Universal Health Services, Inc. (UHS) Earnings

Management highlights

### Strategic Capacity Expansion - Added 177 licensed beds across three existing acute care hospitals in Q2 2026, representing a 2.5% increase in same facility bed capacity to meet strong local demand - Officially opened the new Alan B. Miller Medical Center in Palm Beach Gardens, Florida, which received Joint Commission accreditation and has seen strong community reception - Continues to expand outpatient access, with approximately 40 operating freestanding emergency departments (FEDs) and another 5-10 in development, which have been high-performing investments over the past 5 years - Maintains at least one ambulatory surgery center (ASC) in every market, with continued investment in outpatient surgical capacity M&A and Integration - Completing final integration planning for the pending acquisition of Talkspace, expected to close in mid-August 2026 - Talkspace will add a national virtual behavioral health service line, creating the first end-to-end continuum of behavioral healthcare (inpatient, residential, in-person outpatient, and virtual) in the U.S., and will accelerate outpatient growth by leveraging Talkspace's 6,000+ therapist network to expand access for discharged patients Capital Allocation - Accelerated share repurchases to $320 million in Q2 2026, up from $127 million in Q1 2026, as management views the current discounted share price as a compelling capital deployment opportunity - As of June 30, 2026, $978 million in share repurchase authorization remains, and management intends to remain highly active in repurchasing shares through the end of 2026, with a full-year target of $800-$900 million in repurchases - Capital allocation prioritizes organic investment, particularly in outpatient services and less Medicaid-dependent lines of business, with limited large external M&A outside of the Talkspace acquisition Clinical and Operational Efficiency - Maintained strong expense management: acute care same facility salaries, wages, and benefits per adjusted admission increased 2.7% YoY, while supply expense per adjusted admission decreased 2.5% YoY, and contract labor as a percentage of revenue fell 20 basis points YoY to 2.5% - Labor cost growth in behavioral health moderated to 2% headcount growth in Q2 2026, down from 3% in Q1 2026 - Is undertaking third-party assisted revenue cycle optimization for acute care (already yielding measurable improvements) and has begun the same process for behavioral health to improve margins - California nurse staffing ratio requirements that took effect June 1, 2026 remain on track to hit the original $35 million full-year cost impact expectation

Guidance

- Full-year 2026 same facility acute care adjusted admission growth guidance was revised down to 1.5-2.5%, a 50 basis point reduction at the midpoint from the prior range, to reflect year-to-date performance trends - Full-year 2026 same facility behavioral health adjusted patient day growth guidance was revised down to 1.0-2.0%, a 100 basis point reduction at the midpoint from the prior 2-3% range - Updated full-year 2026 adjusted EBITDA less NCI guidance is $2.61 billion to $2.72 billion, a $50 million reduction at the midpoint from the prior outlook - The guidance incorporates a $150 million increase in expected net Medicaid supplemental funding benefit (to $1.5 billion total for the year) driven primarily by the newly approved 2025 Florida DPP program, offset by $200 million in unanticipated adverse items - Management expects the full-year pre-tax impact of ACA exchange volume declines to be ~$85 million, at the upper half of the original guidance range, due to higher-than-expected shifts from exchange coverage to self-pay - Expected operating losses at the San Antonio behavioral hospital during recertification are $5-10 million per quarter for the remainder of 2026, with a total $50 million full-year 2026 impact - Full-year 2026 professional and general liability expense guidance was increased by $50 million, split evenly between the two segments, driven by industry-wide higher claims severity - Updated full-year guidance projects ~7% total revenue growth, 3% adjusted EBITDA less NCI growth, and 6% adjusted EPS growth at the midpoint - Management expects underlying EBITDA growth to accelerate in the second half of 2026 driven by ramping of newly added acute care beds, improving performance at Cedar Hill, moderating labor cost growth in behavioral health, and easier year-over-year comparisons against 2025's softer fourth quarter performance in Nevada

Segment performance

Acute Care Segment: On a same facility basis, adjusted admissions increased 2.9% YoY, emergency department visits increased 4% YoY, and surgeries decreased 0.8% YoY. Same facility net revenue increased 8.2% YoY (5.9% excluding health plan impact), and revenue per adjusted admission increased 3.0% YoY (2.7% excluding out-of-period Medicaid supplemental benefits). Same facility segment EBITDA grew 8.2% YoY (6.3% excluding the out-of-period supplemental program benefit). The segment accounted for 7% of the total $100 million out-of-period Florida DPP benefit recorded in Q2. Acute care contributed approximately 60% of total company revenue based on segment performance disclosures. Behavioral Health Segment: On a same facility basis, net revenue increased 7.4% YoY, supported by a 6.1% increase in same facility revenue per adjusted patient day and a 1.4% increase in same facility adjusted patient days. Same facility segment EBITDA increased 9.0% YoY (5.7% excluding out-of-period supplemental payments). The segment received an $18 million net out-of-period benefit from Florida DPP supplemental payments in Q2 2026. Pre-tax losses at the San Antonio recertifying behavioral hospital totaled $10 million in Q2 2026, and the facility is excluded from same facility performance. Behavioral health contributed approximately 40% of total company revenue based on segment performance disclosures.

Risks & headwinds

- Ongoing shift of lower-acuity outpatient procedures and elective surgeries to alternate site settings (ASCs, freestanding imaging) creates ongoing pressure on acute care inpatient surgical volumes - The Texas Laurel Ridge Behavioral Hospital stopped receiving reimbursement in late April 2026 during recertification, expected to complete in 2027, and will incur $5-10 million in quarterly operating losses through the end of 2026 while operating at limited census, with total 2026 impact of $50 million - The de novo Cedar Hill Regional Medical Center in Washington, D.C. is ramping slower than expected, due to the need to build an established physician base in the underserved market, and will not reach break-even until Q4 2026, creating a $30 million adverse impact on full-year 2026 EBITDA - Professional and general liability (malpractice) costs have increased consistently for several years due to industry-wide higher claims severity, creating an ongoing structural headwind, and future reserve increases are possible pending semi-annual actuarial reviews; tort reform progress at the state and federal level is uncertain - Scheduled reductions in Medicaid supplemental reimbursement under the OBBA legislation will begin in 2028, which will create pressure on long-term margins if Congress does not act to delay implementation - ACA exchange volume declines have been slower than the original 25%+ forecast, but 100% of lost exchange volumes have shifted to self-pay/uncompensated care, creating higher uncompensated care burden than originally anticipated - California's new nurse staffing ratio requirements created incremental cost pressure in 2026, aligned with original guidance but still a meaningful headwind - Outpatient behavioral health growth has been slower than originally anticipated, even after adding headcount to expand capacity, delaying expected margin expansion from the segment's outpatient strategy prior to the Talkspace acquisition

Analyst Q&A

• Q: The full-year acute care volume guidance was lowered. Is this driven by non-ACA base business pressure, and what factors are driving the slowdown?

  A: The guidance revision is just a practical reflection of first half 2026 performance, which saw adjusted admissions running around 2% year-to-date. The primary ongoing driver of slower growth is a continued shift of elective and outpatient procedures to alternate site settings like ASCs and freestanding imaging centers. Management noted Q2 volume and surgical trends actually rebounded sequentially, and the guidance adjustment is just being respectful of year-to-date performance rather than signaling a new sharp downturn.

• Q: What drivers will lead to accelerating underlying EBITDA growth in the second half of 2026?

  A: There are four key drivers: 1) The 177 new acute care beds added in Q2 will continue to ramp up through the second half, with initial indicators showing strong underlying demand for this new capacity; 2) Cedar Hill's performance will continue to improve, moving from deep 2025 Q3 losses to break-even by year end, creating a positive year-over-year swing; 3) Behavioral health labor cost and headcount growth will continue to moderate, after falling from 3% in Q1 to 2% in Q2; 4) The second half of 2025 had seasonally soft performance in Nevada, creating easier year-over-year comparisons for 2026.

• Q: Why has behavioral health volume growth slowed, and what is the demand outlook for the segment?

  A: The downward guidance adjustment to 1-2% full-year growth is consistent with trends UHS has seen for multiple quarters. Management originally expected slightly higher growth driven by faster outpatient demand growth, but outpatient has grown at roughly the same rate as inpatient, slightly slower than originally projected. The pending Talkspace acquisition is expected to significantly accelerate outpatient growth, as it adds a national virtual platform and 6,000+ therapists that UHS did not have access to previously. Post-close and full integration, management may revisit outpatient growth outlooks.

• Q: How is UHS preparing for the scheduled OBBA Medicaid supplemental reimbursement reductions that begin in 2028?

  A: UHS is taking three main steps to offset upcoming headwinds: 1) Continuing to scale operational efficiency initiatives, including productivity improvements, supply cost management, which have already delivered results like lower per-admission supply costs in Q2; 2) Investing in revenue cycle improvement, with an ongoing third-party review that has already delivered measurable gains on the acute side, and a similar review starting for behavioral health; 3) Shifting growth focus to more Medicare and managed care-centric outpatient behavioral health services, which are less dependent on Medicaid reimbursement than inpatient acute and behavioral services.

• Q: What is the ramp outlook for the San Antonio behavioral hospital after recertification is obtained in 2027?

  A: It is too early to give specific timelines or ramp targets, as the recertification process is still ongoing and the final terms of certification are not yet known. However, management noted the facility holds roughly half of all behavioral health beds in the San Antonio market, and there is strong community and referral source support for reopening the facility. If recertified, management expects demand will be strong, and the facility can be ramped up relatively quickly, with updates provided as the process progresses.