Universal Health Services, Inc. Q4 FY2025 earnings call

• Growth Agenda: Opened two new acute care hospitals, laid groundwork for new capacities in 2026; in behavioral segment, focused on outpatient strategy with 119 outpatient locations, on track to open 10 more in 2026. • Expense Management: Acute care margins improved due to reduced contract labor and strong supply chain; behavioral margins stable with staffing investments. • Technology: Deployed AI in operations for quality/patient experience and administrative operations for efficiency; rolled out agentic AI for post-discharge care, and plans to roll out more in 2026.

Acute Care Segment: Fourth quarter same facility net revenues increased 6.9% reported, 5.2% excluding insurance subsidiary; same facility revenue per adjusted admission increased 5.4%; segment EBITDA grew 10.4% with margin at 14.8% for Q4, full year margin improved 150 basis points to 15.8%. Behavioral Health Segment: Fourth quarter same facility net revenues increased 7.2%, supported by 5.6% revenue per adjusted patient day and 1.5% adjusted patient days; expenses increased slightly faster than revenue due to headcount growth; segment EBITDA grew 6.9% in Q4 and 7.8% for full year 2025.

• Revenue expected to range 18.4 - 18.8 billion, growth 6 - 8%. • Adjusted EBITDA net of NCI expected 2.64 - 2.79 billion, growth 2 - 8%. • Adjusted net income attributable to UHS per diluted share 22.64 - 24.52, growth 4 - 13%. • Assumes 2 - 3% same facility volume growth for both segments in 2026, but first quarter likely below due to winter storms. • Capital expenditures 950 million - 1.1 billion. • Assumes adverse impact from health insurance exchanges, California behavioral staffing regulations, and includes net benefit from Medicaid supplemental payments and other items.

• Health insurance exchange volumes decline could lead to bad debt risk. • California behavioral staffing regulations may increase labor costs and cause short-term volume disruption. • Uncertainty around Medicaid work requirements and funding cuts impact. • Timing issues with receivables related to new programs.

Q: Drill down on 2026 guidance volume growth, pricing; A: Acute pricing 3 - 4% increase, behavioral 2 - 3% with pricing moderation.

Q: How AI translates to operating performance; A: AI used in administrative efforts like revenue cycle, post-discharge, driving efficiencies.

Q: Acute care volumes, surgical vs medical; A: Surgical volume positive in 2025, expected similar in 2026; Nevada market had challenges in 2025 but expected uptick in 2026.

Q: Exchange volumes, bad debt; A: Expect 25 - 30% decline, already seeing decline, risk of bad debt.

Q: California behavioral staffing headwind; A: Need to change staffing mix to licensed professionals, upfront costs, but ongoing impact lower after full staffing.

Q: Outpatient behavioral demand, mix; A: Outpatient represents 10% of revenue, expected to grow, offering various services, outpatient margins better.

Q: California staffing, reimbursement; A: Staffing mix change, need to work with payers for reimbursement.

Q: Behavioral margin expansion; A: Revenue growth likely exceed cost increase, outpatient growth helps.

Q: Acute length of stay, AI; A: Acuity-adjusted LOS below pre-pandemic, supply of sub-acute capacity a hurdle.

Q: Medicaid supplementals, approval; A: Florida program expected approval, California more uncertain.

Q: Leverage ratio; A: Aim for 2 - 3 ratio, keep flexibility for opportunities, continue share repurchase.

Q: AI examples, efficiencies; A: Used in post-discharge, rounding, intake, hard to pinpoint exact dollars but promising.

Q: Behavioral volume confidence; A: Sequential improvement in 2025, investments give confidence for 2026 target.

Q: Healthcare policy risk, Medicaid; A: Uncertainty around Medicaid work requirements, impact hard to quantify.

Q: Cash flow, supply trends; A: Cash flow historically 75 - 80% of operating income; supply costs well controlled.

Q: Behavioral pricing, Medicaid volume; A: DPP reimbursement to reduce in 2028, use outpatient growth as hedge.

Q: Behavioral FTE growth, volume outlook; A: Staffing challenges vary by market, hiring in key areas gives confidence for 2026 volume target