UHS Q1 2026 Earnings Call Transcript

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DATE

Tuesday, April 28, 2026 at 9 a.m. ET

CALL PARTICIPANTS

• Chief Executive Officer — Marc D. Miller
• Chief Financial Officer — Steve G. Filton
• Executive Vice President, Investor Relations — Darren Lehrich

TAKEAWAYS

• Reported revenue growth -- 9.6% driven by performance in both Acute Care and Behavioral Health segments.
• Adjusted EBITDA (net of NCI) -- Up 8.4% as compared to the prior year period.
• Adjusted EPS -- Increased 16.1%, reaching $5.62 per diluted share.
• Talkspace acquisition -- Announced on March 9; management expects the transaction to be accretive to earnings within 12 months post-closing and increasingly accretive thereafter, with a single-digit EBITDA multiple projected by year three.
• Same-facility acute care segment revenue -- Grew 8.2%; excluding the health plan impact, the increase was 6.2%.
• Same-facility acute care revenue per adjusted admission -- Rose 6.3%; excluding $30 million in prior-period Nevada supplemental benefit, the increase was 4.9%.
• Same-facility acute care adjusted admissions -- Declined, driven by approximately 200 basis points impact from weak flu/respiratory trends and winter weather.
• Same-facility acute care emergency department visits -- Increased approximately 2%.
• Nevada acute market -- Adjusted admissions grew about 1.5% over the prior year.
• Acute care segment EBITDA -- Increased 11.7% (same-facility).
• Same-facility behavioral health net revenue -- Up 7.3% on 5.8% higher revenue per adjusted patient day and a 1.6% rise in adjusted patient days; winter weather reduced volume growth by 40–50 basis points.
• Same-facility behavioral health EBITDA -- Grew 8.4%; removing prior-period supplemental payments, revenue per adjusted patient day increased 4.9% and EBITDA rose 4.3%.
• Behavioral labor cost trends -- Salaries and wage expense growth moderated to about 6%-7% from 8% in 2025, with further moderation expected.
• Exchange (HIX) impact -- Exchange adjusted admissions declined about 5%; management expects a $75 million pretax headwind for the full year from HIX disenrollment, anticipating a 25%-30% annual decline in covered patients.
• Cash flow from operating activities -- $402 million, up from $360 million the prior year.
• Capital expenditures -- $217 million spent in the quarter with new capacity coming online: a 156-bed de novo hospital in Florida (opening May), two bed towers, a replacement hospital (totaling 178 beds) in Q2, and a 144-bed behavioral JV hospital in Pennsylvania already opened.
• Share repurchases -- 675,000 shares bought for $127 million; $1.3 billion authorization remaining as of March 31, 2026.
• Credit facilities -- Aggregate capacity expanded by $900 million; revolver capacity at $1.5 billion with $373 million drawn at quarter end, intended to provide flexibility for Talkspace, further M&A, and capital returns.
• AI initiatives -- Eight enterprise AI use cases deployed in revenue cycle operations to drive administrative efficiency; 2026 roadmap includes collaboration with Hippocratic AI for clinical operations impact.
• 2026 guidance -- Full-year financial and operating forecast reiterated; management to reevaluate guidance with Q2 results.

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RISKS

• Filton indicated, "We continue to believe our $75 million negative estimate for the impact of the HIX subsidies expiring is appropriate; it will get larger as the year goes on," confirming a rising headwind from exchange disenrollment and higher uncompensated care.
• Volume softness persisted in both acute and behavioral segments due to weaker flu/respiratory season and winter weather, with lost inpatient and trauma volumes in some markets not recoverable.
• Talkspace acquisition will modestly increase leverage from just under 2x to just over 2x, though management stated it still leaves capacity for M&A and returns but marks a quantitative move higher.
• California supplemental payment program renewal is much less certain and not incorporated into guidance, representing potential downside if consensus with the state and CMS is not achieved.

SUMMARY

Universal Health Services (NYSE:UHS) reported substantial reported revenue, EBITDA, and EPS growth for the fiscal first quarter ended March 31, 2026, highlighted by disciplined expense management and accretive pricing across both segments. The pending Talkspace acquisition positions Universal Health Services for new outpatient behavioral growth, with management projecting the deal to be earnings accretive within the first year and driving a single-digit EBITDA multiple by year three, while maintaining a commitment to ongoing internal expansion. Executives emphasized significant investments in enterprise AI to increase administrative efficiency and improve patient experience, with expanded partnerships targeting clinical workflow gains beginning in 2026. The company expanded its credit facilities by $900 million to actively support the Talkspace integration, future acquisitions, and robust shareholder return initiatives, including planned share repurchases. Management reiterated its full-year forecast and explained that reported fiscal first quarter results, including variations from weather, flu, and supplemental payment timing, aligned with internal models and did not prompt guidance revision.

• Talkspace was acquired to enhance the outpatient behavioral health continuum, bridging Universal Health Services' leadership in residential/inpatient services with scalable virtual offerings.
• AI adoption already yields revenue cycle efficiency, and 2026 expansion will shift toward clinical operations, developed with Hippocratic AI.
• Acute segment volume declines stemmed from temporary flu and weather headwinds, but positive shifts in emergency and higher-acuity service lines partially offset this trend.
• Behavioral segment revenue improvement was led by rate increases and strong outpatient demand capture; supply constraints from staffing remain a target for further growth.
• Bad debt and uncompensated care are increasing as HIX subsidy expirations accelerate, requiring sustained revenue cycle and payer mix management focus.
• Upcoming acute and behavioral hospital capacity additions are expected to balance temporary operating losses (notably the new Florida de novo) with EBITDA contributions from ramping locations such as Cedar Hill in D.C.
• Wage inflation is moderating as behavioral employee turnover declines versus 2025 levels, albeit still exceeding pre-COVID rates.
• Supplemental Medicaid payments remain a variable, with Florida likely to deliver a measurable benefit and California’s payout status unresolved for the outlook period.

INDUSTRY GLOSSARY

• Talkspace: A virtual outpatient behavioral health company offering digital therapy and psychiatry services across the United States, providing Universal Health Services access to a nationwide network of clinicians via a technology platform.
• DPP (Directed Payment Program): State Medicaid supplemental payment programs providing funding to hospitals for specific targeted services, such as those serving low-income populations.
• HIX: Health Insurance Exchange, referring to plans and patients covered via the federal or state-run Affordable Care Act insurance marketplaces.
• De novo hospital: A newly constructed and opened hospital as opposed to an acquired or existing facility.
• Adjusted admissions/patient days: Standardized metrics that normalize inpatient volumes to facilitate comparison across different types of admissions or service lines.
• Thousand Branches initiative: Universal Health Services’ ongoing program to grow a network of freestanding outpatient behavioral health clinics, expanding care access beyond inpatient campuses.

Full Conference Call Transcript

Marc D. Miller: Thank you, Darren. Good morning to all participants on today's call, and thank you for your continued interest in Universal Health Services, Inc. The first quarter of 2026 featured significant acceleration in our behavioral health outpatient strategy with the announcement of the Talkspace acquisition and continued steady operating performance and cash flow generation in our core operations in the midst of more challenging seasonal volume trends. Revenue growth for the first quarter was 9.6%. Adjusted EBITDA, net of NCI, increased 8.4% and adjusted EPS increased 16.1% as compared to the first quarter of 2025.

These results highlight the adaptability and financial discipline of our leadership teams and the benefits of our efficiency initiatives which are driven by technology adoption and operational excellence. Speaking first to the Talkspace acquisition, announced on March 9, Talkspace is an established market leader in virtual outpatient behavioral health care with a network of 6,000 licensed professionals serving all 50 states. We believe Talkspace is the best-in-class virtual platform in the behavioral industry with a differentiated technology offering and strong brand recognition among patients and clinicians. Talkspace's successful payer-driven business model aligns well with our strategy to increase access to a full spectrum of outpatient services and diversify our behavioral payer mix.

Over the past 24 months, we focused significant resources to grow existing outpatient service locations adjacent to our hospital campuses and develop new freestanding outpatient clinic locations. We will continue to invest in these areas internally. The addition of Talkspace's high-quality, scaled platform accelerates our ability to create the industry's first end-to-end continuum of behavioral health care services that is strongly aligned to the demand trends and preferences of the market overall. This national continuum includes lower-acuity outpatient and step-in services, all the way to residential and inpatient services where we have led the market for more than four decades.

We plan to share more details about the impact of the transaction after closing, but I would like to highlight two primary benefits of the acquisition. First, from a strategic perspective, Talkspace represents a multiyear value creation opportunity underpinned by access to new sources of outpatient revenue growth. This is supported by the strength of the base Talkspace business, which has a very strong outlook on a standalone basis, and is enhanced further by the programs we plan to develop alongside Talkspace to complement each other's businesses. For example, there is a significant opportunity for us to introduce Talkspace's 6,000 clinicians into our environment to develop higher-acuity virtual offerings such as virtual intensive outpatient programs, or IOPs.

This will improve our ability to manage more patients stepping down from Universal Health Services, Inc. facilities with a preferred virtual option. The types of programs we build on a virtual outpatient basis will drive higher-quality continuity of care further downstream after our patients step down from higher levels of care. There are numerous other bidirectional revenue synergies we will be working on post closing that will improve access to outpatient virtual services for Universal Health Services, Inc. patients and improve access to higher levels of care for Talkspace patients. Second, from a financial perspective, we expect the deal to be accretive to earnings during the first 12 months post closing, and we expect it to be increasingly accretive thereafter.

By year three post closing, we expect the effective EBITDA multiple for the Talkspace transaction to be in the single-digit range. Moving on to the quarter, I would like to highlight a few items before I turn it over to Steve G. Filton to review the financials. From a growth perspective, we met our internal same-facility revenue growth and earnings objectives in the first quarter despite a more dynamic operating backdrop. This was accomplished through solid expense management and higher contributions from pricing in both segments due to more positive trends in rate.

We expect same-facility growth to be more balanced between volume and pricing as the year progresses, as we believe first quarter volume performance was impacted heavily by seasonal factors consistent with what we highlighted in February on our fourth quarter earnings call. From a technology perspective, our enterprise-level AI governance process remains very active and is focused on two primary domains within our business: in the operational domain to impact quality and patient experience, and in the administrative domain to increase efficiency. During 2025, we focused heavily on scaling solutions that reduce the burden of routine administrative tasks.

We deployed and scaled a total of eight different use cases of AI solutions into our revenue cycle operations that are now yielding significant benefit on a go-forward basis. For 2026, we are focusing more heavily on enabling solutions in our clinical operations to improve hospital-level efficiency and patient experience. Included in our 2026 roadmap are several new use cases being designed and built with Hippocratic AI, which is one of our key AI solution partners. It is too early to project the longer-term financial impact of the 2026 initiatives. Although we expect them to be incremental to margins over time, and just as importantly, we expect them to have a real impact on quality and patient experience.

In closing, I am encouraged by our progress so far in 2026 and remain optimistic about our ability to deliver high-quality services in an efficient manner to the communities we serve. On behalf of our entire organization, we look forward to welcoming Talkspace employees into Universal Health Services, Inc. in the coming months. With that, I will now turn the call over to Steve G. Filton for more details on the quarter.

Steve G. Filton: Thanks, Marc. I will highlight a few financial and operational trends before opening the call up to questions. The company reported net income attributable to Universal Health Services, Inc. per diluted share of $5.65 for the first quarter of 2026. After adjusting for the impact of the items reflected on the supplemental schedule included with the press release, our adjusted EPS was $5.62 for the first quarter. On a same-facility basis, adjusted admissions at our acute care hospitals declined versus the first quarter of 2025. We estimate acute care volumes during the first quarter of 2026 were impacted by approximately 200 basis points due to weaker flu and respiratory activity and winter weather in certain markets.

Performance in the Nevada market rebounded slightly with adjusted admissions increasing approximately 1.5% over the prior year. Same-facility acute care emergency department visits increased approximately 2%, and we also saw positive trends in certain higher-acuity important inpatient service lines, notably cardiology, orthopedics, and neurology. On a same-facility basis, net revenues in our acute segment in the first quarter of 2026 increased 8.2% and were up 6.2% excluding the impact of our health plan. Acute care same-facility revenue per adjusted admission increased 6.3% during the first quarter of 2026 on a reported basis and was up 4.9% after excluding approximately $30 million of prior-period supplemental program net benefit related to the expanded 2025 Nevada program which we contemplated in our guidance.

Operating expenses were well managed across labor and other expense categories. Same-facility acute care salaries, wages, and benefits expense per adjusted admission increased 3.1%, and supply expense per adjusted admission increased 3.5% over last year's first quarter. Same-facility contract labor was 2.3% of acute care segment revenues, or 40 basis points lower year over year. Other operating expenses increased primarily as a result of the growth in our health plan. For the first quarter of 2026, our acute care performance resulted in 11.7% growth in same-facility segment EBITDA. Excluding the prior-period supplemental program revenue, first quarter 2026 same-facility acute care segment revenue would have increased 3.3% on a year-over-year basis.

With respect to health insurance exchange trends during the first quarter of 2026, we estimate an impact of approximately $15 million. Our exchange adjusted admissions declined approximately 5% as compared to the first quarter of 2025. However, due to our expectation that some of the exchange members treated at our acute care facilities during the first quarter will not sustain their premium payments, the impact to our acute care financials assumes an effective HIX decline that is higher than the reported trend. We are reiterating the full-year $75 million pretax impact which assumes the exchange declines will steepen somewhat as the year progresses.

Turning to our behavioral health segment results during the first quarter of 2026, same-facility net revenues increased 7.3%, supported by a 5.8% increase in same-facility revenue per adjusted patient day and a 1.6% increase in same-facility adjusted patient days as compared to the first quarter of 2025. We estimate that the winter weather impacted first quarter behavioral health volume growth by approximately 40 to 50 basis points. Same-facility behavioral health segment EBITDA increased by 8.4% in the first quarter of 2026. Excluding the net benefit from prior-period supplemental payments, same-facility revenue per adjusted patient day would have increased 4.9% and same-facility segment EBITDA would have increased 4.3%.

For wage trends in behavioral in 2026, we expect growth of approximately 6% on a year-over-year basis, moderating slightly from the 7% to 8% level we experienced during 2025. In California, we are making good progress year to date with respect to the state's nurse staffing ratio requirements that go into effect June 1, and we remain on track with the assumptions contemplated in our 2026 outlook. Cash generated from operating activities was $402 million for the three months ended 03/31/2026, as compared to $360 million during the same period last year. During the first quarter of 2026, we spent $217 million on capital expenditures.

In the acute care segment, we continue to invest in the 156-bed de novo hospital in Florida scheduled to open in May, and in two bed towers and a replacement hospital project together comprising 178 beds that go online during the second quarter. In our behavioral health segment, we opened a 144-bed de novo joint venture hospital in Pennsylvania in the early part of the first quarter, and plan to open a 120-bed de novo hospital in Missouri later this year. During the first quarter of 2026, we acquired 675,000 of our shares at a total cost of $127 million.

As of 03/31/2026, we had $1.3 billion of repurchase authorization available pursuant to our stock buyback program, and we expect to remain active with share repurchase throughout 2026, including leading up to and following the closing of the Talkspace acquisition. From a balance sheet perspective, in late April, we expanded the aggregate capacity of our credit facilities by $900 million to provide additional flexibility with the pending Talkspace transaction, other potential acquisitions, and our continued prioritization of returning capital to shareholders through buybacks and dividends. As of 03/31/2026, we had $373 million of borrowings outstanding pursuant to our revolving credit facility, the borrowing capacity of which was recently expanded to $1.5 billion.

Turning to our outlook for 2026, we are reiterating the financial and operating forecast that we established on February 25 in conjunction with fourth quarter earnings. Customary with our historical practice, we plan to reevaluate annual guidance as necessary in conjunction with our second quarter earnings planned for July. Operator, that concludes our prepared remarks, and we are pleased to answer questions at this time.

Operator: We will now open the call for questions. As a reminder, to ask a question, please press 11 on your telephone and wait for your name to be announced. To allow as many people as possible to submit a question, please limit yourself to one question and one follow-up. Please standby while we compile the Q&A roster. Our first question comes from A.J. Rice with UBS. Your line is open.

A.J. Rice: Hi, everybody. Thanks. I appreciate the number you gave on the behavioral side, 4.3% as sort of the normalized core growth. There are a lot of moving parts in the acute business: the negative impact from the weather and the flu, and on the positive side some DPP variance year to year. Can you parse those out and give us a sense of what the core grew on an EBITDA basis in the acute side, possibly? And then, on AI use cases that Marc called out, can you pick two or three that are really meaningful and delve a bit more into the opportunity to deploy AI?

Steve G. Filton: I think it was in the low single-digit range, A.J.

Marc D. Miller: On AI, we are focused on administrative functions to increase efficiency and on clinical operations where we can impact patient experience and improve outcomes. We have already deployed and scaled eight different AI use cases in our revenue cycle operations, which are yielding significant benefits, including improvements in denials management and revenue capture. We are also doing a lot of things that touch the patient experience. We are not doing much in the core clinical decision space yet, but over time we expect progress there as well.

A.J. Rice: Okay. Alright. Thanks so much.

Operator: Thank you. Our next question comes from Jason Paul Cassorla with Guggenheim. Your line is open.

Jason Paul Cassorla: Thanks. Good morning. I wanted to check back in on the $46 million of combined Nevada and Ohio out-of-period Medicaid supplemental payments. I think we are calculating around a $120 million to $130 million year-over-year benefit from total Medicaid supplemental payments in the quarter. Is that a fair characterization? And if so, can you help bridge what would indicate a decent step up in core EBITDA ramp for the remainder of the year to meet that 5% growth expectation?

Steve G. Filton: That is accurate, and it is worth noting that none of what you enumerated was outside of our expectations. The vast majority of DPP we recorded in Q1 was in our guidance. If you exclude the $46 million of out-of-period DPP in Q1, you will have a good run rate for the rest of the year, and that number is consistent with what we disclosed in our 10-K and will disclose in our first quarter 10-Q as our estimated DPP for the year.

We recognized that we would have this significant benefit in Q1 largely because we had a number of large DPP programs last year, for example Tennessee and D.C., that were not approved and therefore recorded until after the first quarter. As far as the ramp for the rest of the year, our overall results were within our expectations, and that implies we expect a ramp in our earnings as the year goes on to get to that core level growth of 5% embedded in our guidance.

Those assumptions include the continued ramp-up of new facilities, Cedar Hill in Washington, D.C., which celebrated its first-year anniversary this month, the opening of the new hospital in Florida, the opening of 178 new beds in existing hospitals in California, Las Vegas, and Florida, continued improvement in behavioral, both in outpatient revenues and operating leverage from volume growth. Volumes were on the softer side in both acute and behavioral, and we expect them to improve as the year goes on. Finally, we expect continued moderation in wage pressures in behavioral versus the significant investments in 2025.

Jason Paul Cassorla: Great. Thanks. As a follow-up on the behavioral volume picture, excluding weather impacts, you still hit the low end of your 2% to 3% volume target in the quarter. How much of that acceleration ex-weather was a function of higher headcount and increased labor supply versus changes in demand or throughput?

Steve G. Filton: Two broad trends. First, we invested heavily in staffing in behavioral in 2025 to allow greater flexibility to take on demand, and that is beginning to reflect in volumes. Second, we continue to focus on outpatient growth, where more and more of the demand is shifting. We think demand remains strong for behavioral services, and we are doing a better and more focused job capturing that demand, which we view as an upward trajectory.

Operator: Thank you. Our next question comes from Ann Hynes with Mizuho. Your line is open.

Ann Hynes: Good morning. Can we talk about bad debt reserve trends? With Medicaid disenrollment and the expiration of the ACA subsidies, how is that trending versus your expectation? And does your guidance assume deterioration of collectability on copays and deductibles?

Steve G. Filton: We addressed the HIX dynamic as it relates to uncompensated care and bad debt in our prepared remarks. We saw a decline in HIX volume in Q1, and we recorded an additional reserve because some HIX patients presenting with coverage will later be deemed not to have coverage if they fail to make premium payments. We have taken a reasonably conservative position in Q1. We continue to believe our $75 million negative estimate for the impact of the HIX subsidies expiring is appropriate; it will get larger as the year goes on, which was always our expectation, and that impact largely is reflected in higher bad debt and uncompensated care.

Other than that, no dramatic changes in payer mix: slight increases in uninsured and Medicare, slight decreases in Medicaid utilization, and no big changes in denials or patient status changes. Investments in technology, people, and process in our revenue cycle, particularly in acute, are helping us keep pace with payers. We will increase that focus in behavioral throughout 2026.

Operator: Thank you. Our next question comes from Matthew Dale Gillmor with KeyBanc. Your line is open.

Matthew Dale Gillmor: Thanks. Following up on pricing, it seemed like rate outperformed even excluding the DPP. What drove the stronger price in the quarter, and why do you expect moderation for the rest of the year?

Steve G. Filton: Mix was a factor. With significantly lower flu this year, by definition the remaining patients were of higher acuity; flu and respiratory are lower-acuity cases. We also saw healthy increases in more acute service lines—cardiology, orthopedics, and neurology—which supported acuity and pricing. We expect a more balanced contribution between rate and volume as the year progresses.

Matthew Dale Gillmor: And on professional fees, any trend updates and what are you doing to alleviate pressure, particularly in radiology?

Steve G. Filton: Our guidance contemplated professional fees rising at an inflationary single-digit rate, maybe toward the high single digits, and we are largely operating within that range. We are addressing pressure from certain hospital-based physicians by running more competitive RFPs for coverage and reducing locums usage, which is more expensive. It is a daily operational focus, but we have been successful keeping fees manageable.

Operator: Thank you. Our next question comes from Joanna Gajuk, filling in for Kevin Mark Fischbeck with Bank of America. Your line is open.

Joanna Gajuk: Hi, good morning. On the HIX volume decline, can you talk more about payer mix in the quarter?

Steve G. Filton: We saw a decline in HIX volumes, a slight decline in Medicaid utilization, a slight increase in uninsured volumes, and a slight increase in Medicare volumes—no major changes beyond that.

Joanna Gajuk: Thanks. And on supplemental payment programs, sounds like nothing new was approved this quarter. Any update on Florida and California?

Steve G. Filton: In Florida, there is a high level of confidence among providers, based on feedback from the state, that the pending 2025 program is likely to be approved. We do not know the exact timing. We have been estimating about a $50 million benefit, and when we see the final approvals, that benefit could be measurably higher; we will adjust guidance when appropriate. In California, a renewed or expanded program is much less certain. We are not estimating a potential benefit there until there is further consensus between the state and CMS, although it is possible an expanded program could be meaningful.

Operator: Thank you. Our next question comes from Justin Lake with Wolfe Research. Your line is open.

Justin Lake: Thanks. On core growth, ex-DPP your core EBITDA looks down about 5% to 6% by my math. Anything in last year’s first quarter that did not reoccur, or anything else driving the decline?

Steve G. Filton: It is difficult to respond with precision without your calculation in front of me, but the items you referenced were anticipated and embedded in our guidance. We understood the difficult DPP comparison in Q1 and that our earnings trajectory would need to increase over the year to get to the core 5% growth embedded in guidance. We believe we can get there for the full year, but we are not at that core 5% growth in the quarter when excluding DPP and other nonrecurring items.

Operator: Thank you. Our next question comes from Benjamin Hendrix with RBC Capital Markets. Your line is open.

Benjamin Hendrix: Thank you. On HIX trends, you cited a 5% decline in volume, but for the year you assume 25% to 30% of HIX patients lose coverage. Are you updating that assumption based on 1Q results?

Steve G. Filton: While we could identify a 5% decline in HIX volumes in Q1, we expect some patients recognized as HIX will later be identified as not having coverage due to nonpayment of premiums. Our reserve reflects a higher effective HIX volume decline, probably in the low double digits—around 10% to 12%. We continue to believe the decline could reach 25% to 30% for the year. We were not expecting to be at that level in Q1. There are still dynamics around premium payments and coverage status that we will learn more about over the next quarter or more, and we are being conservative from an accounting perspective.

Operator: Thank you. Our next question comes from Andrew Mok with Barclays. Your line is open.

Andrew Mok: Good morning. Given flu and weather were early quarter dynamics, can you comment on volume progression throughout the quarter in each segment, including exit rates in March and April?

Steve G. Filton: The flu comparison was more significant in January and February; flu season was largely over by March in both years. Weather impacts were concentrated in January and February and were market-specific. March was a “cleaner” month—no real flu impact and no significant weather impact—and volumes showed a more normative year-over-year increase.

Operator: Great. Thank you. Our next question comes from Raj Kumar with Stephens. Your line is open.

Raj Kumar: Following up on March and April trends, did you see a pickup from deferred care pushed by winter storms? And any commentary on acute care surgical volumes and acuity shifts year over year?

Steve G. Filton: Elective procedures that are scheduled and postponed due to weather tend to be rescheduled. The bigger acute impact was flu, which is not something you recover. We estimate $5 million to $7 million of weather impact, mostly in the D.C. market where burst pipes closed beds temporarily. You recover from closures operationally, but you do not recapture the lost patient days. On the behavioral side, you may recapture outpatient visits, but inpatient trauma-type admissions are generally redirected elsewhere if patients cannot reach the hospital. We are not counting on significant recapture of deferred procedures in our growth outlook.

Operator: Thank you. Our next question comes from Craig Matthew Hettenbach with Morgan Stanley. Your line is open.

Craig Matthew Hettenbach: On the outpatient behavioral strategy and Talkspace, how has the Thousand Branches initiative been going, and did it inform the Talkspace decision?

Marc D. Miller: Things are going well, though deployment has been a bit slower due to state-by-state factors. Thousand Branches did not drive the Talkspace decision. We have known Talkspace for many years and have long focused on building outpatient capabilities. The Talkspace opportunity emerged when they indicated an openness to strategic options, and we moved forward. Our internally developed outpatient offerings will complement Talkspace as we build the full continuum.

Craig Matthew Hettenbach: You mentioned the effective multiple could be single digits a few years out. What gives you that confidence?

Marc D. Miller: We have confidence based on a full look at their business model, recent performance, and their standalone plans for the next 24 months, combined with the incremental programs we can drive together. Today’s multiple is harder to assess off current earnings, but with their growth path and our combined initiatives, we expect earnings to scale such that in a few years the effective multiple will be in the single digits.

Operator: Thank you. Our next question comes from Benjamin Rossi with JPMorgan. Your line is open.

Benjamin Rossi: Good morning. On volumes, what is your current outlook for Medicaid volumes for the year in both segments, and are you seeing any signs of volatility returning through administrative churn or eligibility friction?

Steve G. Filton: We saw slight declines in Medicaid utilization in Q1, which is consistent with our expectations for the year. Outside of HIX, payer mix changes in Q1 were relatively minor and consistent with expectations, and that is how we are thinking about the rest of the year.

Benjamin Rossi: As a follow-up on de novos, can you update on recent openings in Nevada and D.C., and the Florida hospital set to open next month, and how you are thinking about full-year EBITDA performance?

Steve G. Filton: As part of our guidance, we said the new Florida hospital would likely have an operating loss in its first year, as most de novos do. We expect that loss to be largely offset by gains at Cedar Hill in D.C. We still believe that, though Cedar Hill’s improvement is likely more back-end loaded than originally contemplated due to weather and other dynamics. The additional capacity coming online in Q2—new towers in Las Vegas and on Florida’s West Coast, and a replacement facility in California—are in existing markets and should ramp relatively quickly, contributing positively in the back half.

Operator: Thank you. Our next question comes from Ryan M. Langston with TD Cowen. Your line is open.

Ryan M. Langston: On denials activity, are you seeing accelerating levels of denials but navigating more effectively? Any color by payer class?

Steve G. Filton: We are not seeing a material increase in denials. Others have cited more aggressive payer behavior; our investments in revenue cycle technology, personnel, and processes—particularly in acute—are allowing us to keep pace. We plan similar investments in behavioral over the next 12 to 18 months.

Operator: Thank you. Our next question comes from Analyst with Goldman Sachs. Your line is open.

Analyst: Good morning. Update on behavioral supply-demand equilibrium—any incremental shifts on supply or demand versus the last couple of years?

Steve G. Filton: Behavioral demand remains strong. Our greatest challenge has been meeting that demand due to staffing in certain markets and roles—nurses, therapists, mental health technicians. We have made progress but it remains a focus. Demand is also shifting more to outpatient delivery, similar to the long-term trend in acute. We are addressing this through freestanding outpatient facilities (Thousand Branches), step-down programs, and the Talkspace acquisition.

Analyst: As a follow-up on outpatient strategy and capital allocation, how are you balancing buybacks relative to allocating more capital toward building out outpatient and digital capabilities?

Steve G. Filton: Since announcing Talkspace, we have emphasized it is not an either/or with share repurchase. We continue to view buybacks as compelling and intend to remain active; our previously discussed annual target of $800 million to $900 million remains a minimum target. The Talkspace deal modestly increases leverage from just under 2x to just over 2x, leaving plenty of capacity for additional M&A, an aggressive CapEx program, and continued returns of capital through buybacks and dividends.

Operator: Thank you. Our next question comes from Analyst with Baird. Your line is open.

Analyst: Thank you. Following up on core growth math, inputs I am considering include net DPPs, the exchange subsidy headwind, California staffing requirement headwind, flu/weather impact, Palm Beach Gardens de novo costs, and Cedar Hill which sounds more back-end loaded now. Anything else to consider, or any nonrecurring items from last year’s first quarter?

Steve G. Filton: Those are the items we have discussed, and none were a surprise to us in the quarter. Overall results were consistent with our internal expectations. Weather and flu were the less predictable elements, but we referenced both on our Q4 call. On Cedar Hill and the new Florida hospital, we continue to expect a near wash for the year, with Cedar Hill more back-end loaded.

Analyst: And on behavioral labor efforts focused on retention of year-one hires—last time you cited turnover moving down from as high as 50% to at least 40% over the last half year. Where does turnover stand today, and what was the pre-COVID reference point?

Steve G. Filton: Behavioral salary and wage expense was up about 8% in 2025 and moderated to roughly 6% to 7% in Q1 2026. We expect further moderation as the year progresses, reflecting less aggressive hiring, moderation in wage increases, and measurable progress in turnover. Turnover remains elevated industrywide but is improving meaningfully versus last year. Pre-COVID turnover was materially lower than today’s levels, and our initiatives are aimed at continuing to narrow that gap.

Operator: I am showing no further questions at this time. I would now like to turn it back to Darren Lehrich for closing remarks.

Darren Lehrich: Thank you, everyone, for participating in today's call and for your interest in Universal Health Services, Inc. Have a great rest of your day.

Operator: This concludes today's conference call. Thank you for participating. You may now disconnect.

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