Universal Health Services (NYSE:UHS) reported second-quarter adjusted earnings per share of $5.98, up 12% from a year earlier, while adjusted EBITDA less noncontrolling interests rose 5% to $678 million. The company said results benefited from a $100 million out-of-period Florida directed payment program benefit that had not been included in its original outlook.
Excluding that Florida benefit, Chief Financial Officer Steve Filton said quarterly adjusted EBITDA fell short of internal expectations, citing approximately $63 million in costs and operational pressures. Those items included $28 million of higher professional and general liability reserves, about $20 million related to a Texas behavioral health facility undergoing recertification, and roughly $15 million from a slower-than-expected ramp at Cedar Hill Regional Medical Center GW Health in Washington, D.C.
Acute-Care Volumes Rebound, Though Full-Year Outlook Narrows
The company reported growth in higher-acuity inpatient service lines including urology, neurology and cardiology. Payer mix continued to favor Medicare and managed Medicare, with modest managed-care volume growth excluding exchange coverage and slightly lower Medicaid volumes.
However, UHS reduced its full-year same-facility acute-care adjusted-admission growth outlook to 1.5% to 2.5%, from its earlier 2% to 3% range. Filton said the revision reflected first-half performance, as certain elective and outpatient procedures continue to shift to alternate care settings such as ambulatory surgery centers and freestanding imaging facilities.
Same-facility acute-care revenue increased 8.2%, or 5.9% excluding the company’s health plan. Revenue per adjusted admission rose 3.0% on a reported basis and 2.7% after excluding out-of-period Medicaid supplemental benefits. Labor costs per adjusted admission increased 2.7%, while supply expense per adjusted admission declined 2.5%. Contract labor represented 2.5% of acute-care revenue, down 20 basis points from the prior year.
President and CEO Marc Miller said UHS added 177 licensed beds at three acute-care hospitals during the quarter, representing a 2.5% increase in same-facility bed capacity. The company also opened the Alan B. Miller Medical Center in Palm Beach Gardens, Florida, in May and received Joint Commission accreditation for the de novo hospital in July.
Behavioral Health Revenue Grows as Volumes Remain Moderate
In behavioral health, same-facility net revenue increased 7.4%, supported by a 6.1% increase in revenue per adjusted patient day and a 1.4% increase in adjusted patient days. Same-facility segment EBITDA rose 9.0%, or 5.7% excluding the net benefit from out-of-period supplemental payments.
UHS narrowed its behavioral-health volume outlook to growth of 1% to 2% for the full year, compared with its prior 2% to 3% expectation. Filton said outpatient demand has been growing at roughly the same pace as inpatient demand, rather than at the faster rate the company had anticipated.
The company expects to complete its acquisition of Talkspace in mid-August. Miller said the transaction is intended to expand UHS’s outpatient behavioral-health presence through national virtual services, complementing its inpatient, residential and in-person outpatient offerings. Filton said Talkspace’s network of more than 6,000 therapists could help UHS provide follow-up care to patients discharged from inpatient facilities, including patients who live far from a UHS location or lack local therapist access.
UHS also continues to work toward recertification of its San Antonio behavioral health facility. The company stopped receiving reimbursement from government and managed-care payers at the end of April and does not expect reimbursement to resume until certification is regained, which it anticipates in 2027. The facility generated approximately $10 million in pretax losses during the second quarter, including staff severance costs, and UHS expects losses of $5 million to $10 million per quarter for the remainder of 2026.
Guidance Updated for Supplemental Payments and New Costs
UHS now forecasts approximately 7% revenue growth, 3% adjusted EBITDA less noncontrolling interests growth and 6% adjusted EPS growth at the midpoint for 2026. Its updated adjusted EBITDA less noncontrolling interests guidance range is $2.61 billion to $2.72 billion, representing a reduction of about $50 million at the midpoint from the prior outlook.
The revised forecast includes an estimated $150 million increase in net Medicaid supplemental funding for the year, including the $100 million Florida benefit recognized in the second quarter and an anticipated $25 million Texas ATLAS program benefit in the third quarter. That benefit is offset by approximately $200 million in adverse items that were not initially contemplated.
- Approximately $50 million of impact from the Texas behavioral health facility, including lost budgeted earnings and expected operating losses.
- A $50 million reduction in the expected year-over-year benefit from Cedar Hill, which is now projected to reach breakeven in the fourth quarter rather than earlier in the year.
- A $50 million increase in full-year professional and general liability expense, reflecting higher claim severity identified through a third-party actuarial review.
- Approximately $50 million of impact from lower volume assumptions in both operating segments.
Exchange volumes declined about 15% from the prior-year quarter, producing an estimated $20 million second-quarter impact. UHS now expects the full-year pretax effect from exchange trends to be approximately $85 million, in the upper half of its original guidance range. Filton said the decline in exchange enrollment was nearly offset one-for-one by increased self-pay volume.
Capital Spending and Share Repurchases Increase
Cash generated from operating activities totaled $44.3 million in the second quarter, compared with $549 million a year earlier. Capital expenditures were $228 million, reflecting the Florida hospital opening and capacity expansions.
UHS repurchased 1.89 million shares for $320 million during the quarter, up from $127 million in the first quarter. As of June 30, the company had $978 million remaining under its repurchase authorization. Miller said the company views its recent share-price weakness as an opportunity to retire shares, and Filton said UHS expects to meet or exceed its initial plan to repurchase $800 million to $900 million of stock during 2026.
The company ended the quarter with $139 million in cash, $4.85 billion in total debt and net leverage of 1.8 times. It also had $1.27 billion of additional borrowing capacity available under its revolving credit facility.
About Universal Health Services (NYSE:UHS)
Universal Health Services, Inc (NYSE: UHS) is one of the largest diversified health care management companies in the United States, offering a broad spectrum of services through its acute care hospital and behavioral health segments. The company operates general acute care hospitals, surgical hospitals and ambulatory centers, as well as inpatient and outpatient behavioral health facilities. Its network provides emergency and specialized medicine, diagnostic imaging, laboratory services, advanced surgical care and rehabilitation, complemented by a comprehensive array of behavioral services including psychiatric treatment, addiction programs and developmental disabilities care.
In the acute care segment, UHS’s facilities deliver services ranging from emergency department treatment and intensive care to maternity care and outpatient surgery.
