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Item 9A. Controls and Procedures

2026-02-25 compared with 2025-02-26 · 299 added, 288 removed, 1365 unchanged (30% of the section changed)

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Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.

Also, projections of any evaluation of effectiveness of internal control over financial reporting to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Also, projections of any evaluation of effectiveness of internal control over financial reporting to future periods are subject to the risk that

controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Based on its assessment, management has concluded that we maintained effective internal control over financial reporting as of December 31, 2025, based on criteria in Internal Control—Integrated Framework (2013) , issued by the COSO.

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

Employment Agreement between Universal Health Services, Inc.

Miller dated as of December 23, 2020, previously filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K dated December 23, 2020, is incorporated herein by reference.

Amendment, dated as of March 23, 2022, to Employment Agreement, dated as of December 23, 2020, between Universal Health Services, Inc.

Miller, previously filed as Exhibit 10.2 to the Company’s Current Report on Form 8-K dated March 23, 2022, is incorporated herein by reference.

Employment Agreement between Universal Health Services, Inc.

Miller dated as of December 23, 2020, previously filed as Exhibit 10.2 to the Company’s Current Report on Form 8-K dated December 23, 2020, is incorporated herein by reference.

Amendment, dated as of March 23, 2022, to Employment Agreement, dated as of December 23, 2020, between Universal Health Services, Inc.

Miller, previously filed as Exhibit 10.3 to the Company’s Current Report on Form 8-K dated March 23, 2022, is incorporated herein by reference.

Master Lease Document between certain subsidiaries of Universal Health Services, Inc.

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

Employment Agreement dated March 19, 2025, between UHS of Delaware, Inc.

Miller, previously filed as Exhibit 10.2 to the Company’s Current Report on Form 8-K dated March 19, 2025, is incorporated herein by reference .

Guaranty Agreement dated March 19, 2025 between Universal Health Services, Inc.

Miller, previously filed as Exhibit 10.4 to the Company’s Current Report on Form 8-K dated March 19, 2025, is incorporated herein by reference.

Amended and Restated Employment Agreement dated December 30, 2025, between UHS Of Delaware, Inc.

Miller, previously filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K dated December 31, 2025, is incorporated herein by reference .

Guaranty Agreement dated March 19, 2025 between Universal Health Services, Inc.

Miller, previously filed as Exhibit 10.3 to the Company’s Current Report on Form 8-K dated March 19, 2025, is incorporated herein by reference .

Amendment, dated as of December 30, 2025, of the Guaranty Agreement dated as of March 19, 2025, by and between Universal Health Services, Inc., A Delaware corporation having its principal office at 367 South Gulph Road, King of Prussia, Pennsylvania 19406, and Marc D.

Miller, previously filed as Exhibit 10.2 to the Company’s Current Report on Form 8-K dated December 31, 2025, is incorporated herein by reference .

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

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Foreign currency translation adjustment

Other comprehensive income before tax

Other comprehensive income (loss) before tax

Income tax expense related to items of other

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Operating lease liabilities

Deferred grant revenue

Current federal and state income taxes

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Operating lease liabilities noncurrent

Deferred income taxes

Long-term debt

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Stock option expense

Reclass of noncontrolling interests to redeemable noncontrolling interests

Change in redemption amount of redeemable noncontrolling interest

Distributions to noncontrolling interests

Purchase of ownership interests by minority members

Purchase (sale) of ownership interests by (from) minority members

Comprehensive income:

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Stock option expense

Change in redemption amount of redeemable noncontrolling interest

Distributions to noncontrolling interests

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Stock option expense

Acquisition of noncontrolling interest in majority owned business

Distributions to noncontrolling interests

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Depreciation & amortization

(Gain) loss on sales of assets and businesses

Stock-based compensation expense

Unrealized gain on non-marketable securities

Loss (gain) on sales of assets and businesses

Costs related to extinguishment of debt

Provision for asset impairment

Changes in assets & liabilities, net of effects from acquisitions and

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Other working capital accounts

Deferred grant revenue

Other assets and deferred charges

Accrued insurance expense, net of commercial premiums paid

Payments made in settlement of self-insurance claims

Payments made in settlement of self-insurance claims, net of commercial insurance reimbursements

Deferred grant revenue

Net cash provided by operating activities

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Property and equipment additions

Acquisition of businesses and property

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

Proceeds received from sales of assets and businesses

Acquisition of businesses and property

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

Costs incurred for purchase and development of enterprise resource planning application

Proceeds received from sale of marketable equity securities

Investments in non-marketable securities

Decrease in capital reserves of commercial insurance subsidiary

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Profit distributions to noncontrolling interests

Purchase (sale) of ownership interests by (from) minority member

Purchase of ownership interests by minority members

Net cash used in financing activities

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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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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-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 t hat are subject to retrospective review and settlement as of December 31, 2024, would change our after-tax net income by approximately $ 2 million.

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.

See Note 10 - 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.

Charity Care, Uninsured Discounts and Other Adjustments to Revenue:

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At that time, an insurance eligibility determination is made and an insurance plan code is assigned.

There are various

pre-established insurance profiles in our patient accounting system which determine the expected insurance reimbursement for each patient based on the insurance plan code assigned and the services rendered.

There are various pre-established insurance profiles in our patient accounting system which determine the expected insurance reimbursement for each patient based on the insurance plan code assigned and the services rendered.

Certain patients may be classified as Medicaid pending at registration based upon a screening evaluation if we are unable to definitively determine if they are currently Medicaid eligible.

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Concentration of Revenues:

Our seven acute care hospitals and seven free-standing emergency departments in the Las Vegas, Nevada, market contributed, on a combined basis, 15 % in 2024, 14 % in 2023 and 15 % in 2022 of our consolidated net revenues.

Our eight acute care hospitals and nine free-standing emergency departments in the Las Vegas, Nevada, market contributed, on a combined basis, 15 % in both 2025 and 2024 and 14 % in 2023 of our consolidated net revenues.

Cash, Cash Equivalents and Restricted Cash:

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Construction-in-progress includes both construction projects and equipment not yet placed into service.

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.

We capitalized interest during the construction period of major construction projects and during the development and implementation of information technology applications amountin g to $ 33.6 million during 2025 , $ 38.9 million during 2024 and $ 24.4 million during 2023.

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(a) The changes in the Behavioral Health Services’ goodwill consist of foreign currency translation adjustments.

Other Assets and Intangible Assets:

Other Assets, Intangible Assets and Non-Marketable Securities:

Other assets consist primarily of amounts related to:

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(ii) prepaid fees for various software and other applications used by our hospitals;

(iii) costs incurred in connection with the purchase and implementation of an electronic health records application for each of our acute care facilities;

(iv) statutorily required capital reserves related to our commercial insurance subsidiary ($ 118 million and $ 113 million as of December 31, 2024 and 2023, respectively);

(v) deposits;

(vi) investments in various businesses, including Universal Health Realty Income Trust ($ 6 million and $ 7 million as of as of December 31, 2024 and 2023, respectively) and Premier, Inc.

($ 47 million and $ 50 million as of December 31, 2024 and 2023, respectively);

(vii) the invested assets related to a deferred compensation

plan that is held by an independent trustee in a rabbi-trust and that has a related payable included in other noncurrent liabilities, and;

(viii) other miscellaneous assets.

(iii) statutorily required capital reserves related to our commercial insurance subsidiary ($ 153 million and $ 118 million as of December 31, 2025 and 2024, respectively);

(iv) deposits;

(v) investments in various businesses, including Universal Health Realty Income Trust ($ 4 m illion and $ 6 million as of as of December 31, 2025 and 2024, respectively), Premier, Inc.

($ 47 million as of December 31, 2024;

in November, 2025 we sold all of our remaining shares in Premier Inc.) and non-marketable securities of a healthcare generative artificial intelligence company ($ 115 million and $ 12 million as of December 31, 2025 and 2024, respectively);

(vi) the invested assets related to a deferred compensation plan that is held by an independent trustee in a rabbi-trust and that has a related payable included in other noncurrent liabilities, and;

(vii) other miscellaneous assets.

The non-marketable securities that we hold are accounted for under the measurement alternative pursuant to which 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.

In connection with this investment, w e recorded an unrealized pre-tax gain of $ 93 million during the year ended December 31, 2025.

Intangible assets are reviewed for impairment on an annual basis or more often if indicators of impairment arise.

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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.

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

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

We operate in multiple jurisdictions with varying tax laws.

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

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

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

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

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

The noncontrolling interest and redeemable noncontrolling interest balances of $ 63 million and $ 71 million, respectively, as of December 31, 2025, consist primarily of the third-party ownership interests in these hospitals.

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

for $ 51 million.

We now have 100 % ownership interest in the hospital.

The noncontrolling interest balance was reclassified to retained earnings and is included in common stockholders’ equity in the accompanying consolidated balance sheets and in retained earnings in the accompanying consolidated statements of changes in equity.

In connection with the two behavioral health care facilities located in Pennsylvania and Ohio, the minority ownership interests of which are reflected as redeemable noncontrolling interests on our consolidated balance sheets, the outside owners have “put options” to put their entire ownership interest to us at any time.

In connection with certain of the behavioral health care facilities mentioned above, the outside owners have “put options” to potentially put their entire ownership interest to us either in the future upon the occurrence of certain triggering events (as specified in the agreements), or at the present time.

If exercised, the put option requires us to purchase the minority member’s interest at fair market value.

Accordingly, the amounts recorded as redeemable noncontrolling interests on our consolidated balance sheets reflect the estimated fair market value of these ownership interests.

Amounts recorded as redeemable noncontrolling interests on our condensed consolidated balance sheet as of December 31, 2025 reflect the estimated fair market value of the minority ownership interests that contain such put options.

Generally accepted accounting principles require that noncontrolling interests be classified as equity and we have presented noncontrolling interests in total equity.

However, since certain of our noncontrolling interests have redemption rights outside of our control, those noncontrolling interests are classified outside of permanent equity.

Noncontrolling interests with an estimated redemption amount of approximately $ 39 million has been reclassified from noncontrolling interest to redeemable noncontrolling interests as of December 31, 2025.

The minority owners of a 20 % interest in a behavioral health care facility located in Pennsylvania had previously exercised their put option and we purchased their ownership interest in April, 2025

Accumulated Other Comprehensive Income:

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We manage our ratio of fixed and floating rate debt with the objective of achieving a mix that management believes is appropriate.

To manage this risk in a cost-effective manner, we, from time to time, enter into interest rate swap agreements in which we agree to exchange various combinations of fixed and/or variable interest rates based on agreed upon notional amounts.

To manage this risk in a cost-effective manner, we, from time to time, enter into interest rate swap agreements in which

we agree to exchange various combinations of fixed and/or variable interest rates based on agreed upon notional amounts.

We account for our derivative and hedging activities using the Financial Accounting Standard Board’s (“FASB”) guidance which requires all derivative instruments, including certain derivative instruments embedded in other contracts, to be carried at fair value on the balance sheet.

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We have a number of stock-based employee compensation plans.

Pursuant to the FASB’s guidance, we expense the grant-date fair value of stock options and other equity-based compensation pursuant to the straight-line method over the stated vesting period of the award using the Black-Scholes option-pricing model.

Pursuant to the FASB’s guidance, we expense the grant-date fair value of restricted stock units and stock options (computed utilizing the Black-Scholes option-pricing model) pursuant to the straight-line method over the stated vesting period of the award.

The expense associated with share-based compensation arrangements is a non-cash charge.

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

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

The excluded weighted-average stock options totaled approximately 5,250 during 2025, 600,000 during 2024 and 5.1 million during 2023.

Fair Value of Financial Instruments:

The fair values of our debt and investments are based on quoted market prices.

The fair values of other long-term debt, including capital lease obligations, are estimated by discounting cash flows using period-end interest rates and market conditions for instruments with similar maturities and credit quality.

The fair values of other long-term debt, including capital lease obligations, are estimated by discounting cash flows using period-end interest

rates and market conditions for instruments with similar maturities and credit quality.

The carrying amounts reported in the balance sheets for cash, accounts receivable, accounts payable, and short-term borrowings approximates their fair values due to the short-term nature of these instruments.

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

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

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

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

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GPO Agreement/Minority Ownership Interest:

During 2013, we entered into a new group purchasing organization agreement (“GPO”) with Premier, Inc.

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

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

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

We recognized the fair value of this restricted stock, as a reduction to our supplies expense, in our consolidated statements of income, on a pro rata basis, over the vesting period.

During the third quarter of 2020, we entered into an agreement with Premier pursuant to the terms of which, among other things, our ownership interest in Premier was converted into shares of Class A Common Stock of Premier.

We have elected to retain a portion of the previously vested shares of Premier, the value of which is included in other assets on our consolidated balance sheets.

Based upon the closing price of Premier’s stock on each respective date, the market value of our shares of Premier was $ 47 million and $ 50 million as of December 31, 2024 and 2023, respectively.

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

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

Note 9 - Relationship with Universal Health Realty Income Trust and Other Related Party Transactions includes disclosure related to our GPO agreement and minority ownership interest in Premier, Inc.

("Premier"), a healthcare performance improvement alliance.

Pursuant to an agreement and plan of merger providing for the acquisition of Premier by Patient Square Capital, our minority ownership interest in Premier was sold in November, 2025.

Provider Taxes:

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

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

Under these programs, including the impact of the Texas Uncompensated Care and Upper Payment Limit program, the Texas Delivery System Reform Incentive program, the Nevada State Directed Payment program, the Washington D.C State Directed Payment program and various other state programs, we earned revenues (before Provider Taxes) of approximate ly $ 1.914 billion during 2025, $ 1.499 billion during 2024 and $ 853 million during 2023.

These revenues were offset by Provider Taxes of approximately $ 631 million during 2025, $ 536 million during 2024 and $ 297 million during 2023, which are recorded in other operating expenses on the consolidated statements of income as included herein.

The aggregate net benefit from these programs was $ 963 million during 2024, $ 556 million during 2023 and $ 497 million during 2022.

The aggregate net benefit from these programs was $ 1.283 billion during 2025, $ 963 million during 2024 and $ 556 million during 2023.

The aggregate net benefit pursuant to these programs is earned from multiple states and therefore no particular state’s portion is individually material to our consolidated financial statements.

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Recent Accounting Standards:

During 2025 we adopted ASU 2023-09, “Improvements to Income Tax Disclosures (Topic 740)”.

ASU 2023-09 requires enhanced disclosures on income taxes paid, adds disaggregation of continuing operations before income taxes between foreign and domestic earnings and defines specific categories for the reconciliation of jurisdictional tax rate to effective tax rate.

The standard was adopted using the prospective transition method, and accordingly, prior period financial information has not been adjusted.

See Note 6 - Income Taxes for the required disclosures.

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

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See Note 12 - Segment Reporting for the required disclosures.

In November 2025, the FASB issued ASU 2025-09, “Derivatives and Hedging (Topic 815), Hedging Accounting Improvements.

ASU 2025-09 intends to more closely align hedge accounting with the economics of an entity's risk management activities.

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

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

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

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

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

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

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

This ASU is effective for fiscal years beginning after December 15, 2024, and can be applied on a prospective basis.

This ASU is effective for fiscal years beginning after December 15, 2026, and interim

periods within those fiscal years beginning after December 15, 2027.

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

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

We have assessed the recently

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

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

Foreign Currency Translation:

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2025 Acquisitions of Assets and Businesses:

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

During 2025, we spent $ 48 million on the acquisition of behavioral health care businesses and property located in the United Kingdom.

2025 Divestiture of Assets and Businesses:

During 2025, we received $ 16 million from the sale of assets and businesses.

Year ended December 31, 2023:

Years ended December 31, 2024:

2024 Acquisitions of Assets and Businesses:

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2023 Acquisitions of Assets and Businesses:

During 2022, we spent $ 20 million to acquire various businesses and properties.

2022 Divestiture of Assets:

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

During 2023, we spent $ 4 million on the acquisition of businesses and properties.

2023 Divestiture of Assets and Businesses:

During 2023, we received $ 24 million from the sale of assets and businesses.

3) FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENT

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

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

In connection with these forward exchange contracts, we recorded net cash outflows of approximately $ 52 million during 2025, net cash inflows of approximately $ 13 million during 2024 and net cash outflows of approximately $ 41 million during 2023.

Derivatives Hedging Relationships:

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Other noncurrent assets

Equity securities

Non-marketable securities

Other noncurrent assets

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Foreign currency forward exchange contracts

Accrued liabilities other

Other current assets

Deferred compensation liability

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

The fair value of deferred compensation assets and the

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

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

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

The fair value of our foreign

currency exchange contracts is valued using quoted forward exchange rates and spot rates at the reporting date.

The fair value of the 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.

4) LONG-TERM DEBT

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2.65 % Senior Secured Notes due 2032 , net of unamortized discount of $ 734 in 2025 and $ 864 in 2024

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

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

4.625 % Senior Secured Notes due 2029 , net of unamortized discount of $ 161 in 2025 and net of unamortized discount of $ 204 in 2024

5.050 % Senior Secured Notes due 2034 , net of unamortized discount of $ 1,376 in 2025 and net of unamortized discount of $ 1,533 in 2024

Total debt before unamortized financing costs

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Credit Facilities and Outstanding Debt Securities

In 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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The unpaid principal balance at June 30, 2029 (scheduled to be $ 975.0 million) is payable on the September 26, 2029 scheduled maturity date of the Credit Agreement.

Revolving credit and Tranche A Term Loan borrowings under the Credit Agreement bear interest at our election at either (1) the ABR rate which is defined as the rate per annum equal to the greatest of (a) the lender’s prime rate, (b) the greater of the federal funds effective rate and the overnight bank funding rate, plus 0.5 % and (c) one month term SOFR rate plus 1.1 %, in each case, plus an applicable margin based upon our consolidated leverage ratio at the end of each quarter ranging from 0.25 % to 0.625 %, or (2) the one, three or six month term SOFR rate plus 0.1 % (at our election), plus an applicable margin based upon our consolidated leverage ratio at the end of each quarter ranging from 1.25 % to 1.625 %.

Revolving credit and Tranche A Term Loan borrowings under the Credit Agreement bear interest at our election at either (1) the ABR rate which is defined as the rate per annum equal to the greatest of (a) the lender’s prime rate, (b) the greater of the federal funds effective rate and the overnight bank funding rate, plus 0.5 % and (c) one month term SOFR rate plus 1.1 %, in each case, plus an applicable margin based upon our consolidated leverage ratio at the end of each quarter ranging from 0.25 % to 0.625 %, or (2) the one, three or six month term SOFR rate plus 0.1 % (at ou r election), plus an applicable margin based upon our consolidated leverage ratio at the end of each quarter ranging from 1.25 % to 1.625 %.

As of December 31, 2025, the applicable margins were 0.25 % for ABR-based loans and 1.25 % for SOFR-based loans under the revolving credit and term loan A facilities.

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

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

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

The Credit Agreement is secured by certain assets of the Company and our material

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

The Credit Agreement includes a material adverse change clause that must be represented at each draw.

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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).

The Company’s obligations with

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

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

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

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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 U.S.

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

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

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

The fair value of our debt was computed based upon quotes received from financial institutions.

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

The aggregate scheduled maturities of our total debt outstanding as of December 31, 2024 are as follows:

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.

The aggregate scheduled maturities of our total debt outstanding as of December 31, 2025, before unamortized financing costs, are as follows:

Total maturities before unamortized financing costs

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As of January 1, 2025, we had an aggregate available repurchase authorization of $ 824.36 million under our stock repurchase program.

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

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

In October, 2025, our Board of Directors authorized a $ 1.5 billion increase in our stock repurchase program.

As of December 31, 2025, we had an aggregate available repurchase authorization of $ 1.43 billion.

Pursuant to this program, shares of our Class B Common Stock may be repurchased, from time to time as conditions allow, on the open market or in negotiated private transactions.

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During 2025, 4,650,318 shares ($ 899.3 million in the aggregate) were repurchased pursuant to the terms of the stock repurchase program and 369,891 shares ($ 68.7 million in the aggregate) were repurchased in connection with the income tax withholding obligations resulting from stock-based compensation programs.

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

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

purchased (a.)

Balance as of

January 1, 2022

Balance as of Jan.

Total for three year

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At December 31, 2025, we have a number of stock-based employee compensation plans.

Pursuant to the FASB’s guidance, we expense the grant-date fair value of stock options (computed utilizing the Black-Scholes option-pricing model) and other equity-based compensation pursuant to the straight-line method over the stated vesting period of the awards.

Pursuant to the FASB’s guidance, we expense the grant-date fair value of restricted stock units and stock options (computed utilizing the Black-Scholes option-pricing model) and other equity-based compensation pursuant to the straight-line method over the stated vesting period of the awards.

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

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

Pre-tax share-based compensation costs of $ 33.8 million during 2025, $ 54.3 million during 2024 and $ 64.2 million during 2023 were recognized related to outstanding stock options.

In addition, pre-tax compensation costs of $ 45.1 million during 2024, $ 23.5 million during 2023 and $ 19.1 million during 2022 were recognized related to amortization of restricted stock and units as well as discounts provided in connection with shares purchased pursuant to our 2005 Employee Stock Purchase Plan.

In addition, pre-tax compensation costs of $ 61.9 million during 2025, $ 45.1 million during 2024 and $ 23.5 million during 2023 were recognized related to amortization of restricted stock units as well as discounts provided in connection with shares purchased pursuant to our 2005 Employee Stock Purchase Plan.

As of December 31, 2025, there was approximately $ 147.1 million of unrecognized compensation cost related to unvested stock options and restricted stock which is expected to be recognized over the remaining average vesting period of 2.4 years.

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In the consolidated statements of cash flows, stock-based compensation expense is an adjustment to reconcile net income to cash provided by operating activities and aggregated to $ 95.7 million in 2025, $ 99.3 million in 2024 and $ 87.7 million in 2023.

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

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

In connection with ASU 2016-09, “Compensation-Stock Compensation (Topic 718):

Improvements to Employee Share-Based Payment Accounting”, our provision for income taxes and our net income attributable to UHS were favorably impacted by $4 .2 million during 2025 and $ 15.9 million during 2024 (net of unfavorable impacts of $ 15.7 million during 2025 and $ 10.2 million during 2024 resulting from executive compensation limitations pursuant to IRC section 162(m)), and unfavorably impacted by $ 4.7 million during 2023.

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

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

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

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

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

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

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0 stock options and 545,355 restricted stock units (including 61,251 performance based restricted stock units).

3,000 stock options and 480,489 restricted stock units (including 63,362 performance based restricted stock units).

1.6 million stock options and 247,241 restricted stock units (including 93,606 performance based restricted stock units).

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

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

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

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

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

Restricted stock units issued under the 2020 Stock Incentive Plan do not have rights to receive dividends on unvested awards, however, dividends on unvested restricted stock units are typically deferred and accumulated prior to vesting and paid in cash in the aggregate on the vesting date.

The weighted average grant-date fair values of the restricted stock units issued under the 2020 Stock Incentive Plan during each of the last three years, as reflected above, were $ 178.33 during 2025, $ 181.05 during 2024 and $ 118.14 during 2023.

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

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

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

The fair value of each restricted stock unit was determined as the closing market price of our stock on the date of grant.

Restricted stock units have been granted to our officers, key employees and members of our Board of Directors.

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

No option grants were issued in 2025.

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

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

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

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

December 31, 2025, twenty-two option grants for the five-year period ending December 31, 2024 and thirty option grants for the five-year period ending December 31, 2023.

Year Ended December 31,

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Dividend yield

The risk-free r ate is based on the U.S.

(b.) Pursuant to the discussion above, commencing in 2024, our annual stock-based compensation awards were issued fully in restricted stock units.

The risk-free rate is based on the U.S.

Treasury zero coupon four year yield curve in effect at the time of grant.

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Weighted average remaining contractual life (years)

The total in-the-money value of all stock options exercised during the year s ended December 31, 2024, 2023 and 2022 were $ 185.3 million, $ 57.1 million and $ 49.4 million, respectively.

The total in-the-money value of all stock options exercised during the years ended December 31, 2025, 2024 and 2023 were $ 137.0 million, $ 185.3 million and $ 57.1 million, respectively.

The weighted average remaining contractual life for options outstanding and weighted average exercise price per share for exercisable options at December 31, 2023, 2024 and 2025 were as follows:

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Exercise Price

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

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

There were 88,760 , 81,146 and 100,507 shares issued pursuant to the Employee Stock Purchase Plan during 2025, 2024 and 2023, respectively.

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Year Ended December 31,

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

On July 4, 2025, the One Big Beautiful Bill Act (“OBBBA”), which includes a broad range of corporate income tax law changes, was signed into law in the United States.

The OBBBA includes law changes related to bonus depreciation, the expensing of domestic research costs, certain U.S.

international tax rules and other modifications.

There is no material impact on our effective tax rate in 2025.

Although the majority of the tax law changes will take effect starting in 2026, we do not believe the changes will have a material impact on our future provision for income taxes or results of operations.

Our provision for income taxes for the years ended December 31, 2025, 2024 and 2023 included tax benefits of $ 4 million and $ 16 million and tax expenses of $ 5 million, respectively, related to employee share-based payments.

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

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

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

The foreign provision for income taxes is based on foreign pre-tax earnings of $ 91 million in 2025 and $ 80 million during each of 2024 and 2023.

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

As of December 31, 2025, the amount of previously taxed earnings and earnings that would qualify for a full dividend received deduction total $ 96 million.

At this time, there are no material tax effects related to future cash repatriation of undistributed foreign earnings.

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

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

Year Ended December 31,

As of December 31, 2025, $ 24 million of the foreign earnings above is expected to be repatriated and generate future withholding taxes.

As such, we have recognized a deferred tax liability of $ 2 million.

At this time, there are no material tax effects related to the future cash repatriation of other undistributed earnings.

As described in Note 1, effective for the year ended December 31, 2025, we adopted ASU 2023-09, “Improvements to Income Tax Disclosures (Topic 740)" ("ASU 2023-09"), on a prospective basis.

In accordance with prospective application, the prior period

disclosures were not adjusted.

Below is a tabular rate reconciliation pursuant to the disclosure requirements of ASU 2023-09 for the year ended December 31, 2025 (amounts in thousands):

December 31, 2025

federal statutory tax rate

State and local income taxes, net of federal income tax effect (a)

Foreign tax effects

Changes in valuation allowances

Nontaxable or nondeductible items

Noncontrolling interests

Share-based payment awards

Other nondeductible items

Changes in unrecognized tax benefits

Effective tax rate

(a) State taxes in California and the District of Columbia made up the majority (greater than 50 percent) of the tax effect in this category.

A reconciliation between the federal statutory rate and the effective tax rate is as follows for the year ended December 31, 2024 and 2023:

Federal statutory rate

State taxes, net of federal income tax benefit

State, net of federal income tax benefit

Tax effects of foreign operations

Tax benefit from settlement of employee equity awards

Tax benefit from settlements of employee equity awards

Impact of income attributable to noncontrolling interests

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Our effective tax rates were 23.4 %, 22.4 % and 23.5 % for the years ended December 31, 2025, 2024 and 2023, respectively.

The increase in our effective tax rate for the year ended December 31, 2025, as compared to 2024, is due to a $ 10 million increase in the provision for foreign tax effects and a $ 12 million decrease in the net tax benefit recorded pursuant to ASU 2016-09, net of the impact of executive compensation limitations pursuant to IRC section 162(m), during 2025 as compared to 2024.

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

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

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

The components of income taxes paid, net of refunds received, are as follows (amounts in thousands):

Year Ended December 31, 2025

State and local

Total income taxes paid (net of refunds)

The amount of income taxes paid during the year does not meet the 5% disaggregation threshold for any state, local or foreign jurisdictions.

Income tax payments, net of refunds received, were $ 325 million and $ 258 million for the years ended December 31, 2024 and 2023, respectively.

Included in “Other current assets” on our consolidated balance sheets are prepaid federal, state and foreign income taxes amounting to approximately $ 54 million and $ 3 million as of December 31, 2025 and 2024, respectively.

Included in “Other long-term assets” on our consolidated balance sheets are federal taxes receivable amounting to approximately $ 4 million as of December 31, 2025.

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

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Right of use assets-operating leases

State and foreign net operating loss carryforwards and other state and foreign deferred tax assets

Federal state and foreign net operating loss carryforwards and other federal, state and foreign deferred tax assets

Net pension liabilities – OCI only

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Total deferred income taxes

At December 31, 2024, state net operating loss carryforwards (losses originating in tax years beginning prior to January 1, 2024, expiring in years 2025 through 2043), and credit carryforwards available to offset future taxable income approximated $ 1.1 billion representing approximately $ 76 million in deferred state tax benefit (net of the federal benefit);

At December 31, 2025, state net operating loss carryforwards (expiring in years 2026 through 2044), and credit carryforwards available to offset future taxable income approximated $ 1 billion representing approximately $ 73 million in deferred state tax benefit (net of the federal benefit);

and state related interest expense carryforwards approximated $ 160 million representing approximately $ 11 million in deferred state tax benefit (net of the federal benefit).

At December 31, 2025, there were foreign net operating losses and interest expense carryforwards of approximately $ 105 million, most of which are carried forward indefinitely, representing approximately $ 28 million in deferred foreign tax benefit.

At December 31, 2024, related to a prior year stock acquisition, there were federal net operating losses of approximately $ 6 million carried forward indefinitely for federal purposes representing approximately $ 1 million in deferred federal tax benefits.

At December 31, 2025, there were federal tax credits and net operating losses of approximately $ 9 million representing approximately $ 6 million in deferred federal tax benefits.

Of the federal attributes above, $ 5 million will expire between 2027-2036 with the remaining federal attributes carried forward indefinitely.

A valuation allowance is required when it is more likely than not that some portion of the deferred tax assets will not be realized.

Based on available evidence, it is more likely than not that certain of our state tax benefits will not be realized.

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

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

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

Therefore, valuation allowances of approximately $ 78 million have been recorded during each of the periods ended December 31, 2025 and 2024.

In addition, valuation allowances of approximately $ 9 million and $ 4 million have been recorded as of December 31, 2025 and 2024, related to federal and foreign net operating losses and credit carryforwards.

During 2025, the valuation allowance on these federal and foreign tax benefits increased by $ 5 million due to an increase in foreign tax credits that are not expected to be realized.

During 2025 and 2024, the estimated liabilities for uncertain tax positions (including accrued interest and penalties) were increased less than $ 1 million due to tax positions taken in the current and prior years.

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state and local jurisdictions have statutes of limitations generally ranging for 3 to 4 years .

The statute of limitations on certain jurisdictions could expire within the next twelve months .

It is reasonably possible that the amount of unrecognized tax benefits will change during the next 12 months , however, it is anticipated that any such change, if it were to occur, would not have a material impact on our results of operations.

The tabular reconciliation of unrecognized tax benefits for the years ended December 31, 2025, 2024 and 2023 is as follows (amounts in thousands):

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Five of our hospital facilities are held under operating leases with Universal Health Realty Income Trust with two hospital terms expiring in 2026 , two expiring in 2033 , and one expiring in 2040 (see Note 9 for additional disclosure).

We also lease the real property of certain facilities (see Item 2.

Properties for additional disclosure).

We also lease the real property of certain facilities.

The components of lease expense for the years ended December 31, 2025, 2024 and 2023 are as follows (in thousands):

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less imputed interest

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

We assumed approximately $ 4 million in finance lease obligations during 2025, $ 24 million during 2024, and $ 1 million in 2023.

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

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

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

For each of the years indicated above, through February 2025, for claims involving multiple plaintiffs, a single self-insured retention may apply, as stipulated in and subject to the terms and conditions of the applicable commercial policies, for claims qualifying as group related integrated occurrences and/or

medical incidents.

As of March 1, 2025, the single self-insured retention no longer applies in connection with claims made by multiple plaintiffs against our behavioral health care facilities.

These subsidiaries are provided with several excess policies through commercial insurance carriers which provide for coverage in excess of the applicable per occurrence and aggregate self-insured retention or underlying policy limits up to approximately $ 110 million in 2025;

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$ 165 million in 2023;

$ 162 million in 2022;

$ 155 million in 2021 and $ 250 million during each of 2014 through 2020.

Effective March, 2025, our commercial insurance coverage contains less favorable terms than previous years including coverage exclusions for incidents involving sexual molestation or abuse, higher premiums and lower aggregate limitations.

In addition, from time to time based upon marketplace conditions, we may elect to purchase additional commercial coverage for certain of our facilities or businesses.

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

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

As of December 31, 2025, the total net accrual for our self-insured professional and general liability claims was $ 449 million, of which $ 125 million was included in current liabilities.

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

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

As a result of unfavorable trends experienced during the past several years, included in our results of operations were increases to our reserve for self-insured professional and general liability claims amounting to approximately $ 45 million during 2025, $ 79 million during 2024 and $ 25 million during 2023.

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

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

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

As of December 31, 2025, the total accrual for our workers’ compensation liability claims was $ 152 million, $ 64 million of which was included in current liabilities.

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

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

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

As disclosed below in Legal Proceedings:

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Cumberland filed post-trial motions challenging this verdict, including the amounts awarded in the verdict.

Based upon Virginia law, the Court reduced the punitive damage amount to a combined maximum of $ 1.05 million ($ 350,000 per plaintiff).

Cumberland has filed a notice of appeal on the remaining verdict.

Plaintiffs have separately filed a notice of appeal seeking to challenge the dismissal of the Company and UHS Delaware during trial, and the Court’s order reducing the punitive damages award against Cumberland.

These appeals were recently dismissed by the appellate court without prejudice as premature because the judgments in favor of the first three plaintiffs are neither final nor enforceable at this time.

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

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

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

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

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

The Company and UHS Delaware remain defendants with respect to the remaining plaintiffs.

We expect that the trials for the

remaining plaintiffs, as well as any additional plaintiffs, will be scheduled at various times over the next several years.

The next trial is tentatively planned to commence in August, 2026.

We can make no assurances regarding the ultimate financial exposure, timing, substance or outcome of the Cumberland matter (which related to occurrences in the 2020 policy year), or the amount of damages that may be ultimately held recoverable after post-judgment proceedings and appeal s.

As of December 31, 2025, without reduction for any potential amounts related to the Cumberland matter, the Company and its subsidiaries have aggregate insurance coverage of approximately $ 143 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 Cumberland matter exhausts all or a significant portion of our/our subsidiaries' remaining commercial insurance coverage related to the 2020 policy year, or the Cumberland matter causes 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.

We have received lawsuits in various jurisdictions on behalf of numerous former patients spanning decades claiming to be the victims of sexual assaults while patients at our facilities.

Many of these lawsuits have been brought in conjunction with various states extending their statute of limitations to allow alleged victims of sexual assaults or abuse to file claims many years after the alleged incidents occurred.

We are uncertain as to potential liability in connection with these matters.

Below is a schedule showing the changes in our general and professional liability and workers’ compensation reserves during the three years ended December 31, 2025 (amount in thousands):

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We have commercial property insurance policies for our properties, covering the period of June 1, 2025 to June 1, 2026, providing property and business interruption coverage for losses in excess of $ 15 million per occurrence or per location (as applicable based upon the event) up to a $ 1 billion annual policy limitation for certain catastrophic events or perils.

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

These commercial policies provide for coverage of up to $ 250 million of annual aggregate coverage for losses resulting from windstorm damage at all facilities except those in Puerto Rico where $ 100 million of annual aggregate coverage is provided.

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

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

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

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

(i) $ 150 million limitation for our facilities located in California and Alaska;

(ii) $ 100 million limitation for our facilities in New Madrid Seismic Zone, Pacific Northwest Seismic Zone, South Carolina, Utah and certain counties in Nevada;

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

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

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

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

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

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

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

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

These commercial policies are subject to a deductible of:

These commercial property policies are subject to a deductible of:

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

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

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

aggregate losses.

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

In the event the $ 30 million of commercial coverage is also exhausted, we are self-insured for all per location or per occurrence losses up to $ 25 million, including the $ 5 million deductible.

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

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

In the event the $ 30 million of commercial reinsurance coverage is also exhausted, we are self-insured for all per location or per occurrence losses up to $ 25 million, including the $ 5 million deductible.

As of January 1, 2026, property insurance for our behavioral health facilities located in the U.K.

are provided on an all-risk basis up to a £ 2.7 billion, with a coverage cap per location of £ 150 million for any one occurrence, that includes coverage for real and personal property as well as business interruption losses.

Commitment to Develop, Lease and Operate an Acute Care Hospital in Washington, D.C.

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

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

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

Upon completion of the District Facilities, we will lease the District Facilities for a nominal rental amount for a period of 75 years and are obligated to operate the District Facilities during the lease term.

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 (approximately $ 14 million of which has been incurred as of December 31, 2024), over a projected 12-year period, in healthcare infrastructure including expenditures related to the District Facilities as well as other healthcare related expenditures in certain sp ecified areas of Washington, D.C.

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

Information Technology Incident

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

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.

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

Other Contractual Commitments:

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in connection with various agreements with the District of Columbia ($ 54 million), development, implementation and operation of an enterprise resource planning application ($ 70 million), administrative software applications ($ 24 million) and other software applications ($ 10 million);

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

(ii) estimated construction commitment of $ 7 million representing our share of the remaining construction cost of two behavioral health care facilities which opened in 2025 that, subject to approval of certain regulatory conditions, we were required to build pursuant to joint-venture agreements with a third-party;

(iii) combined estimated future payments of $ 154 million related to our non-contributory, defined benefit pension plan ($ 127 million consisting of estimated payments through 2080) and other retirement plan liabilities ($ 27 million), and;

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

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

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

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

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

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If the government chooses not to intervene, the private individual(s) can proceed independently on behalf of the government.

Health care providers that are found to violate the False Claims Act may be subject to substantial monetary fines/penalties as well as face potential exclusion from participating in government health care programs or be required to comply with Corporate Integrity Agreements as a condition of a settlement of a False Claims Act matter.

with Corporate Integrity Agreements as a condition of a settlement of a False Claims Act matter.

In September 2014, the Criminal Division of the Department of Justice (“DOJ”) announced that all qui tam cases will be shared with their Division to determine if a parallel criminal investigation should be opened.

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Certain legal matters are described below:

Disproportionate Share Hospital Payment Matter

In late September, 2015, many hospitals in Pennsylvania, including certain of our behavioral health care hospitals located in the state, received letters from the Pennsylvania Department of Human Services (the “Department”) demanding repayment of allegedly excess Medicaid Disproportionate Share Hospital payments (“DSH”), primarily consisting of managed care payments characterized as DSH payments, for the federal fiscal year (“FFY”) 2011 amounting to approximately $ 4 million in the aggregate.

Since that time, certain of our behavioral health care hospitals in Pennsylvania have received similar requests for repayment for alleged DSH overpayments for FFYs 2012 through 2015.

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

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

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

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

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

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

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

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

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

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

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

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

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

Plaintiff asserted claims of negligence and misrepresentation.

The Pavilion denied any liability.

The case went to trial in March of 2024.

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

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

this type in Champaign County, Illinois.

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

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

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

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

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

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

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

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

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

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

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

Cumberland filed post-trial motions challenging this verdict.

Based upon Virginia law, the Court reduced the punitive damage amount to a combined maximum of $ 1.05 million ($ 350,000 per plaintiff).

Cumberland has filed a notice of appeal on the remaining verdict.

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

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

The Company and UHS Delaware remain defendants with respect to the remaining plaintiffs.

We expect that the trials for the remaining plaintiffs, as well as any additional plaintiffs, will be scheduled at various times over the next several years.

The next trial is tentatively planned to commence in August, 2026.

Mary’s Medical Group, Inc.

Pinnacle Medical Group, Northern Nevada, et.

UHS of Delaware, Inc., the wholly-owned administrative services subsidiary of the Company is a defendant in a lawsuit filed in Washoe County, Nevada, along with Pinnacle Management Group NV, LLC ("Pinnacle Medical Group", in which a subsidiary of the Company holds a 50 % interest) and several individuals.

The Company was previously dismissed from the lawsuit.

The lawsuit contains allegations of intentional interference with contractual relationships and prospective economic advantage resulting from the

departure of several physicians and advance practice providers from St.

Mary’s Medical Group in Reno, Nevada, who joined Pinnacle Medical Group in 2021.

A trial of this matter was concluded on September 26, 2025, with a verdict rendered against UHS of Delaware, Inc.

and the other defendants for approximately $ 4.7 million in compensatory damages.

The jury also awarded punitive damages against UHS of Delaware, Inc.

of $ 500 million and lesser amounts against some of the other defendants.

Based upon Nevada statutory law, we expect the punitive damages to be reduced to a maximum of approximately $ 14 million.

We also believe that recent Nevada Supreme Court precedent could further reduce the amount of punitive damages.

UHS of Delaware, Inc.

and the other defendants are evaluating all legal options and intend to challenge this verdict in post-judgment trial court proceedings and on appeal.

Although we are uncertain as to the ultimate financial exposure related to this matter and we can make no assurance regarding its outcome, or the amount of damages that may be recoverable after post-judgment proceedings and appeals, during the third quarter of 2025, we recorded an $ 18 million legal reserve in connection with this matter.

If we are unsuccessful in reversing the verdict, or significantly reducing the level of damages, or we are required to post a substantial bond pending appeal, this matter could have a material adverse effect on the financial condition of the Company.

Other Matters

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At December 31, 2025, we held approximately 5.7 % of the outstanding shares of Universal Health Realty Income Trust (the “Trust”).

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

and present investment opportunities.

The advisory agreement was renewed by the Trust for 2026 at the same rate in place for 2025, 2024 and 2023, providing for an advisory computation at 0.70 % of the Trust’s average invested real estate assets.

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

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

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

Our pre-tax share of income from the Trust was $ 1.0 million during 2025, $ 1.1 million during 2024 and $ 0.9 million during 2023, which are included in other income (expense), net, on the accompanying consolidated statements of income for each year.

We received dividends from the Trust amounting to $ 2.3 million during each of 2025, 2024 and 2023.

The carrying value of our investment in the Trust was $ 4.4 million and $ 5.8 million at December 31, 2025 and 2024, respectively, and is included in other assets in the accompanying consolidated balance sheets.

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

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

(i) a wholly-owned subsidiary of ours purchased from the Trust the real estate

assets of the Inland Valley Campus of Southwest Healthcare System located in Wildomar, California, at its fair market value;

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

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

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

Our consolidated balance sheets as of December 31, 2025 and December 31, 2024 reflects a financial liabilit y of $ 70.0 million and $ 73.8 million, respectively, which is included in debt, for the fair value of real estate assets that we exchanged as part of the transaction.

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

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The real property of this facility, which was completed and opened in late 2020, is also leased from the Trust (annual rental of approximately $ 2.9 million, $ 2.8 million and $ 2.7 million during 2025, 2024 and 2023, respectively) pursuant to the lease terms as provided in the table below.

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

upon either of the following:

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

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

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(d) This facility is operated by a joint venture in which we are the managing, majority member and an unrelated third-party holds a minority ownership interest.

The joint venture has three, 10 -year renewal options at computed lease rates as stipulated in the lease ( 2041 through 2070 ) and two additional, 10 -year renewal options at fair market value lease rates ( 2071 through 2090 ).

The joint venture has three, 10 -year renewal options at computed lease rates as stipulated in the

lease ( 2041 through 2070 ) and two additional, 10 -year renewal options at fair market value lease rates ( 2071 through 2090 ).

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

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

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

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

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

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

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

The current lease terms on these two FEDs, which are located in Weslaco and Mission, Texas, are scheduled to end on January 31, 2030 .

Pursuant to terms of the leases, the lease rates are scheduled to increase 2 % per year through the end of the lease terms.

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

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

In October, 2025, a ground lease and a master flex lease were executed between a wholly-owned subsidiary of ours and the Trust.

On this land, the Trust intends to develop, construct and own the Palm Beach Garden Medical Plaza I, an MOB located in Palm Beach Gardens, Florida.

This multi-tenant MOB, consisting of 80,000 rentable square feet, is scheduled to be completed during the fourth quarter of 2026.

The MOB will be located on the campus of the Alan B.

Miller Medical Center, a newly constructed acute care hospital owned and operated by a wholly-owned subsidiary of ours, which is scheduled to be completed and opened during the second quarter of 2026.

The 10 -year master flex lease agreement, which is subject to reduction based on the execution of third-party leases with the Trust, was executed for approximately 75 % of the rentable square feet of the MOB.

The Trust has engaged a wholly-owned subsidiary of UHS to act as project manager, and construction of the MOB commenced in February, 2026.

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

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

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

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

In connection with these policies, we paid approximately $ 1.0 million, net, in premium payments during 2025, 2024 and 2023.

In August, 2015, Marc D.

Miller, our President and Chief Executive Officer and member of our Board of Directors, was appointed to the Bo ard of Directors of Premier, Inc.

(“Premier”), a healthcare performance improvement alliance.

During 2013, we entered into a new group purchasing organization agreement (“GPO”) with Premier.

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

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

We have elected to retain a portion of the previously vested shares of Premier, the market value of which is included in other assets on our consolidated balance sheets.

Based upon the closing price of Premier’s stock on each respective date , the market value of our shares of Premier was $ 47 million as of December 31, 2024 and $ 50 million as of December 31, 2023.

The $ 3 million decrease in market value of our vested Premier shares since December 31, 2023 was recorded as an unrealized loss and included in “Other (income) expense, net” in our consolidated statements of income for the year ended December 31, 2024.

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

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

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

Miller, our President and Chief Executive Officer and member of our Board of Directors, was a member of the Board of Directors of Premier, Inc.

(“Premier”) from 2015 until Premier was sold in November, 2025, as discussed below.

In conjunction with our GPO agreement with Premier, we had previously received shares of restricted stock of Premier which vested ratably over a seven-year period ( 2014 through 2020 ).

During 2020, we entered into an agreement with Premier pursuant to the terms of which, among other things, our ownership interest in Premier was converted into shares of Class A Common Stock of Premier.

We elected to retain a portion of the previously vested shares of Premier, the carrying value of which was adjusted for changes in the market value of Premier, which were included in other assets on our consolidated balance sheets (amounting to $ 47 million and $ 50 million as of December 31, 2024 and 2023, respectively).

In September, 2025, Premier entered into an agreement and plan of merger providing for the acquisition of Premier by Patient Square Capital.

In November, 2025 we received approximately $ 63 million for our remaining shares of Premier.

Included in Other (income) expense, net, in our consolidated statements of income, were gains/(losses) recorded to adjust for changes in the market value of our shares of Premier amounting to $ 16 million during 2025, ($ 3 million) during 2024, and ($ 28 million) during 2023.

Additionally, we received cash dividends from Premier amounting to $ 1.4 million during 2025 and $ 1.9 million during each of 2024 and 2023 , which are included in “Other (income) expense, net” in our consolidated statements of income.

In July, 2023 we invested in the non-marketable securities of a healthcare generative artificial intelligence company, in which we hold a small minority ownership percentage.

In December 2025 we recorded a $ 93 million unrealized gain on the increase in market value of this company.

This unrealized gain is included in “Other (income) expense, net” in our consolidated statements of income for the year ended December 31, 2025.

As of December 31, 2025 the current market value of these non-marketable securities was $ 115 million and is included in other assets on our consolidated balance sheets.

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

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10) REVENUE RECOGNITION

We recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which we expect to be entitled in exchange for those goods or services.

We recognize revenue when services/goods have been provided to patients/customers in an amount that reflects the consideration to which we expect to be entitled in exchange for those goods or services.

Our estimate for amounts not expected to be collected based on historical experience will continue to be recognized as a reduction to net revenue.

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

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

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

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

The primary profitability measurement utilized by the President and Chief Executive Officer as well as the Presidents of each operating segment is segment income before income taxes.

Segment income before income taxes is

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

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

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

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.

(amounts in thousands)

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

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

amounting to approximately $1.001 billion in 2025, $880 million in 2024 and $761 million in 2023.

SCHEDULE II—VALUATION AND QUALIFYING ACCOUNTS

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

What changed 10-K

Item 9A. Controls and Procedures