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Item 9A. Controls and Procedures

2025-02-26 compared with 2024-02-27 · 352 added, 307 removed, 1301 unchanged (34% of the section changed)

36 unchanged sentences

(3) Exhibits:

Registrant’s Restated Certificate of Incorporation, and Amendments thereto, previously filed as Exhibit 3.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 1997, are incorporated herein by reference (P).

Amended and Restated Bylaws of Registrant, previously filed as Exhibit 3.1 to the Company’s Current Report on Form 8-K dated September 21, 2022, is incorporated herein by reference.

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Second Supplemental Indenture, dated as of June 23, 2022, among the Company, the Subsidiary Guarantors party thereto, U.S.

Bank Trust Company, National Association (as successor to U.S.

Bank National Association), as trustee, and JPMorgan Chase Bank, N.A., as collateral agent, to the indenture, dated as of September 21, 2020, previously filed as Exhibit 4.1 to the Company’s Current Report on Form 8-K dated June 27, 2022, is incorporated herein by reference.

First Supplemental Indenture, dated as of June 23, 2022, among the Company, the Subsidiary Guarantors party thereto, U.S.

Bank Trust Company and National Association (as successor to U.S.

Bank National Association), as trustee to the indenture, dated as of September 21, 2020, previously filed as Exhibit 4.1 to the Company’s Current Report on Form 8-K dated June 27, 2022, is incorporated herein by reference.

First Supplemental Indenture, dated as of June 23, 2022, among the Company, the Subsidiary Guarantors party thereto, and U.S.

Bank Trust Company, National Association (as successor to U.S.

Bank National Association), as trustee, and

JPMorgan Chase Bank, N.A., as collateral agent, to the indenture, dated as of August 24, 2021, previously filed as Exhibit 4.2 to the Company’s Current Report on Form 8-K dated June 27, 2022, is incorporated herein by reference.

Third Supplemental Indenture, dated as of November 4, 2022, among the Company, the Subsidiary Guarantors party thereto, U.S.

Bank National Association), as trustee, to the indenture, dated as of August 24, 2021, previously filed as Exhibit 4.2 to the Company’s Current Report on Form 8-K dated June 27, 2022, is incorporated herein by reference.

Third Supplemental Indenture, dated as of November 4, 2022, among the Company, the Subsidiary Guarantors party thereto and U.S.

Bank Trust Company, National Association (as successor to U.S.

Bank National Association), as trustee, and JPMorgan Chase Bank, N.A., as collateral agent, to the indenture, dated as of September 21, 2020, previously filed as Exhibit 4.1 to the Company’s Quarterly Report on Form 10-Q dated November 8, 2022, is incorporated herein by reference.

Second Supplemental Indenture, dated as of November 4, 2022, among the Company, the Subsidiary Guarantors party thereto, U.S.

Bank National Association), as trustee, to the indenture, dated as of September 21, 2020, previously filed as Exhibit 4.1 to the Company’s Quarterly Report on Form 10-Q dated November 8, 2022, is incorporated herein by reference.

Second Supplemental Indenture, dated as of November 4, 2022, among the Company, the Subsidiary Guarantors party thereto and U.S.

Bank Trust Company, National Association (as successor to U.S.

Bank National Association), as trustee, and JPMorgan Chase Bank, N.A., as collateral agent, to the indenture, dated as of August 24, 2021, previously filed as Exhibit 4.2 to the Company’s Quarterly Report on Form 10-Q dated November 8, 2022, is incorporated herein by reference.

Bank National Association), as trustee, to the indenture, dated as of August 24, 2021, previously filed as Exhibit 4.2 to the Company’s Quarterly Report on Form 10-Q dated November 8, 2022, is incorporated herein by reference.

Indenture, dated as of September 26, 2024, among the Company, the Subsidiary Guarantors party thereto, U.S.

Bank Trust Company, National Association, as trustee, and JPMorgan Chase Bank, N.A., as collateral agent, previously filed as Exhibit 4.1 to the Company’s Current Report on Form 8-K dated October 1, 2024, is incorporated herein by reference.

First Supplemental Indenture, dated as of September 26, 2024, among the Company, the Subsidiary Guarantors party thereto, U.S.

Bank Trust Company, National Association, as trustee, and JPMorgan Chase Bank, N.A., as collateral agent, to the indenture, dated as of September 26, 2024, governing the Issuer’s 4.625% Senior Secured Notes due 2029 and the Issuer’s 5.050% Senior Secured Notes due 2034, previously filed as Exhibit 4.2 to the Company’s Current Report on Form 8-K dated October 1, 2024, is incorporated herein by reference.

Additional Authorized Representative Joinder Agreement, dated as of September 26, 2024, among U.S.

Bank Trust Company, National Association, as trustee and additional authorized representative for the holders of the Notes, the Issuer, the Subsidiary Guarantors party thereto, and JPMorgan Chase Bank, N.A., as collateral agent and administrative agent, previously filed as Exhibit 4.5 to the Company’s Current Report on Form 8-K dated October 1, 2024, is incorporated herein by reference.

Agreement, dated December 7, 2023, to renew Advisory Agreement dated as of December 24, 1986, and amended and restated effective as of January 1, 2019 between Universal Health Realty Income Trust and UHS of Delaware, Inc.

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Supplemental Deferred Compensation Plan dated as of January 1, 2002, previously filed as Exhibit 10.29 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2002, is incorporated herein by reference.

Universal Health Services, Inc.

Employee Stock Purchase Plan, previously filed as Exhibit 4.1 to the Company’s Registration Statement on Form S-8 (File No.

333-122188), dated January 21, 2005 is incorporated herein by reference.

Universal Health Services, Inc.

Third Amended and Restated 2005 Stock Incentive Plan as Amended, previously filed as Exhibit 99.1 to the Company’s Registration Statement on Form S-8 (File No.333-218359), dated May 31, 2017, is incorporated herein by reference.

Form of Stock Option Agreement, previously filed as Exhibit 10.4 to the Company’s Current Report on Form 8-K, dated June 8, 2005, is incorporated herein by reference.

Form of Stock Option Agreement for Non-Employee Directors, previously filed as Exhibit 10.2 to the Company’s Current Report on Form 8-K, dated October 3, 2005, is incorporated herein by reference.

Amendment No.

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and Universal Health Realty Income Trust, dated April 24, 2006, previously filed as Exhibit 10.29 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2006, is incorporated herein by reference.

Amended and Restated Universal Health Services, Inc.

2010 Employees’ Restricted Stock Purchase Plan, previously filed as Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q filed on August 7, 2015, is incorporated herein by reference.

Universal Health Services, Inc.

2010 Executive Incentive Plan, previously filed as Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q filed on August 7, 2015, is incorporated herein by reference.

Omnibus Amendment to Receivables Sale Agreements, dated as of October 27, 2010, previously filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K dated November 2, 2010, is incorporated herein by reference.

Amended and Restated Credit and Security Agreement, dated as of October 27, 2010, previously filed as Exhibit 10.2 to the Company’s Current Report on Form 8-K dated November 2, 2010, is incorporated herein by reference.

Second Amendment to Amended and Restated Credit and Security Agreement, dated as of October 25, 2013, previously filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K dated October 30, 2013, is incorporated herein by reference.

Third Amendment to Amended and Restated Credit and Security Agreement, dated as of August 1, 2014, previously filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K dated August 4, 2014, is incorporated herein by reference.

Fourth Amendment to Amended and Restated Credit and Security Agreement, dated as of December 22, 2015, previously filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K dated December 22, 2015, is incorporated herein by reference .

Fifth Amendment to Amended and Restated Credit and Security Agreement, dated as of July 7, 2017, previously filed as Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q filed on August 7, 2017, is incorporated herein by reference.

Sixth Amendment to Amended and Restated Credit and Security Agreement, dated as of April 26, 2018, previously filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K dated April 27, 2018, is incorporated herein by reference.

Eighth Amendment to Amended and Restated Credit and Security Agreement, dated as of April 26, 2021, previously filed as Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q dated May 7, 2021, is incorporated herein by reference.

Ninth Amendment to Amended and Restated Credit and Security Agreement, dated as of April 22, 2022.

previously filed as Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the Quarter dated May 6, 2022, is incorporated herein by reference.

Tenth Amendment to Amended and Restated Credit and Security Agreement, dated as of July 22, 2022, previously filed as Exhibit 10.5 to the Company’s Quarterly Report on Form 10-Q dated August 8, 2022, is incorporated herein by reference.

Eleventh Amendment to Amended and Restated Credit and Security Agreement, dated as of September 20, 2022, previously filed as Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q dated November 8, 2022, is incorporated herein by reference.

Assignment and Assumption Agreement, dated as of October 27, 2010, previously filed as Exhibit 10.3 to the Company’s Current Report on Form 8-K dated November 2, 2010, is incorporated herein by reference.

Credit Agreement, dated as of November 15, 2010, by and among Universal Health Services, Inc., JPMorgan Chase Bank, N.A.

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Credit Agreement, dated as of November 15, 2010 and amended and restated as of August 7, 2014, by and among Universal Health Services, Inc., the several banks and other financial institutions from time to time parties thereto, JPMorgan Chase Bank, N.A., as administrative agent and the other agents party thereto, previously filed as Exhibit 10.2 to the Company’s Current Report on Form 8-K dated August 12, 2014, is incorporated herein by reference.

Fifth Amendment to the Credit Agreement, dated as of November 15, 2010, as amended on March 15, 2011, September 21, 2012, May 16, 2013 and August 7, 2014, among the Company, as borrower, the several banks and other financial institutions from time to time parties thereto, as lenders, JPMorgan Chase Bank, N.A., as administrative agent, and the other agents party thereto, previously filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K dated June 8, 2016, is incorporated herein by reference.

Fifth Amendment, dated as of November 7, 2016, to the Credit Agreement, dated as of November 15, 2010, as amended on March 15, 2011, September 21, 2012, May 16, 2013 and August 7, 2014, among the Company, as borrower, the several banks and other financial institutions from time to time parties thereto, as lenders, JPMorgan Chase Bank, N.A., as administrative agent, and the other agents party thereto, previously filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K dated June 8, 2016, is incorporated herein by reference.

Sixth Amendment, dated as of October 23, 2018, to the Credit Agreement, dated as of November 15, 2010, as amended on March 15, 2011, September 21, 2012, May 16, 2013, August 7, 2014 and June 7, 2016, among the Company, as borrower, the several banks and other financial institutions from time to time parties thereto, as lenders, JPMorgan Chase Bank, N.A., as administrative agent, and the other agents party thereto, previously filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K dated October 24, 2018, is incorporated herein by reference.

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Collateral Agreement, dated as of August 7, 2014, among Universal Health Services, Inc., the subsidiary guarantors party thereto, MUFG Union Bank, N.A., as 2014 Trustee, The Bank of New York Mellon Trust Company, N.A., as 2006 Trustee, and JPMorgan Chase Bank, N.A., as collateral agent, previously filed as Exhibit 10.4 to the Company’s Current Report on Form 8-K dated August 12, 2014, is incorporated herein by reference.

Universal Health Services, Inc.

2020 Omnibus Stock and Incentive Plan, previously filed as Exhibit 99.1 to the Company’s Registration Statement on Form S-8 (File No.

333-238880) dated June 2, 2020, is incorporated herein by reference.

Form of Stock Option Award Agreement under the Universal Health Services, Inc.

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and UHS of Delaware, Inc., previously filed as Exhibit 10.3 to the Company’s Current Report on Form 8-K dated July 10, 2020, is incorporated herein by reference.

Stipulation and Agreement of Settlement, dated as of September 15, 2021, by and among (a) lead plaintiffs in the stockholder derivative action captioned In re Universal Health Services, Inc., Derivative Litigation, Case No.

2:17-cv-02187-JHS (including each of its member cases, the “Federal Action”), pending in the United States District Court for the Eastern District of Pennsylvania;

(b) plaintiffs in the stockholder derivative litigation captioned Delaware County Employees’ Retirement Fund and the Chester County Employees’ Retirement System v.

Miller, et al., C.A.

2017-0475-JTL (the “Delaware Action”), brought in the Court of Chancery of the State of Delaware;

Eli Inzlicht-Sprei;

(d) defendants in the Federal Action;

(e) defendants in the Delaware Action;

and (f) nominal defendant in the Federal Action and Delaware Action:

Universal Health Services, Inc., by and through their respective undersigned counsel, previously filed as Exhibit 99.3 to the Company’s Current Report on Form 8-K dated October 25, 2021, is incorporated herein by reference.

Employment Agreement between Universal Health Services, Inc.

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2022 Executive Incentive Plan, previously filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K dated March 23, 2022, is incorporated herein by reference.

Universal Health Services, Inc.

Amended and Restated 2020 Omnibus Stock and Incentive Plan, previously filed as Exhibit 99.1 to the Company’s Registration Statement on Form S-8 (File No.

333-265495) dated June 9, 2022, is incorporated herein by reference.

Form of Restricted Stock Unit Award Agreement under the Universal Health Services, Inc.

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and Edward Sim dated October 18, 2022 previously filed as Exhibit 10.66 to the Company’s Annual Report on Form 10-K dated February 27, 2023, is incorporated herein by reference.

Universal Health Services, Inc.

Amended and Restated 2020 Omnibus Stock and Incentive Plan, as amended by the Amendment thereto, previously filed as Exhibit A to the Company’s Proxy Statement filed on April 4, 2024, is incorporated herein by reference.

Universal Health Services, Inc.

Amended and Restated Employee Stock Purchase Plan, previously filed as Exhibit B to the Company’s Proxy Statement filed on April 4, 2024, is incorporated herein by reference.

Tenth Amendment, dated as of September 26, 2024, to Credit Agreement, dated as of November 15, 2010 and as amended and restated as of September 21, 2012, August 7, 2014, October 23, 2018, August 21, 2021, September 10, 2021, June 23, 2022 and September 26, 2024, among the Company, JP Morgan Chase Bank, N.A., as administrative agent and other financial institutions or entities from time to time parties thereto, including the amendment and restatement thereof, effective as of September 26, 2024, attached as Exhibit A thereto and referred to herein as the Senior Secured Credit Facility, previously filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K dated October 1, 2024, is incorporated herein by reference.

Statement regarding computation of per share earnings is set forth in Note 1 of the Notes to the Consolidated Financial Statements.

Universal Health Services, Inc.

Inside Information and Trading of Company Stock Policy.

Subsidiaries of Registrant.

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Critical Audit Matters

material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments.

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

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Operating lease liabilities

Medicare accelerated payments and deferred CARES Act and other grants

Deferred grant revenue

Current federal and state income taxes

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CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

For the Years Ended December 31, 2023, 2022 and 2021

FOR THE TWELVE MONTHS ENDED DECEMBER 31, 2024

(in thousands)

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Stock option expense

Change in redemption amount of redeemable noncontrolling interest

Distributions to noncontrolling interests

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CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY—(Continued)

For the Years Ended December 31, 2023, 2022 and 2021

FOR THE TWELVE MONTHS ENDED DECEMBER 31, 2023

(in thousands)

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Stock option expense

Acquisition of noncontrolling interest in majority owned business

Distributions to noncontrolling interests

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CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY—(Continued)

For the Years Ended December 31, 2023, 2022 and 2021

FOR THE TWELVE MONTHS ENDED DECEMBER 31, 2022

(in thousands)

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Stock option expense

Acquisition of noncontrolling interest in majority owned business

Distributions to noncontrolling interests

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Other working capital accounts

Medicare accelerated payments and deferred CARES Act and other grants

Deferred grant revenue

Other assets and deferred charges

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Acquisition of businesses and property

(Outflows) inflows from foreign exchange contracts that hedge our net U.K.

Inflows (outflows) from foreign exchange contracts that hedge our net U.K.

Proceeds received from sales of assets and businesses

Costs incurred for purchase and implementation of information technology applications

Decrease (increase) in capital reserves of commercial insurance subsidiary

Decrease in capital reserves of commercial insurance subsidiary

Net cash used in investing activities

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Effect of exchange rate changes on cash and cash equivalents

Increase (decrease) in cash, cash equivalents and restricted cash

Increase in cash, cash equivalents and restricted cash

Cash, cash equivalents and restricted cash, beginning of period

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Adjustments related to the final settlement of these retrospectively determined amounts did not materially impact our results in 2024, 2023 or 2022.

If it were to occur, each 1 % adjustment to our estimated net Medicare revenues that are subject to retrospective review and settlement as of December 31, 2023, would change our after-tax net income by approximately $ 2 mil lion.

If it were to occur, each 1 % adjustment to our estimated net Medicare revenues t hat are subject to retrospective review and settlement as of December 31, 2024, would change our after-tax net income by approximately $ 2 million.

Charity Care, Uninsured Discounts and Other Adjustments to Revenue:

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Our judgments regarding the existence of impairment indicators are based on market conditions and operational performance of each asset.

We have designated October 1 st as our annual impairment assessment date and performed impairment assessments as of October 1, 2023.

There were no impairments in 2023 or 2022.

In connection with the discontinuation of a certain module of a new clinical/financial information technology application under development, our financial results for the year ended December 31, 2021 include 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 statement of income.

We have designated October 1 st as our annual impairment assessment date and performed impairment assessments as of October 1, 2024 which indicated no impairment.

There were also no intangible asset impairments during 2023 or 2022.

The following table shows the amounts recorded as net intangible assets for the years ended December 31, 2024 and 2023:

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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.

All relevant information, including our own historical experience is used in estimating the expected amount of claims.

Our estimated liability for self-insured professional and general liability claims is based on a number of factors including, among other things, the number of asserted claims and reported incidents, estimates of losses for these claims based on recent and historical settlement amounts and jury verdicts, estimates of incurred but not reported claims based on historical experience, and estimates of amounts recoverable under our commercial insurance policies.

All relevant information, including our own historical experience, applicable per occurrence and aggregate self-insured retentions, and limitations and exclusions pursuant to our commercial insurance policies, is used in estimating our expected liability for self-insured claims.

While we continuously monitor these factors, our ultimate liability for professional and general liability claims could change materially from our current estimates due to inherent uncertainties involved in making this estimate.

Our estimated self-insured reserves are reviewed and changed, if necessary, at each reporting date and changes are recognized currently as additional expense or as a reduction of expense.

Given our significant exposure to professional and general liability claims, there can be no assurance that a sharp increase in the number and/or severity of claims asserted against us, and/or reductions in the amount of commercial coverage available to us, will not have a material adverse effect on our future results of operations.

In addition, we also:

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(ii) maintain self-insured employee benefits programs for employee healthcare and dental claims.

The ultimate costs related to these programs/operations include expenses for claims incurred and paid in addition to an accrual for the estimated expenses incurred in connection with claims incurred but not yet reported.See Note 8 - Commitments and Contingencies for additional disclosure related to our self-insured general and professional liability and workers’ compensation liability.

See Note 8 - Commitments and Contingencies for additional disclosure related to our self-insured general and professional liability and workers’ compensation liability.

Income Taxes:

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We believe that future income will enable us to realize our deferred tax assets net of recorded valuation allowances relating to state and foreign net operating loss carry-forwards, tax credits, and interest deduction limitations.

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 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.

We operate in multiple jurisdictions with varying tax laws.

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(i) approximately 7 % in an acute care facility located in Texas;

(ii) 49 %, 20 %, 30 %, 20 %, 25 %, 48 % and 26 % in seven behavioral health care facilities located in Arizona, Pennsylvania, Ohio, Washington, Missouri, Iowa and Michigan, respectively, and;

(iii) approximately 5 % in an acute care facility located in Nevada.

The noncontrolling interest

and redeemable noncontrolling interest balances of $ 48 million and $ 5 million, respectively, as of December 31, 2023, consist primarily of the third-party ownership interests in these hospitals.

(ii) 49 %, 20 %, 30 %,

20 %, 25 %, and 48 % in six behavioral health care facilities located in Arizona, Pennsylvania, Ohio, Washington, Missouri, and Iowa, respectively, (iii) 26 % and 49 % in two behavioral health care facilities located in Michigan (one currently under construction with an expected opening in the second quarter of 2025) and;

(iv) approximately 5 % in an acute care facility and 49 % in a surgery center, located in Nevada.

The noncontrolling interest and redeemable noncontrolling interest balances of $ 83 million and $ 13 million, respectively, as of December 31, 2024, consist primarily of the third-party ownership interests in these hospitals.

In August, 2022, we purchased the 20 % noncontrolling ownership interest in a hospital majority owned by us, located in Washington D.C.

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See Note 11 - Pension Plan for additional disclosure regarding the defined benefit pension plan.

The amounts recognized in AOCI for the two years ended December 31, 2023 were as follows (in thousands):

The amounts recognized in AOCI for the three years ended December 31, 2024 were as follows (in thousands):

Net Unrealized

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Change, net of income tax

Balance, January 1, 2024, net of income tax

2024 activity:

Pretax amount

Income tax effect

Change, net of income tax

Balance, December 31, 2024, net of income tax

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The “Net effect of dilutive stock options and grants based on the treasury stock method”, for all years presented above, excludes certain outstanding stock options applicable to each year since the effect would have been anti-dilutive.

The excluded weighted-average stock options totaled approximately 5.1 million during 2023, 6.0 million during 2022 and 4.2 million during 2021.

The excluded weighted-average stock options totaled approximately 600,000 during 2024, 5.1 million during 2023 and 6.0 million during 2022.

Fair Value of Financial Instruments:

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Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.

Any excess of the purchase price (consideration transferred) over the estimated fair values of net assets acquired is recorded as goodwill.

excess of the purchase price (consideration transferred) over the estimated fair values of net assets acquired is recorded as goodwill.

Transaction costs and costs to restructure the acquired company are expensed as incurred.

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(“Premier"), a healthcare performance improvement alliance, and acquired a minority interest in the GPO for a nominal amount.

deferred income, on a pro rata basis, as a reduction to our supplies expense over the initial expected life of the GPO agreement.

During the fourth quarter of 2013, in connection with the completion of an initial public offering of the stock of Premier, we received cash proceeds for the sale of a portion of our ownership interest in the GPO, which were recorded as deferred income, on a pro rata basis, as a reduction to our supplies expense over the initial expected life of the GPO agreement.

Also in connection with this GPO agreement, we received shares of restricted stock in Premier which vest ratably over a seven-year period ( 2014 through 2020 ), contingent upon our continued participation and minority ownership interest in the GPO.

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The change in market value of these shares is record ed as an unrealized gain/loss and included in “Other (income) expense, net” on our consolidated statements of income.

Additionally, Premier paid cash dividends of $ 1.9 million during 2023, $ 1.8 million during 2022 and $ 1.7 million during 2021, which are included in “Other (income) expense, net” in our consolidated statements of income.

Additionally, Premier paid cash dividends of $ 1.9 million during both 2024 and 2023 and $ 1.8 million during 2022, which are included in “Other (income) expense, net” in our consolidated statements of income.

Provider Taxes:

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We derive a related Medicaid reimbursement benefit from assessed Provider Taxes in the form of Medicaid claims based payment increases and/or lump sum Medicaid supplemental payments.

Under these programs, including the impact of the Texas Uncompensated Care and Upper Payment Limit program, the Texas Delivery System Reform Incentive program, and various other state programs, we earned revenues (before Provider Taxes) of approximately $ 853 million during 2023, $ 784 million during 2022 and $ 641 million during 2021.

Under these programs, including the impact of the Texas Uncompensated Care and Upper Payment Limit program, the Texas Delivery System Reform Incentive program, and various other state programs, we earned revenues (before Provider Taxes) of approximately $ 1.499 billion during 2024, $ 853 million during 2023 and $ 784 million during 2022.

These revenues were offset by Provider Taxes of approximately $ 536 million during 2024, $ 297 million during 2023 and $ 287 million during 2022, which are recorded in other operating expenses on the consolidated statements of income as included herein.

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In addition, under various disproportionate share hospital payment programs and state plan amendment programs, we earned revenues of $ 53 million in 2024, $ 73 million in 2023 and $ 75 million in 2022.

CARES Act and Other Governmental Grants and Medicare Accelerated Payments:

During 2021, we received approximately $ 189 million of additional funds from the federal government in connection with the CARES Act, which we returned during the year utilizing a portion of our cash and cash equivalents held on deposit.

Therefore, there was no impact on our earnings during 2021 in connection with receipt of those funds.

Also during 2021, we made an early repayment of $ 695 million of funds received during 2020 pursuant to the Medicare Accelerated and Advance Payment Program (“MAAPP”).

These funds, which were required to be repaid to the government beginning in the second quarter of 2021 through the third quarter of 2022, were returned to the government utilizing a portion of our cash and cash equivalents held on deposit.

Recent Accounting Standards:

In November 2023, the FASB issued ASU 2023-07, “Improvements to Reportable Segment Disclosures (Topic 280)”.

During 2024, we adopted ASU 2023-07, “Improvements to Reportable Segment Disclosures (Topic 280)”.

ASU 2023-07 modifies reportable segment disclosure requirements, primarily through enhanced disclosures about segment expenses categorized as significant or regularly provided to the Chief Operating Decision Maker (CODM).

In addition, the amendments enhance interim disclosure requirements, clarify circumstances in which an entity can disclose multiple segment measures of profit or loss, and contain other disclosure requirements.

The purpose of the amendments is to enable investors to better understand an entity’s overall performance and assess potential future cash flows.

This ASU is effective for annual periods beginning after December 15, 2023, and interim periods within annual periods beginning after December 15, 2024, with early adoption permitted.

We are currently evaluating the impact this new standard will have on the related disclosures in the consolidated financial statements, but do not believe there will be a material impact.

The standard was applied retrospectively to all periods presented in the financial statements.

See Note 12 - Segment Reporting for the required disclosures.

In November 2024, the FASB issued ASU 2024-03, “Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures (subtopic 220-40)".

ASU 2024-03 requires disclosures, in the notes to financial statements, of specified information about certain costs and expenses.

This ASU is effective for fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027.

We are currently evaluating the impact this new standard will have on the related disclosures in the consolidated financial statements.

In December 2023, the FASB issued ASU 2023-09, “Improvements to Income Tax Disclosures (Topic 740)”.

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From time to time, new accounting guidance is issued by the FASB or other standard setting bodies that is adopted by us as of the effective date or, in some cases where early adoption is permitted, in advance of the effective date.

We have assessed the recently issued guidance that are not yet effective and, unless otherwise indicated above, we believe the new guidance will not have a material impact on our results of operations, cash flows or financial position.

We have assessed the recently

issued guidance that are not yet effective and, unless otherwise indicated above, we believe the new guidance will not have a material impact on our results of operations, cash flows or financial position.

Foreign Currency Translation:

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(i) the rates of exchange at the balance sheet date, and;

(ii) average rates of exchange prevailing during the year

for revenues and expenses.

(ii) average rates of exchange prevailing during the year for revenues and expenses.

The currency translation adjustments are reported as a component of accumulated other comprehensive income.

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2) ACQUISITIONS AND DIVESTITURES

Years ended December 31, 2024:

2024 Acquisitions of Assets and Businesses:

During 2024, we spent $ 19 million on the acquisition of businesses and properties.

2024 Divestiture of Assets and Businesses:

During 2024, we received $ 39 million from the sale of assets and businesses.

Year ended December 31, 2023:

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During 2022, we received $ 12 million from the sales of various assets

Year ended December 31, 2021:

2021 Acquisitions of Assets and Businesses:

During 2021, we spent $ 105 million on the acquisition of businesses and property, consisting primarily of a micro acute care hospital located in Las Vegas, Nevada, and a physician practice management company located in California.

2021 Divestiture of Assets and Businesses:

During 2021, we received $ 25 million from the sale of assets and businesses.

3) FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENT

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The effective portion of the unrealized gains or losses on these contracts is recorded in foreign currency translation adjustment within accumulated other comprehensive income and remains there until either the sale or liquidation of the subsidiary.

In connection with these forward exchange contracts, we recorded net cash outflows of approximately $ 41 million during 2023, and net cash inflows of approximately $ 95 million during 2022 and $ 1 million during 2021.

In connection with these forward exchange contracts, we recorded net cash inflows of approximately $ 13 million during 2024, net cash outflows of approximately $ 41 million during 2023 and net cash inflows of approximately $ 95 million during 2022.

Derivatives Hedging Relationships:

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Other noncurrent assets

Foreign currency foreign exchange contracts

Accrued liabilities other

Foreign currency forward exchange contracts

Other current assets

Deferred compensation liability

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Other noncurrent assets

Foreign currency foreign exchange contracts

Other current assets

Foreign currency forward exchange contracts

Accrued liabilities other

Deferred compensation liability

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The fair value of our money market mutual funds, certificates of deposit and equity securities with a readily determinable fair value are computed based upon quoted market prices in an active market.

The fair value of deferred compensation assets and the offsetting liability are computed based on market prices in an active market held in a rabbi trust.

The fair value of deferred compensation assets and the

offsetting liability are computed based on market prices in an active market held in a rabbi trust.

The fair value of our foreign currency exchange contracts is valued using quoted forward exchange rates and spot rates at the reporting date.

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2.65 % Senior Secured Notes due 2032 , net of unamortized discount of $ 864 in 2024 and $ 994 in 2023

4.625 % Senior Secured Notes due 2029 , net of unamortized discount of $ 204 in 2024

5.050 % Senior Secured Notes due 2034 , net of unamortized discount of $ 1,533 in 2024

Total debt before unamortized financing costs

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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 $ 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.

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.

The revolving credit facility includes a $ 125 million sub-limit for letters of credit.

The revolvi ng credit facility includes a $ 125 million sub-limit for letters of credit.

The Credit Agreement is secured by certain assets of the Company and our material subsidiaries (which generally excludes asset classes such as substantially all of the patient-related accounts receivable of our acute care hospitals, if sold to a receivables facility pursuant to the Credit Agreement, and certain real estate assets and assets held in joint-ventures with third parties) and is guaranteed by our material subsidiaries.

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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).

The Company’s obligations with

respect to All the Notes, the obligations of the Subsidiary Guarantors under the Guarantees, and the performance of all of the Company’s and the Subsidiary Guarantors’ other obligations under the Indentures, are secured equally and ratably with the Company’s and the Subsidiary Guarantors’ obligations under the Credit Agreement.

However, the liens on the collateral securing All the Notes and the Guarantees will be released if:

(i) All the Notes have investment grade ratings;

(ii) no default has occurred and is continuing, and;

(iii) the liens on the collateral securing all first lien obligations (including the Credit Agreement and 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.

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Our lease payments payable to the Trust are recorded to interest expense and as a reduction of the outstanding financial liability, and the amount allocated to interest expense is determined based upon our incremental borrowing rate and the outstanding financial liability.

In connection with this

transaction, our consolidated balance sheets at December 31, 2023 and December 31, 2022 reflect financial liabilities, which are included in debt, of approximately $ 77 million and $ 81 million, respectively.

At December 31, 2023, the carrying value and fair value of our debt were approximately $ 4.9 billion and $ 4.6 billion, respectively.

In connection with this transaction, our consolidated balance sheets at December 31, 2024 and December 31, 2023 reflect financial liabilities, which are included in debt, of approximately $ 74 million and $ 77 million, respectively.

At December 31, 2024, the carrying value a nd fair value of our debt were approximately $ 4.5 billion and $ 4.2 billion, respectively.

At December 31, 2023, the carrying value and fair value of our debt were approximately $ 4.9 billion and $ 4.6 billion, respectively.

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Stock Repurchase Programs

As of January 1, 2023, we had an aggregate available purchase authorization of $ 947.37 million.

As of January 1, 2024, we had an aggregate available repurchase authorization of $ 422.88 million under our stock repurchase program.

In July, 2024, our Board of Directors authorized a $ 1.0 billion increase in our stock repurchase program.

As of December 31, 2024, we had an aggregate available repurchase authorization of $ 824.36 million.

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During 2024, 2,982,906 shares ($ 598.5 million in the aggregate) were repurchased pursuant to the terms of the stock repurchase program and 375,248 shares ($ 72.2 million in the aggregate) were repurchased in connection with the income tax withholding obligations resulting from stock-based compensation programs.

During 2023, 3,855,046 shares ($ 524.5 million in the aggregate) were repurchased pursuant to the terms of the stock repurchase program and 164,649 shares ($ 22.9 million in the aggregate) were repurchased in connection with the income tax withholding obligations resulting from stock-based compensation

During 2022, 6,666,547 shares ($ 810.9 million in the aggregate) were repurchased pursuant to the terms of the stock repurchase program and 153,305 shares ($ 22.0 million in the aggregate) were repurchased in connection with the income tax withholding obligations resulting from stock-based compensation programs.

During 2021, 8,409,721 shares ($ 1.20 billion in the aggregate) were repurchased pursuant to the terms of the stock repurchase program and 134,464 shares ($ 19.5 million in the aggregate) were repurchased in connection with the income tax withholding obligations resulting from stock-based compensation programs.

purchased (a.)

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In connection with our January 1, 2017 adoption of ASU 2016-09, “Compensation-Stock Compensation (Topic 718):

Improvements to Employee Share-Based Payment Accounting”, our provision for income taxes and our net income attributable to UHS we re unfavorably imp acted by $ 4.7 million during 2023, unfavorably impacted by $ 636,000 during 2022 and favorably impacted by $ 2.4 million in 2021.

Improvements to Employee Share-Based Payment Accounting”, our provision for income taxes and our net income attributable to UHS we re favorably impacted by $ 15.9 million during 2024 (net of a $ 10.2 million unfavorable impact resulting from executive compensation limitations pursuant to IRC section 162(m)), unfavorably imp acted by $ 4.7 million during 2023, and unfavorably impacted by $ 636,000 during 2022.

In 2005, we adopted the 2005 Stock Incentive Plan (the “Stock Incentive Plan”) which was amended in 2008, 2010, 2015 and 2017 and was canceled in 2020, as discussed below.

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Stock options to purchase Class B Common Stock have been granted to our officers, key employees and members of our Board of Directors.

Commencing in 2018, our key employees and non-executive officers began receiving a portion of their stock-based compensation in the form of restricted stock (as discussed below) in addition to receiving options to purchase Class B Common Stock.

In 2020, we adopted the 2020 Omnibus Stock and Incentive Plan (the “2020 Stock Incentive Plan”) which was amended in 2022.

Commencing in 2018, our key employees and non-executive officers began receiving a portion of their stock-based compensation in the form of restricted stock or restricted stock units (as discussed below) in addition to receiving options to purchase Class B Common Stock.

Commencing in 2024 our key employees and non-executive officers began receiving their stock-based compensation in the form of restricted stock units only.

In 2020, we adopted the 2020 Omnibus Stock and Incentive Plan (the “2020 Stock Incentive Plan”) which was amended in 2022 and 2024.

An aggregate of 18.1 million shares of Class B Common Stock has been reserved for issuance under the 2020 Stock Incentive Plan.

As of December 31, 2024, approximately 8.62 million shares of Class B Common Stock remain available for issuance pursuant to the 2020 Stock Incentive Plan.

Under the 2020 Stock Incentive Plan, shares that are subject to stock options shall be counted as one share per stock option, and every share that is subject to restricted stock awards or restricted stock units shall be counted as four shares.

Various other types of equity awards are also permitted under the 2020 Stock Incentive Plan.

During 2023, approximately 1.8 million stock options, net of cancellations, and 271,093 restricted stock units (including 93,606 performance based restricted stock units, net of cancellations) were granted under the 2020 Stock Incentive Plan.

During 2022, approximately 1.5 million stock options, net of cancellations, and 215,244 restricted stock units (including 65,768 performance based restricted stock units, net of cancellations) were granted under the 2020 Stock Incentive Plan.

During 2021, approximately 2.0 million stock options, net of cancellations, and 119,004 of restricted stock units, net of cancellations, were granted under the 2020 Stock Incentive Plan.

Restricted stock and restricted stock units issued under the 2020 Stock Incentive Plan do not have right s to receive dividends on unvested restricted awards, however, the accrual of dividend equivalents on unvested restricted awards may be permitted.

During each of the last three years, the following were granted pursuant to the 2020 Stock Incentive Plan (net of cancellations):

3,000 stock options and 514,765 restricted stock units (including 63,362 performance based restricted stock units).

1.6 million stock options and 255,085 restricted stock units (including 93,606 performance based restricted stock units).

1.5 million stock options and 207,253 restricted stock units (including 65,768 performance based restricted stock units, net of cancellations).

Prior to 2024, our annual stock-based compensation awards were generally issued as a blend restricted stock units and stock options.

Commencing in 2024, our annual stock-based compensation awards were issued fully in restricted stock units and are expected to remain so in future years.

Restricted stock and restricted stock units issued under the 2020 Stock Incentive Plan do not have rights to receive dividends on unvested restricted awards, however, the accrual of dividend equivalents on unvested restricted awards may be permitted.

Upon adoption of the 2020 Stock Incentive Plan, no additional awards were granted under the 2005 Stock Incentive Plan or the 2010 Employees’ Restricted Stock Purchase Plan (discussed below), and reserves for future issuance pursuant to each plan were canceled.

The per option weighted-average grant-date fair value of options granted during 2023 under the 2020 Stock Incentive Plan was $ 41.88 .

The per option weighted-average grant-date fair value of options granted during 2022 under the 2020 Stock Incentive Plan was $ 45.63 .

The per option weighted-average grant-date fair value of options granted during 2021 under the 2020 Stock Incentive Plan was $ 39.66 .

The weighted average grant-date fair values of the restricted stock units issued under the 2020 Stock Incentive Plan during each of the last three years, as reflected above, were $ 181.05 during 2024, $ 118.14 during 2023 and $ 142.70 during 2022.

The fair value of each restricted stock unit was determined as the closing UHS market price o n the date of grant.

Restricted shares and/or units of Class B Common Stock have been granted to our officers, key employees and members of our Board of Directors.

The per option weighted-average grant-date fair values for options granted under the 2020 Stock Incentive Plan were $ 44.58 during 2024, $ 41.88 during 2023 and $ 45.63 during 2022.

All stock options issued in 2024, 2023 and 2022 were granted with an exercise price equal to the fair market value on the date of the grant.

Stock options granted during 2021 were either granted with an exercise price equal to the fair market value on the date of grant, or for our named executive officers, half of their total option award value was issued with a premium exercise price of 10 % above the grant date fair market value.

The majority of options are exercisable ratably over a four-year period beginning one year after the date of the grant.

All outstanding options expire five years after the date of the grant.

As of December 31, 2023, approximately 4.31 million shares of Class B Common Stock remain available for issuance pursuant to the 2020 Stock Incentive Plan.

The fair value of each option grant was estimated on the date of grant using the Black-Scholes option-pricing model.

The following weighted avera ge assumptions were derived from averaging the number of options granted during the most recent five-year period.

The weighted-average assumptions reflected below were based upon thirty option grants for the five-year period ending

December 31, 2023, twenty-nine option grants for the five-year period ending December 31, 2022 and twenty-eight option grants for the five-year period ending December 31, 2021.

The following weighted average assumptions were derived from averaging the number of options granted during the most recent five-year period .

The weighted-average assumptions reflected below were based upon twenty-two option grants for the five-year period ending December 31, 2024, thirty option grants for the five-year period ending December 31, 2023 and twenty-nine option grants for the five-year period ending December 31, 2022.

Year Ended December 31,

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Exercise Price

As mentioned above, in 2020, we adopted the 2020 Stock Incentive Plan.

During 2023, 2022 and 2021 restricted stock units, net of cancellations, of approximately 271,093 (including 93,606 performance based restricted stock units), 215,244 (including 65,768 performance based restricted stock units, net of cancellations) and 119,004 , respectively, were granted under the 2020 Stock Incentive Plan with four-year vesting periods from the date of grant.

The weighted average grant-date fair value of the restricted stock units issued during 2023, 2022 and 2021 under the 2020 Stock Incentive Plan was $ 118.14 , $ 142.70 and $ 138.80 , respectively.

The fair value of each rest ricted stock unit was determined as the closing UHS market price on the date of grant.

Restricted shares and/or units of Class B Common Stock have been granted to our officers, key employees and members of our Board of Directors.

In addition to the 2020 Stock Inc entive Plan, we have our 2005 Employee Stock Purchase Plan (the “Employee Stock Plan”) which allows eligible employees to purchase shares of Class B Common Stock at a ten percent discount.

In addition to the 2020 Stock Inc entive Plan, we have our 2005 Employee Stock Purchase Plan (the “Employee Stock Plan”), as amended during 2024, which allows eligible employees to purchase shares of Class B Common Stock at a 10% discount.

There were 81,146 , 100,507 and 127,538 shares issued pursuant to the Employee Stock Purchase Plan during 2024, 2023 and 2022, respectively.

In connection with the Employee Stock Plan, we have reserved 3.0 million shares of Class B Common Stock for issuance and have issued approximately 1.9 million shares as of December 31, 2024.

As of December 31, 2023, approximately 200,000 shares of Class B Common Stock remain available for issuance pursuant to this plan.

As of December 31, 2024, approximately 1.1 million shares of Class B Common Stock remain available for issuance pursuant to this plan.

At December 31, 2024, 24,386,891 shares of Class B Common Stock were reserved for issuance upon conversion of shares of Class A, C and D Common Stock outstanding, for issuance upon exercise of options to purchase Class B Common Stock and for issuance of stock under other incentive plans.

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Year Ended December 31,

Our provision for income taxes for the years ended December 31, 2023, 2022 and 2021 included tax expenses of $ 5 million, tax expenses of $ 1 million and tax benefits of $ 2 million, respectively, related to employee share-based payments.

Our provision for income taxes for the years ended December 31, 2024, 2023 and 2022 included tax benefits of $ 13 million and tax expenses of $ 5 million and $ 1 million, respectively, related to employee share-based payments.

Excess tax benefits (when the deductible amount related to the settlement of employee equity awards for tax purposes exceeds the cumulative compensation cost recognized for financial reporting purposes) and deficiencies, if applicable, are recorded as a component of our tax provision.

The foreign provision for income taxes is based on foreign pre-tax earnings of $ 80 million in 2023, $ 76 million in 2022 and $ 79 million in 2021.

The foreign provision for income taxes is based on foreign pre-tax earnings of $ 80 million during each of 2024 and 2023 and $ 76 million i n 2022.

In the future, we anticipate repatriating only previously taxed foreign earnings subjected as well as any future earnings that would qualify for a full dividend received deduction for distributions post-December 31, 2017.

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As such, we have not recognized a deferred tax liability related to existing undistributed earnings.

On August 16, 2022, the U.S.

federal government enacted the Inflation Reduction Act of 2022 (“the Act”).

The Act includes tax provisions, among other things, which implements (i) a 15 percent minimum tax on book income of certain large corporations;

one percent excise tax on net stock repurchases;

and (iii) several tax incentives to promote clean energy.

The Act does not have a material impact on our income tax provision.

A reconciliation between the federal statutory rate and the effective tax rate is as follows:

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Our effective tax rates were 22.4 %, 23.5 % and 24.2 % for the years ended December 31, 2024, 2023 and 2022, respectively.

The decrease in our effective tax rate for the year ended December 31, 2024, as compared to 2023, is due primarily to a $ 16 million decrease in the provision for income taxes during 2024, as compared to 2023, from the net tax benefit recorded pursuant to ASU 2016-09, net of the impact of executive compensation limitations pursuant to IRC section 162(m).

The decrease in our effective tax rate for the year ended December 31, 2023, as compared to 2022, is due primarily to the increase in net income attributable to noncontrolling interests during 2023, as compared to 2022.

The increase in our effective tax rate for the year ended December 31, 2022, as compared to 2021, is due to the decrease in net income attributable to noncontrolling interests during 2022, as compared to 2021.

Included in “Other current assets” on our consolidated balance sheets are prepaid federal, state and foreign income taxes amounting to approximately $ 37 million and $ 17 million as of December 31, 2023 and 2022, respectively.

Included in “Other current assets” on our consolidated balance sheets are prepaid federal, state and foreign income taxes amounting to appro ximately $ 3 million and $ 37 million as of December 31, 2024 and 2023, respectively.

The components of deferred taxes are as follows (amounts in thousands):

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Therefore, valuation allowances of approximately $ 78 million and $ 68 million have been reflected as of December 31, 2024 and 2023, respectively.

During 2023, the valuation allowance on these state tax benefits increased by $ 9 mil lion primarily due to additional net operating losses incurred.

During 2024, the valuation allowance on these state tax benefits increased by $ 10 million primarily due to additional net operating losses incurred.

In addition, valuation allowances of approximately $ 4 million have been reflected as of December 31, 2024 and 2023, related to foreign net operating losses and credit carryforwards.

During 2024 and 2023, the estimated liabilities for uncertain tax positions (including accrued interest and penalties) were increased less than $ 1 million due to tax positions taken in the current and prior years.

The balance at each of the years ended

December 31, 2023 and 2022, if subsequently recognized, that would favorably affect the effective tax rate and the provision for income taxes is approximately $ 2 million as of each date.

The balance at each of the years ended December 31, 2024 and 2023, if subsequently recognized, that would favorably affect the effective tax rate and the provision for income taxes is approximately $ 2 million as of each date.

We recognize accrued interest and penalties associated with uncertain tax positions as part of the tax provision.

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less imputed interest

We assumed approximately $ 1 million in finance lease obligations during each of 2023 and 2022 and $ 29 million during 2021.

We assumed approximately $ 24 million in finance lease obligations during 2024 and $ 1 million during each of 2023 and 2022.

In the ordinary course of business, our facilities routinely lease equipment pursuant to new lease arrangements that will likely result in future lease and rental expense in excess of amounts indicated above.

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(i) $ 20 million for professional liability and $ 3 million for general liability per occurrence in 2024, 2023, 2022 and 2021;

(ii) $ 10 million and $ 3 million per occurrence in 2020;

(ii) $ 10 million and $ 3 million per occurrence, respectively, in 2020;

(iii) $ 5 million and $ 3 million per occurrence, respectively, during 2019, 2018 and 2017, and;

(iv) $ 10 million and $ 3 million per occurrence, respectively, prior to 2017.

These subsidiaries are provided with several excess policies through commercial insurance carriers which provide for coverage in excess of the applicable per occurrence and aggregate self-insured retention or underlying policy limits up to approximately

For each of the years indicated above, for claims involving multiple plaintiffs, a single self-insured retention may apply, as stipulated in and subject to the terms and conditions of the applicable commercial policies, for claims qualifying as group related integrated occurrences and/or medical incidents.

$ 165 million in 2023;

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that provides for £ 20 million of professional liability coverage and £ 25 million of general liability coverage.

As of December 31, 2023, the total net accrual for our professional and general liability claims was $ 431 million, of which $ 70 million was included in current liabilities.

As of December 31, 2022, the total net accrual for our professional and general liability claims was $ 372 million, of which $ 74 million was included in current liabilities.

As a result of unfavorable trends experienced during the last three years, 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, $ 16 million during 2022 and $ 52 million during 2021.

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

The commercial insurance limits indicated above for each policy year may have been reduced due to payment of covered claims or suits, subject to the policy terms and conditions.

As of December 31, 2024, the total net accrual for our self-insured professional and general liability claims wa s $ 487 million, of which $ 85 million was included in current liabilities.

As of December 31, 2023, the total net accrual for our self-insured professional and general liability claims was $ 431 million, of which $ 70 million was included in current liabilities.

As a result of unfavorable trends experienced during the last three years, our results of operations included pre-tax increases to our reserves for self-insured professional and general liability claims amounting to approximatel y $ 79 million d uring 2024, $ 25 million during 2023 and $ 16 million during 2022.

All professional and general liability insurance we purchase is subject to policy limitations.

Our estimated liability for self-insured professional and general liability claims is based on a number of factors including, among other things, the number of asserted claims and reported incidents, estimates of losses for these claims based on recent and historical settlement amounts and jury verdicts, estimates of incurred but not reported claims based on historical experience, and estimates of amounts recoverable under our commercial insurance policies.

Given our significant self-insured exposure for professional and general liability claims, there can be no assurance that a sharp increase in the number and/or severity of claims asserted against us will not have a material adverse effect on our future results of operations.

In addition, our commercial insurance coverage for the period commencing in March, 2025, contains less favorable terms than previous years including coverage exclusions for incidents involving sexual molestation or abuse, higher premiums and potentially lower aggregate limitations.

As of December 31, 2024, the total accrual for our workers’ compensation liability claims was $ 137 million, $ 58 million of which was included in current liabilities.

As of December 31, 2023, the total accrual for our workers’ compensation liability claims was $ 130 million, $ 55 million of which was included in current liabilities.

As a result of favorable trends experienced during the year, included in our results of operations during 2023 was a pre-tax decrease to our reserves for self-insured workers' compensation liability claims of approximately $ 10 million.

As a result of favorable trends experienced during 2023, included in our results of operations during 2023 was a pre-tax decrease to our reserves for self-insured workers' compensation liability claims of approximately $ 10 million.

Although we are unable to predict whether or not our future financial statements will require updates to estimates for our prior year reserves for self-insured general and professional and workers’ compensation claims, given the relatively unpredictable nature of these potential liabilities and the factors impacting these reserves, as discussed above, it is reasonably likely that our future financial results may include material adjustments to prior period reserves.

As disclosed below in Legal Proceedings:

• On March 28, 2024, a jury returned a verdict for compensatory damages of $ 60 million and punitive damages of $ 475 million and a related judgment was entered against The Pavilion Behavioral Health System (the “Pavilion”), an indirect subsidiary of the Company.

In an order dated October 10, 2024, the trial court ordered a remittitur of punitive damages from $ 475 million to $ 120 million.

The court denied the Pavilion’s request for reduction of compensatory damages.

The Pavilion has filed an appeal of the remaining judgment and the Plaintiff has filed a cross appeal of the remittitur of punitive damages.

Plaintiff has filed and served a Citation to Discover Assets ("Citation") on the Pavilion as well as Universal Health Services, Inc., and UHS of Delaware, Inc.

("UHS Entities") for the purported purpose of executing on the judgment during the pendency of the appeal.

We are currently contesting the Citation as to the UHS Entities who were not parties to the litigation as well as the breadth and scope of the Citation issued to the Pavilion.

• Cumberland Hospital for Children and Adolescents (“Cumberland”), an indirect subsidiary of the Company, is a defendant in multi-plaintiff lawsuits filed in the Circuit Court for Richmond, Virginia (the “Cumberland Litigation”), relating to allegations of inappropriate sexual contact during medical examinations by Dr.

Daniel Davidow, an independent contractor and the former medical director for Cumberland.

The Company and UHS of Delaware, Inc., our administrative services subsidiary (“UHS Delaware”), were also named as co-defendants in the Cumberland Litigation.

Plaintiffs have asserted claims of negligence, assault and battery (against Dr.

Davidow), false imprisonment, violations of the Virginia Consumer Protection Act (“VCPA”), and vicarious liability for Dr.

Davidow’s conduct against Cumberland, the Company, and UHS Delaware.

The Company and UHS Delaware were dismissed from the action during the trial, which occurred in September, 2024.

On September 27, 2024, a jury entered a verdict finding Dr.

Davidow and Cumberland liable and awarded these three plaintiffs combined compensatory damages of $ 60 million for all liability theories, an additional combined $ 180 million in trebled

damages for violation of the VCPA, and an additional combined $ 120 million in punitive damages.

Cumberland is evaluating all legal options and intends to challenge this verdict, including the amounts awarded in the verdict, in post-trial proceedings and on appeal.

Based upon Virginia law, we expect that the punitive damage amount should be reduced to a combined maximum of $ 1.05 million as a matter of law.

There are approximately 40 additional plaintiffs making similar allegations with claims pending in the Cumberland Litigation.

We expect that the trials for the remaining plaintiffs, as well as any additional plaintiffs, will be scheduled at various times over the next several years and will continue to be tried in small groups.

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.

Below is a schedule showing the changes in our general and professional liability and workers’ compensation reserves during the three years ended December 31, 2024 (amount in thousands):

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Property Insurance

We have commercial property insurance policies for our properties providing property and business interruption coverage for losses in excess of $ 25 million per occurrence or per location (as applicable based upon the event) up to a $ 1 billion annual policy limitation for certain catastrophic events or perils.

We have commercial property insurance policies for our properties, covering the period of June 1, 2024 to June 1, 2025, providing property and business interruption coverage for losses in excess of $ 15 million per occurrence or per location (as applicable based upon the event) up to a $ 1 billion annual policy limitation for certain catastrophic events or perils.

These commercial policies provide for coverage of up to $250 million of annual aggregate coverage for losses resulting from windstorm damage.

Losses resulting from named windstor ms are subject to deductibles between 3 % and 5 % of the total insurable value of the property.

Losses resulting from named windstorms are subject to deductibles between 3 % and 5 % of the total insurable value of the property.

In addition, we have commercial property insurance policies covering catastrophic losses resulting from earthquake and flood damage, each subject to aggregated loss limits (as opposed to per occurrence losses).

Commercially insured earthquake coverage for our facilities is subject to various deductibles and limitations including:

(i) $ 100 million limitation for our facilities located in California, New Madrid Seismic Zone, Pacific Northwest Seismic Zone, Alaska and various counties in Nevada;

(i) $ 100 million limitation for our facilities located in California, New Madrid Seismic Zone, Pacific Northwest Seismic Zone, Alaska and certain counties in Nevada;

(ii) $ 100 million limitation for our facilities located in fault zones within the United States;

(iii) $ 40 million limitation for our facilities located in Puerto Rico, and;

(iv) $ 250 million limitation for many of our facilities

located in other states.

(iv) $ 250 million limitation for many of our facilities located in other states.

Our commercially insured flood coverage has a limit of $ 100 million annually.

There is also a $ 10 million sublimit for one of our facilities located in Houston, Texas, and a $ 1 million sublimit for our facilities located in Puerto Rico.

In addition, subject to the underlying policies' deductible provisions, our facilities located in California, New Madrid Seismic Zone, Pacific Northwest Seismic Zone, Alaska and certain counties in Nevada, have $50 million of excess commercial property insurance coverage for earthquake losses in excess of $ 100 million.

Property insurance for our behavioral health facilities located in the U.K.

are provided on an all risk basis up to a £ 1.5 billion policy limit, with coverage caps per location, that includes coverage for real and personal property as well as business interruption losses.

These commercial policies are subject t o a deductible of:

These commercial policies are subject to a deductible of:

(i) $ 5 million per location for damage resulting from earthquake, wind, hail and flood, and;

(ii) $ 5 million per occurrence for all other events.

For per location or per occurrence losses in excess of the applicable deductible, we are self-insured, through our wholly-owned captive, for up to $ 20 million of annual aggregate losses.

For per location or per occurrence losses in excess of the applicable deductible, we are self-insured, through our wholly-owned captive insurance company, for up to $ 10 million of annual

aggregate losses.

Should the $ 10 million self-insured annual aggregate limitation be exhausted during the policy year, we have commercial insurance coverage for the next $ 30 million of annual aggregate losses in excess of the applicable deductible.

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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”).

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 $ 210 million of which was incurred as of December 31, 2023, which will be entirely funded by the District.

Construction of the District Facilities is expected to be completed during 2025.

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, w hich will be entirely funded by the District.

Construction of the District Facilities is expected to be completed in the Spring of 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.

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The lease agreement also entitles the District to participation rent should certain specified earnings before interest, taxes, depreciation and amortization thresholds be achieved by the acute care hospital.

Additionally, we have committed to expend no less than $ 75 million (approximately $ 5 million of which has been incurred as of December 31, 2023), over a projected 12-year period, in healthcare infrastructure including expenditures related to the District Facilities as well as other healthcare related expenditures in certain specified areas of Washington, D.C.

Additionally, we have committed to expend no less than $ 75 million (approximately $ 14 million of which has been incurred as of December 31, 2024), over a projected 12-year period, in healthcare infrastructure including expenditures related to the District Facilities as well as other healthcare related expenditures in certain sp ecified areas of Washington, D.C.

Pursuant to the agreements, the District is entitled to certain termination fees and other amounts as specified in the agreements in the event we, within certain specified periods of time, cease to operate the acute care hospital or there is a transfer of control of us or our subsidiary operating the hospital.

Information Technology Incident

In connection with an information technology security incident in late September, 2020, our results of operations for the years ended December 31, 2022 and 2021 were favorably impacted by an aggregate of approximately $ 13 million and $ 45 million, respectively, resulting from receipt of commercial cyber insurance proceeds (approximate ly $ 41 million in the aggregate during 2022 and 2021), and;

(ii) collection of revenues previously reserved during 2020 (approximately $ 17 million during 2021).

In connection with an information technology security incident in late September, 2020, our results of operations for the year ended December 31, 2022 were favorably impacted by approximately $ 13 million resulting from receipt of commercial cyber insurance proceeds.

Other Contractual Commitments:

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(i) other combined estimated future purchase obligations of $ 436 million related to a long-term contract with third-parties consisting primarily of certain revenue cycle data processing services for our acute care facilities ($ 52 million), expected future costs to be paid to a third-party vendor in connection with the ongoing operation of an electronic health records application and purchase implementation of a revenue cycle and other applications for our acute care facilities ($ 183 million), healthcare infrastructure in Washington D.C.

in connection with various agreements with the District of Columbia ($ 70 million), and other software applications ($ 4 million);

in connection with various agreements with the District of Columbia ($ 61 million), development, implementation and operation of an enterprise resource planning application ($ 85 million), administrative software applications ($ 43 million) and other software applications ($ 12 million);

(ii) estimated construction commitment of $ 32 million representing our share of the construction cost of two behavioral health care facilities scheduled to be completed in 2025 that, subject to approval of certain regulatory conditions, we are required to build pursuant to joint-venture agreements with a third-party;

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We operate in a highly regulated and litigious industry which subjects us to various claims and lawsuits in the ordinary course of business as well as regulatory proceedings and government investigations.

These claims or suits include claims for damages for

personal injuries, medical malpractice, commercial/contractual disputes, wrongful restriction of, or interference with, physicians’ staff privileges, and employment related claims.

These claims or suits include claims for damages for personal injuries, medical malpractice, commercial/contractual disputes, wrongful restriction of, or interference with, physicians’ staff privileges, and employment related claims.

In addition, health care companies are subject to investigations and/or actions by various state and federal governmental agencies or those bringing claims on their behalf.

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Currently, and from time to time, we and some of our facilities are subjected to inquiries in the form of subpoenas, Civil Investigative Demands, audits and other document requests from various federal and state agencies.

These inquiries can lead to notices and/or actions including repayment obligations from state and federal government agencies associated with potential non-compliance with laws and regulations.

These inquiries can lead to notices and/or actions including repayment obligations from state and federal

government agencies associated with potential non-compliance with laws and regulations.

Further, the federal False Claims Act allows private individuals to bring lawsuits (qui tam actions) against healthcare providers that submit claims for payments to the government.

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These laws and regulations are constantly evolving and expanding.

Further, the Legislation has added additional obligations on healthcare providers to report and refund overpayments by government healthcare programs and authorizes the suspension of Medicare and Medicaid payments “pending an investigation of a credible allegation of fraud.” We monitor our business and have developed an ethics and compliance program with respect to these complex laws, rules and regulations.

Further, the original Patient Protection and Affordable Care Act, as amended by the Health and Education Reconciliation Act, has added additional obligations on healthcare providers to report and refund overpayments by government healthcare programs and authorizes the suspension of Medicare and Medicaid payments “pending an investigation of a credible allegation of fraud.” We monitor our business and have developed an ethics and compliance program with respect to these complex laws, rules and regulations.

Although we believe our policies, procedures and practices comply with government regulations, there is no assurance that we will not be faced with the sanctions referenced above which include fines, penalties and/or substantial damages, repayment obligations, payment suspensions, licensure revocation, and expulsion from government healthcare programs.

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Certain legal matters are described below:

In July 2021, a shareholder derivative lawsuit was filed by plaintiff, Robin Knight, in the Chancery Court in Delaware against the members of the Board of Directors of the Company as well as certain officers (C.A.

2021-0581-SG).

The Company was named as a nominal defendant.

The lawsuit alleges that in March 2020 stock options were awarded with exercise prices that did not reflect the Company’s fundamentals and business prospects, and in anticipation of future market rebound resulting in excessive gains.

The lawsuit makes claims of breaches of fiduciary duties, waste of corporate assets, and unjust enrichment.

The lawsuit seeks monetary damages allegedly incurred by the Company, disgorgement of the March 2020 stock awards as well as any proceeds derived therefrom and unspecified equitable relief.

Defendants deny the allegations.

We filed a motion to dismiss the complaint and the court granted part and denied part of our motion.

During the third quarter of 2022, we reached a preliminary settlement, which would not have had a material impact on our consolidated financial statements.

The settlement required court approval which the court declined to provide.

Our Board of Directors has authorized the formation of a Special Litigation Committee to review the matter and determine whether it is in the best interests of the Company to pursue this claim.

The court has stayed the litigation until March 31, 2024 while the Special Litigation Committee conducts their review.

We are uncertain as to potential liability or financial exposure, if any, which may be associated with this matter.

Disproportionate Share Hospital Payment Matter

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For FFY 2012, the claimed overpayment amounts to approximately $ 4 million.

For FFY 2013, FFY 2014 and FFY 2015 the initial claimed overpayments and attempted recoupment by the Department were approximately $ 7

million, $ 8 million and $ 7 million, respectively.

The Department has agreed to a change in methodology which, upon confirmation of the underlying data being accepted by the Department, could reduce the initial claimed overpayments for FFY 2013, FFY 2014 and FFY 2015 to approximately $ 2 million, $ 2 million and $ 3 million, respectively.

For FY 2013, FY 2014 and FY 2015 the initial claimed overpayments and attempted recoupment by the Department were approximately $ 7 million, $ 8 million and $ 7 million, respectively.

The Department has agreed to a change in methodology which, upon confirmation of the underlying data being accepted by the Department, could reduce the initial claimed overpayments for FY 2013, FY 2014 and FY 2015 to approximately $ 2 million, $ 2 million and $ 3 million, respectively.

We filed administrative appeals for all of our facilities contesting the recoupment efforts for FFYs 2011 through 2015 as we believe the Department’s calculation methodology is inaccurate and conflicts with applicable federal and state laws and regulations.

The Department has agreed to postpone the recoupment of the state’s share for FFY 2011 to 2013 until all hospital appeals are resolved but started recoupment of the federal share.

For FFY 2014 and FFY 2015, the Department has initiated the recoupment of the alleged overpayments.

The Department agreed to postpone the recoupment of the state’s share for FFY 2011 to 2013 until all hospital appeals are resolved but recouped the federal share.

For FFY 2014 and FFY 2015, the Department initiated the recoupment of the alleged overpayments (both federal and state shares).

Starting in FY 2016, the first full fiscal year after the January 1, 2015 effective date of Medicaid expansion in Pennsylvania, the Department no longer characterized managed care payments received by the hospitals as DSH payments.

We can provide no assurance that we will ultimately be successful in our legal and administrative appeals related to the Department’s repayment demands.

If our legal and administrative appeals are unsuccessful, our future consolidated results of operations and financial condition could be adversely impacted by these repayments.

While the administrative appeals on the disputed DSH payments were pending, we were in settlement discussions with the Department.

As a part of these discussions, we presented certain calculation errors that we believed, if corrected, could materially reduce the alleged overpayments.

Recently, we finalized a settlement agreement with the Department, received the funds representing the agreed upon portion of amounts previously recouped, and the matter has been concluded.

Rachel Capriglione, as natural mother and Next Friend of A.T., a minor, Plaintiff, v.

The Pavilion Foundation d/b/a The Pavilion Behavioral Health System

The Pavilion Behavioral Health System (the “Pavilion”), an indirect subsidiary of the Company, is the sole defendant in a lawsuit filed in Champaign County, Illinois, relating to the sexual assault of one minor patient by another minor patient in 2020.

Plaintiff asserted claims of negligence and misrepresentation.

The Pavilion denied any liability.

The case went to trial in March of 2024.

On March 28, 2024, a jury rejected the misrepresentation claim, returned a verdict for ordinary negligence, and awarded compensatory damages of $ 60 million and punitive damages of $ 475 million.

Based on a search of verdicts in comparable cases, the magnitude of this verdict was unexpected and is unprecedented for a single-plaintiff injury case of

this type in Champaign County, Illinois.

The Pavilion filed post-trial motions, among other items, contesting the excessiveness of the damage awards.

In an order dated October 10, 2024, the trial court ordered a remittitur of punitive damages from $ 475 million to $ 120 million.

The court denied the Pavilion’s request for reduction of compensatory damages.

The Pavilion has filed an appeal of the remaining judgment and the Plaintiff has filed a cross appeal of the remittitur of punitive damages.

Plaintiff has filed and served a Citation to Discover Assets ("Citation") on the Pavilion as well as Universal Health Services, Inc., and UHS of Delaware, Inc.

("UHS Entities") for the purported purpose of executing on the judgment during the pendency of the appeal.

We are currently contesting the Citation as to the UHS Entities who were not parties to the litigation as well as the breadth and scope of the Citation issued to the Pavilion.

Although we can make no assurances regarding the ultimate outcome of this matter, or what damages will ultimately be awarded, its final resolution could have a material adverse effect on the Company.

K.E.E., et al., Plaintiffs v.

Cumberland Hospital, LLC d/b/a Cumberland Hospital for Children and Adolescents, et al.

(and related lawsuits)

Cumberland Hospital for Children and Adolescents (“Cumberland”), an indirect subsidiary of the Company, is a defendant in multi-plaintiff lawsuits filed in the Circuit Court for Richmond, Virginia (the “Cumberland Litigation”), relating to allegations of inappropriate sexual contact during medical examinations by Dr.

Daniel Davidow, an independent contractor and the former medical director for Cumberland.

The Company and UHS of Delaware, Inc., our administrative services subsidiary (“UHS Delaware”), were also named as co-defendants in the Cumberland Litigation.

Plaintiffs have asserted claims of negligence, assault and battery (against Dr.

Davidow), false imprisonment, violations of the Virginia Consumer Protection Act (“VCPA”), and vicarious liability for Dr.

Davidow’s conduct against Cumberland, the Company, and UHS Delaware.

All defendants have denied liability.

The claims asserted by three of the plaintiffs in the Cumberland Litigation were consolidated for trial in September of 2024.

The Company and UHS Delaware were dismissed from the action during trial.

On September 27, 2024, a jury entered a verdict finding Dr.

Davidow and Cumberland liable and awarded these three plaintiffs combined compensatory damages of $ 60 million for all liability theories, an additional combined $ 180 million in trebled damages for violation of the VCPA, and an additional combined $ 120 million in punitive damages.

Cumberland filed post-trial motions challenging this verdict and briefing is currently underway.

Based upon Virginia law, we expect that the punitive damage amount should be reduced to a combined maximum of $ 1.05 million as a matter of law.

There are approximately 40 additional plaintiffs making similar allegations with claims pending in the Cumberland Litigation.

Although we can make no assurances regarding the ultimate outcomes of the various claims made in connection with the Cumberland Litigation, or what damages will ultimately be awarded, the final resolution of these matters could have a material adverse effect on the Company.

Other Matters

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At December 31, 2024, we held approximately 5.7 % of the outstanding shares of Universal Health Realty Income Trust (the “Trust”).

We serve as Advisor to the Trust under an annually renewable advisory agreement, which is scheduled to expire on December 31 st of each year, pursuant to the terms of which we conduct the Trust’s day-to-day affairs, provide administrative services and present investment opportunities.

and present investment opportunities.

The advisory agreement was renewed by the Trust for 2025 at the same rate in place for 2024, 2023 and 2022, providing for an advisory computation at 0.70 % of the Trust’s average invested real estate assets.

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Management believes that it has the ability to exercise significant influence over the Trust, therefore we account for our investment in the Trust using the equity method of accounting.

Our pre-tax share of income from the Trust w as $ 874,000 during 2023, $ 1.2 million during 2022 and $ 6.2 million during 2021, which are included in other income (expense), net, on the accompanying consolidated statements of income for each year.

We received dividends from the Trust amounting to $ 2.3 million during 2023 and $ 2.2 million during each of 2022 and 2021.

Included in our share of the Trust’s income during 2021 was approximately $ 5.0 million related to our share of gains on various transactions recorded by the Trust, including an asset purchase and sale transaction between the Trust and UHS, as discussed below.

Our pre-tax share of income from the Trust was $ 1.1 million during 2024, $ 874,000 during 2023 and $ 1.2 million during 2022, which are included in other income (expense), net, on the accompanying consolidated statements of income for each year.

We received dividends from the Trust amounting to $ 2.3 million during each of 2024 and 2023 and $ 2.2 million during 2022.

The carrying value of our investment in the Trust was $ 5.8 million and $ 7.0 million at December 31, 2024 and 2023, respectively, and is included in other assets in the accompanying consolidated balance sheets.

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On December 31, 2021, we entered into an asset purchase and sale agreement with the Trust, which was amended during the first quarter of 2022, pursuant to the terms of which:

• a wholly-owned subsidiary of ours purchased from the Trust, the real estate assets of the Inland Valley Campus of Southwest Healthcare System located in Wildomar, California, at its fair market value of $ 79.6 million.

• two wholly-owned subsidiaries of ours transferred to the Trust, the real estate assets of the following properties:

o Aiken Regional Medical Center (“Aiken”), located in Aiken, South Carolina (which includes a 211 -bed acute care hospital and a 62 -bed behavioral health facility), at its fair-market value of approximately $ 57.7 million, and;

o Canyon Creek Behavioral Health (“Canyon Creek”), a 102-bed facility located in Temple, Texas, at its fair-market value of approximately $ 26.0 million.

• in connection with this transaction, since the fair-market value of Aiken and Canyon Creek, which totaled approximately $ 83.7 million in the aggregate, exceeded the $ 79.6 million fair-market value of the Inland Valley Campus of Southwest Healthcare System, we received approximately $ 4.1 million in cash from the Trust.

This transaction generated a gain of approximately $ 68.4 million for the Trust, our share of which (approximately $ 4.0 million) is included in our consolidated statement of income for the year ended December 31, 2021.

Also on December 31, 2021, Aiken and Canyon Creek (as lessees), entered into a master lease and individual property leases (with the Trust as lessor), as amended, for initial lease terms on each property of approximately twelve years , ending on December 31, 2033 .

Subject to the terms of the master lease, Aiken and Canyon Creek have the right to renew their leases, at the then current fair market rent (as defined in the master lease), for seven , five-year optional renewal terms.

The aggregate annual rental during 2023 pursuant to the leases for these two facilities, amounted to approximately $ 5.8 million ($ 4.0 million related to Aiken and $ 1.8 million related to Canyon Creek).

The aggregate annual rental during 2022 pursuant to the leases for these two facilities, amounted to approximately $ 5.7 million ($ 3.9 million related to Aiken and $ 1.8 million related to Canyon Creek).

There is no bonus rental component applicable to either of these leases.

On each January 1 st through 2033, the annual rental will increase by 2.25 % on a cumulative and compounded basis.

(i) a wholly-owned subsidiary of ours purchased from the Trust the real estate assets of the Inland Valley Campus of Southwest Healthcare System located in Wildomar, California, at its fair market value;

(ii) two wholly-owned subsidiaries of ours transferred to the Trust, at their respective fair-market values, the real estate assets of Aiken Regional Medical Center (“Aiken”), located in Aiken, South Carolina (which includes a 211 -bed acute care hospital and a 62 -bed behavioral health facility), and Canyon Creek Behavioral Health (“Canyon Creek”), located in Temple, Texas, and;

(iii) we received approximately $ 4.1 million in cash from the Trust.

As a result of the purchase options within the lease agreements for Aiken and Canyon Creek, the asset purchase and sale transaction is accounted for as a failed sale leaseback in accordance with U.S.

We have accounted for the asset exchange and substitution transaction with the Trust as a financing arrangem ent and, since we did not derecognize the real property related to Aiken and Canyon Creek, we will continue to depreciate the assets.

Our consolidated balance sheets as of December 31, 2023 and 2022 reflects a financial liability of $ 77.5 million and $ 80.9 million, respectively, which is included in debt, for the fair value of real estate assets that we exchanged as part of the transaction.

We have accounted for the asset exchange and substitution transaction with the Trust as a financing arrangement and, since we did not derecognize the real property related to Aiken and Canyon Creek, we will continue to depreciate the assets.

Our consolidated balance sheets as of December 31, 2024 and December 31, 2023 reflect s a financial liability of $ 73.8 million and $ 77.5 million, respectively, which is included in debt, for the fair value of real estate assets that we exchanged as part of the transaction.

Our monthly lease payments payable to the Trust will be recorded to interest expense and as a reduction to the outstanding financial liability.

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The aggregate rent payable to the Trust in connection with the leases on McAllen Medical Center, Wellington Regional Medical Center, Aiken Regional Medical Center and Canyon Creek Behavioral Health was approximately $ 21.2 million during 2024 and $ 20.6 million during 2023.

Total aggregate rent expense under the operating leases on three hospital facilities with the Trust (McAllen Medical Center, Wellington Regional Medical Center and Inland Valley Campus of Southwest Healthcare System) was $ 17.7 million during 2021.

Pursuant to the Master Leases by certain subsidiaries of ours and the Trust as described in the table below, dated 1986 and 2021 (“the Master Leases”) which g overn the leases of McAllen Medical Center and Wellington Regional Medical Center (each of which is governed by the Master Lease dated 1986), and Aiken Regional Medical Center and Canyon Creek Behavioral Health (each of which is governed by the Master Lease dated 2021), we have the option to renew the leases at the lease terms described above and below by providing notice to the Trust at least 90 days prior to the termination of the then current term.

Pursuant to the Master Leases by certain subsidiaries of ours and the Trust as described in the table below, dated 1986 and 2021 (“the Master Leases”) which govern the leases of McAllen Medical Center and Wellington Regional Medical Center (each of which is governed by the Master Lease dated 1986), and Aiken Regional Medical Center and Canyon Creek Behavioral Health (each of which is governed by the Master Lease dated 2021), we have the option to renew the leases at the lease terms described above and below by providing notice to the Trust at least 90 days prior to the termination of the then current term.

We also have the right to purchase the respective leased hospitals at their appraised fair market value upon any of the following:

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(i) purchase the respective leased facilities during and for a specified period after the lease terms at the same price, terms and conditions of any third-party offer, or;

(ii) renew the lease on the respective leased facility at the end of, and for a specified period of time after, the lease term at the same terms and conditions pursuant to any third-party offer.

(ii) renew the lease on the respective leased facility at the end of, and for a specified period after, the lease term at the same terms and conditions pursuant to any third-party offer.

In addition, we are the managing, majority member in a joint venture with an unrelated third-party that operates Clive Behavioral Health, a 100 -bed behavioral health care facility located in Clive, Iowa.

The real property of this facility, which was completed and opened in late, 2020, is also leased from the Trust (annual rental of approxi mately $ 2.7 million, $ 2.6 million and $ 2.5 million during 2023, 2022 and 2021, respectively) pursuant to the lease terms as provided in the table below.

I n connection with the lease on this facility, the joint venture has the right to purchase the leased facility from the Trust at its appraised fair market value upon either of the following:

The real property of this facility, which was completed and opened in late 2020, is also leased from the Trust (annual rental of approximately $ 2.8 million, $ 2.7 million and $ 2.6 million during 2024, 2023 and 2022, respectively) pursuant to the lease terms as provided in the table below.

In connection with the lease on this facility, the joint venture has the right to purchase the leased facility from the Trust at its appraised fair market value

upon either of the following:

(i) by providing notice at least 270 days prior to the end of the lease terms or any renewal terms, or;

upon 30 days' notice anytime within 12 months of a change of control of the Trust (UHS also has this right should the joint venture decline to exercise its purchase right).

(ii) upon 30 days' notice anytime within 12 months of a change of control of the Trust (UHS also has this right should the joint venture decline to exercise its purchase right).

Additionally, the joint venture has rights of first offer to purchase the facility prior to any third-party sale.

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(b) We have one 5 -year renewal option at fair market value lease rates (through 2031 ).

Upon the December 31, 2021 expiration of the lease on Wellington Regional Medical Center, a wholly-owned subsidiary of ours exercised its fair market value renewal option and renewed the lease for a 5 -year term scheduled to expire on December 31, 2026 .

Effective January 1, 2024, the annual lease rate for this hospital is $ 6.6 million (there is no longer a bonus rental component of the lease payment).

On each January 1 st through 2026, the annual rent will increase by 2.50 % on a cumulative and compounded basis.

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In each January through 2040 (and potentially through 2070 if three , 10-year renewal options are exercised), the annual rental will increase by 2.75 % on a cumulative and compounded basis.

In addition, certain of our subsidiaries are tenants in various medical office buildings (“MOBs”) and two free-standing emergency departments owned by the Trust or by limited liability companies in which the Trust holds 95 % to 100 % of the ownership interest.

In addition, certain of our subsidiaries are tenants in several medical office buildings (“MOBs”) and two free-standing emergency departments ("FED") owned by the Trust or by limited liability companies in which the Trust holds 95 % to 100 % of the ownership interest.

In connection with these two FEDs, in October, 2024, our subsidiaries exercised their 5 -year renewal options on the facilities which are located in Weslaco and Mission, Texas.

The renewal option covers the period of February 1, 2025 through January 31, 2030 (the current lease terms were scheduled to expire on January 31, 2025 ;

with aggregate annual lease rates of approximately $ 1.07 million).

Pursuant to terms of the leases, and consistent with the terms of the leases currently in effect for each property, the lease rates are scheduled to increase 2 % per year through the end of the renewed lease terms.

Our subsidiaries have four, 5-year renewal options remaining on each of these FEDs, with the first three renewal options (covering the years 2030 through 2044 ) providing for 2 % annual increases to the lease rates, and the remaining two, 5-year renewal options (covering the years 2045 through 2054 ) providing for lease rates at the then fair market value.

These leases are cross-defaulted with one another and our subsidiaries have the option to purchase the leased properties upon the expiration of each five-year extended term at the fair market value at that time.

During the third quarter of 2023, the Trust acquired the McAllen Doctor's Center, a 79,500 rentable square feet medical office building located in McAllen, Texas.

A master lease was executed between a wholly-owned subsidiary of ours and the Trust, pursuant to the terms of which our subsidiary will master lease 100 % of the rentable square feet of the MOB at an initial minimum rent of $ 624,000 annually.

The master lease commenced during August, 2023 and is scheduled to expire in twelve years.

During the first quarter of 2023, the Trust substantially completed construction on a new 86,000 rentable square feet multi-tenant MOB that is located on the campus of Northern Nevada Sierra Medical Center in Reno, Nevada.

The master lease commenced during August, 2023 and is scheduled to expire in twelve years from that date.

During the first quarter of 2023, the Trust substantially completed construction on a new 86,000 rentable square foot multi-tenant MOB that is located on the campus of Northern Nevada Sierra Medical Center in Reno, Nevada.

Northern Nevada Sierra Medical Center, a 170 -bed newly constructed acute care hospital owned and operated by a wholly-owned subsidiary of ours, was completed and opened in April, 2022.

In connection with this MOB, a ground lease and a master flex lease was executed between a wholly-owned subsidiary of ours and the Trust, pursuant to the terms of which our subsidiary will master lease approximately 68 % of the rentable square feet of the MOB at an initial minimum rent of $ 1.3 million annually plus a pro-rata share of the common area maintenance expenses.

The master flex lease could be reduced during the term if certain conditions are met.

The ground lease and master flex lease each commenced during the first quarter of 2023.

In connection with this MOB, a ten-year master flex lease was executed between a wholly-owned subsidiary of ours and the Trust (scheduled to expire in March, 2033), pursuant to the terms of which our subsidiary initially agreed to master lease up to approximately 68 % of the rentable square feet of the MOB.

The master flex lease has been reduced since inception as certain conditions have been met.

A ground lease for this facility commenced during 2023 and is scheduled to expire in 2098.

Other Related Party Transactions:

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As a result of these agreements, as amended in October, 2016, based on actuarial tables and other assumptions, during the life expectancies of the insureds, we would pay approximately $ 28 million in premiums, and certain trusts owned by our Executive Chairman of the Board, would pay approximately $ 9 million in premiums.

Based on the projected premiums mentioned above, and assuming the policies remain in effect until the death of the insureds, we will be entitled to receive death benefit proceeds of no less than approximately $ 37 million representing the $ 28 million of aggregate premiums paid by us as well as the $ 9 million of aggregate premiums paid by the trusts.

million of aggregate premiums paid by us as well as the $ 9 million of aggregate premiums paid by the trusts.

In connection with these policies, we paid approximately $ 1.0 million, net, in premium payments during 2024, 2023 and 2022.

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In conjunction with the GPO agreement, we acquired a minority interest in Premier for a nominal amount.

During the fourth quarter of 2013, in connection with the completion of

an initial public offering of the stock of Premier, we received cash proceeds for the sale of a portion of our ownership interest in the GPO.

Also in connection with this GPO agreement, we received shares of restricted stock of Premier which vested ratably over a seven-year period ( 2014 through 2020 ), contingent upon our continued participation and minority ownership interest in the GPO.

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A $ 28 million decrease in the market value of our vested Premier shares during 2023 was recorded as an unrealized loss and included in “Other (income) expense, net” in our consolidated statements of income for the year ended December 31, 2023.

A $ 14 million increase in the market value of our vested Premier shares during 2021 was recorded as an unrealized gain and included in “Other (income) expense, net” in our consolidated statements of income for the year ended December 31, 2021.

Additionally, we received cash dividends from Premier amounting to $ 1.9 million during 2023, $ 1.8 million during 2022 and $ 1.7 million during 2021, which are included in “Other (income) expense, net” in our consolidated statements of income.

A member of our Board of Directors and member of the Executive Committee and Finance Committee is a partner in Norton Rose Fulbright US LLP, a law firm engaged by us for a variety of legal services.

A $ 14 million decrease in the market value of our vested Premier shares during 2022 was recorded as an unrealized loss and included in “Other (income) expense, net” in our consolidated statements of income for the year ended December 31, 2022.

Additionally, we received cash dividends from Premier amounting to $ 1.9 million during each of 2024 and 2023 and $ 1.8 million during 2022, which are included in “Other (income) expense, net” in our consolidated statements of income.

A member of our Board of Directors and member of the Executive Committee and Finance Committee is Of Counsel for Norton Rose Fulbright US LLP, a law firm engaged by us for a variety of legal services.

The Board member and his law firm also provide personal legal services to our Executive Chairman and he acts as trustee of certain trusts for the benefit of our Executive Chairman and his family.

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12) SEGMENT REPORTING

Our reportable operating segments consist of acute care hospital services and behavioral health care services.

The “Other” segment column below includes centralized services including, but not limited to, information technology, purchasing, reimbursement, accounting and finance, taxation, legal, advertising and design and construction.

The chief operating decision making group for our acute care services and behavioral health care services is comprised of our Chief Executive Officer and the Presidents of each operating segment.

The Presidents for each operating segment also manage the profitability of each respective segment’s various

We operate in two reportable segments:

Acute Care Hospital Services and Behavioral Health Care Services.

Our chief operating decision making (“CODM”) group is comprised of our President and Chief Executive Officer and each of our respective division Presidents for our Acute Care Hospital Services and Behavioral Health Care Services .

The operating segments are managed separately because each operating segment represents a business unit that offers different types of healthcare services or operates in different healthcare environments.

The primary profitability measurement utilized by the President and Chief Executive Officer as

well as the Presidents of each operating segment is segment income before income taxes.

Segment income before income taxes is utilized by the CODM group during the annual budgeting process and during their reviews of our monthly operating results to monitor each segment’s operating results as compared to prior periods, and the respective operating budgets.

The expenses included in our non-segment operating expenses below include centralized services including, but not limited to, information technology, purchasing, reimbursement, accounting and finance, taxation, legal, advertising and design and construction.

The accounting policies of the operating segments are the same as those described in the summary of significant accounting policies included in Note 1-Business and Summary of Significant Accounting Policies .

The corporate overhead allocations, as reflected below, are utilized for internal reporting purposes and are comprised of each period’s projected corporate-level operating expenses (excluding interest expense).

The overhead expenses are captured and allocated directly to each segment, to the extent possible, based upon each segment’s respective percentage of total operating expenses.

Services (a.)

(Dollar amounts in thousands)

Gross inpatient revenues

Gross outpatient revenues

Total net revenues

Income (loss) before allocation of corporate

overhead and income taxes

Allocation of corporate overhead

Income (loss) after allocation of corporate overhead

and before income taxes

Services (b.)

Services (a.)

(Dollar amounts in thousands)

Gross inpatient revenues

Gross outpatient revenues

Total net revenues

Income (loss) before allocation of corporate

overhead and income taxes

Allocation of corporate overhead

Income (loss) after allocation of corporate overhead

and before income taxes

Services (a.)

(Dollar amounts in thousands)

Gross inpatient revenues

Gross outpatient revenues

Total net revenues

Income (loss) before allocation of corporate

overhead and income taxes

Allocation of corporate overhead

Income (loss) after allocation of corporate overhead

and before income taxes

(a) Includes net revenues generated from our behavioral health care facilities located in the U.K.

We do not present asset information for our segments as this information is not used to allocate resources.

(amounts in thousands)

Net revenue from reportable segments

Reconciliation of Net Revenue

Non-segment revenue

Total Net Revenue

Salaries, wages and benefits

Other segment item operating expenses (a)

Depreciation and amortization expense

Interest (income) expense, net

Other (income) expense, net

Reportable segment income before income taxes

Reconciliation of non-segment revenue/expenses to consolidated income before income taxes

Non-segment revenue

Non-segment operating expenses (b)

Non-segment interest expense, net

Non-segment other (income) expense, net

Income before income taxes

(amounts in thousands)

Net revenue from reportable segments

Reconciliation of Net Revenue

Non-segment revenue

Total Net Revenue

Salaries, wages and benefits

Other segment item operating expenses (a)

Depreciation and amortization expense

Interest (income) expense, net

Other (income) expense, net

Reportable segment income before income taxes

Reconciliation of non-segment revenue/expenses to consolidated income before income taxes

Non-segment revenue

Non-segment operating expenses (b)

Non-segment interest expense, net

Non-segment other (income) expense, net

Income before income taxes

(amounts in thousands)

Net revenue from reportable segments

Reconciliation of Net Revenue

Non-segment revenue

Total Net Revenue

Salaries, wages and benefits

Other segment item operating expenses (a)

Depreciation and amortization expense

Interest (income) expense, net

Other (income) expense, net

Reportable segment income before income taxes

Reconciliation of non-segment revenue/expenses to consolidated income before income taxes

Non-segment revenue

Non-segment operating expenses (b)

Non-segment interest expense, net

Non-segment other (income) expense, net

Income before income taxes

(a) Other segment operating expenses for each period includes other operating expenses, supplies expense and lease and rental expense.

(b) Non-segment operating expenses for each period includes salaries, wages and benefits, other operating expenses, supplies expense and lease and rental expense.

amounting to approximately $ 880 million in 2024, $ 761 million in 2023 and $ 685 million in 2022.

Total assets at our U.K.

behavioral health care facilities were approximately $ 1.327 billion as of December 31, 2023, $ 1.235 billion as of December 31, 2022 and $ 1.351 billion as of December 31, 2021.

(b) Included in our 2022 acute care hospital services operating segment income (loss) before allocation of corporate overhead and income taxes is a pre-tax $ 58 million provision for asset impairment charge to reduce the carrying value of real property assets.

(d) Included in our 2022 acute care hospital services reportable segment income before income taxes is a pre-tax $ 58 million provision for asset impairment charge to reduce the carrying value of real property assets.

SCHEDULE II—VALUATION AND QUALIFYING ACCOUNTS

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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 9A. Controls and Procedures