought against us or our facilities or in responding to any inquiry, such action or inquiry could have a material adverse effect on us.
Certain legal matters are described below:
K.E.E., et al., Plaintiffs v. Cumberland Hospital, LLC d/b/a Cumberland Hospital for Children and Adolescents, et al. (and related lawsuits)
Cumberland Hospital for Children and Adolescents (“Cumberland”), an indirect subsidiary of the Company, is a defendant in multi-plaintiff lawsuits filed in the Circuit Court for Richmond, Virginia (the “Cumberland Litigation”), relating to allegations of inappropriate sexual contact during medical examinations by Dr. Daniel Davidow, an independent contractor and the former medical director for Cumberland. The Company and UHS of Delaware, Inc., our administrative services subsidiary (“UHS Delaware”), were also named as co-defendants in the Cumberland Litigation. Plaintiffs have asserted claims of negligence, assault and battery (against Dr. Davidow), false imprisonment, violations of the Virginia Consumer Protection Act (“VCPA”), and vicarious liability for Dr. Davidow’s conduct against Cumberland, the Company, and UHS Delaware. All defendants have denied liability.
The claims asserted by three of the plaintiffs in the Cumberland Litigation were consolidated for trial in September of 2024. The Company and UHS Delaware were dismissed from the action during trial. On September 27, 2024, a jury entered a verdict finding Dr. Davidow and Cumberland liable and awarded these three plaintiffs combined compensatory damages of $60 million for all liability theories, an additional combined $180 million in trebled damages for violation of the VCPA, and an additional combined $120 million in punitive damages. Cumberland filed post-trial motions challenging this verdict. Based upon Virginia law, the Court reduced the punitive damage amount to a combined maximum of $1.05 million ($350,000 per plaintiff). Cumberland has filed a notice of appeal on the remaining verdict. Plaintiffs have separately filed a notice of appeal seeking to challenge the dismissal of the Company and UHS Delaware during trial, and the Court’s order reducing the punitive damages award against Cumberland. These appeals were recently dismissed by the appellate court without prejudice as premature because the judgments in favor of the first three plaintiffs are neither final nor enforceable at this time.
There are approximately 40 additional plaintiffs making similar allegations with claims pending in the Cumberland Litigation. The Company and UHS Delaware remain defendants with respect to the remaining plaintiffs. We expect that the trials for the remaining plaintiffs, as well as any additional plaintiffs, will be scheduled at various times over the next several years. The next trial is tentatively planned to commence in August, 2026.
In the event the resolution of the Cumberland matter exhausts all or a significant portion of our/our subsidiaries' remaining commercial insurance coverage related to the 2020 policy year, or the Cumberland matter causes the posting of large bonds or other collateral during the appeal processes, our future results of operations and capital resources would be materially adversely impacted.
St. Mary’s Medical Group, Inc. et. al. v. Pinnacle Medical Group, Northern Nevada, et. al.
UHS of Delaware, Inc., the wholly-owned administrative services subsidiary of the Company is a defendant in a lawsuit filed in Washoe County, Nevada, along with Pinnacle Management Group NV, LLC ("Pinnacle Medical Group", in which a subsidiary of the Company holds a 50% interest) and several individuals. The Company was previously dismissed from the lawsuit. The lawsuit contains allegations of intentional interference with contractual relationships and prospective economic advantage resulting from the
departure of several physicians and advance practice providers from St. Mary’s Medical Group in Reno, Nevada, who joined Pinnacle Medical Group in 2021.
A trial of this matter was concluded on September 26, 2025, with a verdict rendered against UHS of Delaware, Inc. and the other defendants for approximately $4.7 million in compensatory damages. The jury also awarded punitive damages against UHS of Delaware, Inc. of $500 million and lesser amounts against some of the other defendants. Based upon Nevada statutory law, we expect the punitive damages to be reduced to a maximum of approximately $14 million. We also believe that recent Nevada Supreme Court precedent could further reduce the amount of punitive damages.
UHS of Delaware, Inc. and the other defendants are evaluating all legal options and intend to challenge this verdict in post-judgment trial court proceedings and on appeal. Although we are uncertain as to the ultimate financial exposure related to this matter and we can make no assurance regarding its outcome, or the amount of damages that may be recoverable after post-judgment proceedings and appeals, during the third quarter of 2025, we recorded an $18 million legal reserve in connection with this matter. If we are unsuccessful in reversing the verdict, or significantly reducing the level of damages, or we are required to post a substantial bond pending appeal, this matter could have a material adverse effect on the financial condition of the Company.
Other Matters
Various other suits, claims and investigations, including government subpoenas, arising against, or issued to, us are pending and additional such matters may arise in the future. Management will consider additional disclosure from time to time to the extent it believes such matters may be or become material. The outcome of any current or future litigation or governmental or internal investigations, including the matters described above, cannot be accurately predicted, nor can we predict any resulting penalties, fines or other sanctions that may be imposed at the discretion of federal or state regulatory authorities. We record accruals for such contingencies to the extent that we conclude it is probable that a liability has been incurred and the amount of the loss can be reasonably estimated. No estimate of the possible loss or range of loss in excess of amounts accrued, if any, can be made at this time regarding the matters described above or that are otherwise pending because the inherently unpredictable nature of legal proceedings may be exacerbated by various factors, including, but not limited to: (i) the damages sought in the proceedings are unsubstantiated or indeterminate; (ii) discovery is not complete; (iii) the matter is in its early stages; (iv) the matters present legal uncertainties; (v) there are significant facts in dispute; (vi) there are a large number of parties, or; (vii) there is a wide range of potential outcomes. It is possible that the outcome of these matters could have a material adverse impact on our future results of operations, financial position, cash flows and, potentially, our reputation.
9) RELATIONSHIP WITH UNIVERSAL HEALTH REALTY INCOME TRUST AND OTHER RELATED PARTY TRANSACTIONS
Relationship with Universal Health Realty Income Trust:
At December 31, 2025, we held approximately 5.7% of the outstanding shares of Universal Health Realty Income Trust (the “Trust”). We serve as Advisor to the Trust under an annually renewable advisory agreement, which is scheduled to expire on December 31st of each year, pursuant to the terms of which we conduct the Trust’s day-to-day affairs, provide administrative services and present investment opportunities. The advisory agreement was renewed by the Trust for 2026 at the same rate in place for 2025, 2024 and 2023, providing for an advisory computation at 0.70% of the Trust’s average invested real estate assets. We earned an advisory fee from the Trust, which is included in net revenues in the accompanying consolidated statements of income, of approximately $5.6 million during 2025, $5.5 million during 2024 and $5.3 million during 2023.
In addition, certain of our officers and directors are also officers and/or directors of the Trust. Management believes that it has the ability to exercise significant influence over the Trust, therefore we account for our investment in the Trust using the equity method of accounting.
Our pre-tax share of income from the Trust was $1.0 million during 2025, $1.1 million during 2024 and $0.9 million during 2023, which are included in other income (expense), net, on the accompanying consolidated statements of income for each year. We received dividends from the Trust amounting to $2.3 million during each of 2025, 2024 and 2023. The carrying value of our investment in the Trust was $4.4 million and $5.8 million at December 31, 2025 and 2024, respectively, and is included in other assets in the accompanying consolidated balance sheets. The market value of our investment in the Trust was $30.9 million at December 31, 2025 and $29.3 million at December 31, 2024, based on the closing price of the Trust’s stock on the respective dates.
The Trust commenced operations in 1986 by purchasing certain hospital properties from us and immediately leasing the properties back to our respective subsidiaries. The base rents are paid monthly and the bonus rents, which effective as of January 1, 2022 are applicable only to McAllen Medical Center, are computed and paid on a quarterly basis, based upon a computation that compares current quarter revenue to a corresponding quarter in the base year. The leases with those subsidiaries are unconditionally guaranteed by us and are cross-defaulted with one another.
On December 31, 2021, we entered into an asset purchase and sale agreement with the Trust, which was amended during the first quarter of 2022, pursuant to the terms of which: (i) a wholly-owned subsidiary of ours purchased from the Trust the real estate
assets of the Inland Valley Campus of Southwest Healthcare System located in Wildomar, California, at its fair market value; (ii) two wholly-owned subsidiaries of ours transferred to the Trust, at their respective fair-market values, the real estate assets of Aiken Regional Medical Center (“Aiken”), located in Aiken, South Carolina (which includes a 211-bed acute care hospital and a 62-bed behavioral health facility), and Canyon Creek Behavioral Health (“Canyon Creek”), located in Temple, Texas, and; (iii) we received approximately $4.1 million in cash from the Trust.
As a result of the purchase options within the lease agreements for Aiken and Canyon Creek, the asset purchase and sale transaction is accounted for as a failed sale leaseback in accordance with U.S. GAAP. We have accounted for the asset exchange and substitution transaction with the Trust as a financing arrangement and, since we did not derecognize the real property related to Aiken and Canyon Creek, we will continue to depreciate the assets. Our consolidated balance sheets as of December 31, 2025 and December 31, 2024 reflects a financial liability of $70.0 million and $73.8 million, respectively, which is included in debt, for the fair value of real estate assets that we exchanged as part of the transaction. Our monthly lease payments payable to the Trust will be recorded to interest expense and as a reduction to the outstanding financial liability. The amount allocated to interest expense is determined using our incremental borrowing rate and is based on the outstanding financial liability.
The aggregate rent payable to the Trust in connection with the leases on McAllen Medical Center, Wellington Regional Medical Center, Aiken Regional Medical Center and Canyon Creek Behavioral Health was approximately $21.7 million during 2025 and $21.2 million during 2024.
Pursuant to the Master Leases by certain subsidiaries of ours and the Trust as described in the table below, dated 1986 and 2021 (“the Master Leases”) which govern the leases of McAllen Medical Center and Wellington Regional Medical Center (each of which is governed by the Master Lease dated 1986), and Aiken Regional Medical Center and Canyon Creek Behavioral Health (each of which is governed by the Master Lease dated 2021), we have the option to renew the leases at the lease terms described above and below by providing notice to the Trust at least 90 days prior to the termination of the then current term. We also have the right to purchase the respective leased hospitals at their appraised fair market value upon any of the following: (i) at the end of the lease terms or any renewal terms; (ii) upon one month’s notice should a change of control of the Trust occur, or; (iii) within the time period as specified in the lease in the event that we provide notice to the Trust of our intent to offer a substitution property/properties in exchange for one (or more) of the hospital properties leased from the Trust should we be unable to reach an agreement with the Trust on the properties to be substituted. In addition, we have rights of first refusal to: (i) purchase the respective leased facilities during and for a specified period after the lease terms at the same price, terms and conditions of any third-party offer, or; (ii) renew the lease on the respective leased facility at the end of, and for a specified period after, the lease term at the same terms and conditions pursuant to any third-party offer.
In addition, we are the managing, majority member in a joint venture with an unrelated third-party that operates Clive Behavioral Health, a 100-bed behavioral health care facility located in Clive, Iowa. The real property of this facility, which was completed and opened in late 2020, is also leased from the Trust (annual rental of approximately $2.9 million, $2.8 million and $2.7 million during 2025, 2024 and 2023, respectively) pursuant to the lease terms as provided in the table below. In connection with the lease on this facility, the joint venture has the right to purchase the leased facility from the Trust at its appraised fair market value upon either of the following: (i) by providing notice at least 270 days prior to the end of the lease terms or any renewal terms, or; (ii) upon 30 days' notice anytime within 12 months of a change of control of the Trust (UHS also has this right should the joint venture decline to exercise its purchase right). Additionally, the joint venture has rights of first offer to purchase the facility prior to any third-party sale.
The table below provides certain details for each of the hospitals leased from the Trust as of January 1, 2026:
| Hospital Name | Annual Minimum Rent | End of Lease Term | Renewal Term (years) | |||||||||
| McAllen Medical Center | $ | 5,485,000 | December, 2026 | 5 | (a) | |||||||
| Wellington Regional Medical Center | $ | 6,975,000 | December, 2026 | 5 | (b) | |||||||
| Aiken Regional Medical Center/Aurora Pavilion Behavioral Health Services | $ | 4,257,000 | December, 2033 | 35 | (c) | |||||||
| Canyon Creek Behavioral Health | $ | 1,925,000 | December, 2033 | 35 | (c) | |||||||
| Clive Behavioral Health | $ | 2,930,000 | December, 2040 | 50 | (d) |
(a)
We have one 5-year renewal option at existing lease rates (through 2031).
(b)
We have one 5-year renewal option at fair market value lease rates (through 2031). On each January 1st through 2026, the annual rent will increase by 2.50% on a cumulative and compounded basis.
(c)
We have seven 5-year renewal options at fair market value lease rates (2034 through 2068). On each January 1st through 2033, the annual rent will increase by 2.25% on a cumulative and compounded basis.
(d)
This facility is operated by a joint venture in which we are the managing, majority member and an unrelated third-party holds a minority ownership interest. The joint venture has three, 10-year renewal options at computed lease rates as stipulated in the
lease (2041 through 2070) and two additional, 10-year renewal options at fair market value lease rates (2071 through 2090). In each January through 2040 (and potentially through 2070 if three, 10-year renewal options are exercised), the annual rental will increase by 2.75% on a cumulative and compounded basis.
In addition, certain of our subsidiaries are tenants in several medical office buildings (“MOBs”) and two free-standing emergency departments ("FED") owned by the Trust or by limited liability companies in which the Trust holds 95% to 100% of the ownership interest. The current lease terms on these two FEDs, which are located in Weslaco and Mission, Texas, are scheduled to end on January 31, 2030. Pursuant to terms of the leases, the lease rates are scheduled to increase 2% per year through the end of the lease terms. Our subsidiaries have four, 5-year renewal options remaining on each of these FEDs, with the first three renewal options (covering the years 2030 through 2044) providing for 2% annual increases to the lease rates, and the remaining two, 5-year renewal options (covering the years 2045 through 2054) providing for lease rates at the then fair market value. These leases are cross-defaulted with one another and our subsidiaries have the option to purchase the leased properties upon the expiration of each five-year extended term at the fair market value at that time.
In October, 2025, a ground lease and a master flex lease were executed between a wholly-owned subsidiary of ours and the Trust. On this land, the Trust intends to develop, construct and own the Palm Beach Garden Medical Plaza I, an MOB located in Palm Beach Gardens, Florida. This multi-tenant MOB, consisting of 80,000 rentable square feet, is scheduled to be completed during the fourth quarter of 2026. The MOB will be located on the campus of the Alan B. Miller Medical Center, a newly constructed acute care hospital owned and operated by a wholly-owned subsidiary of ours, which is scheduled to be completed and opened during the second quarter of 2026. The 10-year master flex lease agreement, which is subject to reduction based on the execution of third-party leases with the Trust, was executed for approximately 75% of the rentable square feet of the MOB. The Trust has engaged a wholly-owned subsidiary of UHS to act as project manager, and construction of the MOB commenced in February, 2026.
During the third quarter of 2023, the Trust acquired the McAllen Doctor's Center, a 79,500 rentable square feet medical office building located in McAllen, Texas. A master lease was executed between a wholly-owned subsidiary of ours and the Trust, pursuant to the terms of which our subsidiary will master lease 100% of the rentable square feet of the MOB at an initial minimum rent of $624,000 annually. The master lease commenced during August, 2023 and is scheduled to expire in twelve years from that date.
During the first quarter of 2023, the Trust substantially completed construction on a new 86,000 rentable square foot multi-tenant MOB that is located on the campus of Northern Nevada Sierra Medical Center in Reno, Nevada. Northern Nevada Sierra Medical Center, a 170-bed newly constructed acute care hospital owned and operated by a wholly-owned subsidiary of ours, was completed and opened in April, 2022. In connection with this MOB, a ten-year master flex lease was executed between a wholly-owned subsidiary of ours and the Trust (scheduled to expire in March, 2033), pursuant to the terms of which our subsidiary initially agreed to master lease up to approximately 68% of the rentable square feet of the MOB. The master flex lease has been reduced since inception as certain conditions have been met. A ground lease for this facility commenced during 2023 and is scheduled to expire in 2098.
Other Related Party Transactions:
In December, 2010, our Board of Directors approved the Company’s entering into supplemental life insurance plans and agreements on the lives of Alan B. Miller (our Executive Chairman of the Board) and his wife. As a result of these agreements, as amended in October, 2016, based on actuarial tables and other assumptions, during the life expectancies of the insureds, we would pay approximately $28 million in premiums, and certain trusts owned by our Executive Chairman of the Board, would pay approximately $9 million in premiums. Based on the projected premiums mentioned above, and assuming the policies remain in effect until the death of the insureds, we will be entitled to receive death benefit proceeds of no less than approximately $37 million representing the $28 million of aggregate premiums paid by us as well as the $9 million of aggregate premiums paid by the trusts. In connection with these policies, we paid approximately $1.0 million, net, in premium payments during 2025, 2024 and 2023.
Marc D. Miller, our President and Chief Executive Officer and member of our Board of Directors, was a member of the Board of Directors of Premier, Inc. (“Premier”) from 2015 until Premier was sold in November, 2025, as discussed below. In conjunction with our GPO agreement with Premier, we had previously received shares of restricted stock of Premier which vested ratably over a seven-year period (2014 through 2020). During 2020, we entered into an agreement with Premier pursuant to the terms of which, among other things, our ownership interest in Premier was converted into shares of Class A Common Stock of Premier. We elected to retain a portion of the previously vested shares of Premier, the carrying value of which was adjusted for changes in the market value of Premier, which were included in other assets on our consolidated balance sheets (amounting to $47 million and $50 million as of December 31, 2024 and 2023, respectively). In September, 2025, Premier entered into an agreement and plan of merger providing for the acquisition of Premier by Patient Square Capital. In November, 2025 we received approximately $63 million for our remaining shares of Premier. Included in Other (income) expense, net, in our consolidated statements of income, were gains/(losses) recorded to adjust for changes in the market value of our shares of Premier amounting to $16 million during 2025, ($3 million) during 2024, and ($28 million) during 2023. Additionally, we received cash dividends from Premier amounting to $1.4 million during 2025 and $1.9 million during each of 2024 and 2023, which are included in “Other (income) expense, net” in our consolidated statements of income.
In July, 2023 we invested in the non-marketable securities of a healthcare generative artificial intelligence company, in which we hold a small minority ownership percentage. In December 2025 we recorded a $93 million unrealized gain on the increase in market value of this company. This unrealized gain is included in “Other (income) expense, net” in our consolidated statements of income for the year ended December 31, 2025. As of December 31, 2025 the current market value of these non-marketable securities was $115 million and is included in other assets on our consolidated balance sheets.
A member of our Board of Directors and member of the Executive Committee and Finance Committee is Of Counsel for Norton Rose Fulbright US LLP, a law firm engaged by us for a variety of legal services. The Board member and his law firm also provide personal legal services to our Executive Chairman and he acts as trustee of certain trusts for the benefit of our Executive Chairman and his family.
10) REVENUE RECOGNITION
We recognize revenue when services/goods have been provided to patients/customers in an amount that reflects the consideration to which we expect to be entitled in exchange for those goods or services. Our estimate for amounts not expected to be collected based on historical experience will continue to be recognized as a reduction to net revenue. However, subsequent changes in estimate of collectability due to a change in the financial status of a payer, for example a bankruptcy, will be recognized as bad debt expense in operating charges.
The performance obligation is separately identifiable from other promises in the customer contract. As the performance obligations are met (i.e.: room, board, ancillary services, level of care), revenue is recognized based upon allocated transaction price. The transaction price is allocated to separate performance obligations based upon the relative standalone selling price. In instances where we determine there are multiple performance obligations across multiple months, the transaction price will be allocated by applying an estimated implicit and explicit rate to gross charges based on the separate performance obligations*.*
In assessing collectability, we have elected the portfolio approach. This portfolio approach is being used as we have large volume of similar contracts with similar classes of customers. We reasonably expect that the effect of applying a portfolio approach to a group of contracts would not differ materially from considering each contract separately. Management’s judgment to group the contracts by portfolio is based on the payment behavior expected in each portfolio category. As a result, aggregating all of the contracts (which are at the patient level) by the particular payer or group of payers, will result in the recognition of the same amount of revenue as applying the analysis at the individual patient level.
We group our revenues into categories based on payment behaviors. Each component has its own reimbursement structure which allows us to disaggregate the revenue into categories that share the nature and timing of payments. The other patient revenue consists primarily of self-pay, government-funded non-Medicaid, and other.
The following table disaggregates our revenue by major source for the years ended December 31, 2025, 2024 and 2023 (in thousands):
| For the year ended December 31, 2025 | ||||||||||||||||||||||||
| Acute Care | Behavioral Health | Other | Total | |||||||||||||||||||||
| Medicare | $ | 1,538,151 | 15 | % | $ | 318,253 | 4 | % | $ | 1,856,404 | 11 | % | ||||||||||||
| Managed Medicare | 1,658,864 | 17 | % | 421,414 | 6 | % | 2,080,278 | 12 | % | |||||||||||||||
| Medicaid | 1,337,579 | 13 | % | 1,349,388 | 18 | % | 2,686,967 | 15 | % | |||||||||||||||
| Managed Medicaid | 685,083 | 7 | % | 1,797,518 | 24 | % | 2,482,601 | 14 | % | |||||||||||||||
| Managed Care (HMO and PPOs) | 3,257,367 | 33 | % | 1,644,729 | 22 | % | 4,902,096 | 28 | % | |||||||||||||||
| UK Revenue | 0 | 0 | % | 1,001,356 | 13 | % | 1,001,356 | 6 | % | |||||||||||||||
| Other patient revenue and adjustments, net | 584,535 | 6 | % | 655,743 | 9 | % | 1,240,278 | 7 | % | |||||||||||||||
| Other non-patient revenue | 864,328 | 9 | % | 237,099 | 3 | % | 13,422 | 1,114,849 | 6 | % | ||||||||||||||
| Total Net Revenue | $ | 9,925,907 | 100 | % | $ | 7,425,500 | 100 | % | $ | 13,422 | $ | 17,364,829 | 100 | % | ||||||||||
| For the year ended December 31, 2024 | ||||||||||||||||||||||||
| Acute Care | Behavioral Health | Other | Total | |||||||||||||||||||||
| Medicare | $ | 1,363,090 | 15 | % | $ | 306,035 | 4 | % | $ | 1,669,125 | 11 | % | ||||||||||||
| Managed Medicare | 1,480,707 | 17 | % | 403,198 | 6 | % | 1,883,905 | 12 | % | |||||||||||||||
| Medicaid | 1,113,070 | 12 | % | 1,138,960 | 17 | % | 2,252,030 | 14 | % | |||||||||||||||
| Managed Medicaid | 626,352 | 7 | % | 1,677,586 | 24 | % | 2,303,938 | 15 | % | |||||||||||||||
| Managed Care (HMO and PPOs) | 2,865,515 | 32 | % | 1,630,887 | 24 | % | 4,496,402 | 28 | % | |||||||||||||||
| UK Revenue | 0 | 0 | % | 880,148 | 13 | % | 880,148 | 6 | % | |||||||||||||||
| Other patient revenue and adjustments, net | 499,420 | 6 | % | 613,388 | 9 | % | 1,112,808 | 7 | % | |||||||||||||||
| Other non-patient revenue | 996,134 | 11 | % | 222,888 | 3 | % | 10,557 | 1,229,579 | 8 | % | ||||||||||||||
| Total Net Revenue | $ | 8,944,288 | 100 | % | $ | 6,873,090 | 100 | % | $ | 10,557 | $ | 15,827,935 | 100 | % | ||||||||||
| For the year ended December 31, 2023 | ||||||||||||||||||||||||
| Acute Care | Behavioral Health | Other | Total | |||||||||||||||||||||
| Medicare | $ | 1,297,084 | 16 | % | $ | 310,321 | 5 | % | $ | 1,607,405 | 11 | % | ||||||||||||
| Managed Medicare | 1,368,284 | 17 | % | 345,771 | 6 | % | 1,714,055 | 12 | % | |||||||||||||||
| Medicaid | 638,986 | 8 | % | 893,918 | 14 | % | 1,532,904 | 11 | % | |||||||||||||||
| Managed Medicaid | 716,380 | 9 | % | 1,574,281 | 25 | % | 2,290,661 | 16 | % | |||||||||||||||
| Managed Care (HMO and PPOs) | 2,658,890 | 33 | % | 1,552,304 | 25 | % | 4,211,194 | 29 | % | |||||||||||||||
| UK Revenue | 0 | 0 | % | 761,124 | 12 | % | 761,124 | 5 | % | |||||||||||||||
| Other patient revenue and adjustments, net | 452,781 | 6 | % | 528,422 | 9 | % | 981,203 | 7 | % | |||||||||||||||
| Other non-patient revenue | 948,997 | 12 | % | 224,780 | 4 | % | 9,653 | 1,183,430 | 8 | % | ||||||||||||||
| Total Net Revenue | $ | 8,081,402 | 100 | % | $ | 6,190,921 | 100 | % | $ | 9,653 | $ | 14,281,976 | 100 | % |
11) PENSION PLAN
We maintain contributory and non-contributory retirement plans for eligible employees. Our contributions to the contributory plan amounted to $87.9 million, $82.1 million and $73.9 million in 2025, 2024 and 2023, respectively. The non-contributory plan is a defined benefit pension plan which covers employees of one of our subsidiaries. The benefits are based on years of service and the employee’s highest compensation for any five years of employment. Our funding policy is to contribute annually at least the minimum amount that should be funded in accordance with the provisions of ERISA.
For defined benefit pension plans, the benefit obligation is the “projected benefit obligation”, the actuarial present value, as of December 31 measurement date, of all benefits attributed by the pension benefit formula to employee service rendered to that date. The amount of benefit to be paid depends on a number of future events incorporated into the pension benefit formula, including estimates of the average life of employees/survivors and average years of service rendered. It is measured based on assumptions
concerning future interest rates and future compensation levels. The following table shows the reconciliation of the defined benefit pension plan as of December 31, 2025 and 2024:
| 2025 | 2024 | |||||||
| (000s) | ||||||||
| Change in plan assets: | ||||||||
| Fair value of plan assets at beginning of year | $ | 93,415 | $ | 98,415 | ||||
| Actual return (loss) on plan assets | 8,418 | 1,865 | ||||||
| Benefits paid | (6,385 | ) | (6,289 | ) | ||||
| Administrative expenses | (487 | ) | (576 | ) | ||||
| Fair value of plan assets at end of year | $ | 94,961 | $ | 93,415 | ||||
| Change in benefit obligation: | ||||||||
| Benefit obligation at beginning of year | $ | 78,422 | $ | 85,625 | ||||
| Service cost | 603 | 616 | ||||||
| Interest cost | 4,025 | 3,874 | ||||||
| Benefits paid | (6,385 | ) | (6,289 | ) | ||||
| Actuarial (gain) loss | 862 | (5,404 | ) | |||||
| Benefit obligation at end of year | $ | 77,527 | $ | 78,422 | ||||
| Amounts recognized in the Consolidated Balance Sheet: | ||||||||
| Other noncurrent assets | $ | 17,434 | $ | 14,993 | ||||
| Total amounts recognized at end of year | $ | 17,434 | $ | 14,993 |
| 2025 | 2024 | 2023 | ||||||||||
| (000s) | ||||||||||||
| Components of net periodic cost (benefit) | ||||||||||||
| Service cost | $ | 603 | $ | 616 | $ | 803 | ||||||
| Interest cost | 4,025 | 3,874 | 4,118 | |||||||||
| Expected return on plan assets | (4,054 | ) | (4,277 | ) | (4,195 | ) | ||||||
| Net periodic cost | $ | 574 | $ | 213 | $ | 726 |
| 2025 | 2024 | |||
| Measurement Dates | ||||
| Benefit obligations | 12/31/2025 | 12/31/2024 | ||
| Fair value of plan assets | 12/31/2025 | 12/31/2024 |
| 2025 | 2024 | |||||||
| Weighted average assumptions as of December 31 | ||||||||
| Discount rate | 5.10 | % | 5.36 | % | ||||
| Rate of compensation increase | 4.00 | % | 4.00 | % |
| 2025 | 2024 | 2023 | ||||||||||
| Weighted-average assumptions for net periodic benefit cost calculations | ||||||||||||
| Discount rate | 5.36 | % | 4.71 | % | 4.91 | % | ||||||
| Expected long-term rate of return on plan assets | 4.50 | % | 4.50 | % | 4.50 | % | ||||||
| Rate of compensation increase | 4.00 | % | 4.00 | % | 4.00 | % |
The “accumulated benefit obligation” for our pension plan represents the actuarial present value of benefits based on employee service and compensation as of a certain date and does not include an assumption about future compensation levels. The accumulated benefit obligation for our plan was $77.5 million and $78.4 million as of December 31, 2025 and 2024, respectively. The fair value of plan assets exceeded the accumulated benefit obligation by $17.4 million and $15.0 million as of December 31, 2025 and 2024, respectively.
We estimate that there will be no net loss or prior service cost amortized from accumulated other comprehensive income during 2026.
The market values of our pension plan assets at December 31, 2025 and 2024, reported using net asset value as a practical expedient, by asset category are as follows (in thousands):
| 2025 | 2024 | |||||||
| Equities: | ||||||||
| U.S. Large Cap | $ | 5,132 | $ | 5,131 | ||||
| U.S. Mid Cap | 1,388 | 1,351 | ||||||
| U.S. Small Cap | 1,382 | 1,259 | ||||||
| International Developed | 3,765 | 3,746 | ||||||
| Emerging Markets | 2,371 | 2,291 | ||||||
| Fixed income: | ||||||||
| Core Fixed Income | 29,218 | 28,175 | ||||||
| Long Duration Fixed Income | 50,951 | 50,674 | ||||||
| Cash/Currency: | ||||||||
| Cash Equivalents | 754 | 788 | ||||||
| Total market value | $ | 94,961 | $ | 93,415 |
To develop the expected long-term rate of return on plan assets assumption, we considered the historical returns and the future expectations for returns for each asset class, as well as the target asset allocation of the pension portfolio.
The following table shows expected benefit payments for the years 2026 through 2035 for our defined pension plan. There will be benefit payments under this plan beyond 2035.
| Estimated Future Benefit Payments (000s) | ||||
| 2026 | $ | 6,644 | ||
| 2027 | 6,630 | |||
| 2028 | 6,575 | |||
| 2029 | 6,496 | |||
| 2030 | 6,404 | |||
| 2031-2035 | 29,996 | |||
| Total | $ | 62,745 |
| 2025 | 2024 | |||||||
| Plan Assets | ||||||||
| Asset Category | ||||||||
| Equity securities | 15 | % | 15 | % | ||||
| Fixed income securities | 84 | % | 84 | % | ||||
| Other | 1 | % | 1 | % | ||||
| Total | 100 | % | 100 | % |
Investment Policy, Guidelines and Objectives have been established for the defined benefit pension plan. The investment policy is in keeping with the fiduciary requirements under existing federal laws and managed in accordance with the Prudent Investor Rule. Total portfolio risk is regularly evaluated and compared to that of the plan’s policy target allocation and judged on a relative basis over a market cycle. The following asset allocation policy and ranges have been established in accordance with the overall risk and return objectives of the portfolio:
| As of 12/31/2025 | Permitted****Range | |||||
| Total Equity | 15 | % | 10-30% | |||
| Total Fixed Income | 84 | % | 70-90% | |||
| Other | 1 | % | 0-10% |
In accordance with the investment policy, the portfolio will invest in high quality, large and small capitalization companies traded on national exchanges, and investment grade securities. The investment managers will not write or buy options for speculative purposes; securities may not be margined or sold short. The manager may employ futures or options for the purpose of hedging exposure, and will not purchase unregistered sectors, private placements, partnerships or commodities.
12) SEGMENT REPORTING
We operate in two reportable segments: Acute Care Hospital Services and Behavioral Health Care Services. Our chief operating decision making (“CODM”) group is comprised of our President and Chief Executive Officer and each of our respective division Presidents for our Acute Care Hospital Services and Behavioral Health Care Services. The operating segments are managed separately because each operating segment represents a business unit that offers different types of healthcare services or operates in different healthcare environments. The primary profitability measurement utilized by the President and Chief Executive Officer as well as the Presidents of each operating segment is segment income before income taxes. Segment income before income taxes is
utilized by the CODM group during the annual budgeting process and during their reviews of our monthly operating results to monitor each segment’s operating results as compared to prior periods, and the respective operating budgets.
The expenses included in our non-segment operating expenses below include centralized services including, but not limited to, information technology, purchasing, reimbursement, accounting and finance, taxation, legal, advertising and design and construction. The accounting policies of the operating segments are the same as those described in the summary of significant accounting policies included in Note 1-Business and Summary of Significant Accounting Policies. We do not present asset information for our segments as this information is not used to allocate resources.
Note: prior year amounts related to certain facilities previously included in our Behavioral Health Care Services’ results have been reclassified into our Acute Care Hospital Services' results as of May 1, 2024 to conform with current year presentation.
| 2025 | Acute Care Hospital Services | Behavioral Health Care Services (c) | Total | |||||||||
| (amounts in thousands) | ||||||||||||
| Net revenue from reportable segments | $ | 9,925,907 | $ | 7,425,500 | $ | 17,351,407 | ||||||
| Reconciliation of Net Revenue | ||||||||||||
| Non-segment revenue | 13,422 | |||||||||||
| Total Net Revenue | $ | 17,364,829 | ||||||||||
| Salaries, wages and benefits | $ | 3,797,810 | $ | 3,893,474 | ||||||||
| Other segment item operating expenses (a) | 4,707,603 | 1,848,084 | ||||||||||
| Depreciation and amortization expense | 388,804 | 220,464 | ||||||||||
| Interest (income) expense, net | 6,285 | 4,110 | ||||||||||
| Other (income) expense, net | (21,533 | ) | (1,135 | ) | ||||||||
| Reportable segment income before income taxes | $ | 1,046,938 | $ | 1,460,503 | $ | 2,507,441 | ||||||
| Reconciliation of non-segment revenue/expenses to consolidated income before income taxes | ||||||||||||
| Non-segment revenue | 13,422 | |||||||||||
| Non-segment operating expenses (b) | 514,575 | |||||||||||
| Non-segment interest expense, net | 145,673 | |||||||||||
| Non-segment other (income) expense, net | (111,526 | ) | ||||||||||
| Income before income taxes | $ | 1,972,141 |
| 2024 | Acute Care Hospital Services | Behavioral Health Care Services (c) | Total | |||||||||
| (amounts in thousands) | ||||||||||||
| Net revenue from reportable segments | $ | 8,944,288 | $ | 6,873,090 | $ | 15,817,378 | ||||||
| Reconciliation of Net Revenue | ||||||||||||
| Non-segment revenue | 10,557 | |||||||||||
| Total Net Revenue | $ | 15,827,935 | ||||||||||
| Salaries, wages and benefits | $ | 3,523,526 | $ | 3,590,956 | ||||||||
| Other segment item operating expenses (a) | 4,206,890 | 1,720,364 | ||||||||||
| Depreciation and amortization expense | 368,717 | 205,741 | ||||||||||
| Interest (income) expense, net | 6,339 | 4,027 | ||||||||||
| Other (income) expense, net | (1,305 | ) | (3,547 | ) | ||||||||
| Reportable segment income before income taxes | $ | 840,121 | $ | 1,355,549 | $ | 2,195,670 | ||||||
| Reconciliation of non-segment revenue/expenses to consolidated income before income taxes | ||||||||||||
| Non-segment revenue | 10,557 | |||||||||||
| Non-segment operating expenses (b) | 529,927 | |||||||||||
| Non-segment interest expense, net | 175,743 | |||||||||||
| Non-segment other (income) expense, net | 2,621 | |||||||||||
| Income before income taxes | $ | 1,497,936 |
| 2023 | Acute Care Hospital Services | Behavioral Health Care Services (c) | Total | |||||||||
| (amounts in thousands) | ||||||||||||
| Net revenue from reportable segments | $ | 8,081,402 | $ | 6,190,921 | $ | 14,272,323 | ||||||
| Reconciliation of Net Revenue | ||||||||||||
| Non-segment revenue | 9,653 | |||||||||||
| Total Net Revenue | $ | 14,281,976 | ||||||||||
| Salaries, wages and benefits | $ | 3,406,060 | $ | 3,353,008 | ||||||||
| Other segment item operating expenses (a) | 3,762,066 | 1,564,649 | ||||||||||
| Depreciation and amortization expense | 367,644 | 189,297 | ||||||||||
| Interest (income) expense, net | (2,501 | ) | 4,558 | |||||||||
| Other (income) expense, net | 7,788 | (4,271 | ) | |||||||||
| Reportable segment income before income taxes | $ | 540,345 | $ | 1,083,680 | $ | 1,624,025 | ||||||
| Reconciliation of non-segment revenue/expenses to consolidated income before income taxes | ||||||||||||
| Non-segment revenue | 9,653 | |||||||||||
| Non-segment operating expenses (b) | 463,871 | |||||||||||
| Non-segment interest expense, net | 204,617 | |||||||||||
| Non-segment other (income) expense, net | 24,764 | |||||||||||
| Income before income taxes | $ | 940,426 |
(a)
Other segment operating expenses for each period includes other operating expenses, supplies expense and lease and rental expense.
(b)
Non-segment operating expenses for each period includes salaries, wages and benefits, other operating expenses, supplies expense and lease and rental expense.
(c)
Includes net revenues generated from our behavioral health care facilities located in the U.K. amounting to approximately $1.001 billion in 2025, $880 million in 2024 and $761 million in 2023.
SCHEDULE II—VALUATION AND QUALIFYING ACCOUNTS
(amounts in thousands)
| Balance at | Charges to | Balance | ||||||||||
| beginning | costs and | at end | ||||||||||
| Valuation Allowance for Deferred Tax Assets: | of period | expenses | of period | |||||||||
| Year ended December 31, 2025 | $ | 82,690 | $ | 4,191 | $ | 86,881 | ||||||
| Year ended December 31, 2024 | $ | 72,667 | $ | 10,023 | $ | 82,690 | ||||||
| Year ended December 31, 2023 | $ | 63,325 | $ | 9,342 | $ | 72,667 |
Previous: Item 15. Exhibits and Financial Statement Schedules