What changed in this filing

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Item 7. Management’s Discussion and Analysis

2025-02-26 compared with 2024-02-27 · 468 added, 421 removed, 874 unchanged (50% of the section changed)

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• 3 inpatient behavioral health care facilities.

Net revenues from our acute care hospitals, outpatient facilities and commercial health insurer accounted for 57% of our consolidated net revenues during each of 2023 and 2022.

Net revenues from our behavioral health care facilities and commercial health insurer accounted for 43% of our consolidated net revenues during each of 2023 and 2022.

Net revenues from our acute care hospitals, outpatient facilities and commercial health insurer accounted for 56% of our consolidated net revenues during 2024 and 57% during 2023.

Net revenues from our behavioral health care facilities and commercial health insurer accounted for 44% of our consolidated net revenues during 2024 and 43% during 2023.

Our behavioral health care facilities located in the U.K.

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Such factors include, among other things, the following:

• in our acute care segment, we have experienced a significant increase in hospital based physician related expenses (especially in the areas of emergency room care and anesthesiology) which has had a material unfavorable impact on our results of operations during 2023.

Although we have implemented various initiatives to mitigate the increased expense, to the degree possible, increases in these physician related expenses could continue to have an unfavorable material impact on our results of operations for the foreseeable future;

• the healthcare industry is labor intensive and salaries, wages and benefits are subject to inflationary pressures, as are supplies expense and other operating expenses.

In addition, the nationwide shortage of nurses and other clinical staff and support personnel experienced by healthcare providers in the past has been a significant operating issue facing us and other healthcare providers.

In the past, the staffing shortage has, at times, required us to hire expensive temporary personnel and/or enhance wages and benefits to recruit and retain nurses and other clinical staff and support personnel.

In the past, staffing shortages have, at times, required us to hire expensive temporary personnel and/or enhance wages and benefits to recruit and retain nurses and other clinical staff and support personnel.

At certain facilities, particularly within our behavioral health care segment, there have been occasions when we were unable to fill all vacant positions and, consequently, we were required to limit patient volumes.

The staffing shortage has required us to enhance wages and benefits to recruit and retain nurses and other clinical staff and support personnel or required us to hire expensive temporary personnel.

We have also experienced general inflationary cost increases related to medical supplies as well as certain of our other operating expenses.

Many of these factors, which had a material unfavorable impact on our results of operations during 2022, moderated to a certain degree during 2023;

• in 2021, the rate of inflation in the United States began to increase and has since risen to levels not experienced in over 40 years.

We are experiencing inflationary pressures, primarily in personnel costs, and we anticipate continuing impacts on other cost areas within the next twelve months.

We have also experienced general inflationary cost increases related to certain of our other operating expenses.

Many of these factors, which had a material unfavorable impact on our results of operations in prior years, have moderated more recently.

However, we cannot predict future inflationary increases, which if significant, could have a material unfavorable impact on our future results of operations.

We have experienced inflationary pressures, primarily in personnel costs, although those pressures have moderated more recently.

The extent of any future impacts from inflation on our business and our results of operations will be dependent upon how long the elevated inflation levels persist and the extent to which the rate of inflation further increases, if at all, neither of which we are able to predict.

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Further, given the complexities of the reimbursement landscape in which we operate, our ability to pass on increased costs associated with providing healthcare to Medicare and Medicaid patients is limited due to various federal, state and local laws, which in certain circumstances, limit our ability to increase prices;

In addition, although we have been requesting and negotiating increased rates from commercial payers to defray our increased cost of providing patient care, commercial payers may be unwilling or unable to increase reimbursement rates commensurate with the inflationary impacts on our costs;

• The rapid increase in interest rates have increased our interest expense significantly increasing our expenses and reducing our free cash flow and our ability to access the capital markets on favorable terms.

As such, the effects of inflation and increased borrowing rates may adversely impact our results of operations, financial condition and cash flows;

• on January 19, 2024, President Biden signed into law H.R.

2872 which provides fiscal year 2024 appropriations to federal agencies for continuing projects and activities funded in four of the 12 annual appropriations bills through March 1, 2024.

The remaining eight annual appropriations bills are funded through March 8, 2024.

• in our acute care segment, we have experienced a significant increase in hospital based physician related expenses, especially in the areas of emergency room care and anesthesiology.

We have implemented various initiatives to mitigate the increased expense, to the degree possible, which has moderated the rate of increase.

However, significant increases in these physician related expenses could have a material unfavorable impact on our future results of operations;

• the increase in interest rates during the past few years has increased our interest expense significantly thereby reducing our free cash flow.

As such, although interest rates have moderated more recently, the effects of increased borrowing rates have adversely impacted our results of operations, financial condition and cash flows.

We cannot predict future changes to interest rates, however, significant increases in our borrowing rates could have a material unfavorable impact on our future results of operations and our ability to access the capital markets on favorable terms;

• President Biden signed into law fiscal year 2025 appropriations to federal agencies for continuing projects and activities through March 14, 2025.

We cannot predict whether or not there will be future legislation averting a federal government shutdown, however, our operating cash flows and results of operations could be materially unfavorably impacted by a federal government shutdown;

• in January 2020, the Centers for Disease Control and Prevention confirmed the spread of COVID-19 to the United States and, in March 2020, the World Health Organization declared the COVID-19 outbreak a pandemic.

Although the federal government had previously declared COVID-19 a national emergency, that declaration expired on May 11, 2023 at which time the favorable payment provisions available to us during the declared national emergency ended.

Many of the federal and state legislative and regulatory measures allowing for flexibility in delivery of care and various financial supports for healthcare

providers were available only for the duration of the public health emergency (“PHE”).

Most states have ended their state-level emergency declarations.

The end of the PHE status will result in the conclusion of those policies over various designated timeframes.

We cannot predict whether the loss of any such favorable conditions available to providers during the declared PHE will ultimately have a negative financial impact on us.

The federal Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) created a $175 billion “Public Health and Social Services Emergency Fund” to reimburse eligible health care providers for “health care related expenses or lost revenues that are attributable to coronavirus” (the “PHSSEF”).

We received payments from the targeted distributions of the PHSSEF, as disclosed herein.

The CARES Act also makes other forms of financial assistance available to healthcare providers, including through Medicare and Medicaid payment adjustments and an expansion of the Medicare Accelerated and Advance Payment Program, which made available accelerated payments of Medicare funds in order to increase cash flow to providers.

We received accelerated payments under this program during 2020, and returned early all of those funds during the first quarter of 2021, as disclosed herein.

Providers receiving PHSSEF payments were required to sign terms and conditions regarding utilization of the payments.

We, and other providers, will report healthcare related expenses attributable to COVID-19 that have not been reimbursed by another source, which may include general and administrative or healthcare related operating expenses.

Funds may also be applied to lost revenues, represented as a negative change in year-over-year net patient care operating income.

On December 29, 2022, the Consolidated Appropriations Act, 2023, was signed into law and phases out the enhanced federal medical assistance percentage rate states have received during the COVID-19 PHE and fully eliminates the increase on December 31, 2023.

States were also permitted to begin Medicaid eligibility redeterminations on March 31, 2023, which is anticipated to result in a large decrease in Medicaid enrollment.

The impact of the COVID-19 pandemic, which began in March, 2020, has had a material effect on our operations and financial results, at various times, since that time.

We cannot predict if there will be future disruptions caused by the COVID-19 pandemic;

• our ability to comply with the existing laws and government regulations, and/or changes in laws and government regulations;

• on December 29, 2022, the Consolidated Appropriations Act, 2023, was signed into law phasing out the enhanced federal medical assistance percentage rate that states received during the COVID-19 public health emergency and fully eliminated the increase on December 31, 2023.

States were also permitted to begin Medicaid eligibility redeterminations on March 31, 2023, which has resulted in a decrease in Medicaid enrollment;

• our ability to comply with the existing laws and government regulations, and/or changes in laws and government regulations, including the recently enacted and proposed significant new tariffs.

Significant tariffs or other restrictions, if imposed on our imported pharmaceutical ingredients, medical devices, medical equipment and their ingredients and components, could escalate costs of medications, medical devices and medical equipment and disrupt our supply chains.

While we continue to evaluate the potential impact of the new tariffs on our business, given the uncertainty regarding the scope and duration of any new tariffs, as well as the potential for additional tariffs or trade barriers by the U.S.

impacted foreign countries, we can provide no assurance that any strategies we implement to mitigate the impact of such tariffs or other trade actions will be successful;

• an increasing number of legislative initiatives have been passed into law that may result in major changes in the health care delivery system on a national or state level.

For example, Congress has reduced to $0 the penalty for failing to maintain health coverage that was part of the original Patient Protection and Affordable Care Act, as amended by the Health and Education Reconciliation Act (collectively, the "Legislation") as part of the Tax Cuts and Jobs Act.

President Biden has undertaken and is expected to undertake additional executive actions that will strengthen the Legislation and reverse the policies of the prior administration.

To date, the Biden administration has issued executive orders implementing a special enrollment period permitting individuals to enroll in health plans outside of the annual open enrollment period and reexamining policies that may undermine the Legislation or the Medicaid program.

The Inflation Reduction Act of 2022 (“IRA”) was passed on August 16, 2022, which among other things, allows for CMS to negotiate prices for certain single-source drugs reimbursed under Medicare Part B and Part D.

The American Rescue Plan Act’s expansion of subsidies to purchase coverage through a Legislation exchange, which the IRA continued through 2025, is anticipated to increase exchange enrollment.

The Inflation Reduction Act of 2022 (“IRA”) was passed on August 16, 2022, which among other things, allows for the Centers for Medicare and Medicaid Services ("CMS") to negotiate prices for certain single-source drugs reimbursed under Medicare Part B and Part D.

The American Rescue Plan Act’s expansion of subsidies to purchase coverage through a Legislation exchange, which the IRA continued through 2025, has increased exchange enrollment.

However, the Trump administration has already taken steps to undo certain Biden-era executive orders, including those intended to lower drug costs for beneficiaries, and to freeze funding for federal programs.

While the administration’s initial freeze has since been rescinded, the administration is likely to make other attempts to reduce federal program expenditures and can generally be expected to oppose increases in ACA and Medicaid enrollment.

If the subsidies are not extended beyond 2025, exchange enrollment may be adversely impacted;

• there have been numerous political and legal efforts to expand, repeal, replace or modify the Legislation, since its enactment, some of which have been successful, in part, in modifying the Legislation, as well as court challenges to the constitutionality of the Legislation.

Supreme Court rejected the latest such case on June 17, 2021, when the Court held in California v.

Supreme Court held in California v.

Texas that the plaintiffs lacked standing to challenge the Legislation’s requirement to obtain minimum essential health insurance coverage, or the individual mandate.

The Court dismissed the case without specifically ruling on the constitutionality of the Legislation.

As a result, the Legislation will continue to remain law, in its entirety, likely for the foreseeable future.

As a result, the Legislation continued to remain law, in its entirety.

On September 7, 2022, the Legislation faced its most recent challenge when a Texas Federal District Court judge, in the case of Braidwood Management v.

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Constitution and that the coverage of certain HIV prevention medication violates the Religious Freedom Restoration Act.

The government has appealed the decision to the U.S.

Circuit Court of Appeals for the Fifth Circuit.

The decision was appealed to the U.S.

Court of Appeals for the Fifth Circuit, which on June 21, 2024, affirmed the District Court’s ruling regarding preventive services recommended by United States Preventive Services Task Force being unconstitutional.

However, the Fifth Circuit overturned the nationwide injunction imposed by the District Court, preserving access to the majority of preventive services in dispute for now.

Government appealed and on January 10, 2025, the U.S.

Supreme Court agreed to hear the matter.

The outcome and impacts of this litigation cannot be predicted.

Any future efforts to challenge, replace or replace the Legislation or expand or substantially amend its provision is unknown.

See below in Sources of Revenues and Health Care Reform for additional disclosure;

• under the Legislation, hospitals are required to make public a list of their standard charges, and effective January 1, 2019, CMS has required that this disclosure be in machine-readable format and include charges for all hospital items and services and average charges for diagnosis-related groups.

On November 27, 2019, CMS published a final rule on “Price Transparency Requirements for Hospitals to Make Standard Charges Public.” This rule took effect on January 1, 2021 and requires all hospitals to also make public their payer-specific negotiated rates, minimum negotiated rates, maximum negotiated rates, and discounted cash rates, for all items and services, including individual items and services and service packages, that could be provided by a hospital to a patient.

Failure to comply with these requirements may result in daily monetary penalties.

On November 2, 2021, CMS released a final rule amending several hospital price transparency policies and increasing the amount of penalties for noncompliance through the use of a scaling factor based on hospital bed count.

On April 26, 2023, CMS announced updated enforcement processes that requires a shortened timeline for coming into compliance when a violation has been identified and the automatic imposition of a civil monetary penalties in certain circumstances of noncompliance;

• as part of the Consolidated Appropriations Act of 2021 (the "CAA"), Congress passed legislation aimed at preventing or limiting patient balance billing in certain circumstances.

The CAA addresses surprise medical bills stemming from emergency services, out-of-network ancillary providers at in-network facilities, and air ambulance carriers.

The legislation prohibits surprise billing when out-of-network emergency services or out-of-network services at an in-network facility are provided, unless informed consent is received.

The CAA prohibits surprise billing when out-of-network emergency services or out-of-network services at an in-network facility are provided, unless informed consent is received.

In these circumstances providers are prohibited from billing the patient for any amounts that exceed in-network cost-sharing requirements.

HHS, the Department of Labor and the Department of the Treasury have issued interim final rules, which begin to implement the legislation.

HHS, the Department of Labor and the Department of the Treasury have issued rules to implement the legislation.

The rules have limited the ability of our hospital-based physicians to receive payments for services at usually higher out-of-network rates in certain circumstances, and, as a result, have caused us to increase subsidies to these physicians or to replace their services at a higher cost level;

On February 28, 2022, a district judge in the Eastern District of Texas invalidated portions of the rule governing aspects of the Independent Dispute Resolution (“IDR”) process.

In light of this decision, the government issued a final rule on August 19, 2022 eliminating the rebuttable presumption in favor of the qualifying payment amount (“QPA”) by the IDR entity and providing additional factors the IDR entity should consider when choosing between two competing offers.

On September 22, 2022, the Texas Medical Association filed a lawsuit challenging the IDR process provided in the updated final rule and alleging that the final rule unlawfully elevates the QPA above other factors the IDR entity must consider.

On February 6, 2023, a federal judge vacated parts of the rule, including provisions related to considerations of the QPA.

The government's appeal of the district court's order is pending in the U.S.

Court of Appeals for the Fifth Circuit;

• in June 2024, the U.S.

Supreme Court issued its decision in Loper Bright Enters.

Raimondo and Relentless, Inc.

Department of Commerce , which modified the regulatory interpretation standard established 40 years ago by Chevron v.

National Resources Defense Council .

Chevron doctrine generally required courts to defer to federal agencies in their interpretation of federal statutes when a statute was silent or ambiguous with respect to a specific issue.

In Loper Bright , the Supreme Court held that courts are no longer required to grant such deference, though they may consider an agency’s statutory interpretation.

As it is highly regulated, the health care industry could be significantly impacted by the Loper Bright decision, particularly in the areas of Medicare reimbursement, decision making by the Food & Drug

Administration and health care fraud and abuse compliance, where parties may no longer be able to rely on federal agencies’ policies, rules and guidance;

• possible unfavorable changes in the levels and terms of reimbursement for our charges by third party payers or government based payers, including Medicare or Medicaid in the United States, and government based payers in the United Kingdom;

• our ability to enter into managed care provider agreements on acceptable terms and the ability of our competitors to do the same;

• the outcome of known and unknown litigation, government investigations, false claims act allegations, and liabilities and other claims asserted against us and other matters as disclosed in Note 8 to the Consolidated Financial Statements - Commitments and Contingencies and the effects of adverse publicity relating to such matters ;

• the outcome of known and unknown litigation, government investigations, inquiries, false claims act allegations, and liabilities and other claims asserted against us and other matters, and the effects of adverse publicity relating to such matters, including, but not limited to, the jury verdicts returned against The Pavilion Behavioral Health System (the "Pavilion") and Cumberland Hospital for Children and Adolescents ("Cumberland"), two of our indirect subsidiaries, as disclosed in Note 8 to the Consolidated Financial Statements - Commitments and Contingencies, Legal Proceedings.

We are uncertain as to the ultimate financial exposure related to the Pavilion and Cumberland matters (which relate to occurrences in the 2020 policy year) and we can make no assurances regarding timing or substance of their outcome, or the amount of damages that may be ultimately held recoverable after post-judgment proceedings and appeals.

As of December 31, 2024, without reduction for any potential amounts related to the Pavilion and Cumberland matters, the Company and its subsidiaries have aggregate insurance coverage of approximately $221 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 Pavilion and/or Cumberland matters exhausts all or a significant portion of the remaining commercial insurance coverage available to the Company and its subsidiaries related to other matters that occurred in 2020, or the Pavilion and Cumberland matters cause 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;

• competition from other healthcare providers (including physician owned facilities) in certain markets;

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• as discussed below in Sources of Revenue , we receive revenues from various state and county-based programs, including Medicaid in all the states in which we operate.

We receive annual Medicaid revenues of approximately $100 million, or greater, from each of Texas, California, Nevada, Illinois, Pennsylvania, Washington, D.C., Kentucky, Florida, Massachusetts and Virginia.

We also receive Medicaid disproportionate share hospital ("DSH") payments in certain states including Texas and South Carolina.

We receive annual Medicaid revenues of approximately $100 million, or greater, from each of Texas, Nevada, California, Illinois, Pennsylvania, Washington, D.C., Kentucky, Florida, Virginia, Massachusetts and Mississippi.

Most of these programs are approved on a year-to-year basis and there is no assurance that these revenues will continue at their current rates or at all.

The prior President Trump administration had attempted to limit Medicaid expenditures by, for example, attaching work requirements to eligibility for Medicaid waiver benefits.

second Trump administration is likely to explore similar solutions to limit Medicaid enrollment or expenditure.

The Trump administration has already taken steps to undo Biden-era executive orders and to freeze funding for federal programs.

We also receive Medicaid DSH payments in certain states including, most significantly, Texas.

We are therefore particularly sensitive to potential reductions in Medicaid and other state-based revenue programs as well as regulatory, economic, environmental and competitive changes in those states;

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The Joint Committee was unable to reach an agreement by the November 23, 2011 deadline and, as a result, across-the-board cuts to discretionary, national defense and Medicare spending were implemented on March 1, 2013 resulting in Medicare payment reductions of up to 2% per fiscal year with a uniform percentage reduction across all Medicare programs.

The Bipartisan Budget Act of 2015, enacted on November 2, 2015, continued the 2% reductions to Medicare reimbursement imposed under the 2011 Act.

Recent legislation suspended payment reductions through December 31, 2021 in exchange for extended cuts through 2030.

Subsequent legislation extended the payment reduction suspension through March 31, 2022, with a 1% payment reduction from then until June 30, 2022 and the full 2% payment reduction thereafter.

The most recent legislation extended these reductions through 2032.

Current legislation has extended these reductions through 2032.

We cannot predict whether Congress will restructure the implemented Medicare payment reductions or what other federal budget deficit reduction initiatives may be proposed by Congress going forward;

See below in 2019 Novel Coronavirus Disease Medicare and Medicaid Payment Related Legislation – Medicare Sequestration Relief , for additional disclosure related to the favorable effect the legislative extensions have had on our results of operations;

• uninsured and self-pay patients treated at our acute care facilities unfavorably impact our ability to satisfactorily and timely collect our self-pay patient accounts;

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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.

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.

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

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 is used in estimating the expected amount of claims.

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Fair values are determined based on estimated future cash flows using appropriate discount rates.

Please see additional disclosure below in Provision for Asset Impairments .

Please see additional disclosure below in Provision for Asset Impairments, for disclosure regarding a provision for asset impairment recorded during 2022.

Goodwill and Intangible Assets:

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The healthcare industry is labor intensive and salaries, wages and benefits are subject to inflationary pressures, as are supplies expense and other operating expenses.

In some areas, the labor scarcity has strained our resources and staff, which has required us to utilize higher‑cost temporary labor and pay premiums above standard compensation for essential workers.

The staffing shortage has required us to enhance wages and benefits to recruit and retain nurses and other clinical staff and support personnel or required us to hire expensive temporary personnel.

We have also experienced general inflationary cost increases related to medical supplies as well as certain of our other operating expenses.

Many of these factors, which had a material unfavorable impact on our results of operations during 2022, moderated to a certain degree during 2023.

In our acute care segment, we have experienced a significant increase in hospital-based physician related expenses (especially in the areas of emergency room care and anesthesiology) which has had a material unfavorable impact on our results of operations during 2023.

Although our ability to pass on increased costs associated with providing healthcare to Medicare and Medicaid patients is limited due to various federal, state and local laws which, in certain circumstances, limit our ability to increase prices, we have been requesting and negotiating increased rates from commercial insurers to defray our increased cost of providing patient care.

We have also experienced general inflationary cost increases related to certain of our other operating expenses.

Many of these factors, which had a material unfavorable impact on our results of operations in prior years, have moderated more recently.

However, we cannot predict future inflationary increases, which if significant, could have a material unfavorable impact on our future results of operations.

We have experienced inflationary pressures, primarily in personnel costs, although those pressures have moderated more recently.

If elevated levels of inflation were to persist or if the rate of inflation were to accelerate, our expenses could increase faster than anticipated and we may utilize our capital resources sooner than expected.

In our acute care segment, during the past few years we experienced significant increases in hospital-based physician related expenses, especially in the areas of emergency room care and anesthesiology.

We have implemented various initiatives to mitigate the increased expense, to the degree possible, which has moderated the rate of increase experienced during 2024.

However, significant increases in these physician related expenses could have a material unfavorable impact on our future results of operations.

Although our ability to pass on increased costs associated with providing healthcare to Medicare and Medicaid patients is limited, as discussed above, we have been requesting and negotiating increased rates from commercial insurers to defray our increased cost of providing patient care.

In addition, we have implemented various productivity enhancement programs and cost reduction initiatives including, but not limited to, the following:

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Net income attributable to UHS

Net revenues increased by 6.6%, or $883 million, to $14.28 billion during 2023 as compared to $13.40 billion during 2022.

Net revenues increased by 10.8%, or $1.55 billion, to $15.83 billion during 2024 as compared to $14.28 billion during 2023.

The increase in net revenues was primarily attributable to:

• a $1.32 billion or 9.5% increase in net revenues generated from our acute care and behavioral health care operations owned during both periods (which we refer to as “same facility”), and;

• $123 million of other combined net decreases including $162 million of decreased revenues at Desert Springs which discontinued all inpatient operations during the first quarter of 2023.

Income before income taxes increased by $74 million to $940 million during 2023 as compared to $866 million during 2022.

• $222 million of other combined net increases consisting primarily of a $239 million increase in provider tax assessments which had no impact on income before income taxes since amounts offset between net revenues and other operating expenses.

Income before income taxes increased by $558 million, or 59%, to $1.50 billion during 2024 as compared to $940 million during 2023.

The increase was attributable to:

• an increase of $295 million at our acute care facilities, as discussed below in Acute Care Hospital Services ;

• an increase of $103 million at our behavioral health care facilities, as discussed below in Behavioral Health Services ;

• a decrease of $80 million due to an increase in interest expense due to increases in our weighted average cost of borrowings and aggregate average borrowings outstanding, as discussed below in Other Operating Results-Interest Expense , and;

• $60 million of other combined net decreases, including a $28 million increase in the unrealized loss in the market value of certain equity securities.

Net income attributable to UHS increased by $42 million to $718 million during 2023 as compared to $676 million during 2022.

• an increase of $277 million at our behavioral health care facilities, as discussed below in Behavioral Health Services, and;

• $14 million of other combined net decreases.

Net income attributable to UHS increased by $424 million, or 59%, to $1.14 billion during 2024 as compared to $718 million during 2023.

This increase was attributable to:

• an increase of $74 million in income before income taxes, as discussed above;

• a decrease of $20 million due to an increase in the income attributable to noncontrolling interests, and;

• a decrease of $12 million resulting from an increase in the provision for income taxes due primarily to the income tax expense recorded in connection with the $54 million increase in pre-tax income.

Please see additional disclosure below in Other Operating Results-Provision for Income Taxes and Effective Tax Rates.

Adjustments to self-insured professional and general liability and workers' compensation liability reserves:

Professional and general liability:

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

As a result of unfavorable trends experienced during 2023 and 2022, our results of operations included pre-tax increases to our reserves for self-insured professional and general liability claims amounting to approximately $25 million during 2023 and $16 million during 2022.

• a $558 million in income before income taxes, as discussed above;

• a decrease of $20 million due to an increase in the net income/loss attributable to noncontrolling interests, and;

• a decrease of $114 million resulting from an increase in the provision for income taxes resulting primarily from:

(i) the increase in the provision for income taxes resulting from the $538 million increase in pre-tax income (consisting of $558 million increase in income before income taxes minus a $20 million increase in the income/loss attributable to noncontrolling interests), partially offset by;

(ii) 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).

Adjustments to Self-Insured Professional and General Liability Reserves:

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.

As a result of unfavorable trends experienced during 2024 and 2023, our results of operations included pre-tax increases to our reserves for self-insured professional and general liability claims amounting to approximately $79 million during 2024 and $25

million during 2023.

During 2024, approximately $54 million of the reserves increase is included in our Same Facility basis acute care hospitals services’ results, and approximately $25 million is included in our behavioral health services’ results.

During 2023, approximately $18 million of the reserves increase is included in our Same Facility basis acute care hospitals services’ results, and approximately $7 million is included in our behavioral health services’ results.

Workers' compensation liability:

As a result of favorable trends experienced recently, our results of operations during 2023 included a decrease to our reserves for self-insured workers' compensation liability claims amounting to approximately $10 million, of which approximately $4 million is included in our same facility basis acute care hospitals services’ results, and approximately $5 million is included in our behavioral health services’ results.

Acute Care Hospital Services

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During 2024, as compared to 2023, net revenues from our acute care hospital services, on a Same Facility basis, increased by $674 million or 8.5%.

Income before income taxes (and before income attributable to noncontrolling interests) increased by $61 million, or 11.9%, amounting to $573 million, or 7.3% of net revenues during 2023, as compared to $512 million, or 7.0% of net revenues during 2022.

During 2023, net revenue per adjusted admission decreased by 0.6% while net revenue per adjusted patient day increased by 2.2%, as compared to 2022.

During 2023, as compared to 2022, the net revenue per adjusted admission, and per adjusted patient day, were pressured by the following:

(i) a greater percentage of lower acuity procedures;

(ii) an increase in denied claims and challenges to patient status classifications by certain of our commercial payers, and;

(iii) a decrease in the number of patients with a COVID-19 diagnosis treated at our acute care hospitals and less incremental government reimbursement associated with COVID-19 patients.

During 2023, as compared to 2022, inpatient admissions to our acute care hospitals increased by 6.4% and adjusted admissions (adjusted for outpatient activity) increased by 7.6%.

Patient days at these facilities increased by 3.5% and adjusted patient days increased by 4.7% during 2023, as compared to 2022.

The average length of inpatient stay at these facilities was 4.9 days during 2023 and 5.0 days during 2022.

The occupancy rate, based on the average available beds at these facilities, was 67% during 2023, as compared to 64% during 2022.

Income before income taxes (and before income attributable to noncontrolling interests) increased by $301 million, or 54%, amounting to $858 million, or 10.0% of net revenues during 2024, as compared to $557 million, or 7.1% of net

revenues during 2023.

Included in our Same Facility basis' net revenues and income before income taxes, during 2024, was approximately $186 million of net reimbursements (net of related provider taxes) recorded in connection with the Nevada state directed payment program which was approved by the Centers for Medicare and Medicaid Services in December, 2023.

Please see additional disclosure below in Sources of Revenue-Nevada State Directed Payment Program ("SDP").

During 2024, net revenue per adjusted admission increased by 5.1% while net revenue per adjusted patient day increased by 6.3%, as compared to 2023.

During 2024, as compared to 2023, inpatient admissions to our acute care hospitals increased by 3.1% while adjusted admissions increased by 2.9%.

Patient days and adjusted patient days at these facilities increased by 2.0% and 1.8%, respectively, during 2024, as compared to 2023.

The average length of inpatient stay at these facilities was 4.8 days and 4.9 days during 2024 and 2023, respectively.

The occupancy rate, based on the average available beds at these facilities, was approximately 67% during each of 2024 and 2023.

On a Same Facility basis during 2024, as compared to 2023, salaries, wages and benefits expense increased by $115 million, or 3.4%.

Although our acute care facilities experienced an increase in patient volumes during 2024, as compared to the 2023, the related incremental staffing cost increase was offset by the following:

(i) a reduction in premium pay (overtime paid to employees and external temporary resources' expense) which decreased by approximately $48 million during 2024, as compared to 2023, and;

(ii) a restructuring, that occurred in early 2024, at certain of our acute care hospitals that reduced the number of employees in positions that were not directly related to the delivery of patient care.

As a percentage of net revenues, salaries, wages and benefits expense decreased to 40.9% during 2024 as compared to 42.9% during 2023.

Other operating expenses increased $281 million, or 15.1%, during 2023, as compared to 2022.

Operating expenses incurred by our commercial health insurer, consisting primarily of medical costs, increased approximately $40 million during 2023 as compared to 2022.

Excluding the operating expenses incurred by our commercial health insurer, other operating expenses increased $241 million, or 16.4% during 2023 as compared to 2022.

The increase during 2023, as compared to 2022, was due primarily to a $127 million, or 26.6%, increase in physician-related expenses (as discussed above in Results of Operations - Clinical Staffing, Physician Related Expenses and Effects of Inflation), as well as the expenses related to the increase in patient volumes.

Supplies expense increased $77 million, or 6.3%, during 2023, as compared to 2022.

The increase was due, in part, to the increase in patient volumes experienced during 2023, as compared to 2022 .

Other operating expenses increased by $214 million, or 9.9%, during 2024, as compared to 2023.

Operating expenses incurred by our commercial health insurer, consisting primarily of medical costs, increased by $69 million during 2024, as compared to 2023.

In addition, as discussed above in Results of Operations-Adjustments to Self-Insured Professional and General Liability Reserves , included in the other operating expenses of our acute care hospital services during 2024, as compared to 2023, was a $36 million increase in the adjustments made to our self-insured professional and general liability reserves that was applicable to our acute care facilities.

Excluding these expense items from each year, other operating expenses increased by $109 million, or 6.3%.

Contributing to the increase during 2024, as compared to 2023, were the expenses incurred in connection with the increase in patient volumes.

As a percentage of net revenues, other operating expenses increased to 27.8% during 2024, as compared to 27.4% during 2023.

Supplies expense increased by $43 million, or 3.3%, during 2024, as compared to 2023.

As a percentage of net revenues, supplies expense decreased to 15.9% during 2024, as compared to 16.7% during 2023.

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(ii) the impact of provider tax assessments which increased net revenues and other operating expenses but had no impact on income before income taxes, and;

(iii) certain other amounts including, if applicable, the operating results of recently acquired/opened facilities, or divested/closed facilities, including the operating results and provision for asset impairment (recorded during 2022) for Desert Springs Hospital which discontinued all inpatient operations during the first quarter of 2023.

(iii) certain other amounts including, if applicable, the operating results of recently acquired/opened facilities, or divested/closed facilities, including the operating results for Desert Springs Hospital which discontinued all inpatient operations during the first quarter of 2023.

Dollar amounts below are reflected in thousands.

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During 2024, as compared to 2023, net revenues from our acute care hospital services increased by $841 million, or 10.4%, due to:

(i) the $556 million, or 7.6% increase in Same Facility revenues, as discussed above, and;

(ii) $121 million of other combined net decreases consisting primarily of decreased revenues at Desert Springs Hospital and decreased provider tax assessments, partially offset by the revenues generated at a 170-bed acute care hospital located in Reno, Nevada, that opened in early April, 2022 (this facility was reflected in our acute care hospital services' operating results effective May 1st of each year).

(i) the $674 million, or 8.5% increase in Same Facility revenues, as discussed above;

(ii) a $187 million increase in provider tax assessments (which had no impact on income before income taxes since the amounts offset between net revenues and other operating

expenses), and;

(iii) $20 million of other combined net decreases consisting primarily of decreased revenues at Desert Springs Hospital.

Income before income taxes increased by $295 million, or 54.6%, to $835 million, or 9.4% of net revenues during 2024, as compared to $540 million, or 6.7% of net revenues during 2023.

The $111 million increase in income before income taxes from our acute care hospital services resulted from the $61 million, or 12%, increase in income before income taxes at our acute care hospital services, on a Same Facility basis, as discussed above, and $50 million of other combined net increases resulting primarily from decreased losses incurred at Desert Springs Hospital (a $58 million provision for asset impairment was recorded for Desert Springs Hospital during 2022).

The increase resulted from the $301 million, or 54%, increase in income before income taxes at our acute care hospital services, on a Same Facility basis, as discussed above, and $6 million of other combined net decreases resulting primarily from the losses incurred at the newly constructed 150-bed West Henderson Hospital located in Las Vegas, Nevada, that was completed and opened during the fourth quarter of 2024.

During 2024, as compared to 2023, salaries, wages and benefits expense increased by $105 million, or 3.1%.

The increase was due primarily to the above-mentioned $138 million increase related to our acute care hospital services, on a Same Facility basis, partially offset by a combined net decrease of $64 million resulting primarily from decreased salaries, wages and benefits expense related to Desert Springs Hospital.

The increase was due primarily to the above-mentioned $115 million increase related to our acute care hospital services, on a Same Facility basis, partially offset by a combined other net decrease of $10 million (consisting primarily of a decrease related to Desert Springs Hospital, partially offset by an increase related to West Henderson Hospital).

Other operating expenses increased $396 million, or 16.9%, during 2024 as compared to 2023.

The increase was due primarily to the $281 million above-mentioned increase related to our acute care hospital services, on a Same Facility basis, partially offset by a combined net decrease of $80 million resulting primarily from decreased operating expenses related to Desert Springs Hospital (2022 included a $58 million provision for asset impairment).

The increase was due primarily to the $214 million above-mentioned increase related to our acute care hospital services, on a Same Facility basis, as well as the above-mentioned $187 million increase in provider tax assessments.

Supplies expense increased by $42 million, or 3.2%, during 2024 as compared to 2023.

The increase was due primarily to the above-mentioned $77 million increase related to our acute care hospital services, on a Same Facility basis, partially offset by a combined net decrease of $24 million resulting primarily from decreased supplies expense related to Desert Springs Hospital.

The increase was due primarily to the above-mentioned $43 million increase related to our acute care hospital services, on a Same Facility basis.

Please see Results of Operations - Clinical Staffing, Physician Related Expenses and Effects of Inflation above for additional disclosure regarding the factors impacting our operating costs.

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During 2024, as compared to 2023, net revenues from our behavioral health services, on a Same Facility basis, increased by $650 million or 10.7%.

Income before income taxes increased by $98 million, or 9.9%, amounting to $1.094 billion or 18.1% of net revenues during 2023, as compared to $995 million or 17.8% of net revenues during 2022.

Income before income taxes increased by $281 million, or 25.9%, amounting to $1.366 billion or 20.4% of net revenues during 2024, as compared to $1.085 billion or 17.9% of net revenues during 2023.

During 2024, net revenue per adjusted admission increased by 9.8% while net revenue per adjusted patient day increased by 8.8%, as compared to 2023.

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The increased staffing was due, in part, to increased patient volumes.

As a percentage of net revenues during each year, salaries, wages and benefits expense increased slightly to 55.3% during 2023 as compared to 55.2% during 2022.

As a percentage of net revenues during each year, salaries, wages and benefits expense decreased to 53.6% during 2024 as compared to 55.3% during 2023.

Other operating expenses increased $94 million, or 8.0%, during 2024, as compared to 2023.

The increase during 2023, as compared to 2022, was due, in part, to increased patient volumes.

As a percentage of net revenues during each year, other operating expenses decreased slightly to 19.2% during 2023 as compared to 19.3% during 2022.

Included in the increase, as discussed above in Results of Operations-Adjustments to Self-Insured Professional and General Liability Reserves , included in the other operating expenses of our behavioral health care services during 2024, as compared to 2023, was an $18 million increase in the adjustments made to our self-insured professional and general liability reserves that was applicable to our behavioral health facilities.

As a percentage of net revenues during each year, other operating expenses decreased to 18.8% during 2024 as compared to 19.3% during 2023.

Supplies expense increased $13 million, or 6.0%, during 2024, as compared to 2023.

As a percentage of net revenues during each year, supplies expense decreased to 3.4% during 2024 as compared to 3.6% during 2023.

All Behavioral Health Care Services

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(ii) the impact of provider tax assessments which increased net revenues and other operating expenses but had no impact on income before income taxes, and;

(iii) certain other amounts, if applicable, including the results of facilities acquired or opened during the past year as well as the results of certain facilities that were closed or restructured during the past year.

(iii) certain other amounts, if applicable, including the results of facilities acquired or opened during the past year as well as the results of facilities that were opened or closed during the past year.

Dollar amounts below are reflected in thousands.

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During 2024, as compared to 2023, net revenues generated from our behavioral health services increased by $704 million, or 11.4%.

The increase was primarily attributable to the $450 million, or 8.0%, increase in net revenues at our behavioral health facilities, on a Same Facility basis, as discussed above.

Income before income taxes increased by $103 million, or 11%, to $1.084 billion or 17.5% of net revenues during 2023, as compared to $980 million or 17.1% of net revenues during 2022.

The increase was primarily attributable to the $650 million, or 10.7%, increase in net revenues at our behavioral health facilities, on a Same Facility basis, as discussed above, as well as a $51 million increase in provider tax assessments.

Income before income taxes increased by $277 million, or 26%, to $1.360 billion or 19.7% of net revenues during 2024, as compared to $1.084 billion or 17.5% of net revenues during 2023.

The increase in income before income taxes at our behavioral health facilities during 2024, as compared to 2023, was primarily attributable to the $281 million, or 26%, increase in income before income taxes generated at our behavioral health facilities, on a Same Facility basis, as discussed above.

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The increase was due primarily to the above-mentioned $94 million, or 8.0%, increase related to our behavioral health facilities, on a Same Facility basis, as well as a $51 million increase in provider tax assessments.

Supplies expense increased $6 million, or 2.6%, during 2023, as compared to 2022.

Supplies expense increased $13 million, or 6.0%, during 2024, as compared to 2023, due primarily to the above-mentioned increase related to our behavioral health facilities, on a Same Facility basis.

Please see Results of Operations - Clinical Staffing, Physician Related Expenses and Effects of Inflation above for additional disclosure regarding the factors impacting our operating costs.

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We believe that our experience with respect to our increased outpatient levels mirrors the general trend occurring in the health care industry and we are unable to predict the rate of growth and resulting impact on our future revenues.

Patients are generally not responsible for any difference between customary hospital charges and amounts reimbursed for such services under Medicare, Medicaid, some private insurance plans, and managed care plans, but are responsible for services not

covered by such plans, exclusions, deductibles or co-insurance features of their coverage.

The amount of such exclusions, deductibles and co-insurance has generally been increasing each year.

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Given increasing budget deficits, the federal government and many states are currently considering additional ways to limit increases in levels of Medicare and Medicaid funding, which could also adversely affect future payments received by our hospitals.

In addition, the uncertainty and fiscal pressures placed upon the federal government as a result of, among other things, impacts on state revenue and expenses resulting from the COVID-19 pandemic, economic recovery stimulus packages, responses to natural disasters, and the federal and state budget deficits in general may affect the availability of government funds to provide additional relief in the future.

In addition, the uncertainty and fiscal pressures placed upon the federal government as a result of, among other things, economic recovery stimulus packages, responses to natural disasters, and the federal and state budget deficits in general may affect the availability of government funds to provide additional relief in the future.

Changes resulting from the outcome of the 2024 elections may include increased reliance on Medicare Advantage programs, work requirements for Medicaid waiver program eligibility, increased focus on hospital outpatient site neutral payment policies, and similar initiatives that may reduce the availability of funding for federal healthcare programs or make eligibility for benefits more difficult.

There have been proposals to substantially decrease federal funding for state Medicaid Programs.

Any significant reduction in federal Medicaid funding to states would likely result in states reducing Medicaid payments to us which would have a material adverse effect on us.

We are unable to predict the effect of future policy changes on our operations.

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The Biden administration withdrew certain previously issued section 1115 demonstrations aligned with these policies, but Georgia has imposed work and community engagement requirements under a Medicaid demonstration program that launched July 1, 2023.

President Trump, more favorable to work and community engagement requirements in his first administration, is more likely to again seek these obligations for Medicaid demonstration programs.

If additional section 1115 demonstrations that include work and community requirements are implemented, we anticipate that they would lead to reductions in coverage and likely increases in uncompensated care in those states where these demonstration waivers are granted.

On December 14, 2018, a Texas Federal District Court deemed the Legislation to be unconstitutional in its entirety.

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

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

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

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The Court did not reach the plaintiffs’ merits arguments, which specifically challenged the constitutionality of the Legislation’s individual mandate and the entirety of the Legislation itself.

As a result, the Legislation will continue to be law, and HHS and its respective agencies will continue to enforce regulations implementing the law.

As a result, the Legislation will continue to be law, and the Department of Health and Human Services ("HHS") and its respective agencies will continue to enforce regulations implementing the law.

However, on September 7, 2022, the Legislation faced its most recent challenge when a Texas Federal District Court judge, in the case of Braidwood Management v.

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Constitution and that the coverage of certain HIV prevention medication violates the Religious Freedom Restoration Act.

The government has appealed the decision to the U.S.

Circuit Court of Appeals for the Fifth Circuit.

The decision was appealed to the U.S.

Court of Appeals for the Fifth Circuit, which on June 21, 2024 affirmed the District Court’s ruling regarding preventive services recommended by United States Preventive Services Task Force being unconstitutional.

However, the Fifth Circuit overturned the nationwide injunction imposed by the District Court, preserving access to the majority of preventive services in dispute for now.

The government has appealed the matter to the U.S.

Supreme Court.

The outcome and impacts of this litigation cannot be predicted.

The Legislation also contained provisions aimed at reducing fraud and abuse in healthcare.

The Legislation amends several existing laws, including the federal Anti-Kickback Statute and the False Claims Act, making it easier for government agencies and private plaintiffs to prevail in lawsuits brought against healthcare providers.

While Congress had previously revised the intent requirement of the Anti-Kickback Statute to provide that a person is not required to “have actual knowledge or specific intent to commit a violation of” the Anti-Kickback Statute in order to be found in violation of such law, the Legislation also provides that any claims for items or services that violate the Anti-Kickback Statute are also considered false claims for purposes of the federal civil False Claims Act.

While Congress had previously revised the intent requirement of the Anti-Kickback Statute to provide that a person is not required to “have actual knowledge or specific intent to

commit a violation of” the Anti-Kickback Statute in order to be found in violation of such law, the Legislation also provides that any claims for items or services that violate the Anti-Kickback Statute are also considered false claims for purposes of the federal civil False Claims Act.

The Legislation provides that a healthcare provider that retains an overpayment in excess of 60 days is subject to the federal civil False Claims Act.

In December, 2022, CMS proposed to change the standard for identification of an overpayment and would require the report and return of an overpayment if a provider or supplier has actual knowledge of the existence of an overpayment or acts in reckless disregard or deliberate ignorance of an overpayment.

The Legislation also expands the Recovery Audit Contractor program to Medicaid.

In December, 2024, CMS changed the standard for identification of an overpayment and now requires the report and return of an overpayment if a provider or supplier has actual knowledge of the existence of an overpayment or acts in reckless disregard or deliberate ignorance of an overpayment.

The Legislation also expanded the Recovery Audit Contractor program to Medicaid.

These amendments also make it easier for severe fines and penalties to be imposed on healthcare providers that violate applicable laws and regulations.

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These investments have been permitted under an exception to the physician self-referral law.

The Legislation permits existing physician investments in a hospital to continue under a “grandfather” clause if the arrangement satisfies certain requirements and restrictions, but physicians are prohibited from

increasing the aggregate percentage of their ownership in the hospital.

The Legislation also imposes certain compliance and disclosure requirements upon existing physician-owned hospitals and restricts the ability of physician-owned hospitals to expand the capacity of their facilities.

As discussed below, should the Legislation be repealed in its entirety, this aspect of the Legislation would also be repealed restoring physician ownership of hospitals and expansion right to its position and practice as it existed prior to the Legislation.

A repeal of the Legislation, in whole or in relevant part, may result in physicians being able to expand ownership interest in hospitals.

In addition to legislative changes, the Legislation can be significantly impacted by executive branch actions.

President Biden has taken executive actions that will strengthen the Legislation and may reverse the policies of the prior administration.

The Biden administration had issued executive orders implementing a special enrollment period permitting individuals to enroll in health plans outside of the annual open enrollment period and reexamining policies that may undermine the ACA or the Medicaid program.

The American Rescue Plan Act of 2021's expansion of subsidies to purchase coverage through an exchange contributed to increased exchange enrollment in 2021.

The IRA’s extension of the subsidies through 2025 is expected to increase exchange enrollment in future years.

The recent and on-going COVID-19 pandemic and related U.S.

National Emergency declaration may significantly increase the number of uninsured patients treated at our facilities extending beyond the most recent CBO published estimates due to increased unemployment and loss of group health plan health insurance coverage.

It is also anticipated that these policies may create additional cost and reimbursement pressures on hospitals.

The IRA’s extension of subsidies through 2025 was expected to increase exchange enrollment in future years.

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

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Accordingly, there can be no assurance that the adoption of any future federal or state healthcare reform legislation will not have a negative financial impact on our hospitals, including their ability to compete with alternative healthcare services funded by such potential legislation, or for our hospitals to receive payment for services.

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, please see Note 10 to the Consolidated Financial Statements-Revenue .

Medicare is a federal program that provides certain hospital and medical insurance benefits to persons aged 65 and over, some disabled persons and persons with end-stage renal disease.

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In August, 2024, CMS published its IPPS 2025 final payment rule which provides for a 2.9% market basket increase to the base Medicare MS-DRG blended rate.

When statutorily mandated budget neutrality factors, annual geographic wage index updates, documenting and coding adjustments, and adjustments mandated by the Legislation are considered, without consideration for the required Medicare DSH payments changes and increase to the Medicare Outlier threshold, the overall increase in IPPS payments is

approximately 1.8%.

Including DSH payments, an increase to the Medicare Outlier threshold and certain other adjustments, we estimate our overall increase from the final IPPS 2025 rule (covering the period of October 1, 2024 through September 30, 2025) will approximate 1.2%.

In August, 2023, CMS published its IPPS 2024 final payment rule which provides for a 3.1% market basket increase to the base Medicare MS-DRG blended rate.

When statutorily mandated budget neutrality factors, annual geographic wage index updates (including a change in the Medicare Rural Floor calculation), documenting and coding adjustments, and adjustments mandated by the Legislation are considered, without consideration for the required Medicare DSH payments changes and increase to the Medicare Outlier threshold, the overall increase in IPPS payments is approximately 6.6%.

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Including DSH payments, an increase to the Medicare Outlier threshold and certain other adjustments, we estimate our overall increase from the final IPPS 2023 rule (covering the period of October 1, 2022 through September 30, 2023) will

approximate 4.4%.

This projected impact from the IPPS 2023 final rule includes an increase of approximately 0.5% to partially restore cuts made as a result of the American Taxpayer Relief Act of 2012 (“ATRA”), as required by the 21st Century Cures Act, but excludes the impact of the sequestration reductions related to the 2011 Act, Bipartisan Budget Act of 2015, and Bipartisan Budget Act of 2018.

This projected impact from the IPPS 2023 final rule includes an increase of approximately 0.5% to partially restore cuts made as a result of the American Taxpayer Relief Act of 2012, as required by the 21st Century Cures Act, but excludes the impact of the sequestration reductions related to the 2011 Act, Bipartisan Budget Act of 2015, and Bipartisan Budget Act of 2018.

In June, 2019, the Supreme Court of the United States issued a decision favorable to hospitals impacting prior year Medicare DSH payments ( Azar v.

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In July, 2024, CMS published its Psych PPS final rule for the federal fiscal year 2025.

Under this final rule, payments to our behavioral health care hospitals and units from the market basket update are estimated to increase by 2.8% compared to federal fiscal year 2024.

This amount includes the effect of the 3.3% net market basket update which reflects the offset of a 0.5% productivity adjustment.

When all of the final patient level adjustments described below as well as proposed wage index values are considered, we estimate that Psych PPS payments will increase by 2.1% in FFY 2025.

In addition to the market basket update noted above, CMS will make the following changes:

• Revisions to the methodology for determining the payment rates under the Inpatient Psychiatric Facility ("IPF") PPS for psychiatric hospitals and psychiatric units based on a review of the data and information collected in prior years in accordance with section 1886(s)(5)(A) of the Social Security Act, as added by the Consolidated Appropriations Act of 2023 ("CAA of 2023").

CMS finalized revisions to the IPF patient-level adjustment factors.

The patient-level adjustments include Medicare Severity Diagnosis Related Groups (MS–DRGs) assignment of the patient’s principal diagnosis, selected comorbidities, patient age, and the variable per diem adjustments;

• Implement these revisions in a budget-neutral manner (that is, estimated payments to IPFs for FFY 2025 would be the same with or without the final revisions), and;

• Clarified the criteria regarding all-inclusive cost reporting.

This clarification requires our behavioral health care hospitals, which are currently utilizing an all-inclusive charging practice, to modify both their billing practices and information technology applications by June 1, 2025 to ensure compliance with future regulations.

We intend to be in compliance with this CMS billing requirement.

This final rule also includes two requests for information on future revisions to the IPF PPS facility-level adjustment factors and development of the new standardized IPF Patient Assessment Instrument, required by the CAA of 2023, which IPFs participating in the IPF Quality Reporting Program will be required to report for Rate Year 2028.

In July, 2023, CMS published its Psych PPS final rule for the federal fiscal year 2024.

Under this final rule, payments to our behavioral health care hospitals and units are estimated to increase by 3.3% compared to federal fiscal year 2023.

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The hospital market basket increase is 3.4% and the productivity adjustment reduction is 0.5% for a net market basket increase of 2.9%.

When other statutorily required adjustments and hospital patient service mix are considered, including a 14.2% increase to the partial hospitalization rate, we estimate that our overall Medicare OPPS update for 2025 will aggregate to a net increase of 3.6%.

In November, 2023, CMS issued its OPPS final rule for 2024.

The hospital market basket increase is 3.3% and the productivity adjustment reduction is 0.2% for a net market basket increase of 3.1%.

When other statutorily required adjustments and hospital patient service mix are considered, we estimate that our overall Medicare OPPS update for 2024 will aggregate to a net increase of 9.7%.

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The final rule provides that in light of the Supreme Court decision in American Hospital Association v.

Becerra , CMS is applying the default rate, generally average sales price plus 6%, to

340B acquired drugs and biologicals for 2023.

CMS stated they will address the remedy for 340B drug payments from 2018-2022 in future rulemaking prior to the CY 2024 OPPS/ASC proposed rule.

Becerra , CMS is applying the default rate, generally average sales price plus 6%, to 340B acquired drugs and biologicals for 2023.

During the 2018-2022 time period, we recorded an aggregate of approximately $45 million to $50 million of Medicare revenues related to the prior 340B payment policy.

When other statutorily required adjustments and hospital patient service mix are considered as well as impact of the aforementioned 340B Program policy change, we estimate that our overall Medicare OPPS update for 2023 will aggregate to a net increase of 0.9% which includes a 0.3% increase to behavioral health division partial hospitalization rates.

When other statutorily required adjustments and hospital patient service mix are considered, as well as impact of the aforementioned 340B Program policy change, our overall Medicare OPPS update for 2023 aggregated to a net increase of approximately 0.9% which includes a 0.3% increase to behavioral health division partial hospitalization rates.

On November 2, 2021, CMS issued its OPPS final rule for 2022.

The hospital market basket increase is 2.7% and the productivity adjustment reduction is -0.7% for a net market basket increase of 2.0%.

When other statutorily required adjustments and hospital patient service mix are considered, we estimate that our overall Medicare OPPS update for 2022 will aggregate to a net increase of 2.4% which includes a 3.0% increase to behavioral health division partial hospitalization rates.

When other statutorily required adjustments and hospital patient service mix are considered, our overall Medicare OPPS update for 2022 aggregated to a net increase of approximately 2.4% which includes a 3.0% increase to behavioral health division partial hospitalization rates.

In November, 2019, CMS finalized its Hospital Price Transparency rule that implements certain requirements under the June 24, 2019 Presidential Executive Order related to Improving Price and Quality Transparency in American Healthcare to Put Patients First.

Under this final rule, effective January 1, 2021, CMS will require:

(1) hospitals make public their standard changes (both gross charges and payer-specific negotiated charges) for all items and services online in a machine-readable format, and;

(2) hospitals to make public standard charge data for a limited set of “shoppable services” the hospital provides in a form and manner that is more consumer friendly.

On November 2, 2021, CMS released a final rule increasing the monetary penalty that CMS can impose on hospitals that fail to comply with the price transparency requirements.

hospitals to make public:

(1) their standard changes (both gross charges and payer-specific negotiated charges) for all items and services online in a machine-readable format, and;

(2) standard charge data for a limited set of “shoppable services” the hospital provides in a form and manner that is more consumer friendly.

November 2, 2021, CMS released a final rule increasing the monetary penalty that CMS can impose on hospitals that fail to comply with the price transparency requirements.

We believe that our hospitals are in full compliance with the applicable federal regulations.

In July, 2023, CMS proposed multiple provisions, effective as of January 1, 2024, focused on increasing hospital price transparency and compliance enforcement including but not limited to:

In November, 2023, CMS finalized multiple provisions, effective as of January 1, 2024, focused on increasing hospital price transparency and compliance enforcement including but not limited to:

(1) standard charges data would be posted online using a CMS template, instead of using the hospital’s own form/format;

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(4) certifications regarding accuracy of standard charge data and related compliance warning notices from CMS and requiring accessibility to health system leadership regarding transparency noncompliance.

In July, 2023, the Departments of Labor, Health and Human Services and the Treasury announced proposed rules that would:

In September, 2024, the Departments of Labor, Health and Human Services and the Treasury published final rules that:

• Mandate that insurers analyze the outcomes of their coverage to ensure there's equivalent access to mental health care, including provider networks, prior authorization rates and payment for out-of-network providers, and take action to get in compliance;

• Establish when health plans can’t use prior authorization or other tactics to make it more difficult to access mental health and substance use treatment;

• Establish when health plans can’t use prior authorization or other tactics to make it more difficult to access mental health and substance use treatment, and;

• Require additional insurers to comply with the 2008 Mental Health Parity and Addiction Equity Act.

While these proposed rules, if adopted, would likely improve patient access to inpatient and outpatient mental health services, we are unable to estimate the related potential impact on our results of operations.

While these rules will likely improve patient access to inpatient and outpatient mental health services, we are unable to estimate the related potential impact on our results of operations.

Medicaid is a joint federal-state funded health care benefit program that is administered by the states to provide benefits to qualifying individuals.

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We receive revenues from various state and county-based programs, including Medicaid in all the states in which we operate.

We also receive Medicaid disproportionate share hospital payments in certain states including, most significantly, Texas.

Many of these programs have a Medicaid supplemental payment component that are subject to approval on a year-to-year basis and there is no assurance that these supplemental payment revenues will continue at their current rates or at all.

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We can provide no assurance that further reductions to Medicaid revenues, particularly in the above-mentioned states, will not have a material adverse effect on our future results of operations.

In January, 2020, CMS announced a new opportunity to support states with greater flexibility to improve the health of their Medicaid populations.

The new 1115 Waiver Block Grant Type Demonstration program, titled Healthy Adult Opportunity (“HAO”), emphasizes the concept of value-based care while granting states extensive flexibility to administer and design their programs within a defined budget.

CMS believes this state opportunity will enhance the Medicaid program’s integrity through its focus on accountability for results and quality improvement, making the Medicaid program stronger for states and beneficiaries.

The Biden administration has signaled its intent to withdraw the HAO demonstration and it has not been implemented in any states.

Accordingly, we are unable to predict whether the HAO demonstration will impact our future results of operations.

Summary of Various State Medicaid Supplemental Payment Programs:

The following table summarizes the revenues, healthcare provider taxes (“Provider Taxes”) and net benefit related to each of the above-mentioned Medicaid supplemental programs for the years ended December 31, 2023 and 2022.

The following table summarizes the revenues, healthcare provider taxes (“Provider Taxes”) and net benefit related to each of the below-mentioned Medicaid supplemental programs for the years ended December 31, 2024 and 2023.

The Provider Taxes are recorded in other operating expenses on the consolidated statements of income, as included herein.

The "Estimated 2025" amounts reflected on the table below are, in many cases, subject to federal and potentially state approval and may be affected by any reductions or other changes in federal funding for these programs.

(amounts in millions)

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CHIRP (including QIF)

On March 26, 2021, THHSC published a final rule that will apply to program periods on or after September 1, 2021, and Uniform Hospital Rate Increase Program ("UHRIP") was re-named the Comprehensive Hospital Increase Reimbursement Program (“CHIRP”).

CHIRP will be comprised of a UHRIP component and an Average Commercial Incentive Award component.

a pool size of $4.7 billion.

On March 25, 2022, CMS approved the CHIRP program retroactive to September 1, 2021 through August 31, 2022.

The impact of the CHIRP program is reflected in the State Medicaid Supplemental Payment Program Table below including approximately $12 million of estimated CHIRP revenues which were recorded during the first quarter of 2022, attributable to the period September 1, 2021 through December 31, 2021, net of associated provider taxes.

On August 1, 2022, CMS approved the CHIRP program, with a pool of $5.2 billion, for the rate period effective September 1, 2022 to August 31, 2023.

On August 1, 2022, CMS approved the Comprehensive Hospital Increase Reimbursement Program ("CHIRP"), with a pool of $5.2 billion, for the rate period effective September 1, 2022 to August 31, 2023.

On July 31, 2023, CMS approved the CHIRP program, with a pool of $6.5 billion, for the rate period of September 1, 2023 to August 31, 2024.

On January 26, 2024, THHSC issued a final rule that will modify the CHIRP payments beginning with the State Fiscal Year (SFY) 2025 rate period to promote the advancement of the quality goals and strategies the program is designed to advance.

On September 13, 2024, CMS approved the CHIRP program with a pool of $6.5 billion for the rate period September 1, 2024 to August 31, 2025 (with an amended CMS approval on October 1, 2024).

On January 26, 2024, the Texas Health and Human Services Commission ("THHSC") issued a final rule that will modify the CHIRP payments beginning with the State Fiscal Year (SFY) 2025 rate period to promote the advancement of the quality goals and strategies the program is designed to advance.

The final modifications include:

• Creation of a new a pay-for-performance incentive payment through a third component in CHIRP, the Alternate Participating Hospital Reimbursement for Improving Quality Award ("APHRIQA").

For state fiscal years beginning with SFY 2025, THHSC does not anticipate that behavioral health hospitals or rural hospitals will be included in a pay-for-performance program.

• The funds for payment of the APHRIQA component will be transitioned from the existing uniform rate increase components of the UHRIP and the Average Commercial Incentive Award and will be paid using a scorecard that directs managed care organizations to pay providers for performance achievements on quality outcome measures.

Payments will be distributed under APHRIQA on a monthly, quarterly, semi-annual, or annual basis that aligns with the measurement period determined for quality metrics reporting.

We cannot determine the impact of this final rule.

However, CHIRP payment levels could be reduced materially if:

(1) the pool size of the new APHRIQA component is materially less than THHSC carve-out of the current CHIRP pool, or;

(2) if our hospitals are not able meet the required APHRIQA pay-for-performance metrics.

Certain of our acute care hospitals located in Texas recorded an aggregate of $33 million in Quality Incentive Fund (“QIF”) revenues during each of 2023 and 2022.

The amounts recorded during 2023 were applicable to the period of September 1, 2021 to August 31, 2022;

and the amounts recorded during 2022 were applicable to the period of September 1, 2020 to August 31, 2021.

This revenue was earned pursuant to contract terms with various Medicaid managed care plans which requires the annual payout of QIF funds when a managed care service delivery area’s actual claims-based CHIRP payments are less than targeted CHIRP payments for a specific rate year.

We also anticipate these hospitals may be entitled to a comparable amount of aggregate QIF revenue during 2024.

Included in these provider pax programs are reimbursements received in connection with the Texas Uncompensated Care program ("UC").

• Creation of a new pay-for-performance incentive payment through a third component in CHIRP, the Alternate Participating Hospital Reimbursement for Improving Quality Award ("APHRIQA").

For state fiscal years beginning with SFY 2025, behavioral health hospitals and rural hospitals will not be included in the pay-for-performance program, and;

• The funds for payment of the APHRIQA component will be transitioned from the existing uniform rate increase components of the Uniform Hospital Rate Increase Percentage and the Average Commercial Incentive Award and will be paid using a scorecard that directs managed care organizations to pay providers for performance achievements on quality outcome measures.

Payments will be distributed under APHRIQA on a semi-annual basis that aligns with the measurement period determined for quality metrics reporting.

CHIRP payment levels could be reduced materially if our hospitals are not able meet the required APHRIQA pay-for-performance metrics.

In connection with the Quality Incentive Fund (“QIF”), the results of operations of certain of our acute care hospitals located in Texas included aggregate revenues of $50 million and $33 million during the years ended December 31, 2024 and 2023, respectively.

These amounts were earned pursuant to contract terms with various Medicaid managed care plans which requires the annual payout of QIF funds when a managed care service delivery area’s actual claims-based CHIRP payments are less than targeted CHIRP payments for a specific rate year.

We estimate that these hospitals will be entitled to approximately $29 million of aggregate QIF revenues during the year ended December 31, 2025.

Included in these provider tax programs are reimbursements received in connection with the Texas Uncompensated Care program ("UC").

The size and distribution of the UC pool are determined based on charity care costs reported to THHSC in accordance with Medicare cost report Worksheet S-10 principles.

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The program, which was approved by CMS on August 15, 2023, will provide additional funding to hospitals to help offset the cost hospitals incur while providing Medicaid services.

Included in our results of operations during 2023 was approximately $20 million, approximately $13 million of which is applicable to the period of October 1, 2021 through September 30, 2022.

During 2024, we expect to record HARP revenues of approximately $28 million.

The HARP program is technically a Medicaid Upper Payment Limit as payment under this program is based on a reasonable estimate of the amount that would be paid for the services under Medicare payment principles but is referred to as HARP by THHSC.

In addition, the Texas Medicaid Section 1115 Waiver included a Delivery System Reform Incentive Payments ("DSRIP") pool to incentivize hospitals and other providers to transform their service delivery practices to improve quality, health status, patient experience, coordination, and cost-effectiveness.

DSRIP pool payments are incentive payments to hospitals and other providers that develop programs or strategies to enhance access to health care, increase the quality of care, the cost-effectiveness of care provided and the health of the patients and families served.

In FFY 2022, DSRIP funding under the waiver is eliminated except for certain carryover DSRIP projects.

No revenues were recorded by us during 2023 in connection with this DSRIP program.

Included in our results of operations during 2022, was approximately $18 million of DSRIP revenues.

HARP is technically a Medicaid Upper Payment Limit as payment under this program is based on a reasonable estimate of the amount that would be paid for the services under Medicare payment principles but is referred to as HARP by THHSC.

In connection with this program, included in our results of operations was approximately $43 million and $20 million during the years ended December 31, 2024 and 2023, respectively.

Approximately $16 million of the amount recorded during 2024 was applicable to the period of October 1, 2022 through September 30, 2023.

Approximately $13 million of the amount recorded during 2023 was applicable to the period of October 1, 2021 through September 30, 2022.

We expect our net reimbursements pursuant to HARP to approximate $24 million during the year ended December 31, 2025.

Nevada State Directed Payment Program ("SDP"):

As previously reported, in February, 2023, the Nevada Division of Health Care Financing and Policy (“DHCFP”) outlined a new provider fee on private hospitals located in Nevada that would effectively capture new Medicaid federal share for certain categories of services eligible for the new payment program.

In late December, 2023, the Centers for Medicare and Medicaid Services (“CMS”) approved the Medicaid managed care component of the Nevada SDP program, with an effective date of January 1, 2024.

Based upon financial data provided by the DHCFP for our facilities located in Nevada, we estimate that our aggregate net

reimbursements pursuant to the Medicaid managed care component of the Nevada SDP program (net of related provider taxes) will approximate $140 million during the year ended December 31, 2024.

In late December, 2023, CMS approved the Medicaid managed care component of the Nevada SDP program, with an effective date of January 1, 2024.

In November 2024, CMS approved an increased assessment rate which funded an increase in the SDP pool size covering the period of July 1, 2024 through December 31, 2024.

Payments made pursuant to this component of the Nevada SDP program, which requires annual approval by CMS, are subject to reconciliation by DHCFP based on actual Medicaid managed care utilization during 2024.

There can be no assurance that the Medicaid managed care component of the Nevada SDP will continue for any period after December 31, 2024, or that it will not be modified.

Including the impact of the Medicaid fee for service upper payment limit component of the Nevada SDP program (estimated net reimbursements of $18 million attributable to our Nevada facilities during the year ended December 31, 2024), which was approved by CMS in November and December of 2023, we estimate that our aggregate net reimbursements pursuant to both components of the Nevada SDP program (net of related provider taxes) will approximate $158 million during the year ended December 31, 2024.

In connection with this program, included in our results of operations was approximately $194 million and $9 million recorded during the years ended December 31, 2024 and 2023, respectively.

We estimate that our aggregate net reimbursements pursuant to both components of the Nevada SDP program (net of related provider taxes) will approximate $222 million during the year ended December 31, 2025.

The Nevada SDP for the period of January 1, 2025 through December 31, 2025 is under CMS' review for approval.

Various Other State Programs:

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Kentucky Hospital Rate Increase Program (“HRIP”)

In early 2021, CMS approved the Kentucky Medicaid Managed Care Hospital Rate Increase Program (“HRIP”).

Included in our financial results was approximately $73 million during 2023 and approximately $69 million during 2022, Programs such as HRIP require an annual state submission and approval by CMS.

In January, 2024, CMS approved the program for the period of January 1, 2024 through December 31, 2024 at rates comparable to the prior year.

We estimate that our reimbursements pursuant to HRIP will approximate $71 million during the year ended December 31, 2024.

California SPA:

In early 2021, CMS approved the Kentucky Medicaid Managed Care Hospital Rate Increase Program.

In connection with this program, included in our results of operations was approximately $88 million and $73 million during the years ended December 31, 2024 and 2023, respectively.

In December, 2024, CMS approved the program for the period of January 1, 2025 through December 31, 2025 at rates comparable to the prior year.

We estimate that our net reimbursements pursuant to HRIP will approximate $84 million during the year ended December 31, 2025.

California Supplemental Payments

In California, the state continues to operate Medicaid supplemental payment programs consisting of three components:

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Approved through December 31, 2024;

Paid through December 31, 2022

Paid through September 30, 2024

Managed Care-Pass-Through Payment

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Approved through December 31, 2024

Approved through December 31, 2021 and paid through December 31, 2021

In connection with this program, included in our financial results was approximately $46 million during 2023 and approximately $50 million during 2022.

We estimate that our reimbursements pursuant to this program will approximate $51 million during the year ended December 31, 2024.

Approved through December 31, 2022 and paid in advance through June 30, 2023

In connection with this program, included in our results of operations was $47 million and $46 million during the years ended December 31, 2024 and 2023, respectively.

We estimate that our net reimbursements pursuant to this program will approximate $63 million during the year ended December 31, 2025.

Mississippi Hospital Access Program

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These hospital assessments are calculated using a formula provided under state law.

The first part of the proposal, known as the Mississippi Hospital Access Program (“MHAP”), would provide direct payments for hospitals that serve patients in the state's Medicaid managed care delivery system.

Hospitals would be reimbursed near the average commercial rate, which is the upper limit for Medicaid managed care reimbursements.

The second part of the proposal would supplement Medicaid payment rates for hospitals providing inpatient and outpatient services up to Medicaid's regulated upper payment limit.

In December, 2023, CMS approved the MHAP program component.

In connection with this new program and the prior program, included in our financial results was approximately $33 million during 2023 and $16 million during 2022.

We estimate that our reimbursements pursuant to these supplemental payment programs will approximate $45 million during the year ended December 31, 2024.

The first part of the program, known as the Mississippi Hospital Access Program (“MHAP”), provides direct payments for hospitals that serve patients in the state's Medicaid managed care delivery system.

Hospitals are reimbursed near the average commercial rate, which is the upper limit ("UPL") for Medicaid managed care reimbursements.

The second part of the program supplements traditional Medicaid payment rates for hospitals providing inpatient and outpatient services up to Medicaid's regulated UPL.

In June 2024, CMS approved the MHAP program component for the period July 1, 2024 to June 30, 2025.

The UPL component was approved in April, 2024.

In connection with this program, included in our results of operations was approximately $48 million and $33 million recorded during the years ended December 31, 2024 and 2023, respectively.

We estimate that our net reimbursements pursuant to these supplemental payment programs will approximate $44 million during the year ended December 31, 2025.

Florida Medicaid Managed Care Directed Payment Program (“DPP”)

The Florida DPP provides for an additional payment for Medicaid managed care contracted services.

In connection with this program, included in our financial results was approximately $43 million during 2023 and $36 million during 2022 (recorded during fourth quarters of each year).

For the years ended December 31, 2024 and 2023, our results of operations included approximately $46 million and $43 million recorded in connection with this program (substantially all of which was recorded during the fourth quarters of each year).

We estimate that our reimbursements pursuant to this DPP will approximate $37 million during the year ended December 31, 2025.

The Florida DPP for the period of October 1, 2024 to September 30, 2025 is under CMS' review for approval.

Illinois Medicaid Supplemental Payment Programs

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These programs require various related legislative and regulatory approvals each year.

In connection with these programs, included in our financial results was approximately $36 million during 2023 and $49 million during 2022 .

Included in the 2022 amount was a non-recurring Medicaid managed care claims processing catchup payment amounting to approximately $10 million.

We estimate that our reimbursements pursuant to these supplemental payment programs will approximate $38 million during the year ended December 31, 2024.

In connection with this program, included in our results of operations was approximately $39 million and $36 million during the years ended December 31, 2024 and 2023, respectively.

We estimate that our net reimbursements pursuant to these supplemental payment programs will approximate $36 million during the year ended December 31, 2025.

Approval of these programs for the period of January 1, 2025 to December 31, 2025 is under CMS' review.

Indiana Medicaid Managed Care DPP

The Indiana DPP provides for an additional payment for Medicaid managed care contracted services.

In connection with this program, included in our financial results was approximately $31 million during 2023 and $27 million during 2022 .

We estimate that our reimbursements pursuant to this program will approximate $34 million during the year ended December 31, 2024.

In connection with this program, included in our results of operations was approximately $31 million recorded during each of the years ended December 31, 2024 and 2023.

We estimate that our net reimbursements pursuant to this program will approximate $33 million during the year ended December 31, 2025.

Oklahoma (Transition to Managed Care and Implementation of a Medicaid Managed Care DPP)

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In December, 2022, the OHCA delayed the implementation date of the Medicaid managed care change and related DPP until April 1, 2024.

In September, 2023, CMS approved the DPP program effective as of April 1, 2024.

In connection with the SHOPP program, included in our financial results was approximately $12 million during 2023 and $9 million during 2022.

We estimate that our reimbursements pursuant to these two supplemental payment programs (i.e.

In September, 2023, CMS approved the DPP program for the 15-momth period effective as of April 1, 2024 through June 30, 2025.

In connection with this program, included in our results of operations was approximately $20 million and $12 million recorded during the years ended December 31, 2024 and 2023, respectively.

We estimate that our net reimbursements pursuant to these two supplemental payment programs (i.e.

SHOPP and DPP) will approximate $22 million during the year ended December 31, 2025.

South Carolina Health Access, Workforce and Quality (“HAWQ”) Program

In September 2023, CMS approved the South Carolina HAWQ Program retroactive to July 1, 2023.

This program is Medicaid managed care directed payment program that provides for a rate enhancement to Medicaid managed care encounters.

In connection with this new program and the prior program, included in our financial results was approximately $11 million during 2023.

We estimate that our reimbursements pursuant to these supplemental payment programs will approximate $21 million during the year ended December 31, 2024.

Texas, Nevada and South Carolina DSH/Other Programs:

In September 2023, CMS approved the South Carolina HAWQ Program retroactive to July 1, 2023 and subsequently approved by CMS in July, 2024 for the period of July 1, 2024 to June 30, 2025.

This program is a Medicaid managed care directed payment program that provides for a rate enhancement to Medicaid managed care encounters.

In connection with this program, included in our results of operations was approximately $28 million and $11 million recorded during the years ended December 31, 2024 and 2023, respectively.

We estimate that our net reimbursements pursuant to this program will approximate $26 million during the year ended December 31, 2025.

Michigan Directed Payment Program (“DPP”)

In March 2024, CMS approved the Michigan Medicaid DPP retroactive to October 1, 2023 based on average commercial rates.

The Michigan DPP provides for an additional payment for Medicaid managed care contracted services.

In connection with this program, included in our results of operations was approximately $37 million and $17 million recorded during the years ended December 31, 2024 and 2023, respectively.

We estimate that our net reimbursements pursuant to this program will approximate $31 million during the year ended December 31, 2025.

The Michigan DPP for the period of October 1, 2024 to September 30, 2025 is under CMS' review for approval.

Idaho Upper Payment Limit (“UPL”)

In April 2024, the Idaho Department of Health and Welfare (“IDHW”) released its updated Medicaid UPL calculation for SFY 2024 (July 1, 2023 to June 30, 2024) and revised its SFY 2023 (July 1, 2022 to June 30, 2023) UPL calculation.

Subject to CMS approval, the IDHW plans to continue this UPL program through SFY 2025 (July 1, 2024 to June 30, 2025) at payment levels comparable to SFY 2024.

In SFY 2026, the IDHW intends to replace the UPL program with a Medicaid managed care state directed payment program.

We are unable to predict whether payments levels under the planned new state directed payment program will be comparable to the SFY 2024 UPL payment levels.

In connection with this program, included in our results of operations was approximately $31 million and $22 million recorded during the years ended December 31, 2024 and 2023, respectively.

We estimate that our net reimbursements pursuant to this program will approximate $19 million during the year ended December 31, 2025.

Washington Safety Net Assessment Program

On April 2, 2024, CMS approved an expanded state directed payment program in Washington whereby payments will now be based on the average commercial rates.

The program was approved retroactively for the period January 1, 2024 to December 31, 2024.

In connection with this program, included in our results of operations was approximately $46 million and $3 million recorded during the years ended December 31, 2024 and 2023, respectively.

We estimate that our net reimbursements pursuant to this expanded program will approximate $48 million during the year ended December 31, 2025.

Approval of this program for the period of January 1, 2025 to December 31, 2025 is under CMS' review.

New Mexico State Directed Payment Program (“SDP”)

In November, 2024, CMS approved the New Mexico Medicaid SDP, retroactive to July 1, 2024, based on average commercial rates.

The New Mexico SDP provides for an additional payment for Medicaid managed care contracted services.

In connection with this program, included in our results of operations was approximately $8 million in the year ended December 31, 2024.

There was no impact from this program included in our results of operations for the year ended December 31, 2023.

The program requires the submission of an annual report that demonstrates that 75% of the incremental net funds were used for the delivery of and access to healthcare services in the state.

The state agency intends to renew the program for calendar year 2025 at payments level consistent with the 2024 annualized payment level.

The New Mexico SDP for the period of January 1, 2025 to December 31, 2025 is under CMS' review.

We estimate that our net reimbursements pursuant to this program will approximate $16 million during the year ended December 31, 2025.

Tennessee Directed Payment Program (“DPP”)

Tennessee SB1740, enacted in May, 2024, imposes an annual coverage assessment on covered hospitals for fiscal year 2024-2025.

The total assessment on all covered hospitals in the aggregate will be equal to 6% of the federally recognized annual coverage assessment base.

The assessment proceeds will be used to fund an increase to the state’s DPP payment pool to be based on average commercial rates.

In January, 2025, CMS approved the DPP payment increase for the period July 1, 2024 to December 31, 2024, contingent upon CMS' approval of the state's 1115 Medicaid Waiver amendment .

The DPP preprint for calendar year (January 1, 2025 to December 31, 2025) is pending CMS approval.

We estimate that our net reimbursements pursuant to this program will approximate $28 million during the year ended December 31, 2025 (related to the six-month period July 1, 2024 to December 31, 2024), if CMS' approval of the state's 1115 Medicaid Waiver amendment occurs during 2025.

In addition, although we are unable to predict whether the DPP program for calendar year 2025 will be approved by CMS, or the timing of such approval, TennCare's financial models indicate that our annual DPP reimbursements could range from $40 million to $56 million.

The "Estimated 2025" amounts reflected on the table above do not include any net reimbursements in connection with the Tennessee DPP.

Washington, D.C.

State Directed Payment program (“SDP”)

In July, 2024, the Budget Support Act (B24-0784) was approved by the mayor of Washington, D.C.

This legislation includes a new Medicaid managed care directed payment program that, if ultimately approved, could become effective for the period of October 1, 2024 through September 30, 2025, with potential subsequent annual programs.

Finalization of this program remains contingent upon U.S.

Congressional and CMS approval.

Estimated amounts related to this program are subject to change for various reasons including modifications based upon CMS' review of the preprint payment methodology terms, as well as actual Medicaid managed care utilization for hospitals that operate in the District of Columbia, including ours.

If ultimately approved, there can be no assurance that this program will continue for any period after September 30, 2025, or that it will not be modified.

The Washington, D.C., Medicaid agency submitted the SDP preprint to CMS in July 2024, for review and approval.

Although we cannot predict if this new SDP program will be ultimately approved, or the timing of such approval should it occur, if approved in its current form, we estimate that our aggregate net benefit from this program for the period of October 1, 2024 through September 30, 2025, related to our two existing hospitals in the market, will approximate $85 million.

The "Estimated 2025" amounts reflected on the table above do not include any net reimbursements in connection with the Washington, D.C.

Texas DSH and Nevada SPA Programs:

Upon meeting certain conditions and serving a disproportionately high share of Texas’ low income patients, our qualifying facilities located in Texas receive additional reimbursement from the state’s DSH fund.

The Texas DSH program was renewed for the state’s 2025 DSH fiscal year (covering the period of October 1, 2024 through September 30, 2025).

In connection with this DSH program, included in our financial results was an aggregate of approximately $47 million and $48 million during 2023 and 2022, respectively.

We estimate that our aggregate reimbursements earned pursuant to the Texas DSH program will approximate $34 million during 2024.

In connection with this program, included in our results of operations was approximately $36 million and $47 million recorded during the years ended December 31, 2024 and 2023, respectively.

We estimate that our aggregate net reimbursements earned pursuant to the Texas DSH program will approximate $30 million during the year ended December 31, 2025.

The Legislation and subsequent federal legislation provides for a significant reduction in Medicaid disproportionate share payments beginning in federal fiscal year 2025 (see above in Sources of Revenues and Health Care Reform-Medicaid for additional disclosure related to the delay of these DSH reductions).

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As Medicaid DSH payments to states will be cut, consequently, payments to Medicaid-participating providers, including our hospitals in Texas, will be reduced in the coming years.

Based on the CMS final rule published in September, 2019, beginning in fiscal year 2024 (as amended by the CARES Act and the CAA), annual Medicaid DSH payments in Texas could be reduced by approximately 41% from current DSH payment levels.

A series of federal continuing resolutions ("CR") were passed by the federal government which provided for ongoing federal funding.

We continue to maintain reserves in the financial statements for cumulative Medicaid DSH and UC reimbursements related to our behavioral health hospitals located in Texas that amounted to $31 million as of December 31, 2023 and $42 million as of December 31, 2022 related to certain DSH and UC adverse federal court decisions including the Children’s Hospital Association of Texas v.

Azar (“CHAT”).

Based on the CMS final rule published in September, 2019 (as amended by the CARES Act and the CAA), beginning in fiscal year 2025, annual Medicaid DSH payments in Texas could be reduced by approximately 41% from current DSH payment levels.

A series of federal continuing resolutions were passed by the federal government which provided for ongoing federal funding.

In connection with certain previous DSH and UC adverse federal court decisions, including the Children’s Hospital Association of Texas v.

Azar , we continue to maintain reserves in the financial statements for cumulative Medicaid DSH and UC reimbursements related to our behavioral health hospitals located in Texas that amounted to $34 million as of December 31, 2024 and $31 million as of December 31, 2023.

Nevada State Plan Amendment ("SPA")

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CMS approval for the 2025 fiscal year, which is still pending, is expected to occur.

In connection with this program, included in our financial results was approximately $25 million and $21 million during 2023 and 2022, respectively.

We estimate that our reimbursements pursuant to this program will approximate $21 million during 2024.

South Carolina DSH:

One of our facilities located in South Carolina received additional reimbursement from the state’s DSH fund.

However, the South Carolina HAWQ Program, as described above, ended our DSH payment eligibility in the South Carolina DSH program during 2023.

In connection with this DSH program, included in our financial results was approximately $6 million during 2022.

Future changes to these terms and conditions could materially reduce our net benefit derived from the programs which could have a material adverse impact on our future consolidated results of operations.

In addition, Provider Taxes are governed by both federal and state laws and are subject to future legislative changes that, if reduced from current rates in several states, could have a material adverse impact on our future consolidated results of operations.

As described below in 2019 Novel Coronavirus Disease Medicare and Medicaid Payment Related Legislation , a 6.2% increase to the Medicaid Federal Matching Assistance Percentage (“FMAP”) was included in the Families First Coronavirus Response Act.

The Consolidated Appropriations Act of 2023 (“CAA of 2023”) provided for the transitional reduction of the 6.2% enhanced FMAP during 2023 to 5.0% during the second quarter, 2.5% during the third quarter and 1.5% during the fourth quarter of 2023.

The impact of the enhanced FMAP Medicaid supplemental and DSH payments are reflected in our financial results for the years ended December 31, 2023 and 2022.

In connection with this program, included in our results of operations was approximately $17 million and $25 million recorded during the years ended December 31, 2024 and 2023, respectively.

We estimate that our net reimbursements pursuant to this program will approximate $18 million during the year ended December 31, 2025.

Risk Factors Related To State Supplemental Medicaid Payments:

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In November, 2020, CMS issued a final rule permitting pass-through supplemental provider payments during a time-limited period when states transition populations or services from fee-for-service Medicaid to managed care.

We receive Medicaid SDP payments from managed care organizations (“MCO’s”) authorized by CMS under 42 CFR §438.6 (c).

We receive Medicaid SDP payments from MCOs authorized by CMS under 42 CFR § 438.6(c).

Consistent with capitated rates paid by Medicaid state agencies to MCO’s for managing Medicaid beneficiary lives under a risk-based arrangement, SDP program related capitated rates must also be developed by the state in accordance with actuarial soundness standards noted at 42 CFR § 438.4 and non-compliance could result in a reduction to SDP payment levels.

In general, Medicaid SDP payments under 42 CFR § 438.6(c) are subject to annual CMS approval via the submission of a preprint application by a state agency which provides details of the SDP payment methodology and conformity with the applicable federal regulations.

CMS SDP preprint approval, and the timing of such approval, if it occurs, are not certain which can affect the both the SDP payment level and timing of SDP revenue recorded by us.

We incur Provider Taxes imposed by states in the form of a licensing fee, assessment or other mandatory payment which are related to:

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States are subject to CMS both concurrent and retrospective review for their compliance with the applicable Provider Tax regulations and related federal statute.

If CMS determines Provider Taxes used by a state Medicaid program to finance the non-federal share of a SDP (or other Medicaid supplemental payment programs) are not in compliance with the applicable Provider Tax regulations and related federal statute, Company SDP payments (and other Medicaid supplemental payments) could be subject to recoupment by the respective state agency when non-compliance is determined by CMS to exist.

If CMS determines Provider Taxes used by a state Medicaid program to finance the non-federal share of a SDP (or other Medicaid supplemental payment programs) are not in compliance with the

applicable Provider Tax regulations and related federal statute, Company SDP payments (and other Medicaid supplemental payments) could be subject to recoupment by the respective state agency when non-compliance is determined by CMS to exist.

We believe that the SDP (and other state supplemental payment) programs are designed by each state to be in full compliance with the applicable federal regulations and federal statutes.

However, we are unable to provide assurance CMS will determine on a

retroactive basis that a state’s SDP (or other Medicaid supplemental payment program) design and Medicaid financing structures is in full compliance with the applicable federal regulations and federal statute(s).

On April 27, 2023, CMS released two proposed rules addressing access, quality and payment in Medicaid, Children's Health Insurance Program ("CHIP"), and Medicaid/CHIP Managed Care plans.

Together, the Access NPRM and Managed Care NPRM (“Managed Care Rule”) include new and updated proposed requirements for states and managed care plans that would establish consistent access standards, and a standardized approach to transparently review and assess Medicaid payment rates across states.

The Managed Care Rule also proposes standards to allow enrollees to easily compare plans based on quality and access to providers through the state’s website.

The Managed Care Rule proposes several new requirements related to Medicaid State Directed Payments.

These proposed changes would include:

• A broader requirement that states ensure each provider receiving a state directed payment attest that it does not participate in any arrangement that holds taxpayers harmless for the cost of a tax in violation of federal requirements.

• Requiring that provider payment levels for inpatient and outpatient hospital services not exceed the average commercial rate.

• Removing unnecessary regulatory barriers to help states use state directed payments to implement value-based payment arrangements.

The Managed Care proposed rule, if implemented, could have a significant impact on the means by which states finance the non-federal share of their Medicaid programs.

Under the proposal, CMS would have the ability to strike down common financing arrangements such as a provider taxes.

These changes could have detrimental impacts on state Medicaid programs.

If finalized as proposed, the rule could potentially force states to raise taxes or cut their Medicaid budgets.

In subsequent years, it could have an unfavorable impact on Medicaid beneficiaries by likely limiting access to providers and requiring states to consider reductions to their Medicaid programs.

However, we are unable to provide assurance CMS will determine on a retroactive basis that a state’s SDP (or other Medicaid supplemental payment program) design and Medicaid financing structures is in full compliance with the applicable federal regulations and federal statute(s).

On April 22, 2024, CMS issued Medicaid and Children’s Health Insurance Program ("CHIP") Managed Care Access, Finance, and Quality Final Rule (“Managed Care Rule”).

CMS intends for the Managed Care Rule to:

• Strengthen standard for timely access to care and states’ monitoring and enforcement efforts;

• Enhance quality and fiscal and program integrity standards for state directed payments (“SDPs”);

• Specify the scope of in lieu of services and settings to better address health-related social needs;

• Further specify medical loss ratio requirements, and;

• Establish a quality rating system for Medicaid and CHIP managed care plans.

The SDP provisions included in the Managed Care Rule:

• Requires that provider payment levels for state directed payments for inpatient and outpatient hospital services, nursing facility services, and the professional services at an academic medical center not exceed the average commercial rate;

• Prohibits the use of post-payment reconciliation processes for state directed payments that are based on fee schedules;

• Makes explicit in regulation the existing requirement that state directed payments must comply with all federal laws concerning funding sources of the non-federal share, and;

• Requires that states ensure each provider receiving a state directed payment attest that it does not participate in any arrangement that holds taxpayers harmless for the cost of a tax.

CMS concurrently released an informational bulletin regarding CMS’ exercise of enforcement discretion until calendar year 2028 for existing health-care related tax programs with certain hold-harmless arrangements involving the redistribution of Medicaid payments.

As disclosed herein, we receive a significant amount of Medicaid and Medicaid managed care revenue from both base payments and supplemental payments.

Although we are unable to estimate the impact of the Managed Care Rule on our future results of operations, if implemented as proposed, Managed Care Rule related changes could have a material adverse impact on our future results of operations.

In July 2010, HHS published final regulations implementing the health information technology (“HIT”) provisions of the American Recovery and Reinvestment Act (referred to as the “HITECH Act”).

Future changes to the terms and conditions of the various programs outlined above could materially reduce our net benefit derived from the programs which could have a material adverse impact on our future results of operations.

A 6.2% increase to the Medicaid Federal Matching Assistance Percentage (“FMAP”) was included in the Families First Coronavirus Response Act.

The CAA of 2023 provided for the transitional reduction of the 6.2% enhanced FMAP during 2023 to 5.0% during the second quarter, 2.5% during the third quarter and 1.5% during the fourth quarter of 2023.

The impact of the enhanced FMAP Medicaid supplemental and DSH payments are reflected in our financial results for the three and nine-month periods ended September 30, 2024 and 2023.

In July 2010, HHS published final regulations implementing the health information technology provisions of the American Recovery and Reinvestment Act (referred to as the “HITECH Act”).

The final regulation defines the “meaningful use” of Electronic Health Records (“EHR”) and establishes the requirements for the Medicare and Medicaid EHR payment incentive programs.

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Our hospitals also provide services to individuals covered by private health care insurance.

Private insurance carriers typically make direct payments to hospitals or, in some cases, reimburse their policy holders, based upon the

particular hospital’s established charges and the particular coverage provided in the insurance policy.

Private insurance carriers typically make direct payments to hospitals or, in some cases, reimburse their policy holders, based upon the particular hospital’s established charges and the particular coverage provided in the insurance policy.

Private insurance reimbursement varies among payers and states and is generally based on contracts negotiated between the hospital and the payer.

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Part II.” This rule is related to Title I (the “No Surprises Act”) of Division BB of the Consolidated Appropriations Act, 2021, and establishes new protections from surprise billing and excessive cost sharing for consumers receiving health care items/services.

It implements additional protections against surprise medical bills under the No Surprises Act, including provisions related to the independent dispute resolution process, good faith estimates for uninsured (or self-pay) individuals, the patient-provider dispute resolution process, and expanded rights to external review.

On February 28, 2022, a district judge in the Eastern District of Texas invalidated portions of the rule governing aspects of the Independent Dispute Resolution (“IDR”) process.

It implements additional protections against surprise medical bills under the No Surprises Act, including provisions related to the independent dispute resolution ("IDR") process, good faith estimates for uninsured (or self-pay) individuals, the patient-provider dispute resolution process, and expanded rights to external review.

On February 28, 2022, a district judge in the Eastern District of Texas invalidated portions of the rule governing aspects of the IDR process.

In light of this decision, the government issued a final rule on August 19, 2022 eliminating the rebuttable presumption in favor of the qualifying payment amount by the IDR entity and providing additional factors the IDR entity should consider when choosing between two competing offers.

CMS regulations and guidance implementing the IDR process has been subject to a significant amount of provider-initiated litigation.

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Commencing in federal fiscal year 2025, and continuing through 2027, DSH payments are scheduled to be reduced by $8 billion annually.

The most recent CR (H.R.

2872) enacted into law on January 17, 2024, funds four appropriations bills through March 1, 2024, and eight appropriations bills through March 8, 2024.

This CR also delayed the aforementioned Medicaid Disproportionate Share Hospital cuts through March 8, 2024.

The American Relief Act, 2025 (HR 10545, Public Law No.

118-158) enacted into law on December 21, 2024 postponed the scheduled ACA Medicaid DSH cuts that were to take effect January 1, 2025 to April 1, 2025.

The $8 billion DSH reduction for FFY 2025 will be implemented over six months rather than twelve months if not delayed further by Congressional action.

Value-Based Purchasing

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These value-based purchasing programs include both public reporting of quality data and preventable adverse events tied to the quality and efficiency of care provided by facilities.

Governmental programs including Medicare and Medicaid currently require hospitals to report certain quality data to receive full reimbursement updates.

Governmental programs including Medicare and Medicaid currently require hospitals to report certain quality

data to receive full reimbursement updates.

In addition, Medicare does not reimburse for care related to certain preventable adverse events.

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Beginning in FFY 2015, hospitals that fall into the top 25% of national risk-adjusted HAC rates for all hospitals in the previous year will receive a 1% reduction in their total Medicare payments.

As part of the FFY 2023 final rule discussed above, and as a result of the on-going COVID-19 pandemic, CMS will suppress all six measures in the HAC Reduction Program for the FY 2023 program year and eliminate the HAC reduction program’s one percent payment penalty.

As part of the FFY 2023 final rule discussed above, and as a result of the on-going COVID-19 pandemic, CMS suppressed all nine measures in the HAC Reduction Program for the FY 2023 program year and eliminated the HAC reduction program’s one percent payment penalty.

In FFY 2024, as part of the FFY 2024 IPPS final rule, CMS eliminated the suppression of the applicable HAC measures and as a result reinstated the HAC reduction program.

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To account for excess readmissions, an applicable hospital's base operating DRG payment amount is adjusted for each discharge occurring during the fiscal year.

Readmissions payment adjustment factors can be no more than a 3 percent reduction.

As part of the FFY 2023 IPPS final rule discussed above, CMS will modify all of the condition-specific readmission measures to include an adjustment for patient history of COVID-19 for FFY 2024.

Readmissions payment adjustment factors can be no more than a 3% reduction.

As part of the FFY 2023 IPPS final rule discussed above, CMS modified all of the condition-specific readmission measures to include an adjustment for patient history of COVID-19 for FFY 2024.

Accountable Care Organizations

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ACOs that achieve quality performance standards established by HHS will be eligible to share in a portion of the amounts saved by the Medicare program.

CMS is also developing and implementing more advanced ACO payment models that require ACOs to assume greater risk for attributed beneficiaries.

On December 21, 2018, CMS published a final rule that, in general, requires ACO participants to take on additional risk associated with participation in the program.

On April 30, 2020, CMS issued an interim final rule with comment in response to the COVID-19 national emergency permitting ACOs with current agreement periods expiring on December 31, 2020 the option to extend their existing agreement period by one year, and permitting certain ACOs to retain their participation level through 2021.

It remains unclear to what extent providers will pursue federal ACO status or whether the required investment would be warranted by increased payment.

2019 Novel Coronavirus Disease Medicare and Medicaid Payment Related Legislation

In response to the growing threat of COVID-19, on March 13, 2020 a national emergency was declared.

The declaration empowered the HHS Secretary to waive certain Medicare, Medicaid and CHIP program requirements and Medicare conditions of participation under Section 1135 of the Social Security Act.

Having been granted this authority by HHS, CMS issued a broad range of blanket waivers, which eased certain requirements for impacted providers, including:

(i) Waivers and Flexibilities for hospitals and other healthcare facilities including those for physical environment requirements and certain Emergency Medical Treatment & Labor Act provisions;

(ii) Provider Enrollment Flexibilities;

(iii) Flexibility and Relief for State Medicaid Programs including those under section 1135 Waivers, and;

(iv) Suspension of Certain Enforcement Activities.

In addition to the national emergency declaration, various forms of legislation were enacted intended to support state and local authority responses to COVID-19 as well as provide fiscal support to businesses, individuals, financial markets, hospitals and other healthcare providers.

Some of the financial support included in the various legislative actions include:

Medicaid FMAP Enhancement

• The FMAP was increased by 6.2% retroactive to the federal fiscal quarter beginning January 1, 2020 and each subsequent federal fiscal quarter for all states and U.S.

territories during the declared public health emergency through December 31, 2022, in accordance with specified conditions.

The CAA of 2023, signed into law on December 29, 2022, provided for the transitional reduction of the 6.2% enhanced FMAP during 2023 to 5.0% during the second quarter, 2.5% during the third quarter and 1.5% during the fourth quarter of 2023.

• Effective April 1, 2023, the CAA of 2023 allows states to initiate Medicaid renewals, post-enrollment verifications, and redeterminations over a 12-month period for all individuals who are enrolled in such plan (or waiver) as of April 1, 2023.

This activity was previously prohibited as a condition for the receipt of the enhanced FMAP during the PHE.

This Medicaid enrollment related activity is likely to reduce Medicaid beneficiary enrollment.

In the states in which we

operate, we cannot predict the extent to which disenrolled Medicaid beneficiaries will be able to replace their Medicaid coverage with employer-based insurance coverage or via coverage obtained through the ACA Health Insurance Exchange.

We are therefore unable to estimate the impact of this Medicaid enrollment activity on our results of operations.

Public Health Emergency Declaration

• Up to its expiration on May 11, 2023, the PHE provided for certain Medicare payment provisions that were contingent on the PHE including the twenty percent (20%) Medicare add-on for inpatient hospital COVID-19 patients noted below.

Reimburse hospitals at Medicare rates for uncompensated COVID-19 care for the uninsured

• Our financial results for 2023 included no revenues recorded in connection with the COVID-19 uninsured program while our financial results for 2022 included revenues of approximately $22 million.

• Effective March 22, 2022, HHS announced that the HRSA COVID-19 Uninsured Program and Coverage Assistance Fund is no longer accepting claims due to insufficient funding.

Medicare Sequestration Relief

• Suspension of the 2% Medicare sequestration offset for Medicare services provided from May 1, 2020 through December 31, 2021 by various legislative extensions.

In December, 2021, the suspended 2% payment reduction was extended until June 30, 2022 and partially suspended at a 1% payment reduction for an additional three-month period that ended on June 30, 2022, with a return to the full 2% Medicare payment reduction thereafter.

• Our financial results for 2023 included no revenues recorded in connection with the Medicare sequestration relief program while our financial results for 2022 included revenues of approximately $17 million.

Medicare add-on for inpatient hospital COVID-19 patients

• Increases the payment that would otherwise be made to a hospital for treating a Medicare patient admitted with COVID-19 by twenty percent (20%) for the duration of the COVID-19 public health emergency.

• Included in our financial results were revenues recorded in connection with the COVID-19 add-on program amounting to approximately $6 million during 2023 and $30 million during 2022.

These payments were intended to offset the increased expenses associated with the treatment of Medicare COVID-19 patients.

CMS also developed and implemented more advanced ACO payment models that require ACOs to assume greater risk for attributed beneficiaries.

Through various subsidiaries, we participate in ACOs in many of our acute care hospital markets.

Infectious Disease Outbreaks, Pandemics, or Other Public Health Emergencies or Crisis

Our business and financial results may be harmed by an international, national or localized outbreak of a highly contagious or epidemic disease, including but not limited to, COVID-19 or similar corona viruses, Ebola or Zika, may put stress on the capacity of all or a part of our health care facilities, could result in an abnormally high demand for health care services, require that resources be diverted from one part of operations to another part, or disrupt the supply chain for equipment and supplies necessary for operations.

In addition, unaffected individuals may decide to defer elective procedures or otherwise avoid medical treatment, resulting in reduced patient volumes and operating revenues.

In addition to statutory and regulatory changes to the Medicare program and each of the state Medicaid programs, our operations and reimbursement may be affected by administrative rulings, new or novel interpretations and determinations of existing laws and regulations, post-payment audits, requirements for utilization review and new governmental funding restrictions, all of which may materially increase or decrease program payments as well as affect the cost of providing services and the timing of payments to our facilities.

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We believe that we have made adequate provisions for such potential adjustments.

Nevertheless, until final adjustments are made, certain issues remain unresolved and previously determined allowances could become either inadequate or more than ultimately required.

Nevertheless, until final adjustments are

made, certain issues remain unresolved and previously determined allowances could become either inadequate or more than ultimately required.

Finally, we expect continued third-party efforts to aggressively manage reimbursement levels and cost controls.

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Revolving credit & demand notes (a.)

Tranche A term loan facility (a.)

Tranche A term loan, extinguished (a.)

Tranche A term loan, 2029 (a.)

$800 million, 2.65% Senior Notes due 2030 (b.)

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$500 million, 2.65% Senior Notes due 2032 (d.)

Accounts receivable securitization program (e.)

Subtotal - revolving credit, demand notes, Senior Notes, term

loan facilities and accounts receivable securitization

$500 million, 4.625% Senior Notes due 2029 (e.)

$500 million, 5.05% Senior Notes due 2034 (f.)

Subtotal - revolving credit, term loan A and Senior Notes

Amortization of financing fees

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Interest expense, net

(a.) As of December 31, 2023, our credit agreement dated November 15, 2010, as amended, provided for the following:

• a $1.2 billion aggregate amount revolving credit facility that is scheduled to mature in August, 2026 (which, as of December 31, 2023, had $701 million of aggregate available borrowing capacity net of $496 million of outstanding borrowings and $3 million of letters of credit), and;

• a tranche A term loan facility with $2.26 billion of outstanding borrowings as of December 31, 2023 (including the $700 million increase that occurred in June, 2022).

(a.) On September 26, 2024, we entered into the tenth amendment to our credit agreement dated November 15, 2010, as amended and restated at various times from March, 2011 to June, 2022 (the "Credit Agreement").

The tenth amendment provides for, among other things, the following:

(i) an extension of the maturity date to September 26, 2029;

(ii) a $100 million increase in the revolving credit facility to $1.3 billion of aggregate borrowing capacity (which as of December 31, 2024, had $1.17 billion of aggregate available borrowing capacity, net of $130 million of borrowings outstanding and $3 million of letters of credit), and;

(iii) a $1.0 billion reduction in the outstanding borrowings pursuant to the tranche A term loan facility, to $1.2 billion from $2.2 billion previously, utilizing the proceeds generated from the September, 2024, issuance of the below-mentioned senior notes due in 2029 and 2034.

(b.) In September, 2020, we completed the offering of $800 million aggregate principal amount of 2.65% Senior Notes due in 2030.

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(d.) In August, 2021, we completed the offering of $500 million aggregate principal amount of 2.65% Senior Notes due in 2032.

(e.) The accounts receivable securitization program expired on its maturity date in December, 2022 and was not renewed or replaced.

Interest expense increased by $80 million during 2023 to $207 million as compared to $127 million during 2022.

The increase was primarily due to:

(i) a net $102 million increase in aggregate interest expense on our revolving credit, demand notes, senior notes, term loan facilities and accounts receivable securitization program, resulting from an increase in our aggregate average cost of borrowings pursuant to these facilities (4.8% during 2023 as compared to 2.8% during 2022), as well as an increase in the aggregate average outstanding borrowings ($4.63 billion during 2023 as compared to $4.40 billion during 2022), partially offset by;

(ii) a net $22 million decrease in other combined interest expenses, including a $16 million increase in capitalized interest on major projects.

The average effective interest rate, including amortization of deferred financing costs, original issue discount and designated interest rate swap expense/income, on borrowings outstanding under our revolving credit, demand notes, senior notes, term loan A facility and accounts receivable securitization program, which amounted to approximately $4.63 billion during 2023 and $4.40 billion during 2022, were 4.9% during 2023 and 2.9% during 2022.

(e.) On September 26, 2024, we completed the offering of $500 million aggregate principal amount of 4.625% Senior Notes due in 2029.

(f.) On September 26, 2024, we completed the offering of $500 million aggregate principal amount of 5.050% Senior Notes due in 2034.

Interest expense decreased by $21 million during 2024 to $186 million as compared to $207 million during 2023.

The decrease was primarily due to:

(i) a net $13 million decrease in aggregate interest expense on our revolving credit, term loan A and senior notes, resulting from a decrease in our aggregate average cost of borrowings pursuant to these facilities (4.65% during 2024 as compared to 4.8% during 2023), as well as a decrease in the aggregate average outstanding borrowings ($4.47 billion during 2024 as compared to $4.63 billion during 2023);

(ii) a $15 million decrease resulting from an increase in capitalized interest on major projects, partially offset by;

(iii) a net $7 million increase in other combined interest expenses.

The average effective interest rate, including amortization of deferred financing costs, on borrowings outstanding under our revolving credit, term loan A and senior notes, which amounted to approximately $4.47 billion as of 2024 and $4.63 billion as of 2023, were 4.8% during 2024 and 4.9% during 2023.

Provision for Asset Impairments

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The provision for asset impairment reduced the asset values of the facility's real estate and equipment to their estimated fair values.

During 2021, in connection with the discontinuation of a certain module of a new clinical/financial information technology application under development, our financial results included a pre-tax provision for asset impairment of approximately $14 million to write-off the applicable portion of the capitalized costs incurred and is included in other operating expenses on the accompanying consolidated statements of income.

Provision for Income Taxes and Effective Tax Rates

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Effective tax rate

The provision for income taxes increased $12 million during 2023, as compared to 2022, due primarily to the income tax provision recorded in connection with the $54 million increase in pre-tax income ($74 million increase in income before income taxes partially offset by a $20 million increase in net income attributable to noncontrolling interests).

The provision for income taxes increased $114 million during 2024, as compared to 2023, due primarily to:

Due to recent guidance and enacted laws surrounding the global 15% minimum tax rate that will be effective after 2024 from the Organization for Economic Co-operation and Development ("OECD"), as well as jurisdictions that we operate in, we anticipate adverse effects to our provision for income taxes as well as cash taxes.

We do not expect these adverse effects to be material and will continue to monitor changes in tax policies and laws issued by the OECD and jurisdictions that we operate in.

Currently, the United States has not enacted legislation that aligns with the OECD global minimum tax rate.

We do not expect these effects to be material and will continue to monitor changes in tax policies and laws issued by the OECD and jurisdictions in which we operate.

Effects of Inflation and Seasonality

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The net increase of $799 million was primarily attributable to the following:

• a favorable change of $114 million from other working capital accounts due primarily to the timing of disbursements for accrued compensation and certain other accrued liabilities;

• a favorable change of $76 million in accounts receivable;

• a favorable change of $29 million in other assets and deferred charges, and;

• $53 million of other combined net favorable changes.

• a favorable change of $472 million resulting from an increase in net income plus/minus depreciation and amortization expense, stock-based compensation expense, gains on sales of assets and businesses and costs related to the extinguishment of debt;

• a favorable change of $250 million in accounts receivable due, in part, to a decrease in our days sales outstanding as of December 31, 2024, as compared to December 31, 2023, as discussed below;

• a favorable change of $94 million from other working capital accounts due primarily to the timing of disbursements for certain accrued liabilities;

• an unfavorable change of $61 million in other assets and deferred charges;

• a favorable change of $56 million in accrued and deferred income taxes, and;

• $12 million of other combined net unfavorable changes.

Days sales outstanding (“DSO”):

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• $944 million spent on capital expenditures including capital expenditures for equipment, renovations and new projects at various existing facilities;

• $41 million paid in connection with net cash outflows from forward exchange contracts that hedge our investment in the U.K.

• $39 million of proceeds received from sales of assets and businesses;

• $19 million spent on the acquisition of businesses and property, and;

• $13 million received in connection with net cash inflows from forward exchange contracts that hedge our investment in the U.K.

against movements in exchange rates;

• $24 million of proceeds received from sales of assets and businesses, and;

• $4 million spent on the acquisition of businesses and property.

The $763 million of net cash used in investing activities during 2023 consisted of:

• $743 million spent on capital expenditures including capital expenditures for equipment, renovations and new projects at various existing facilities;

• $95 million received in connection with net cash inflows from forward exchange contracts that hedge our investment in the U.K.

• $41 million paid in connection with net cash outflows from forward exchange contracts that hedge our investment in the U.K.

against movements in exchange rates;

• $20 million spent on the acquisition of businesses and property, and;

• $12 million of proceeds received from sales of assets and businesses.

• $24 million of proceeds received from sales of assets and businesses, and;

• $4 million spent on the acquisition of businesses and property.

Net cash used in financing activities

Net cash used in financing activities was $494 million during 2023 and $318 million during 2022.

The $494 million of net cash used in financing activities during 2023 consisted of the following:

• generated $185 million of proceeds from additional borrowings pursuant to our revolving credit facility;

Net cash used in financing activities was $1.145 billion during 2024 and $494 million during 2023.

The $1.145 billion of net cash used in financing activities during 2024 consisted of the following:

• spent $2.640 billion on net repayments of debt as follows:

(i) $2.259 billion related to our previous tranche A term loan facility which was extinguished in September, 2024, and replaced with a new $1.2 billion tranche A term loan facility;

(ii) $366 million related to our revolving credit facility, and;

(iii) $15 million related to other debt facilities;

• generated $2.210 billion of proceeds from additional borrowings as follows:

(i) $1.200 billion related to our new tranche A term loan facility, as mentioned above;

(ii) generated approximately $500 million of net proceeds (before expenses) related to the public offering, in September, 2024, of 4.625% senior secured notes due in 2029;

(iii) generated approximately $498 million of net proceeds (before expenses) related to the public offering, in September, 2024, of 5.050% senior secured notes due in 2034, and;

(iv) $12 million of proceeds related to other debt facilities;

• spent $671 million to repurchase shares of our Class B Common Stock in connection with:

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(ii) income tax withholding obligations related to stock-based compensation programs ($72 million);

• spent $85 million on net repayment of debt as follows:

(i) $79 million related to our tranche A term loan facility, and;

(ii) $6 million related to other debt facilities;

• spent $53 million to pay quarterly cash dividends of $.20 per share;

• generated $15 million from the issuance of shares of our Class B Common Stock pursuant to the terms of employee stock purchase plans;

• spent $7 million to pay profit distributions related to noncontrolling interests in majority owned businesses, and;

• received $3 million for the purchase of minority ownership interests in majority owned businesses.

• received $13 million from the sale of ownership interests to minority members;

• spent $13 million to pay financing costs, and;

• spent $7 million to pay profit distributions related to noncontrolling interests in majority owned businesses.

The $494 million of net cash used in financing activities during 2023 consisted of the following:

• generated $705 million of proceeds from new borrowings consisting primarily of $700 million of proceeds generated from the new tranche A term loan facility which commenced in June, 2022;

• generated $185 million of proceeds from additional borrowings pursuant to our revolving credit facility;

• spent $547 million to repurchase shares of our Class B Common Stock in connection with:

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• spent $85 million on net repayment of debt as follows:

(i) $51 million related to our tranche A term loan facility;

(ii) $32 million related to our revolving credit facility, and;

(iii) $6 million related to other debt facilities;

(i) $79 million related to our tranche A term loan facility, and;

(ii) $6 million related to other debt facilities;

• spent $55 million to pay quarterly cash dividends of $.20 per share;

• spent $49 million in connection with the purchase of ownership interests from minority members, net of sales, consisting primarily of our purchase of George Washington University's 20% ownership in the George Washington University Hospital (we now own 100% of the hospital);

• generated $14 million from the issuance of shares of our Class B Common Stock pursuant to the terms of employee stock purchase plans;

• spent $7 million to pay profit distributions related to noncontrolling interests in majority owned businesses, and;

• spent $3 million to pay financing costs.

• received $3 million for the purchase of minority ownership interests in majority owned businesses.

2025 Expected Capital Expenditures:

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Credit Facilities and Outstanding Debt Securities

In June, 2022, we entered into a ninth amendment to our credit agreement dated as of November 15, 2010, as amended and restated as of September, 2012, August, 2014, October, 2018, August, 2021, and September, 2021, among UHS, as borrower, the several banks and other financial institutions from time to time parties thereto, as lenders, and JPMorgan Chase Bank, N.A., as administrative agent, (the “Credit Agreement”).

The ninth amendment provided for, among other things, the following:

(i) a new incremental tranche A term loan facility in the aggregate principal amount of $700 million which is scheduled to mature on August 24, 2026, and;

(ii) replaces the option to make Eurodollar borrowings (which bear interest by reference to the LIBO Rate) with Term Benchmark Loans, which will bear interest by reference to the Secured Overnight Financing Rate (“SOFR”).

The net proceeds generated from the incremental tranche A term loan facility were used to repay a portion of the borrowings that were previously outstanding under our revolving credit facility.

As of December 31, 2023, our Credit Agreement provided for the following:

• a tranche A term loan facility with $2.26 billion of outstanding borrowings as of December 31, 2023.

The tranche A term loan facility provides for installment payments of $30.0 million per quarter through June, 2026.

The unpaid principal balance at June 30, 2026 is payable on the August 24, 2026 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 weighted average of the federal funds rate, plus 0.5% and (c) one month term SOFR rate plus 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 %.

In September, 2024, we completed the following financing transactions:

• The public offering of $500 million of aggregate principal amount of 4.625% senior secured notes due on October 15, 2029 ("2029 Notes");

• The public offering of $500 million of aggregate principal amount of 5.050% senior secured notes due on October 15, 2034 ("2034 Notes");

• Amended our credit agreement to:

o Extend the maturity date to September, 2029 (from August, 2026 previously);

o Increase the revolving credit facility to $1.3 billion (from $1.2 billion previously), and;

o reduce the outstanding borrowings pursuant to the tranche term loan A facility by approximately $1.0 billion, to $1.2 billion, utilizing the proceeds generated from the issuance of the above-mentioned 2029 Notes and 2034 Notes.

On September 26, 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, 2024, had $1.17 billion of aggregate available borrowing capacity, net of $130 million of outstanding borrowings 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 $1.19 billion of outstanding borrowings as of December 31, 2024).

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, 2024, the applicable margins were 0.375% for ABR-based loans and 1.375% for SOFR-based loans under the revolving credit and term loan A facilities.

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and requires compliance with financial covenants including maximum leverage.

We were in compliance with all required covenants as of December 31, 2023 and 2022.

The average amounts outstanding under our Credit Agreement were $2.629 billion during 2023, $2.396 billion during 2022 and $2.214 billion during 2021.

The average effective interest rate on borrowings under our Credit Agreement, including amortization of deferred financing costs, were 6.80% during 2023, 3.33% during 2022 and 1.69% during 2021.

On August 24, 2021, we completed the following via private offerings to qualified institutional buyers under Rule 144A and to non-U.S.

persons outside the United States in reliance on Regulation S under the Securities Act of 1933, as amended:

• Issued $700 million of aggregate principal amount of 1.65% senior secured notes due on September 1, 2026, and;

• Issued $500 million of aggregate principal amount of 2.65% senior secured notes due on January 15, 2032.

On September 13, 2021, we redeemed $400 million of aggregate principal amount of 5.00% senior secured notes, that were scheduled to mature on June 1, 2026, at 102.50% of the aggregate principal, or $410 million.

As of December 31, 2023, we had combined aggregate principal of $2.0 billion from the following senior secured notes:

We were in compliance with all required covenants as of December 31, 2024 (pursuant to the terms of the Credit Agreement, as amended on September 26, 2024) and as of December 31, 2023 (pursuant to the terms of the previous credit agreement).

As mentioned above, on September 26, 2024, we completed the public offering of:

(i) $500,000,000 aggregate principal amount of the 4.625%, 2029 Notes, and;

(ii) $500,000,000 aggregate principal amount of the 5.050%, 2034 Notes (and together with the 2029 Notes, the "2029 and 2034 Notes"), each guaranteed on a senior secured basis by all of our existing and future direct and indirect subsidiaries that guarantee our senior secured credit facility or our other first lien obligations or any junior lien obligations (the “Subsidiary Guarantors”).

The 2029 and 2034 Notes have been registered under the Securities Act of 1933, as amended (the “Securities Act”), pursuant to the Issuer’s and the Subsidiary Guarantors’ registration statement on Form S-3 (File No.

333-282135), including the prospectus dated September 16, 2024, and a related prospectus supplement dated September 17, 2024, as filed with the Securities and Exchange Commission on September 19, 2024.

As of December 31, 2024, including the above-mentioned newly issued Notes, we had combined aggregate principal of $3.0 billion from the following senior secured notes:

• $700 million aggregate principal amount of 1.65% senior secured notes due in September, 2026 ("2026 Notes") which were issued on August 24, 2021.

• $800 million aggregate principal amount of 2.65% senior secured notes due in October, 2030 (“2030 Notes”) which were issued on September 21, 2020.

• $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 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 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.

The 2026 Notes, 2030 Notes and 2032 Notes (collectively “The Notes”) were initially issued only to qualified institutional buyers under Rule 144A and to non-U.S.

persons outside the United States in reliance on Regulation S under the Securities Act of 1933, as amended (the “Securities Act”).

In December, 2022, we completed a registered exchange offer in which virtually all previously outstanding Notes were exchanged for identical Notes that were registered under the Securities Act, and thereby became freely transferable (subject to certain restrictions applicable to affiliates and broker dealers).

Notes originally issued under Rule 144A or Regulation S that were not exchanged remain outstanding and may not be offered or sold in the United States absent registration under the Securities Act or an applicable exemption from registration requirements thereunder.

The Notes are guaranteed (the “Guarantees”) on a senior secured basis by all of our existing and future direct and indirect subsidiaries (the “Subsidiary Guarantors”) that guarantee our Credit Agreement, or other first lien obligations or any junior lien obligations.

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 the Company’s Existing Receivables Facility (as defined in the Indenture pursuant to which The Notes were issued (the “Indenture”)), and certain other excluded assets).

The Company’s obligations with respect to 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 Indenture, are secured equally and ratably with the Company’s and the Subsidiary Guarantors’ obligations under the Credit Agreement and The Notes by a perfected first-priority security interest, subject to permitted liens, in the collateral owned by the Company and its Subsidiary Guarantors, whether now owned or hereafter acquired.

However, the liens on the collateral securing The Notes and the Guarantees will be released if:

(i) The Notes have investment grade ratings;

• $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 Notes, 2030 Notes and 2032 Notes (collectively the "2026, 2030 and 2032 Notes") were initially issued only to qualified institutional buyers under Rule 144A and to non-U.S.

persons outside the United States in reliance on Regulation S under the Securities Act.

In December, 2022, we completed a registered exchange offer in which virtually all previously outstanding 2026, 2030 and 2032 Notes were exchanged for identical 2026, 2030 and 2032 Notes that were registered under the Securities Act, and thereby became freely transferable (subject to certain restrictions applicable to affiliates and broker dealers).

2026, 2030 and 2032 Notes originally issued under Rule 144A or Regulation S that were not exchanged remain outstanding and may not be offered or sold in the United States absent registration under the Securities Act or an applicable exemption from registration requirements thereunder.

The 2026, 2030 and 2032 Notes, and the 2029 and 2034 Notes (collectively "All the Notes") are guaranteed (the “Guarantees”) on a senior secured basis by our Subsidiary Guarantors that guarantee our Credit Agreement, or other first lien obligations or any junior lien obligations.

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).

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 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 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.

(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.

As discussed in Note 9 to the Consolidated Financial Statements-Relationship with Universal Health Realty Income Trust and Other Related Party Transactions , on December 31, 2021, we (through wholly-owned subsidiaries of ours) entered into an asset purchase and sale agreement with Universal Health Realty Income Trust (the “Trust”).

Pursuant to the terms of the agreement, which was amended during the first quarter of 2022, we, among other things, transferred to the Trust, the real estate assets of Aiken Regional Medical Center (“Aiken”) and Canyon Creek Behavioral Health (“Canyon Creek”).

Pursuant to the terms of the agreement, as amended, we, among other things, transferred to the Trust, the real estate assets of Aiken Regional Medical Center (“Aiken”) and Canyon Creek Behavioral Health (“Canyon Creek”).

In connection with this transaction, Aiken and Canyon Creek (as lessees), entered into a master lease and individual property leases, as amended, (with the Trust as lessor), for initial lease terms on each property of approximately twelve years, ending on December 31, 2033.

As a result of our purchase option within the Aiken and Canyon Creek lease agreements, this asset purchase and sale transaction is accounted for as a failed sale leaseback in accordance with U.S.

As a result of our purchase option within the Aiken and Canyon Creek lease agreements, this asset purchase and sale transaction is accounted for as a failed sale leaseback in accordance with

GAAP and we have accounted for the transaction as a financing arrangement.

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Additional funds may be obtained through:

(i) borrowings under our existing revolving credit facility, which had $701 million of available borrowing capacity as of December 31, 2023, or through refinancing the existing Credit Agreement;

(i) borrowings under our existing revolving credit facility, which had $1.17 billion of available borrowing capacity as of December 31, 2024, or through refinancing the existing Credit Agreement;

(ii) the issuance of other short-term and/or long-term debt, and/or;

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Supplemental Guarantor Financial Information

As of December 31, 2023, we had combined aggregate principal of $2.0 billion from The Notes:

As of December 31, 2024, we had combined aggregate principal of $3.0 billion from All the Notes:

• $700 million aggregate principal amount of the 2026 Notes;

• $800 million aggregate principal amount of the 2030 Notes, and;

• $500 million aggregate principal amount of the 2029 Notes;

• $800 million aggregate principal amount of the 2030 Notes;

• $500 million of aggregate principal amount of the 2032 Notes, and;

• $500 million of aggregate principal amount of the 2034 Notes.

The Notes are fully and unconditionally guaranteed pursuant to the Guarantees on a senior secured basis by the Subsidiary Guarantors.

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 the Company’s existing receivables facility (as defined in the Indentures pursuant to which The Notes were issued ), and certain other excluded assets).

The Company’s obligations with respect to 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 and The Notes by a perfected first-priority security interest, subject to permitted liens, in the collateral owned by the Company and its Subsidiary Guarantors, whether now owned or hereafter acquired.

However, the liens on the collateral securing The Notes and the Guarantees will be released if:

(i) The Notes have investment grade ratings;

All the Notes are fully and unconditionally guaranteed pursuant to the Guarantees on a senior secured basis by 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 the Company’s existing receivables facility (as defined in the Indentures pursuant to which All the Notes were issued), 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 and All the Notes by a perfected first-priority security interest, subject to permitted liens, in the collateral owned by the Company and its Subsidiary Guarantors, whether now owned or hereafter acquired.

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;

The Notes will be structurally subordinated to all obligations of our existing and future subsidiaries that are not and do not become Subsidiary Guarantors of The Notes.

All the Notes will be structurally subordinated to all obligations of our existing and future subsidiaries that are not and do not become Subsidiary Guarantors of All the Notes.

No appraisal of the value of the collateral has been made, and the value of the collateral in the event of liquidation will depend on market and economic conditions, the availability of buyers and other factors.

Consequently, liquidating the collateral securing The Notes may not produce proceeds in an amount sufficient to pay any amounts due on The Notes.

Consequently, liquidating the collateral securing All the Notes may not produce proceeds in an amount sufficient to pay any amounts due on All the Notes.

We and our subsidiaries may be able to incur significant additional indebtedness in the future.

Although our Credit Agreement contains restrictions on the incurrence of additional indebtedness and our Credit Agreement and The Notes contain restrictions on our ability to incur liens to secure additional indebtedness, these restrictions are subject to a number of qualifications and exceptions, and the additional indebtedness incurred in compliance with these restrictions could be substantial.

Although our Credit Agreement contains restrictions on the incurrence of additional indebtedness and our Credit Agreement and All the Notes contain restrictions on our ability to incur liens to secure additional indebtedness, these restrictions are subject to a number of qualifications and exceptions, and the additional indebtedness incurred in compliance with these restrictions could be substantial.

These restrictions also will not prevent us from incurring obligations that do not constitute indebtedness.

In addition, if we incur any additional indebtedness secured by liens that rank equally with The Notes, subject to collateral arrangements, the holders of that debt will be entitled to share ratably with you in any proceeds distributed in connection with any insolvency, liquidation, reorganization, dissolution or other winding up of our company.

This may have the effect of reducing the amount of proceeds paid to holders of The Notes.

Federal and state fraudulent transfer and conveyance statutes may apply to the issuance of The Notes and the incurrence of the Guarantees.

Under federal bankruptcy law and comparable provisions of state fraudulent transfer or conveyance laws, which may vary from state to state, The Notes or the Guarantees (or the grant of collateral securing any such obligations) could be voided as a fraudulent transfer or conveyance if we or any of the Subsidiary Guarantors, as applicable, (a) issued The Notes or incurred the Guarantees with the intent of hindering, delaying or defrauding creditors or (b) under certain circumstances received less than reasonably equivalent value or fair consideration in return for either issuing The Notes or incurring the Guarantees.

In addition, if we incur any additional indebtedness secured by liens that rank equally with All the Notes, subject to collateral arrangements, the holders of that debt will be entitled to share

ratably with holders of All the Notes in any proceeds distributed in connection with any insolvency, liquidation, reorganization, dissolution or other winding up of our company.

This may have the effect of reducing the amount of proceeds paid to holders of All the Notes.

Federal and state fraudulent transfer and conveyance statutes may apply to the issuance of All the Notes and the incurrence of the Guarantees.

Under federal bankruptcy law and comparable provisions of state fraudulent transfer or conveyance laws, which may vary from state to state, All the Notes or the Guarantees (or the grant of collateral securing any such obligations) could be voided as a fraudulent transfer or conveyance if we or any of the Subsidiary Guarantors, as applicable, (a) issued All the Notes or incurred the Guarantees with the intent of hindering, delaying or defrauding creditors or (b) under certain circumstances received less than reasonably equivalent value or fair consideration in return for either issuing All the Notes or incurring the Guarantees.

Basis of Presentation

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Affiliates Whose Securities Collateralize the Senior Secured Notes

The Notes and the Guarantees are secured by, among other things, pledges of the capital stock of our subsidiaries held by us or by our secured Guarantors, in each case other than certain excluded assets and subject to permitted liens.

All the Notes and the Guarantees are secured by, among other things, pledges of the capital stock of our subsidiaries held by us or by our secured Guarantors, in each case other than certain excluded assets and subject to permitted liens.

Such collateral securities are secured equally and ratably with our and the Guarantors’ obligations under our Credit Agreement.

For a list of our subsidiaries the capital stock of which has been pledged to secure The Notes, see Exhibit 22.1 to this Report.

Upon the occurrence and during the continuance of an event of default under the indentures governing The Notes, subject to the terms of the Security Agreement relating to The Notes provide for (among other available remedies) the foreclosure upon and sale of the Collateral (including the pledged stock) and the distribution of the net proceeds of any such sale to the holders of The Notes, the lenders under the Credit Agreement and the holders of any other permitted first priority secured obligations on a pro rata basis, subject to any prior liens on the collateral.

For a list of our subsidiaries the capital stock of which has been pledged to secure All the Notes, see Exhibit 22.1 to this Report.

Upon the occurrence and during the continuance of an event of default under the indentures governing All the Notes, subject to the terms of the Security Agreement relating to All the Notes provide for (among other available remedies) the foreclosure upon and sale of the Collateral (including the pledged stock) and the distribution of the net proceeds of any such sale to the holders of All the Notes, the lenders under the Credit Agreement and the holders of any other permitted first priority secured obligations on a pro rata basis, subject to any prior liens on the collateral.

No appraisal of the value of the collateral securities has been made, and the value of the collateral securities in the event of liquidation will depend on market and economic conditions, the availability of buyers and other factors.

Consequently, liquidating the collateral securities securing The Notes may not produce proceeds in an amount sufficient to pay any amounts due on The Notes.

The security agreement relating to The Notes provides that the representative of the lenders under our Credit Agreement will initially control actions with respect to that collateral and, consequently, exercise of any right, remedy or power with respect to enforcing interests in or realizing upon such collateral will initially be at the direction of the representative of the lenders.

Consequently, liquidating the collateral securities securing All the Notes may not produce proceeds in an amount sufficient to pay any amounts due on All the Notes.

The security agreement relating to All the Notes provides that the representative of the lenders under our Credit Agreement will initially control actions with respect to that collateral and, consequently, exercise of any right, remedy or power with respect to enforcing interests in or realizing upon such collateral will initially be at the direction of the representative of the lenders.

No trading market exists for the capital stock pledged as collateral.

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We sublease space in these buildings and any amounts received from these subleases are offset against the expense.

In addition, we lease certain hospital facilities from Universal Health Realty Trust (the “Trust”) with terms scheduled to expire in 2026, 2033 and 2040.

In addition, we lease certain hospital facilities from Universal Health Realty Income Trust (the “Trust”) with terms scheduled to expire in 2026, 2033 and 2040.

These leases contain various renewal options, as disclosed in Note 9 to the Consolidated Financial Statements-Relationship with Universal Health Realty Income Trust and Other Related Party Transactions .

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(d) Consists of:

(i) $65 million related to long-term contracts with third-parties consisting primarily of certain revenue cycle data processing services for our acute care facilities;

(ii) $188 million related to the future expected costs to be paid to a third-party vendor in connection with the ongoing operation of an electronic health records application and purchase and implementation of a revenue cycle and other applications for our facilities;

(iii) $4 million for other software applications, and;

(iv) $70 million in healthcare infrastructure in Washington D.C.

(i) $183 million related to the ongoing operation of an electronic health records application and purchase and implementation of a revenue cycle and other applications for our facilities;

(ii) $85 million related to the development, implementation and operation of an enterprise resource planning application;

(iii) $61 million in healthcare infrastructure in Washington D.C.

in connection with various agreements with the District of Columbia, as discussed below;

(iv) $52 million related to long-term contracts with third-parties consisting primarily of certain revenue cycle data processing services for our acute care facilities;

(v) $43 million for administrative software applications, and;

(vi) $12 million for other software applications.

(e) Reflects our future minimum operating lease payment obligations related to our operating lease agreements outstanding as of December 31, 2024 as discussed in Note 7 to the Consolidated Financial Statements .

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(g) Consists of accrued and unpaid estimated claims expense incurred in connection with our commercial health insurers and self-insured employee benefit plans.

As of December 31, 2023, the total net accrual for our professional and general liability claims was $431 million, of which $70 million is included in other current liabilities and $361 million is included in other non-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 is included in other current liabilities and $402 million is included in other non-current liabilities.

We exclude the $487 million for professional and general liability claims from the contractual obligations table because there are no significant contractual obligations associated with these liabilities and because of the uncertainty of the dollar amounts to be ultimately paid as well as the timing of such payments.

Please see Self-Insured/Other Insurance Risks above for additional disclosure related to our professional and general liability claims and reserves.

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”).

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 (that is expected to be completed and opened in the Spring of 2025) and certain other facilities/structures on land owned by the District (“District Facilities”).

The agreements contemplate that we will serve as manager for development and construction of the District Facilities on behalf of the District, with a projected aggregate cost of approximately $439 million, approximately $344 million of which was incurred as of December 31, 2024, which is being entirely funded by the District.

Construction of the District Facilities is expected to be completed during 2025.

Upon completion of the District Facilities, we will lease 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.

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 10 th 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.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis