tapebrief
UHS · Q3 2025

UHS · Q4 2025 Earnings

Cautious

Universal Health Services

Reported February 26, 2026

30-second summary

UHS closed FY25 in line with the raised guide (revenue $17.37B +9.7%, adj EPS $21.74) but the FY26 setup is the story: guidance implies just +4.8% EBITDA growth on +7.1% revenue growth, a clear deceleration and margin give-back driven by a quantified ~$110M of named 2026 headwinds (ACA exchange volume loss ~$75M, California behavioral staffing $35M). The acute pricing run-rate that drove the back-half 2025 bull case has already normalized to +5.4% same-facility per adjusted admission in Q4, and behavioral patient days at +1.5% landed below management's 2-3% target range for behavioral volume growth.

Headline numbers

EPS

Q4 FY2025

$5.88

Revenue

Q4 FY2025

$4.49B

+9.1% YoY

Operating margin

Q4 FY2025

11.5%

Key financials

Q4 FY2025
MetricQ4 FY2025YoYQ3 FY2025QoQ
Revenue$4.49B+9.1%$4.50B-0.2%
EPS$5.88—$5.69+3.3%
Operating margin11.5%—11.6%-10bps

Guidance

UHS reaffirmed FY2025 guidance and provided FY2026 guidance implying 7.1% revenue growth, 8.5% Adjusted EPS growth, and 4.8% Adjusted EBITDA growth at midpoints.

Guidance is issued for the full year only, refreshed each quarter. Prior and new below are the same FY updated this quarter.

Actuals vs prior guidance

MetricPeriodPrior guideActualΔResult
RevenueFY 2025$17.306 billion to $17.445 billion$17.365 billionwithin guide range (midpoint-aligned)Beat
Adjusted EPS (diluted, non-GAAP)FY 2025$21.50 to $22.10 per share$21.74 per sharein-lineMet
Adjusted EBITDA net of NCIFY 2025$2.569 billion to $2.619 billion$2.590 billionin-line with midpointBeat

New guidance

MetricPeriodGuideYoY
RevenueFY 2026$18.417 billion to $18.789 billion+7.1% at midpoint vs FY2025
Adjusted EPS (diluted, non-GAAP)FY 2026$22.64 to $24.52 per share+8.5% at midpoint vs FY2025
Adjusted EBITDA net of NCIFY 2026$2.641 billion to $2.789 billion+4.8% at midpoint vs FY2025
Capital ExpendituresFY 2026$950 million to $1.1 billion—

Segment KPIs

Q4 FY2025
SegmentQ4 FY2025YoY
Acute Care Services (Same Facility)$2.374B+6.9%
Behavioral Health Care Services (Same Facility)$1.838B+7.2%
Acute Care Services (Full Year)$9.926B+10.9%
Behavioral Health Care Services (Full Year)$7.185B+7.7%

Other KPIs

Q4 FY2025
SegmentQ4 FY2025
Acute Care Adjusted Admissions (Q4 Same Facility)0.0%
Acute Care Adjusted Patient Days (Q4 Same Facility)-0.7%
Acute Care Revenue Per Adjusted Admission (Q4 Same Facility)5.4%
Behavioral Health Adjusted Admissions (Q4 Same Facility)1.8%
Behavioral Health Adjusted Patient Days (Q4 Same Facility)1.5%
Behavioral Health Revenue Per Adjusted Admission (Q4 Same Facility)5.3%
Adjusted EBITDA Margin (Q4)15.1%
Debt/Adjusted EBITDA (LTM)1.83x

Management tone

Narrative arc: Q2 2028 cliff sizing → Q3 bullish reframe on Cedar Hill + DC → Q4 conservative FY26 anchor with named near-term headwinds.

Three quarters ago management was openly modeling a 2028+ Medicaid drag against a fast-growing supplemental program base; last quarter the story pivoted to Cedar Hill breakeven and acute pricing durability; this quarter the message is that 2026 carries ~$110M of identified, near-term, non-Medicaid headwinds management is choosing to absorb rather than offset away. The Wolf Research exchange on ACA — management assuming a 25-30% exchange volume decline with ~$75M pre-tax earnings impact, against exchange volumes that are ~6% of acute admissions but visibility on bad debt explicitly limited ("real precision... within a few months") — is the clearest signal that 2026 EBITDA is being guided with wider-than-usual uncertainty bands.

The acute pricing narrative quietly retreated. In Q3 the +9.8% per-adjusted-admission run-rate was framed as containing a persistent ~5pp of revenue cycle improvement on top of historical 3%. In Q4 same-facility per-adjusted-admission landed at +5.4% — a material revert — and 2026 guidance assumes 3-4% acute pricing, i.e. essentially the historical norm. Management did not characterize the Q3 figure as one-time on the Q3 call; the Q4 print does. This is the second-most consequential tone shift after the EBITDA-growth deceleration.

Behavioral inflection thesis is being re-stated rather than proven. Adjusted patient days at +1.5% remain below the 2-3% range management is now targeting for 2026, and the answer in Q&A leans on extrapolation — "sequential improvement... 2-3% achievable in 2026" — and on capex (156-bed Palm Beach Gardens de novo Q2 2026, 264 beds of behavioral de novo) rather than evidence the labor constraint has cleared. The capex guide ($950M-$1.1B vs. estimated 2025 around $0.95B based on FCF math) signals management is investing through the uncertainty.

Interest expense and Medicaid policy risk moved from sidebar to top-of-disclosure. The forecast caveats now explicitly call out "Increased interest rates have significantly increased interest expense and reduced free cash flow," and supplemental Medicaid program renewal and exchange premium tax credit elimination are named as material adverse-effect risks. That language was not as prominent last quarter.

Q&A highlights

A.J. Rice · UBS

What pricing assumptions are embedded in 2026 guidance for both segments, and how do AI applications translate into financial impact on revenues and margins?

Management expects 3-4% pricing in acute care (in line with 10-year average) and 2-3% in behavioral (moderating from recent years). AI efforts focus on administrative efficiencies (revenue cycle, claims appeals) and clinical outcomes (post-discharge calls, readmissions reduction). Financial impact difficult to quantify precisely but includes headcount reduction and improved outcomes.

Acute care pricing: 3-4% expected for 2026Behavioral pricing: 2-3% expected for 2026 (moderating from prior years)AI reducing post-discharge follow-up headcountClaims appeals and coding improvements through AI

Andrew Mock · Barclays

Why is the 2026 California behavioral staffing regulation headwind $35M for a mid-year implementation but only $30M ongoing annual impact?

The regulation requires a different staff mix (more RNs, fewer unlicensed staff) but not necessarily higher total headcount. 2026 includes startup costs, recruiting/training expenses, and potential short-term volume disruption from unfilled positions. Once fully staffed in 2026, ongoing costs drop because those one-time investments don't repeat.

$35M pre-tax headwind in 2026$30M expected annual ongoing impact from 2027 onwardsRegulation effective June 1, 2026Requires shift to more licensed nursing staff (RNs)

Justin Lake · Wolf Research

What visibility does UHS have on ACA exchange volume declines and bad debt exposure from members not paying premiums?

Management assumes 25-30% exchange volume decline based on CBO projections; early 2025 data shows some decline but not yet at full expected level. Insurance companies don't report volume losses until premium defaults occur, creating delayed visibility. Bad debt risk is elevated but management believes it is accounted for in assumptions. Real precision on actual impact expected within a few months.

25-30% exchange volume decline assumedExchange volumes represent ~6% of acute care admissions and <5% of acute care revenuesEarly 2025 data shows decline but not yet at projected levelsPremium non-payment creates bad debt risk

Ben Hendrix · RBC Capital Markets

How is UHS addressing accelerating behavioral trend through outpatient development, and what is the long-term optimal mix between inpatient and outpatient behavioral?

Outpatient services currently represent 10% of behavioral segment revenue with growth expected. UHS operates ~120 outpatient locations offering step-down (PH, IOP) and step-in services. The 'thousand branches wellness' brand is planned to open at least 10 new freestanding centers in 2026. Outpatient margins are better than inpatient; payer demand for in-network outpatient alternatives to inpatient care is increasing.

Outpatient currently 10% of behavioral revenue~120 outpatient locations currently operating10 new 'thousand branches wellness' locations planned for 2026Step-down services (PH, IOP, etc.) near inpatient campuses

Craig Hennenbach · Morgan Stanley

What is the confidence level in achieving 2-3% behavioral volume growth in 2026 given pricing normalization, and what are capital investment priorities?

Management expresses confidence based on sequential quarterly improvement in patient day growth in 2025, exiting year near 2-3% target range. Staffing investments made in 2025 are expected to support volume growth. Capital priorities include new de novo 156-bed hospital in Palm Beach Gardens (Q2 2026), Florida and California expansions, two behavioral de novo projects (264 beds), and ER/surgical capacity expansion.

Sequential improvement in behavioral volume growth each quarter of 20252-3% volume growth target achievable in 2026156-bed de novo hospital opening Q2 2026 in Palm Beach Gardens178 licensed beds in acute care expansions (FL, CA, NV)

Answers to last quarter's watch list

Behavioral same-facility adjusted patient days — Q4 print vs. management's volume target. Came in at +1.5%, up from +1.3% in Q3 but still below the 2-3% range management is now targeting for 2026. The trajectory is right (+0.5% admissions Q3 → +1.8% Q4, days +1.3% → +1.5%) but volumes remain short of the stated range.
Resolved negatively
Cedar Hill Q4 EBITDA disclosure. The press release does not call out Cedar Hill Q4 EBITDA contribution specifically, and Q&A coverage did not surface a discrete figure. Management did not publicly confirm the "breakeven or better" commitment with a number.
Not resolved
FY26 initial guidance framing — material EPS lift or conservative anchor? Anchored conservatively. FY26 EPS midpoint $23.58 vs. FY25 $21.74 is +8.5% — well below what the Q3 bull case (Cedar Hill flipping, DC annualizing, acute pricing durability) would have suggested. The conservatism is driven by ~$110M of named 2026 headwinds (ACA $75M + California $35M) plus acute pricing reverting to 3-4% from the +5.4% Q4 run-rate. Status: Resolved negatively (for the bull case)
Acute revenue per adjusted admission run-rate above +7%? No — landed at +5.4% same-facility in Q4, a material revert from Q3's +9.8%. The "persistent ~$5/admission revenue cycle uplift" Steve described last quarter did not hold at that magnitude in Q4, and 2026 guidance reverts to 3-4%.
Resolved negatively
2028 OB3 mitigation specificity. No new quantified mitigation specifics in the press release. AI cost takeout discussion in Q&A remained qualitative; no new state DPP approvals beyond the year-end picture were named in the disclosures available.
Not resolved
Capital return cadence — buyback pace at year-end. Press release does not break out a Q4 buyback figure in the available extraction, and capex guidance of $950M-$1.1B for 2026 is elevated relative to the $0.85B FY25 FCF base, implying capital priorities tilting back toward organic investment (Palm Beach Gardens, behavioral de novo).
Continue monitoring

What to watch into next quarter

Q1 2026 behavioral adjusted patient days vs. the 2-3% 2026 commitment. Q4 came in at +1.5%; the FY26 guide requires sustained 2-3%. A Q1 print below +2% would directly challenge the labor-resolution narrative.

ACA exchange volume erosion — actual vs. the embedded 25-30% decline assumption. Management said precision arrives "within a few months." A Q1 print showing faster erosion or higher bad-debt conversion than the $75M baked into guidance would force a mid-year guide cut; slower erosion creates upside.

Acute same-facility revenue per adjusted admission — does it hold at 3-4% or revert higher? The Q4 +5.4% sits between the 2025 surge and the 2026 guide. Q1 above +5% would suggest the FY26 acute pricing assumption is conservative; at or below +4% confirms last quarter's "persistent revenue cycle uplift" framing was overstated.

California behavioral staffing ramp ahead of June 1, 2026 effective date. Watch for any sizing change to the $35M headwind or commentary on census disruption during recruiting — the gap between $35M 2026 and $30M ongoing is the cleanest near-term execution test.

Q1 capex pace against the $950M-$1.1B FY26 envelope. With Palm Beach Gardens (156 beds) opening Q2 2026 and 264 beds of behavioral de novo in flight, Q1 capex run-rate and any disclosed buyback throttling would signal where on the capex range management is tracking.

Any new state DPP approvals or supplemental program renewals. With Medicaid renewal language now flagged as a material risk and OB3 mitigation specificity an open watch item from Q3, any named program activity is the cleanest signal that the long-term offset thesis still has runway.

Sources

  1. UHS Q4-2025 press release, exhibit 99.1: https://www.sec.gov/Archives/edgar/data/352915/000119312526073545/uhs-ex99_1.htm
  2. UHS Q4-2025 earnings conference call Q&A (exchanges cited above)
  3. UHS Q3-2025 and Q2-2025 Tapebrief briefs for prior guide and watch-list comparison

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