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Item 7. Management’s Discussion and Analysis

2026-02-25 compared with 2025-02-26 · 388 added, 321 removed, 1021 unchanged (41% of the section changed)

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This section generally discusses our results of operations for the year ended December 31, 2025, as compared to the year ended December 31, 2024.

For discussion of our result of operations and changes in our financial condition for the year ended December 31, 2023 as compared to the year ended December 31, 2022, please refer to Part II, Item 7.

For discussion of our results of operations and changes in our financial condition for the year ended December 31, 2024 as compared to the year ended December 31, 2023, please refer to Part II, Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended December 31, 2024, as filed with the Securities and Exchange Commission on February 26, 2025.

Our principal business is owning and operating, through our subsidiaries, acute care hospitals and outpatient facilities and behavioral health care facilities.

As of February 26, 2025, we owned and/or operated 359 inpatient facilities and 60 outpatient and other facilities, including the following, located in 39 states, Washington, D.C., the United Kingdom and Puerto Rico:

As of February 25, 2026, we owned and/or operated 375 inpatient facilities and 168 outpatient and other facilities located in 40 states, Washington, D.C., the United Kingdom and Puerto Rico.

We have changed the method of our outpatient behavioral health care facility counts during the third quarter of 2025 and substantially all of the increase from prior periods is related to that change in convention.

Acute care facilities located in the U.S.:

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• 3 inpatient behavioral health care facilities;

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

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

• 7 outpatient behavioral health care facilities.

Net revenues from our acute care hospitals, outpatient facilities and commercial health insurer accounted for approximately 57% of our consolidated net revenues during each of 2025 and 2024.

Net revenues from our behavioral health care facilities and commercial health insurer accounted for approximately 43% of our consolidated net revenues during each of 2025 and 2024.

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

generated net revenues of approximately $880 million in 2024 and $761 million in 2023.

generated net revenues of approximately $1.001 billion in 2025 and $880 million in 2024.

Total assets at our U.K.

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You should carefully review the information contained in this Annual Report, and should particularly consider any risk factors that we set forth in this Annual Report on Form 10-K for the year ended December 31, 2025, and in other reports or documents that we file from time to time with the Securities and Exchange Commission (the “SEC”).

In this Annual Report, we state our beliefs of future events and of our future financial performance.

In this Annual Report, we state our beliefs of

future events and of our future financial performance.

This Annual Report contains “forward-looking statements” that reflect our current estimates, expectations and projections about our future results, performance, prospects and opportunities.

Forward-looking statements include, among other things, the information concerning our possible future results of operations, business and growth

strategies, financing plans, expectations that regulatory developments or other matters will or will not have a material adverse effect on our business or financial condition, our competitive position and the effects of competition, the projected growth of the industry in which we operate, and the benefits and synergies to be obtained from our completed and any future acquisitions, and statements of our goals and objectives, and other similar expressions concerning matters that are not historical facts.

Forward-looking statements include, among other things, the information concerning our possible future results of operations, business and growth strategies, financing plans, expectations that regulatory developments or other matters will or will not have a material adverse effect on our business or financial condition, our competitive position and the effects of competition, the projected growth of the industry in which we operate, and the benefits and synergies to be obtained from our completed and any future acquisitions, and statements of our goals and objectives, and other similar expressions concerning matters that are not historical facts.

Words such as “may,” “will,” “should,” “could,” “would,” “predicts,” “potential,” “continue,” “expects,” “anticipates,” “future,” “intends,” “plans,” “believes,” “estimates,” “appears,” “projects” and similar expressions, or the negative of those words and expressions, as well as statements in future tense, identify forward-looking statements.

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Such factors include, among other things, the following:

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

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

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

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

• legislation adopted on July 4, 2025 (the One Big Beautiful Bill Act), attaches work and community service requirements to eligibility for Medicaid benefits that will have the effect of limiting Medicaid enrollment and expenditure.

That legislation also places limits on provider fees used to increase federal Medicaid funding to states.

The legislation prohibits states not previously having expanded Medicaid eligibility to 138% of federal poverty level from increasing the rate of current provider fees which fund certain state supplemental payments or increasing the base of the fee to a class or items of services that the fee did not previously cover.

That current provider fee threshold will remain at 6%.

For states having expanded Medicaid eligibility under the legislation, the provider fee threshold will be reduced by 0.5% annually between federal fiscal years 2028 and 2032 with the resulting threshold ultimately becoming 3.5%.

Under current law, and based on our current expectations, we estimate that, commencing with the 2028 state fiscal years, our aggregate annual net benefit will be reduced, on an annually increasing and relatively pro rata basis, by approximately $432 million to $480 million by 2032.

The legislation also eliminates certain insurance exchange premium tax credits beyond 2025 and exchange enrollment is expected to be adversely impacted.

On January 8, 2026, the U.S.

House of Representatives passed H.R.1834 to extend for three years the enhanced premium tax credits ("EPTCs") that expired on December 31, 2025, which is currently undergoing review in the Senate.

We cannot predict whether these subsidies will ultimately be adopted in federal fiscal year 2026.

All of these factors, which could have a material unfavorable impact on our results of operations, may be expected to reduce our revenue and likely increase the level of uncompensated care provided by our facilities;

• there are additional legislative changes that are likely to result in major changes in the health care delivery system on a national or state level, including changes in the structure and administration of, and funding for, federal and state agencies and programs.

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

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

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

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

These enhanced subsidies expired on December 31, 2025;

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

the legislation.

Supreme Court held in California v.

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

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

The legislation faced its most recent challenge when the Supreme Court, in the June 2025 Kennedy v.

Braidwood Management decision, opined in favor of ACA HIV preventive care coverage.

The impacts of this decision cannot be predicted.

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

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

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

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

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

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

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

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

Additionally, California is in the process of implementing staffing standards specific to acute psychiatric hospitals and requirements to determine appropriate staffing based on patient acuity and care needs, which are expected to take effect on June 1, 2026.

This can further increase our costs and limit our revenue if we are required to limit the number of patients at our California facilities;

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

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

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

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

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

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

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

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

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

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

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

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

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

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

• the increase in interest rates during the past few years has increased our interest expense significantly increasing our expenses and reducing our free cash flow and our ability to access the capital markets on favorable terms.

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

We cannot predict future changes to interest rates, however, significant increases in our borrowing rates could have a material unfavorable impact on our future results of operations.

Our $700 million, 1.65% senior notes ("2026 Notes") mature on September 1, 2026.

Market interest rates have increased significantly since the 2026 Notes were issued in 2021.

We expect that we will refinance the 2026 Notes at significantly higher interest rates which will significantly increase our interest expense thereby decreasing our net income attributable to UHS;

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

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

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

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

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

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

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

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

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

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

Supreme Court held in California v.

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

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

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

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

Becerra , ruled that a requirement that certain health plans cover services without cost sharing violates the Appointments Clause of the U.S.

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

The decision was appealed to the U.S.

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

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

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

Supreme Court agreed to hear the matter.

The outcome and impacts of this litigation cannot be predicted.

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

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

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

Therefore, changes in laws or policies governing the terms of foreign trade, and in particular, increased trade restrictions, tariffs or taxes on imports from where our products or materials are made (either directly or through our suppliers) could have an impact on our competitive position, business operations and financial results;

• as of early February 2026, Congress has passed and the President has signed a consolidated appropriations package providing fiscal year 2026 funding for the majority of federal agencies, while lawmakers continue to negotiate and consider outstanding appropriations legislation for the Department of Homeland Security.

In the past several years political disputes concerning authorization of a federal budget have led to shutdown of substantial portions of the federal government and other federal budget authorization delays have occurred.

Federal budget delays and federal government shutdowns are unpredictable and may occur in the future.

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

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

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

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

• in June 2024, the U.S.

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

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

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

As it is highly regulated, the health care industry could be significantly impacted by the Loper Bright decision, particularly in the areas of Medicare reimbursement, decision making by the Food & Drug Administration and health care fraud and abuse compliance, where parties may no longer be able to rely on federal agencies’ policies, rules and guidance;

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

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

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

As of December 31, 2024, without reduction for any potential amounts related to the Pavilion and Cumberland matters, the Company and its subsidiaries have aggregate insurance coverage of approximately $221 million remaining under commercial policies for matters applicable to the 2020 policy year (in excess of the applicable self-insured retention amounts of $10 million per single occurrence/$25 million for multi-plaintiff matters for professional liability claims and $3 million per occurrence for general liability claims).

In the event the resolution of the Pavilion and/or Cumberland matters exhausts all or a significant portion of the remaining commercial insurance coverage available to the Company and its subsidiaries related to other matters that occurred in 2020, or the Pavilion and Cumberland matters cause the posting of large bonds or other collateral during the appeal processes, our future results of operations and capital resources would be materially adversely impacted;

• the impact of a shift of care from inpatient to lower cost outpatient settings and controls designed to reduce inpatient services;

• our ability to achieve operating and financial targets, develop and execute plans to offset to the extent possible impacts from the recent regulatory changes, including the enactment of the One Big Beautiful Bill Act and the expiration of EPTCs, and tariffs, attain expected levels of patient volumes and revenues, and control the costs of providing services;

• the outcome of known and unknown litigation, government investigations, inquiries, false claims act allegations, and liabilities and other claims asserted against us and other matters, and the effects of adverse publicity relating to such matters, as disclosed in Note 8 to the Condensed Consolidated Financial Statements - Commitments and Contingencies, including, but not limited to, the jury verdict returned against Cumberland Hospital for Children and Adolescents located in New Kent, Virginia, an indirect subsidiary of ours, and the verdict in the Pinnacle litigation in Washoe County, Nevada, against certain subsidiaries of ours;

• effective March, 2025, our excess commercial insurance coverage for professional and general liability claims contains less favorable terms than previous years including coverage exclusions for incidents involving sexual molestation or abuse, higher premiums and lower aggregate limitations;

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

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There can be no assurance that we or our service providers, if applicable, will not suffer losses relating to cyber-attacks or other information security breaches in the future or that our insurance coverage will be adequate to cover all the costs resulting from such events;

• our ability to implement technology and other programs to drive efficiencies, and improve patient outcomes and experiences, and the risks associated with the use of technologies by us or our services providers;

• the availability of suitable acquisition and divestiture opportunities and our ability to successfully integrate and improve our acquisitions since failure to achieve expected acquisition benefits from certain of our prior or future acquisitions could result in impairment charges for goodwill and purchased intangibles;

• the impact of severe weather conditions, including the effects of hurricanes and climate change;

• our business, results of operations, financial condition, or stock price may be adversely affected if we are not able to achieve our environmental, social and governance (“ESG”) goals or comply with emerging ESG regulations, or otherwise meet the expectations of our stakeholders with respect to ESG matters;

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

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

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

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

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

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

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

• the impact of severe weather conditions, including the effects of hurricanes, flash floods, wildfires and climate change;

• our ability to continue to obtain capital on acceptable terms, including borrowed funds, to fund the future growth of our business;

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

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

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

• changes in our business strategies or development plans;

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To the extent that these hedges are inadequate, our reported financial results or the way we conduct our business could be adversely affected.

Furthermore, if a financial counterparty to our hedges experiences financial difficulties or is otherwise unable to honor the terms of the foreign currency hedge, we may experience material financial losses;

• the impact of a shift of care from inpatient to lower cost outpatient settings and controls designed to reduce inpatient services on our revenue, and;

• other factors referenced herein or in our other filings with the Securities and Exchange Commission.

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Revenue Recognition:

Patient services provided in the U.S.:

We report net patient service revenue at the estimated net realizable amounts from patients and third-party payers and others for services rendered.

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Payment arrangements include rates per discharge, reimbursed costs, discounted charges and per diem payments.

Estimates of contractual allowances under managed care plans, which represent explicit price concessions, are based upon the payment terms specified in the related contractual agreements.

Estimates of contractual allowances under managed care plans, which represent explicit

price concessions, are based upon the payment terms specified in the related contractual agreements.

We closely monitor our historical collection rates, as well as changes in applicable laws, rules and regulations and contract terms, to assure that provisions are made using the most accurate information available.

However, due to the complexities involved in these estimations, actual payments from payers may be different from the amounts we estimate and record.

See Note 10 to the Consolidated Financial Statements-Revenue Recognition , for additional disclosure related to our revenues including a disaggregation of our consolidated net revenues by major source for each of the periods presented herein.

We estimate our Medicare and Medicaid revenues using the latest available financial information, patient utilization data, government provided data and in accordance with applicable Medicare and Medicaid payment rules and regulations.

The laws and regulations governing the Medicare and Medicaid programs are extremely complex and subject to interpretation and as a result, there is at least a reasonable possibility that recorded estimates will change by material amounts in the near term.

The laws and regulations governing the Medicare and Medicaid programs are extremely complex and subject to interpretation.

Certain types of payments by the Medicare program and state Medicaid programs (e.g.

Medicare Disproportionate Share Hospital, Medicare Allowable Bad Debts and Inpatient Psychiatric Services) are subject to retroactive adjustment in future periods as a result of administrative review and audit and our estimates may vary from the final settlements.

Such amounts are included in accounts receivable, net, on our consolidated balance sheets.

Medicaid State Directed Payments, Medicare Disproportionate Share Hospital, Medicare Allowable Bad Debts and Inpatient Psychiatric Services) are subject to retroactive adjustment in future periods as a result of administrative review and audit and our estimates may vary from the final settlements.

The funding of both federal Medicare and state Medicaid programs are subject to legislative and regulatory changes.

As such, we cannot provide any assurance that future legislation and regulations, if enacted, will not have a material impact on our future Medicare and Medicaid reimbursements.

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, 2024, would change our after-tax net income by approximately $2 million.

Behavioral health care services provided in the U.K.:

The majority of the revenues generated by our behavioral health care facilities located in the U.K.

are recorded pursuant to contracts with the National Health Service and other local governments for services including the following:

behavioral health care services, rehabilitation services, residential homes, nursing homes, supported living services and specialist day services.

Commercial health insurer - certain acute care markets:

The majority of the revenues generated by our commercial health insurer conducting business in certain acute care markets relate to Medicare Advantage premiums which are determined by the Centers for Medicare and Medicaid Services ("CMS") utilizing a risk adjustment model that apportions premiums paid to health plans according to health and geographic factors.

Risk score adjustments result in retroactive premium adjustments.

The revenue adjustments are recognized when the amount is determinable and collectability or liability is reasonably assured.

CMS also uses a star rating system which is derived from comprehensive evaluations of member satisfaction, quality of care and operational efficiency.

In addition, our insurer also generates revenues from premiums for coverage under membership contracts with employer groups and individuals.

Charity Care, Uninsured Discounts and Other Adjustments to Revenue:

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Because we do not pursue collection of amounts classified as uninsured discounts, the transaction price is fully adjusted and there is no impact in our net revenues or in our net accounts receivable.

In implementing the discount policy, we

first attempt to qualify uninsured patients for governmental programs, charity care or any other discount program.

In implementing the discount policy, we first attempt to qualify uninsured patients for governmental programs, charity care or any other discount program.

If an uninsured patient does not qualify for these programs, the uninsured discount is applied.

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

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

Goodwill and Intangible Assets:

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Future changes in the estimates used to conduct the impairment review, including profitability and market value projections, could indicate impairment in future periods potentially resulting in a write-off of a portion or all of our goodwill or indefinite-lived intangible assets.

Non-Marketable Securities:

Non-marketable securities that we hold are accounted for under the measurement alternative.

Under the measurement alternative, the carrying value is measured at cost, less any impairment, plus or minus changes resulting from observable price changes in orderly transactions for identical or similar investments of the same issuer.

Adjustments are determined primarily based on a market approach as of the transaction date and are recorded in other (income) expense, net.

We recorded an unrealized pre-tax gain of $93 million during the year ended December 31, 2025.

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 anticipate adverse effects to our provision for income taxes as well as cash taxes.

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

We operate in multiple jurisdictions with varying tax laws.

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Results of Operations

Clinical Staffing, Physician Related Expenses and Effects of Inflation:

Clinical Staffing, Inflation, future Medicaid reductions and Tariffs:

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

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

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

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

Legislation adopted on July 4, 2025 attaches work and community service requirements to eligibility for Medicaid benefits that will have the effect of limiting Medicaid enrollment and expenditures and the legislation also places limits on provider taxes used to increase federal Medicaid funding to states.

In addition, insurance exchange subsidies expired on December 31, 2025 which could unfavorably impact insurance exchange enrollment.

Extension of these subsidies is currently the subject of Congressional debate as part of the federal budget negotiation, and we cannot predict whether these subsidies will ultimately be adopted in federal fiscal year 2026.

As these provisions become effective over the next several years, they may be expected to reduce our revenues and likely increase the level of uncompensated care provided by our facilities.

Please see Sources of Revenue below for additional disclosure related to Medicaid supplemental payment programs in various states in which we operate.

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

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

Therefore, changes in laws or policies governing the terms of foreign trade, and in particular,

increased trade restrictions, tariffs or taxes on imports from where our products or materials are made (either directly or through our suppliers) could have an impact on our competitive position, business operations and financial results.

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

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• a $1.25 billion or 8.2% increase in net revenues generated from our acute care and behavioral health care operations owned during both periods (which we refer to as “Same Facility”), and;

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

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

• $287 million of other combined net increases consisting primarily of the combined net revenues generated during 2025 at two newly constructed acute care hospitals located in Las Vegas, Nevada (West Henderson Hospital which opened during the fourth quarter of 2024) and Washington, D.C.

(Cedar Hill Regional Medical Center which opened during the second quarter of 2025).

Income before income taxes increased by $474 million, or 32%, to $1.97 billion during 2025 as compared to $1.50 billion during 2024.

The increase was attributable to:

• an increase of $207 million at our acute care facilities, as discussed below in Acute Care Hospital Services ;

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

• $14 million of other combined net decreases.

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

• an increase of $105 million at our behavioral health care facilities, as discussed below in Behavioral Health Services ;

• an increase of $93 million from an unrealized gain recorded during 2025 in connection with our minority ownership in a healthcare generative artificial intelligence company;

• an increase of $30 million from a decrease in interest expense, as discussed below in Other Operating Results-Interest Expense;

• an increase of $16 million from an increase in the market value of certain equity securities that were sold during the fourth quarter of 2025, and;

• $23 million of other combined net increases.

Net income attributable to UHS increased by $347 million, or 30%, to $1.49 billion during 2025 as compared to $1.14 billion during 2024.

This increase was attributable to:

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• a decrease of $126 million resulting from an increase in the provision for income taxes resulting primarily from:

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

(ii) a $16 million decrease in the provision for income taxes during 2024, as compared to 2023, from the net tax benefit recorded pursuant to ASU 2016-09, net of the impact of executive compensation limitations pursuant to IRC section 162(m).

(i) the increase in the provision for income taxes resulting from the $474 million increase in income before income taxes, and;

(ii) a $12 million increase in the provision for income taxes due to a decrease in the net benefit recorded in connection with "ASU 2016-09", Compensation-Stock Compensation:

Improvements to Employee Share-Based Payment Accounting, net of the impact of executive compensation limitations pursuant to IRC section 162(m).

Adjustments to self-insured professional and general liability reserves:

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

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

million during 2023.

As a result of unfavorable trends experienced during the past few years, our results of operations included increases to our reserves for self-insured professional and general liability claims amounting to $45 million during 2025 and $79 million during 2024.

During 2025, approximately $27 million of the reserves increase is included in our Same Facility basis acute care hospitals services’ results, and approximately $18 million is included in our behavioral health services’ results.

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Our Same Facility results also neutralize (if applicable) the effect of items that are non-operational in nature including items such as, but not limited to, gains/losses on sales of assets and businesses, impacts of settlements, legal judgments and lawsuits, impairments of long-lived and intangible assets and other amounts that may be reflected in the current or prior year financial statements that relate to prior periods.

Our Same Facility basis results reflected on the tables below also exclude from net revenues and other operating expenses, provider tax assessments incurred in each period as discussed below Sources of Revenue-Summary of Various State Medicaid Supplemental Payment Programs.

Our Same Facility basis results reflected on the table below also exclude from net revenues and other operating expenses, provider tax assessments incurred in each period as discussed below Sources of Revenue-Summary of Various State Medicaid Supplemental Payment Programs.

However, these provider tax assessments are included in net revenues and other operating expenses as reflected in the table below under All Acute Care Hospital Services .

The provider tax assessments had no impact on the income before income taxes as reflected on the tables below since the amounts offset between net revenues and other operating expenses.

Prior year amounts related to certain facilities previously included in our Behavioral Health Care Services’ results have been reclassified into our Acute Care Hospital Services' results as of May 1, 2024 to conform with current year presentation.

To obtain a complete understanding of our financial performance, the Same Facility results should be examined in connection with our net income as determined in accordance with U.S.

GAAP and as presented in the consolidated financial statements and notes thereto as contained in this Annual Report on Form 10-K.

GAAP and as presented in the condensed consolidated financial statements and notes thereto as contained in this Annual Report on Form 10-K.

The following table summarizes the results of operations for our acute care hospital services on a Same Facility basis and is used in the discussions below for the years ended December 31, 2025 and 2024 (dollar amounts in thousands):

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During 2025, as compared to 2024, net revenues from our acute care hospital services, on a Same Facility basis, increased by $733 million or 8.5%.

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

revenues during 2023.

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

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

Income before income taxes (and before income attributable to noncontrolling interests) increased by $273 million, or 32%, amounting to $1.13 billion, or 12.1% of net revenues during 2025, as compared to $855 million, or 10.0% of net revenues during 2024.

During 2025, net revenue per adjusted admission increased by 5.4% while net revenue per adjusted patient day increased by 6.8%, as compared to 2024.

During 2025, as compared to 2024, inpatient admissions to our acute care hospitals increased by 1.3% while adjusted admissions increased by 1.6%.

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

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

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

Patient days at these facilities remained relatively flat and adjusted patient days increased by 0.3% during 2025, as compared to 2024.

During each of the years ended December 31, 2025 and 2024, the average length of inpatient stay at these facilities was 4.8 days and the occupancy rate, based on the average available beds at these facilities, was 67%.

Included in our acute care hospital services net revenues during 2025, as compared to 2024 (on a Same Facility basis), was a $176 million, or 32.6%, increase in net revenues generated by our commercial health insurer (due to an increase in membership).

On a Same Facility basis, during 2025, as compared to 2024, salaries, wages and benefits expense increased by $168 million, or 4.8%.

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

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

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

Contributing to the increase in salaries, wages and benefits was an increase in our patient volumes during 2025 as compared to 2024.

As a percentage of net revenues, salaries, wages and benefits expense decreased to 39.5% during 2025 as compared to 41.0% during 2024.

Other operating expenses increased by $280 million, or 11.7%, during 2025 as compared to 2024.

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

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

Operating expenses incurred by our commercial health insurer, consisting primarily of medical costs, increased by $177 million, or 34.6% (due primarily to an increase in membership), during 2025 as compared to 2024.

In addition, as discussed above in Results of Operations-Adjustments to Self-Insured Professional and General Liability Reserves , included in the other operating expenses of our acute care hospital services during 2025, as compared to 2024, was a $27 million decrease in the adjustments made to our self-insured professional and general liability reserves that was applicable to our acute care facilities.

Excluding these expense items from each year, other operating expenses increased by $130 million, or 7.1%.

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

Contributing to the increase during 2025, as compared to 2024, was a $49 million, or 7.8%, increase in physician expenses incurred at certain hospitals.

As a percentage of net revenues, other operating expenses increased to 28.6% during 2025, as compared to 27.8% during 2024.

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

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

(iii) certain other amounts including the operating results of recently opened/acquired facilities and businesses.

Dollar amounts below are reflected in thousands.

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During 2025, as compared to 2024, net revenues from our acute care hospital services increased by $982 million, or 11.0%, due to:

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

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

expenses), and;

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

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

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

(i) the $733 million, or 8.5% increase in Same Facility revenues, as discussed above, and;

(ii) an other combined net increase of $249 million consisting primarily of $182 million of combined net revenue increases at two new acute care hospitals, as mentioned above, and a $59 million increase in provider tax assessments.

Income before income taxes increased by $207 million, or 25%, to $1.05 billion, or 10.5% of net revenues during 2025, as compared to $840 million, or 9.4% of net revenues during 2024.

The increase resulted primarily from:

(i) the $273 million, or 32%, increase in income before income taxes from our acute care hospital services, on a Same Facility basis, as discussed above, partially offset by;

(ii) a $49 million pre-tax loss incurred during 2025 at Cedar Hill Regional Medical Center, and;

(iii) an $18 million legal reserve established during 2025 (third quarter) in connection with the verdict in the Pinnacle litigation in Washoe County, Nevada, against certain subsidiaries of ours, as disclosed herein.

During 2025, as compared to 2024, salaries, wages and benefits expense increased by $274 million, or 7.8%.

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

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

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

The increase was due primarily to the above-mentioned $168 million increase related to our acute care hospital services, on a Same Facility basis, as well as the salaries, wages and benefits expense incurred at the two above-mentioned new acute care hospitals.

Other operating expenses increased by $433 million, or 15.8%, during 2025 as compared to 2024.

The increase was due to:

(i) the $280 million above-mentioned increase related to our acute care hospital services, on a Same Facility basis;

(ii) a $59 million increase in provider tax assessments;

(iii) a combined increase of $75 million in operating expenses incurred at the two above-mentioned new acute care hospitals, and;

(iv) the above-mentioned $18 million legal reserve established during 2025.

Supplies expense increased by $65 million, or 4.8%, during 2025 as compared to 2024.

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

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

The increase was due to the above-mentioned $37 million increase related to our acute care hospital services, on a Same Facility basis, as well as the supplies expense incurred at the two above-mentioned new acute care hospitals.

Behavioral Health Care Services

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Behavioral Health Care Services-Same Facility Basis

We believe that providing our results on a “Same Facility” basis (which is a non-GAAP measure), which includes the operating results for facilities and businesses operated in both the current year and prior year periods, is helpful to our investors as a measure of our operating performance.

We believe that providing our results on a Same Facility basis, which includes the operating results for facilities and businesses operated in both the current year and prior year periods, is helpful to our investors as a measure of our operating performance.

Our Same Facility results also neutralize (if applicable) the effect of items that are non-operational in nature including items such as, but

not limited to, gains/losses on sales of assets and businesses, impacts of settlements, legal judgments and lawsuits, impairments of long-lived and intangible assets and other amounts that may be reflected in the current or prior year financial statements that relate to prior periods.

Our Same Facility basis results reflected on the table below also excludes from net revenues and other operating expenses, provider tax assessments incurred in each period as discussed below Sources of Revenue-Summary of Various State Medicaid Supplemental Payment Programs.

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The provider tax assessments had no impact on the income before income taxes as reflected on the tables below since the amounts offset between net revenues and other operating expenses.

To obtain a complete understanding of our financial performance, the Same Facility results should be examined in connection with our net income as determined in accordance with U.S.

GAAP and as presented in the consolidated financial statements and notes thereto as contained in this Annual Report on Form 10-K.

GAAP and as presented in the condensed consolidated financial statements and notes thereto as contained in this Annual Report on Form 10-K.

The following table summarizes the results of operations for our behavioral health care services, on a Same Facility basis, and is used in the discussions below for the years ended December 31, 2025 and 2024 (dollar amounts in thousands):

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During 2025, net revenue per adjusted admission increased by 7.5% while net revenue per adjusted patient day increased by 6.8%, as compared to 2024.

During 2024, as compared to 2023, inpatient admissions and adjusted admissions to our behavioral health care hospitals increased by 1.0% and 0.7%, respectively.

During 2025, as compared to 2024, inpatient admissions to our behavioral health care hospitals increased by 0.4% and adjusted admissions increased by 0.2%.

Patient days at these facilities increased by 1.1% and adjusted patient days increased by 0.9% during 2025, as compared to 2024.

The average length of inpatient stay at these facilities was 13.7 days and 13.6 days during 2025 and 2024, respectively.

The occupancy rate, based on the average available beds at these facilities, was 73% and 72% during 2024 and 2023, respectively.

On a Same Facility basis during 2024, as compared to 2023, salaries, wages and benefits expense increased $245 million or 7.3%.

During each of the years ended December 31, 2025 and 2024, the occupancy rate, based on the average available beds at these facilities, was 73%.

On a Same Facility basis during 2025, as compared to 2024, salaries, wages and benefits expense increased by $302 million or 8.4%.

The increase during 2025, as compared to 2024, was due to a 4.7% increase in salaries, wages and benefits expense per average full time equivalent employee, as well as a 3.5% increase in the average number of full-time equivalent employees.

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

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

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

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

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

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

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

As a percentage of net revenues during each quarter, salaries, wages and benefits expense increased to 54.0% during 2025 as compared to 53.6% during 2024.

Other operating expenses increased by $75 million, or 5.9%, during 2025 as compared to 2024.

As a percentage of net revenues, other operating expenses decreased to 18.6% during 2025 as compared to 19.0% during 2024.

Supplies expense increased by $6 million, or 2.6%, during 2025 as compared to 2024.

As a percentage of net revenues, supplies expense decreased slightly to 3.3% during 2025 as compared to 3.4% during 2024.

All Behavioral Health Care Services

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

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

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

Dollar amounts below are reflected in thousands.

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During 2025, as compared to 2024, net revenues generated from our behavioral health services increased by $552 million, or 8.0%.

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

The increase was primarily attributable to the above-mentioned $516 million, or 7.7%, increase in net revenues at our behavioral health facilities, on a Same Facility basis, as well as a $36 million increase in provider tax assessments.

Income before income taxes increased by $105 million, or 7.7%, to $1.46 billion, or 19.7% of net revenues during 2025, as compared to $1.36 billion, or 19.7% of net revenues during 2024.

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

The increase in income before income taxes at our behavioral health facilities during 2025, as compared to 2024, was primarily attributable to the $119 million, or 8.8% increase in income before income taxes generated at our behavioral health facilities, on a Same Facility basis, partially offset by the losses incurred at recently opened, closed or divested facilities.

During 2025, as compared to 2024, salaries, wages and benefits expense increased by $303 million or 8.4%.

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Other operating expenses increased by $123 million, or 8.5%, during 2025 as compared to 2024.

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

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

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

The increase was due primarily to the above-mentioned $75 million, or 5.9%, increase related to our behavioral health facilities, on a Same Facility basis, as well as $48 million of other combined net increases consisting primarily of increased provider tax assessments.

Supplies expense increased by $6 million, or 2.6%, during 2025 as compared to 2024.

Sources of Revenue

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

Indications from recent federal and state legislation are that this trend will continue.

Indications from recent federal and state legislation are that this trend will

Collection of amounts due from individuals is typically more difficult than from governmental or business payers which unfavorably impacts the collectability of our patient accounts.

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

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

Legislation adopted on July 4, 2025, One Big Beautiful Bill Act (“OBBBA”) of 2025”, will have the effect of substantially decreasing federal funding for state Medicaid Programs.

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

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

In 2010, the Patient Protection and Affordable Care Act, as amended by the Health and Education Reconciliation Act (collectively, the “Legislation”) was enacted and its two primary goals were to provide for increased access to coverage for healthcare and to reduce healthcare-related expenses.

The Legislation revised reimbursement under the Medicare and Medicaid programs to emphasize the efficient delivery of high-quality care and contains a number of incentives and penalties under these programs to achieve these goals.

The Legislation provides for reductions to Medicaid DSH payments which are scheduled to begin in 2025.

In 2010, the Patient Protection and Affordable Care Act, as amended by the Health and Education Reconciliation Act (collectively, the “ACA”) was enacted and its two primary goals were to provide for increased access to coverage for healthcare and to reduce healthcare-related expenses.

The ACA revised reimbursement under the Medicare and Medicaid programs to emphasize the efficient delivery of high-quality care and contains a number of incentives and penalties under these programs to achieve these goals.

The ACA provides for reductions to Medicaid DSH payments which are now scheduled to begin in federal fiscal year 2028.

Supreme Court ruling limited the federal government’s ability to expand health insurance coverage by holding unconstitutional sections of the Legislation that sought to withdraw federal funding for state noncompliance with certain Medicaid coverage requirements.

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

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

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

President Trump, who favored work and community engagement requirements in his first administration, sought and obtained legislation under the OBBBA that applies such requirements to a significant percentage of Medicaid program beneficiaries.

We anticipate this change will lead to reductions in Medicaid coverage and likely increases in uncompensated care.

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

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

The decision was appealed to the U.S.

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

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

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

Supreme Court.

The outcome and impacts of this litigation cannot be predicted.

The decision was ultimately appealed to the U.S.

Supreme Court, which in its June 2025 Kennedy v.

Braidwood Management decision, opined in favor of HIV preventive care coverage.

The impact of this decision on us cannot be predicted.

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

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

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

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

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

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

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

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

The Legislation also expanded the Recovery Audit Contractor program

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

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

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

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

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

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

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

The Inflation Reduction Act (IRA)’s extension of subsidies through 2025 increased exchange enrollment in years subsequent to 2021.

These enhanced subsidies expired on December 31, 2025.

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

Any such future repeal or replacement may have significant impact on the reimbursement for healthcare services generally, and may create reimbursement for services competing with the services offered by our hospitals.

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

For additional disclosure related to our revenues including a disaggregation of our consolidated net revenues by major source for each of the periods presented herein, please see Note 10 to the Consolidated Financial Statements-Revenue Recognition .

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Generally, however, the percentage increases in the MS-DRG payments have been lower than the projected increase in the cost of goods and services purchased by hospitals.

In July, 2025, CMS published its IPPS 2026 final payment rule which provides for a 3.3% market basket increase to the base Medicare MS-DRG blended rate.

When statutorily mandated budget neutrality factors, annual geographic wage index updates, documenting and coding adjustments, and adjustments mandated by the Legislation are considered (including a -0.7% productivity adjustment offset), without consideration for the required Medicare DSH payments changes and increase to the Medicare Outlier threshold, the overall increase in IPPS payments is approximately 1.0%.

Instead of applying a state-level rural floor budget neutrality adjustment to the wage index, the final rule has applied a uniform, national budget neutrality adjustment to the FY 2026 wage index for the rural floor.

Nevada will be subject to a 5.0% reduction in the wage index adjustment as a result of a decrease in the wage index rural floor in that state.

Including DSH payments, a decrease to the Medicare Outlier threshold and certain other adjustments, we estimate our overall increase from the final IPPS 2026 rule (covering the period of October 1, 2025 through September 30, 2026) will approximate 2.7%.

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

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

approximately 1.8%.

When statutorily mandated budget neutrality factors, annual geographic wage index updates,

documenting and coding adjustments, and adjustments mandated by the Legislation are considered, without consideration for the required Medicare DSH payments changes and increase to the Medicare Outlier threshold, the overall increase in IPPS payments is approximately 1.8%.

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

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Including DSH payments, an increase to the Medicare Outlier threshold and certain other adjustments, we estimate our overall increase from the final IPPS 2024 rule (covering the period of October 1, 2023 through September 30, 2024) will approximate 5.4%.

In August, 2022, CMS published its IPPS 2023 final payment rule which provides for a 4.1% market basket increase to the base Medicare MS-DRG blended rate.

When statutorily mandated budget neutrality factors, annual geographic wage index updates, documenting and coding adjustments, and adjustments mandated by the Legislation are considered, without consideration for the required Medicare DSH payments changes and increase to the Medicare Outlier threshold, the overall increase in IPPS payments is approximately 4.6.%.

Including DSH payments, an increase to the Medicare Outlier threshold and certain other adjustments, we estimate our overall increase from the final IPPS 2023 rule (covering the period of October 1, 2022 through September 30, 2023) will approximate 4.4%.

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

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

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The Psych PPS also contains provisions for outlier payments and an adjustment to a psychiatric hospital’s base payment if it maintains a full-service emergency department.

In August, 2025, CMS published its Psych PPS final rule for the federal fiscal year 2026.

Under this final rule, payments to our behavioral health care hospitals and units from the market basket update are estimated to increase by 2.5% compared to federal fiscal year 2025.

This amount includes the effect of the 3.2% net market basket update which reflects the offset of a 0.7% productivity adjustment.

When all of the final patient level adjustments described below as well as proposed wage index values are considered, we estimate that Psych PPS payments will increase by 1.7% in FFY 2026.

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

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

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

We are in compliance with this CMS billing requirement.

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

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This amount includes the effect of the 3.5% net market basket update which reflects the offset of a 0.2% productivity adjustment.

In July, 2022, CMS published its Psych PPS final rule for the federal fiscal year 2023.

Under this final rule, payments to our behavioral health care hospitals and units are estimated to increase by 3.8% compared to federal fiscal year 2022.

This amount includes the effect of the 4.1% net market basket update which reflects the offset of a 0.3% productivity adjustment.

In November, 2025, CMS issued its OPPS final rule for 2026.

The hospital market basket increase is 3.3% and the productivity adjustment reduction is 0.7% for a net market basket increase of 2.6%.

When other statutorily required adjustments (including a 0.5% reduction for the 340B remedy discussed below) and hospital patient service mix are considered, we estimate that our overall Medicare OPPS update for 2026 will aggregate to a net increase of 2.0%

Some key changes in the 2026 OPPS final rule include:

340B Remedy Recoupment:

CMS anticipates shortening the 340B Remedy recoupment transition from the previously established 16-year schedule beginning 2027;

however the revised duration has not yet been determined.

A 2023 CMS final rule had implemented a negative OPPS recoupment adjustment of 0.5 percent for approximately 16 years to offset $7.8 billion paid to hospitals for non-drug OPPS payments between 2018 and 2022 – following the US Supreme Court decision overturning the Trump Administration’s 340B reduction policy.

CMS will maintain the annual offset of 0.5 percent in CY 2026 with a plan to increase the reduction amount above the 0.5% in CY 2027 and with an unspecified reduction to remain in effect until the estimated payment reduction reaches $7.8 billion.

Eliminating the Inpatient Only (IPO) List:

CMS will phase out the IPO list over a 3-year period, beginning with removing 285 mostly musculoskeletal procedures for CY 2026.

Procedures removed from the IPO list would be exempted from certain medical review activities related to the two-midnight policy for CY 2026 and subsequent years until CMS determines the service or procedure is more commonly performed in the Medicare population in the outpatient setting.

For CY 2026, the Company expects the impact to be immaterial.

For CY’s 2027 and later, the estimated potential financial impact to the Company cannot be determined until future CMS rulemaking process related to changes in the IPO list occurs.

On November 2, 2023, in light of the Supreme Court’s decision in American Hospital Association v.

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Because CMS is now making additional payments to affected 340B covered entity hospitals to pay them what they would have been paid had the 340B policy never been implemented, CMS will make a corresponding offset to maintain budget neutrality as if the 340B payment policy had never been in effect.

To carry out this required $7.8 billion budget neutrality adjustment, CMS will reduce future non-drug item and service payments by adjusting the OPPS conversion factor by minus 0.5% starting in calendar year 2026 and continuing for 16 years.

The impact of this 0.5% reduction on our 2026 results of operations is approximately $4 million.

However, as discussed above and as noted in the 2026 OPPS final rule, CMS is likely to shorten the recovery period of the $7.8 billion to less than 17 years starting in calendar year 2027 to a currently unspecified reduction to non-drug item and service payments.

In November, 2024, CMS issued its OPPS final rule for 2025.

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This percentage reflects the impact resulting from rural floor changes to the Medicare wage index adjustment factor where certain states, such as California and Nevada, will materially benefit from this change.

In November, 2022, CMS issued its OPPS final rule for 2023.

The hospital market basket increase is 4.1% and the productivity adjustment reduction is -0.3% for a net market basket increase of 3.8%.

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

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

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

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

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

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

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

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

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

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

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

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

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

Medicare Advantage Payment Annual Update:

On January 26, 2026, CMS released the calendar year 2027 ("CY 2027") Advance Notice of Methodological Changes for Medicare Advantage (“MA”) Capitation Rates ("Advance Notice").

The proposed policies in the CY 2027 Advance Notice are projected to result in a net average year-over-year payment increase of 0.09% in MA payments to plans in CY 2027.

When considering estimated risk score trend in MA driven by coding practices and population changes, the expected average change in payments will be 2.54%.

For CY 2027, CMS expects the MA risk scores to increase, on average, by 2.45% due to the underlying coding trend.

The CY 2027 rate announcement will be published no later than April 6, 2026.

In April, 2025, the CMS released the calendar year 2026 ("CY 2026") rate announcement for the MA that finalizes the payment policies for this program.

Payments from the government to MA plans are expected to increase on average by 5.06% from 2025 to 2026 excluding the CMS estimate of Medicare Advantage risk score trend.

This change represents an increase of 2.83% since the CY 2026 announcement, which is largely attributable to an increase in the effective growth rate.

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

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

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

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However, the Supreme Court has struck down portions of the Legislation requiring states to expand their Medicaid programs in exchange for increased federal funding.

Accordingly, many states in which we operate have not expanded Medicaid coverage to individuals at 133% of the federal poverty level.

Accordingly, many states in which we operate have not expanded Medicaid coverage to

individuals at 133% of the federal poverty level.

Facilities in states not opting to expand Medicaid coverage under the Legislation may be additionally penalized by corresponding reductions to Medicaid disproportionate share hospital payments beginning in fiscal year 2024, as discussed below.

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Summary of Various State Medicaid Supplemental Payment Programs:

As noted elsewhere herein, the OBBBA has specific legislative language that will reduce Medicaid supplemental payments as well as limit Provider Taxes used by states to finance the non-federal share of Medicaid supplemental payments.

The following table summarizes the revenues, healthcare provider taxes (“Provider Taxes”) and net benefit related to each of the below-mentioned Medicaid supplemental programs for the years ended December 31, 2025 and 2024.

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

A CHIRP preprint for the rate period September 1, 2025 to August 31, 2026 was approved by CMS in August, 2025 with a pool size of $9.2 billion.

This program is estimated to increase reimbursement to our hospitals by approximately $20 million to $23 million in program year 2026.

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

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

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

We expect our net reimbursements pursuant to HARP to approximate $19 million during the year ended December 31, 2026.

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

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

There can be no assurance that the

Medicaid managed care component of the Nevada SDP will continue for any period after December 31, 2025, or that it will not be modified.

The Nevada SDP (as revised in February, 2026) for the period of January 1, 2025 through December 31, 2025 has been approved by CMS.

In connection with this program, included in our results of operations was approximately $228 million and $194 million recorded during the years ended December 31, 2025 and 2024, respectively.

We estimate that our aggregate net reimbursements pursuant to both components of the Nevada SDP program (net of related provider taxes) will approximate $296 million during the year ended December 31, 2026.

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

Approximately $30 million of this amount relates to the period of January 1, 2025 to December 31, 2025.

Various Other State Programs:

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In connection with this program, included in our results of operations was approximately $94 million and $88 million during the years ended December 31, 2025 and 2024, respectively.

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

In February, 2026, CMS approved the program for the period of January 1, 2026 through December 31, 2026 whereby the HIRP pool size will increase from $2.4 billion to $2.8 billion.

We estimate that our net reimbursements pursuant to HRIP will approximate $109 million during the year ended December 31, 2026.

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Approved through December 31, 2024;

Paid through September 30, 2024

Paid through December 31, 2024

Managed Care-Pass-Through Payment

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In connection with this program, included in our results of operations was $68 million and $47 million during the years ended December 31, 2024 and 2023, respectively.

During the first quarter of 2025, the Department of Health Care Services submitted a final draft of the Hospital Quality Assurance Fee program 9 fee to CMS for approval for the period January 1, 2025 to December 31, 2025 and a subsequent amendment in July 2025.

This submission includes the Managed Care-Directed Payment preprint.

We are unable to predict the outcome, amount or timing of any related increase that may result from this submission.

We estimate that our net reimbursements pursuant to this program will approximate $68 million during the year ended December 31, 2026.

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

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

In June 2024, CMS approved the MHAP program component for the period

July 1, 2024 to June 30, 2025.

The UPL component was approved in April, 2024.

In September 2025, CMS approved the MHAP program component for the period July 1, 2025 to June 30, 2026.

The UPL component was approved in April 2024.

In connection with this program, included in our results of operations was approximately $55 million and $48 million recorded during the years ended December 31, 2025 and 2024, respectively.

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

The submitted DPP preprint includes a request to increase the size of the program and related DPP add-on payment levels based on a percentage of average commercial rates.

If approved as submitted, we estimate that the aggregate net benefit applicable to our facilities could increase by approximately $47 million on an annual basis.

This incremental increase to the Florida DPP program is not reflected in the above Medicaid Supplemental Provider Tax table.

Illinois Medicaid Supplemental Payment Programs

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

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

In connection with this program, included in our results of operations was approximately $32 million and $31 million recorded during the years ended December 31, 2025 and 2024, respectively.

We estimate that our net reimbursements pursuant to this program will approximate $34 million during the year ended December 31, 2026.

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

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

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

CMS approval of the DPP program for the period July 1, 2025 to June 30, 2026 is pending.

In connection with this program, included in our results of operations was approximately $26 million and $20 million recorded during the years ended December 31, 2025 and 2024, respectively.

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

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

In December 2025, CMS approved the period July 1, 2025 to June 30, 2026.

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

managed care encounters.

In connection with this program, included in our results of operations was approximately $30 million and $28 million recorded during the years ended December 31, 2025 and 2024, respectively.

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We estimate that our net reimbursements pursuant to this program will approximate $45 million during the year ended December 31, 2026.

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

The Michigan DPP for the period of October 1, 2024 to September 30, 2025 was approved by CMS.

Idaho Upper Payment Limit (“UPL”)

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

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

We are unable to predict whether payments levels under the planned new state directed payment program or a continuation of the UPL program in SFY 2026 will be comparable to the SFY 2025 UPL payment levels.

In connection with this program, included in our results of operations was approximately $25 million and $31 million recorded during the years ended December 31, 2025 and 2024, respectively.

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We estimate that our net reimbursements pursuant to this expanded program will approximate $40 million during the year ended December 31, 2026.

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

The program for the period of January 1, 2025 to December 31, 2025 was approved by CMS.

New Mexico State Directed Payment Program (“SDP”)

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

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

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

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

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

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

The New Mexico SDP for the period of January 1, 2025 to December 31, 2025 was approved by CMS.

In connection with this program, included in our results of operations was approximately $30 million and $8 million recorded during the years ended December 31, 2025 and 2024, respectively.

We estimate that our net reimbursements pursuant to this program will approximate $22 million during the year ended December 31, 2026.

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

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

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

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

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

In addition, the DPP program for calendar year 2025 (January 1, 2025 to December 31, 2025) was approved by CMS in April, 2025, also contingent upon CMS' approval of the state's 1115 Medicaid Waiver amendment which was approved by CMS in June, 2025.

In connection with this program, included in our results of operations was approximately $92 million and $10 million recorded during the years ended December 31, 2025 and 2024, respectively.

$29 million of the 2025 recorded amount relates to the period July 1, 2024 to December 31, 2024.

We estimate that our net reimbursements pursuant to this program will approximate $50 million during the year ended December 31, 2026.

Washington, D.C.

State Directed Payment program (“SDP”)

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

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

Finalization of this program remains contingent upon U.S.

Congressional and CMS approval.

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

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

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

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

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

In September, 2025, CMS approved the SDP program for the period October 1, 2024 to September 30, 2025.

This SDP program provides for an add-on to in-network Medicaid managed care paid claims.

In connection with this program, included in our results of operations was approximately $114 million recorded during the year ended December 31, 2025.

We estimate that our net reimbursements pursuant to this program will approximate $107 million during the year ended December 31, 2026.

Ohio Medicaid Managed Care DPP

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

In connection with this program, included in our results of operations was approximately $18 million and $22 million recorded during the years ended December 31, 2025 and 2024, respectively.

We estimate that our net reimbursements pursuant to this program will approximate $50 million during the year ended December 31, 2026, approximately $16 million of which relates to the period January through December, 2025.

Texas DSH and Nevada SPA Programs:

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We estimate that our aggregate net reimbursements earned pursuant to the Texas DSH program will approximate $21 million during the year ended December 31, 2026.

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

The ACA and subsequent federal legislation provides for a significant reduction in Medicaid disproportionate share payments beginning in federal fiscal year 2028 (see above in Sources of Revenues and Health Care Reform-Medicaid for additional disclosure related to the delay of these DSH reductions).

HHS is to determine the amount of Medicaid DSH payment cuts imposed on each state based on a defined methodology.

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Based on the CMS final rule published in September, 2019 (as amended by the CARES Act and the CAA), beginning in fiscal year 2026, annual Medicaid DSH payments in Texas could be reduced by approximately 33% from current DSH payment levels.

However, states have discretion in the allocation of their respective federal DSH allotment and we do not believe the state's allocation will result in a material decrease to DSH payment levels to our hospitals located in Texas.

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

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CMS initially approved an SPA in Nevada in August, 2014 and this SPA has been approved for additional state fiscal years, including the 2024 fiscal year covering the period of July 1, 2023 through June 30, 2024.

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

CMS approval for the 2025 and 2026 fiscal years, which is still pending, is expected to occur.

In connection with this program, included in our results of operations was approximately $18 million and $17 million recorded during the years ended December 31, 2025 and 2024, respectively.

We estimate that our net reimbursements pursuant to this program will approximate $17 million during the year ended December 31, 2026.

Risk Factors Related To State Supplemental Medicaid Payments:

Legislation Commonly Known as the One Big Beautiful Bill Act ("OBBBA")

The OBBBA was enacted into law on July 4, 2025.

This legislation includes material changes to the Medicaid program and other healthcare related programs including but not limited to:

Medicaid State Directed Payments (“SDP”)

• In states that expanded their Medicaid programs under the ACA ("Expansion States"), the SDP payment rate is capped at 100% of Medicare.

• For states that did not expand Medicaid under the ACA ("Non-Expansion States"), the SDP rate is capped at 110% of Medicare.

• These provisions grandfathered SDP programs already in existence or pending approval from CMS.

Beginning with the 2028 state fiscal years, SDP provisions pursuant to the OBBBA are being phased in whereby grandfathered payment plans will be reduced by no more than 10% annually until the applicable Medicare rate is reached.

Limits on Provider Taxes

• Prior law capped Provider Taxes at 6% of net patient revenue.

The new law reduces the percentage of revenue that can be taxed as a Provider Tax.

• The Provider Tax provisions pursuant to the OBBBA are largely being phased in over a 5-year period.

• In Expansion States, beginning with the 2028 state fiscal years, this percentage will be reduced by 0.5% each year until it reaches 3.5%.

In Non-Expansion States, the Provider Tax percentage will remain unchanged.

• Establishes new discretion for CMS to refuse waivers of Provider Tax uniformity requirement.

• In January 2026, CMS issued its Medicaid Provider Tax Rule final rule changing how state provider taxes are evaluated for compliance with federal requirements.

Transition periods for state compliance with the new requirements will vary based on state specific circumstances.

We are unable to determine the financial impact on our future Medicaid supplemental payments.

Rural Health Transformation Program

• Establishes a $50 billion rural health grant program for states between fiscal years 2026 and 2030 to be used for payments to rural health facilities.

50% of the fund will go to states equally and 50% will be allocated based on a rural formula determined by the HHS Secretary.

• In December 2025, The Centers for Medicare & Medicaid Services (CMS) announced that all 50 states will receive awards under the Rural Health Transformation Program.

In 2026, states will receive first-year awards from CMS averaging $200 million within a range of $147 million to $281 million.

The state of Texas received the highest award amount.

• Although certain of our hospitals that are designated by CMS as rural may be eligible for reimbursement pursuant to this fund, we are unable to predict if any of our facilities will ultimately qualify for reimbursement and are therefore unable to quantify any potential favorable impact on our future results of operations.

Medicaid Eligibility:

• Institutes an 80-hour a month work requirement for all Medicaid individuals ages 19-64 at least every 6 months, with some exceptions.

• Requires states to conduct eligibility redeterminations at least every 6 months for Medicaid expansion adults effective no later than January 1, 2027.

• Although we cannot predict the potential unfavorable impact on our future results of operations from these changes to Medicaid eligibility requirements, these changes could reduce the overall number of Medicaid enrollees thereby potentially decreasing our Medicaid revenues (including revenues earned pursuant to various state Medicaid supplemental payment programs) while potentially increasing the level of uncompensated care provided by our facilities.

As noted above, the OBBBA has specific legislative language that will reduce SDP payments as well as limit Provider Taxes used by states to finance the non-federal share of Medicaid supplemental payments.

However, certain OBBBA provisions that would impact payment levels could be subject to some interpretation by CMS and related future federal rulemaking such as the definition of an SDP grandfathered program.

Based upon our current 2025 full year net benefit related to various state Medicaid supplemental payment programs, amounting to approximately $1.339 billion, as reflected on the table above in Summary of Various State Medicaid Supplemental Payment

Programs, we estimate that, commencing with the 2028 state fiscal years, our aggregate annual net benefit will be reduced, on an annually increasing and relatively pro rata basis, by approximately $432 million to $480 million by 2032.

We cannot predict, among other things, if this legislation will ultimately be implemented as enacted, or if certain states may attempt to modify their respective SDP program in response to the OBBBA legislation.

Given the various uncertainties and evolving state-by-state interpretations and computations related to this legislation, our forecasted estimates are subject to change, potentially by material amounts

Other Risk Factors Related To State Supplemental Medicaid Payments:

As outlined above, we receive substantial reimbursement from multiple states in connection with various supplemental Medicaid payment programs.

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

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

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

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

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

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

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

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

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

Fee-For-Service Short-Doyle Medi-Cal (“SD/MC”) Hospitals Change In Payment Methodology:

Under the California Medicaid prepaid inpatient health plan program, counties are required to ensure delivery of mental health services utilizing a system of county operated and contract providers.

The California Medicaid program has adopted a new reimbursement method for inpatient psychiatric services with an effective date of December 12, 2023, incorporated a cost-based ceiling to negotiated rates.

This change may require renegotiation of contracts our hospitals have had with counties, retroactive to December 12, 2023, and may also impact prospective rate negotiations.

New California Medicaid rates could be materially lower than prior payment rates particularly if counties look to limit payment rates to a cost-based methodology rather than a market-based negotiated rate.

We are awaiting formal guidance from California as to the manner in which this change will be implemented and whether the reimbursement method will change prospectively.

Further, it is uncertain at this time whether and how counties will retroactively apply this change in method retroactively to December 12, 2023, given the previously negotiated payment terms.

We are unable to predict with certainty the impact of this SPA at this time.

However, under some scenarios, the adverse financial impact could be material.

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

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

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

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

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Medicaid Federal DSH Allotment

Although the implementation has been delayed several times, the Legislation (as amended by subsequent federal legislation) requires annual aggregate reductions in federal Medicaid DSH allotment from FFY 2025 through FFY 2027.

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

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

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

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

The ACA (amended by subsequent federal legislation) requires annual aggregate reductions in federal Medicaid DSH allotment.

In FFY 2028, DSH payments are scheduled to be reduced by $8 billion.

Value-Based Purchasing

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

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

data to receive full reimbursement updates.

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

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

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

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

As part of the

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

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

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

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

Such outbreaks may stress the capacity of all or a part of our health care facilities, could result in an abnormally high demand for health care services which may require that resources be diverted from one part of operations to another, or disrupt the supply chain for equipment and supplies necessary for operations.

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

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

Nevertheless, until final adjustments are

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

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

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

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Tranche A term loan, 2029 (a.)

$800 million, 2.65% Senior Notes due 2030

$700 million, 1.65% Senior Notes due 2026

$500 million, 2.65% Senior Notes due 2032

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

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

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

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

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

Subtotal - revolving credit, term loan A and Senior Notes

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

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

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

(ii) a $100 million increase in the revolving credit facility to $1.3 billion of aggregate borrowing capacity (which as of December 31, 2025, had $889 million of aggregate available borrowing capacity, net of $408 million of borrowings outstanding and $3 million of letters of credit), and;

(iii) a $1.0 billion reduction in the outstanding borrowings pursuant to the tranche A term loan facility, to $1.2 billion from $2.2 billion previously (which had $1.16 billion of outstanding borrowings as of December 31, 2025), utilizing the proceeds generated from the September, 2024, issuance of the below-mentioned senior notes due in 2029 and 2034.

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

(c.) In August, 2021, we completed the offering of $700 million aggregate principal amount of 1.65% Senior Notes due in 2026.

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

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

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

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

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

Interest expense decreased by $30 million, or 16%, during 2025 to $156 million as compared to $186 million during 2024.

The decrease was primarily due to:

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

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

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

(i) a net $35 million decrease in aggregate interest expense on our revolving credit, term loan A and senior notes, resulting from a decrease in our aggregate average cost of borrowings pursuant to these facilities (3.94% during 2025 as compared to 4.65% during 2024), as well as a decrease in the aggregate average outstanding borrowings ($4.40 billion during 2025 as compared to $4.47 billion during 2024), partially offset by;

(ii) a $5 million increase resulting from an decrease in capitalized interest on major projects.

The average effective interest rate, including amortization of deferred financing costs, on borrowings outstanding under our revolving credit, term loan A and senior notes, which amounted to approximately $4.40 billion as of 2025 and $4.47 billion as of 2024, were 4.1% during 2025 and 4.8% during 2024.

Provision for Asset Impairments

Our financial statements for the year ended December 31, 2022, include a pre-tax provision for asset impairment of approximately $58 million, which is included in other operating expenses on the accompanying consolidated statements of income, to write-down the asset value of Desert Springs Hospital Medical Center, a 282-bed acute care hospital located in Las Vegas, Nevada.

In early 2023, as a result of various competitive pressures and operational challenges experienced in the market, which had a significant unfavorable impact on the hospital's results of operations during the past year, as well as physical plant constraints and limitations resulting from the advanced age of the facility (which opened in 1971), we announced plans to discontinue all inpatient operations by March of 2023.

For a period of time, we plan to continue providing emergency department services within a portion of the existing facility while we construct a new free-standing emergency department on the hospital's campus.

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

Provision for Income Taxes and Effective Tax Rates

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The provision for income taxes increased $126 million during 2025, as compared to 2024, due primarily to:

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

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.

(i) the increase in the provision for income taxes resulting from the $474 million increase in income before income taxes, and;

(ii) a $12 million increase in the provision for income taxes due to a decrease in the net benefit recorded in connection with ASU 2016-09 ($4.2 million net benefit recorded during 2025 as compared to $15.9 million during 2024).

Excluding the impact of ASU 2019-09, our effective tax rates were 23.9% and 23.8% during 2025 and 2024, respectively.

Effects of Inflation and Seasonality

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This seasonality occurs because, generally, more people become ill during the winter months, which results in significant increases in the number of patients treated in our hospitals during those months.

Inflation — See disclosure above in Results of Operations-Clinical Staffing, Physician Related Expenses and Effects of Inflation.

Inflation — See disclosure above in Results of Operations-Clinical Staffing, Inflation, future Medicaid reductions and Tariffs.

Year ended December 31, 2025 as compared to December 31, 2024:

Net cash provided by operating activities

Net cash provided by operating activities was $2.067 billion during 2024 as compared to $1.268 million during 2023.

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

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

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

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

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

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

Net cash provided by operating activities was $1.864 billion during 2025 as compared to $2.067 billion during 2024.

The net decrease of $203 million was primarily attributable to the following:

• a favorable change of $300 million resulting from an increase in net income plus/minus depreciation and amortization expense, stock-based compensation expense, unrealized gain on non-marketable securities, losses/gains on sales of assets and businesses, and costs related to the extinguishment of debt;

• an unfavorable change of $385 million in accounts receivable (due, in part, to a $145 million increase in net receivables recorded in connection with various Medicaid supplemental payment programs and a $50 million increase in accounts receivable related to two relatively recently opened hospitals in Las Vegas, NV, and Washington, D.C.);

• an unfavorable change of $67 million in payments made in settlement of self-insurance claims, net of commercial insurance reimbursements, and;

• $51 million of other combined net unfavorable changes.

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Net cash used in investing activities

Net cash used in investing activities was $911 million during 2024 and $763 million during 2023.

Net cash used in investing activities was $1.071 billion during 2025 and $911 million during 2024.

The $1.071 billion of net cash used in investing activities during 2025 consisted of:

• $1.015 billion spent on capital expenditures including capital expenditures for equipment, renovations and new projects at various existing facilities;

• $63 million received in connection with the sale of certain equity securities;

• $52 million paid in connection with net cash outflows from forward exchange contracts that hedge our investment in the U.K.

against movements in exchange rates;

• $48 million spent on the acquisition of businesses and property, and;

• $25 million spent in connection with the purchase and development of an enterprise resource planning application;

• $16 million of proceeds received from sales of assets and businesses, and;

• $10 million spent in connection with our minority ownership interest in a healthcare generative artificial intelligence company.

The $911 million of net cash used in investing activities during 2024 consisted of:

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against movements in exchange rates;

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

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

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

against movements in exchange rates;

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

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

Net cash used in financing activities

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

Net cash used in financing activities was $750 million during 2025 and $1.145 billion during 2024.

The $750 million of net cash used in financing activities during 2025 consisted of the following:

• spent $968 million to repurchase shares of our Class B Common Stock in connection with:

(i) open market purchases pursuant to our stock repurchase program ($899 million), and;

(ii) income tax withholding obligations related to stock-based compensation programs ($69 million);

• generated $286 million of proceeds from additional borrowings as follows:

(i) $278 million pursuant to our revolving credit facility, and;

(ii) $8 million of proceeds related to other debt facilities;

• spent $44 million on net repayments of debt as follows:

(i) $30 million related to our tranche A term loan facility, and;

(ii) $14 million related to other debt facilities;

• generated $17 million from the issuance of shares of our Class B Common Stock pursuant to the terms of employee stock purchase plans;

• spent $51 million to pay quarterly cash dividends of $.20 per share;

• received $23 million, net of purchases, from the sale of ownership interests to minority members, and;

• spent $12 million to pay profit distributions related to noncontrolling interests in majority owned businesses.

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

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

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

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

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

(i) open market purchases pursuant to our stock repurchase program ($524 million), and;

(ii) income tax withholding obligations related to stock-based compensation programs ($23 million);

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

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

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

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

• generated $14 million from the issuance of shares of our Class B Common Stock pursuant to the terms of employee stock purchase plans;

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

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

2026 Expected Capital Expenditures:

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Credit Facilities and Outstanding Debt Securities

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.

In September 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;

(ii) a new revolving credit facility of up to $1.3 billion (which as of December 31, 2025, had $889 million of aggregate available borrowing capacity, net of $408 million of borrowings outstanding 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 $1.16 billion of outstanding borrowings as of December 31, 2025).

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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, 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.

We were in compliance with all required covenants as of December 31, 2025 and December 31, 2024.

As of December 31, 2025, we had combined aggregate principal of $3.0 billion from the following senior secured notes:

• $700 million of aggregate principal amount of 1.65% senior secured notes due in September, 2026 ("2026 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.

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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.

• $800 million of 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.

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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.

The 2026, 2029, 2030, 2032 and 2034 Notes (collectively "All the Notes") are guaranteed (the “Guarantees”) on a senior secured basis by all of our existing and future direct and indirect subsidiaries that guarantee our Credit Agreement, other first lien obligations, or any junior lien obligations (the "Subsidiary Guarantors").

All the Notes and the Guarantees are secured by first-priority liens, subject to permitted liens, on certain of the Company’s and the Subsidiary Guarantors’ assets now owned or acquired in the future by the Company or the Subsidiary Guarantors (other than real property, accounts receivable sold pursuant to 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).

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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, as amended, we, among other things, transferred to the Trust, the real estate assets of Aiken Regional Medical Center (“Aiken”) and Canyon Creek Behavioral Health (“Canyon Creek”).

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

As a result of our purchase option within the Aiken and Canyon Creek lease agreements, this asset purchase and sale transaction is accounted for as a failed sale leaseback in accordance with

In connection with an asset purchase and sale agreement, and related lease agreements, completed with Universal Health Realty Income Trust ("Trust") in December 2021, our consolidated balance sheets at December 31, 2025 and December 31, 2024 reflect financial liabilities, which are included in debt, of approximately $70 million and $74 million, respectively.

In connection with that transaction, as a result of our purchase option within the lease agreements related to two of our facilities, the asset purchase and sale

transaction was accounted for as a failed sale leaseback in accordance with U.S.

GAAP and we have accounted for the transaction as a financing arrangement.

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, 2024 and December 31, 2023 reflect financial liabilities, which are included in debt, of approximately $74 million and $77 million, respectively.

At December 31, 2025, the carrying value and fair value of our debt were approximately $4.8 billion and $4.6 billion, respectively.

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We consider these to be “level 2” in the fair value hierarchy as outlined in the authoritative guidance for disclosures in connection with debt instruments.

Our total debt as a percentage of total capitalization was approximately 40% at December 31, 2024 and 44% at December 31, 2023.

Our total debt as a percentage of total capitalization was approximately 40% at each of December 31, 2025 and December 31, 2024.

We expect to finance all capital expenditures and acquisitions and pay dividends and potentially repurchase shares of our common stock utilizing internally generated and additional funds.

Additional funds may be obtained through:

(i) borrowings under our existing revolving credit facility, which had $1.17 billion of available borrowing capacity as of December 31, 2024, or through refinancing the existing Credit Agreement;

(i) borrowings under our existing revolving credit facility, which had $965 million of available borrowing capacity as of December 31, 2025, or through refinancing the existing Credit Agreement;

(ii) the issuance of other short-term and/or long-term debt, and/or;

(iii) the issuance of equity.

Our $700 million, 1.65% senior notes ("2026 Notes") mature on September 1, 2026.

Market interest rates have increased significantly since the 2026 Notes were issued in 2021.

We expect that we will refinance the 2026 Notes at significantly higher interest rates which will significantly increase our interest expense thereby decreasing our net income attributable to UHS.

We believe that our operating cash flows, cash and cash equivalents, available commitments under existing agreements, as well as access to the capital markets, provide us with sufficient capital resources to fund our operating, investing and financing requirements for the next twelve months.

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We and our subsidiaries may be able to incur significant additional indebtedness in the future.

Although our Credit Agreement contains restrictions on the incurrence of additional indebtedness and our Credit Agreement and All the Notes contain restrictions on our ability to incur liens to secure additional indebtedness, these restrictions are subject to a number of qualifications and exceptions, and the additional indebtedness incurred in compliance with these restrictions could be substantial.

Although our Credit Agreement contains restrictions on the incurrence of additional indebtedness and our Credit Agreement and All the Notes contain restrictions on

our ability to incur liens to secure additional indebtedness, these restrictions are subject to a number of qualifications and exceptions, and the additional indebtedness incurred in compliance with these restrictions could be substantial.

These restrictions also will not prevent us from incurring obligations that do not constitute indebtedness.

In addition, if we incur any additional indebtedness secured by liens that rank equally with All the Notes, subject to collateral arrangements, the holders of that debt will be entitled to share

ratably with holders of All the Notes in any proceeds distributed in connection with any insolvency, liquidation, reorganization, dissolution or other winding up of our company.

In addition, if we incur any additional indebtedness secured by liens that rank equally with All the Notes, subject to collateral arrangements, the holders of that debt will be entitled to share ratably with holders of All the Notes in any proceeds distributed in connection with any insolvency, liquidation, reorganization, dissolution or other winding up of our company.

This may have the effect of reducing the amount of proceeds paid to holders of All the Notes.

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Due to non-guarantors

(1) Includes goodwill of $3,262 million and $3,267 million as of December 31, 2024 and 2023, respectively.

(1) Includes goodwill of $3,262 million as of December 31, 2025 and 2024.

The summarized results of operations information for the consolidated obligor group of debt issued by Universal Health Services, Inc.

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We have the right to repay borrowings upon short notice and without penalty, pursuant to the terms of the Credit Agreement.

(c) Our share of the estimated 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 third parties.

(c) Our share of the estimated construction cost of two behavioral health care facilities completed in 2025 that, subject to approval of certain regulatory conditions, we are required to build pursuant to joint-venture agreements with third parties.

In addition, we had various other projects under construction as of December 31, 2025.

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Some of the lease agreements provide us with the option to renew the lease and our future lease obligations would change if we exercised these renewal options.

In connection with these operating lease commitments, our consolidated balance sheet as of December 31, 2024 includes right of use assets amounting to $419 million and aggregate operating lease liabilities of $451 million ($75 million included in current liabilities and $376 million included in noncurrent liabilities).

In connection with these operating lease commitments, our consolidated balance sheet as of December 31, 2025 includes right of

use assets amounting to $379 million and aggregate operating lease liabilities of $414 million ($73 million included in current liabilities and $341 million included in noncurrent liabilities).

(f) Consists of $127 million of estimated future payments related to our non-contributory, defined benefit pension plan (estimated through 2080), as disclosed in Note 8 to the Consolidated Financial Statements , and $27 million of estimated future payments related to other retirement plan liabilities ($25 million of liabilities recorded in other non-current liabilities as of December 31, 2025 in connection with these retirement plans).

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Please see Self-Insured/Other Insurance Risks above for additional disclosure related to our professional and general liability claims and reserves.

During 2020, we entered into various agreements with the District of Columbia (the “District”) related to the development, leasing and operation of an acute care hospital (that is expected to be completed and opened in the Spring of 2025) and certain other facilities/structures on land owned by the District (“District Facilities”).

The agreements contemplate that we will serve as manager for development and construction of the District Facilities on behalf of the District, with a projected aggregate cost of approximately $439 million, approximately $344 million of which was incurred as of December 31, 2024, which is being entirely funded by the District.

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.

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”).

Pursuant to the agreements, on behalf of the District, we served as manager for development and construction of the District Facilities, which were funded entirely by the District.

The District Facilities had an aggregate cost of approximately $417 million, substantially all of which has been incurred as of December 31, 2025.

Construction of the acute care hospital (Cedar Hill Regional Medical Center) was completed and the hospital opened on April 15, 2025.

We are leasing the District Facilities for a nominal rental amount for a period of 75 years and are obligated to operate the District Facilities during the lease term.

We have certain lease termination rights in connection with the District Facilities beginning on the tenth anniversary of the lease commencement date for various and decreasing amounts as provided for in the agreements.

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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, 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 $21 million of which has been incurred as of December 31, 2025), 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.

This financial commitment is included in “Purchase and other obligations” as reflected on the contractual obligations table above.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis