Justin Lake — Analyst, Wolfe Research
Thanks. Good morning, Steve. Appreciate all the details. I was hoping you could give us an update in terms of, I know there's a couple of states pending approval: Florida and I believe Nevada. Maybe you can give us some color on the potential DPP there that could benefit the company if those are approved, and then maybe give us a quick rundown on or an update on where the exchange contribution looks like. What's the kind of run rate on the exchange volume and revenue year to date? Any updated thoughts on if those subsidies expire, what you think that estimate is? Thanks.
Steve Filton — CFO, Universal Health Services
Sure, Justin. As far as any new potential Medicaid supplemental benefits, we've been disclosing for, I think, several quarters that there's an approval of a pending plan or expansion of a pending plan in Florida that we estimate would result in about a $47 million annual benefit to us. As I said, that program remains pending CMS approval, while the state of Florida seems confident that it will be forthcoming at some point. Additionally, I think we learned this quarter, and we'll include this in our to-be-filed 10-Q for the quarter, that there's another maybe $30 million approximately of Nevada DPP increase, again, pending CMS approval. On a combined basis, these two states would represent somewhere in the $75 million-$80 million range. To the best of our knowledge, there are no other material programs or approvals pending.
As far as your second question about exchange contribution, the percentage of our total adjusted admissions, acute care admissions that are exchange patients, is in the 6%-6.5% range. That number has been ticking up. Most of those patients are in two states, in Texas and Florida. I think all the public companies have been reporting increases, and we have a smaller footprint in those states than some of our peers, but our numbers have been ticking up as well. We have previously given an estimate, assuming that the exchange subsidies don't get extended, of a $50 million-$100 million negative impact on us annually. Given the increase in exchange volumes, we're probably trending towards the higher end of that range.
As far as I think sort of any prediction about how the exchange subsidy issue is to be resolved, I don't think we have any particularly pressing insight into that, and you know we're watching how this develops in Congress along with everybody else.
Justin Lake — Analyst, Wolfe Research
Thanks.
Jason Cassorla — Analyst, Guggenheim
Great, thanks. Good morning. Just wanted to check in on 2025 guidance. You increased the midpoint by a little over $90 million. Can you just walk through the bridge to the updated guidance, how that's split between the five quarters of BC DPP, the malpractice reserve increase, the legal settlement in the quarter, and outperformance? You have about a $50 million guidance range at the low and high end. Not a significant range by any means, but just thoughts on what you need to see to trend towards the high end or the low end of guidance at this point. Thanks.
Steve Filton — CFO, Universal Health Services
Yeah. Jason, I think you largely captured the components of the guidance increase. As you said, at the midpoint, it's in that $90 million-$95 million range. That's made up of $140 million of increased DPP. The biggest chunk of that, of course, is the DC number. That's $90 million that we recorded in the third quarter and another $25 million that we expect to record in Q4. That's $115 million of new DPP. There's another $25 million of miscellaneous increases across a variety of states, none of which are singularly material to get us to the $140 million increase in DPP. We deduct from that the $35 million malpractice increase that we described in our press release and another $18 million in a legal settlement that we described in an 8-K that we filed a few weeks ago.
That gets you to that sort of low to mid-$90 million number, effectively meaning that we're assuming from a core business perspective that the trends that we expected when we increased guidance last quarter will continue. When you talk about what it takes to get us to maybe the higher end of that, we're talking about the two businesses running same-store revenue increases in the 5%-7% range. What gets us to the higher end is if we land at the higher end of that range either through volumes or pricing. I think all that is pretty consistent with what we've said previously.
Jason Cassorla — Analyst, Guggenheim
Okay, thanks. Maybe just as a follow-up, just checking in on managed care activity and state budgets in relation to your behavioral health business. I mean, it looks like behavioral health length of stay continues to hold on. Pricing remains favorable. I guess, are you seeing any different behavior as it relates to managed care at this juncture for behavioral? We're hearing multiple states enacting budgets that are reducing behavioral rates. Any thoughts on the state budget situation across your markets stepping into 2026 would be helpful. Thanks.
Steve Filton — CFO, Universal Health Services
Yeah, I mean, I think we have consistently found that managed care players are aggressive in their utilization management, in their management of length of stay, and in their management of where patients are treated, meaning in inpatient or outpatient settings. I don't know that that's changed materially. As you point out, our length of stay has remained fairly constant. A lot of that is, I think, a function of our aggressive behavior in terms of documenting the medical needs of patients, etc., which we are very much focused on. We, again, have not seen, I think, significant changes in payer behavior to date. We understand that payers are under, or any number of payers are under some pressure, but we also understand that their subscribers do need behavioral treatment.
I think given our market presence, given our clinical reputation, etc., we continue to be, I think, a preferred provider for many of those managed care companies. As far as state budgets are concerned, the only state budget that I'm aware of where there have been actual Medicaid cuts is in North Carolina for behavioral. It's not a state that's material to us. I think about 2% of our behavioral beds are in the state of North Carolina. Other states have talked about state budget cuts for Medicaid, and we're sort of tracking that. At the moment, I'm not seeing anything that affects us in any sort of material way.
Jason Cassorla — Analyst, Guggenheim
Okay, great. Thank you very much.
Whit Mayo — Senior Managing Director, Leerink Partners
Hey, thanks. I'm just curious how West Henderson is performing now and any cannibalization of that on overall volumes within the quarter. My second question is just on Cedar Hill, whether or not you think it can offset the headwind. If it was, let's say, a $50 million drag with startup losses this year, that $50 million will reverse itself. Any thoughts on maybe the growth next year? Thanks.
Steve Filton — CFO, Universal Health Services
Yeah. I think as Marc commented in his remarks, West Henderson's been performing well. It's had positive EBITDA really ever since it opened, which is really quite remarkable for a startup hospital. It does, I think, affect our same-store numbers and particularly our same-store volumes. We've talked in the past that there's probably, and again, this is difficult to quantify precisely, but we would estimate maybe a 50 or 60 basis point impact on our same-store adjusted admissions. Meaning, without a West Henderson in the mix, our same-store adjusted admissions might be 50 or 60 basis points higher because of the cannibalization, because some of their admissions or adjusted admissions are coming from our existing hospitals in the market. West Henderson is doing well, and we would expect we'll continue to improve into 2026.
Cedar Hill, as we identified last quarter, lost $25 million in the second quarter. We projected they would lose $25 million in the back half of the year. They did lose that $25 million in the third quarter. I think, as Marc pointed out, we expect them to break even in Q4 and improve into next year. Obviously, the $50 million loss that we incurred in 2025 should be a tailwind going into 2026, assuming that worst case, Cedar breaks even. We assume they'll do better than that and they will be profitable in 2026, although I think our general sense, and we'll give more detail on this when we give our guidance in February, is that any incremental improvement over break-even will largely help to offset any opening and startup losses from the ADM Medical Center in Florida.
Whit Mayo — Senior Managing Director, Leerink Partners
Okay, thanks.
Ben Hendrix — Analyst, RBC Capital Markets
Great. Thank you very much. Appreciate your commentary on your outpatient surgical initiatives. I was wondering if you could give us a little bit more color on what you're seeing in terms of surgical trends, both inpatient and outpatient, and what case mix is looking like in the quarter and just how that's contributing overall to the volume growth for the acute care hospital segment. Thank you.
Steve Filton — CFO, Universal Health Services
I think in our prepared remarks, we made the comment that outpatient surgical trends increased slightly over the prior year in the quarter, and that actually was an improvement over the first half of the year when I think they were actually down. We were encouraged by that. I think we've noted that some of the, I'll call it surgical softness or softness in surgical volumes, have been difficult comparisons with prior years where we were seeing some benefit from the catch-up of deferred and postponed procedures that had been deferred and postponed during COVID. I think we're starting to anniversary that and kind of get that behind us, and it feels to us like surgical volumes are returning to sort of more normal levels. I'm sorry, was there a second part to your question?
Marc Miller — President and CEO, Universal Health Services
Case mix.
Steve Filton — CFO, Universal Health Services
Oh, case mix. Yeah, case mix was up slightly in the quarter, not a big driver of improvement, maybe 30 basis points.
Ben Hendrix — Analyst, RBC Capital Markets
Thank you.
Raj Kumar — Analyst, Stephens
Hi. Just on the BA side, maybe just trying to kind of understand the overall supply-demand dynamic. You've seen kind of like SWB growth of high single digits on a same-store basis, where volumes have kind of been slightly negative to slightly positive throughout the year. Maybe just trying to understand what the dynamics are in terms of you're kind of increasing staffing and we should expect kind of better volume growth in subsequent quarters, or is this kind of more just in order to maintain capacity that you're kind of pushing through these SWB trends?
Steve Filton — CFO, Universal Health Services
Yeah, Raj. I mean, I think that we talked at some length in previous quarters. If there are two broad sort of overarching dynamics that I think have muted behavioral volumes, one, as I think we mentioned in our prepared remarks, has been a labor scarcity issue. It's not pervasive. I think it exists in maybe a quarter to a third of our hospitals where we struggle to fill all of our vacancies, whether that's nurses, whether that's therapists, whether that's a non-degree professional, the people that we describe as mental health technicians. I do think that in those specific facilities, volumes are often muted. I think, as we said in our prepared remarks, our hiring numbers are increasing incrementally, albeit. I think you see a little bit of that in the salary and wage data that you're referring to.
The other piece of this is what we're finding, and I think you know we read through what a number of the managed care companies say, is that behavioral utilization broadly and nationally is up across the board. A lot of that seems to be on the outpatient side, and I think that's being delivered in a very, I'll describe it as sort of fragmented way, meaning that outpatient care is being delivered in all sorts of settings, including hospital emergency rooms and urgent care centers and retail pharmacy clinics and mom-and-pop operations. We think we can do a better job of capturing more of that outpatient activity through, frankly, better focus as well as new and additional dedicated outpatient facilities. Obviously, that focus and those facilities require additional staff, and we've been staffing up for that.
To some degree, I think the increase that you're alluding to in salaries and wages is something that's preparing us to be able to treat and absorb more patient volume.
Raj Kumar — Analyst, Stephens
Great. Maybe as a quick follow-up, you had a step up in kind of acquisition spend in the quarter, and I'm assuming that's kind of more on the outpatient behavioral acceleration that you've kind of spoken to. What can we kind of expect forward from a capital deployment on M&A on that front?
Steve Filton — CFO, Universal Health Services
The acquisition spending that you referred to is actually mostly, it's about $35 million or $40 million in the U.K. in the quarter, and that's mostly, honestly, on the inpatient side. I think we've talked about the fact on the outpatient side in the U.S., creating a greater presence in the outpatient space really doesn't require a tremendous amount of new capital. It's probably $1 million or $2 million on average to create one of these step-in outpatient clinics. I think the bigger challenge in those places is finding the appropriate number of therapists more than it is a significant capital spend.
Raj Kumar — Analyst, Stephens
Thank you.
AJ Rice — Managing Director, UBS
Hi, everybody. Maybe a couple of quick things here. I think in your updated guidance, there's about $25 million of sort of miscellaneous DPP payments, a`hing that will be booked in the fourth quarter? On the litigation settlement in Nevada, was that booked in the third quarter, or is that going to be booked in the fourth quarter?
Steve Filton — CFO, Universal Health Services
The litigation settlement was recorded in the third quarter, and it's reflected in our non-same-store acute results. The additional DPP, I think, is spread pretty rapidly between the third and fourth quarters.
AJ Rice — Managing Director, UBS
Okay. I know your pricing on both businesses, actually, even if you X out the DPP payments, was pretty strong by historic standards. Anything to call out there? Is that a sustainable level of year-to-year pricing gains? Any thoughts on that?
Steve Filton — CFO, Universal Health Services
You know, taking it segment by segment, I think on the acute side, we said that our revenue per adjusted admission was close to 10% increase. Half of that, I think, is DPP related, which means 5% is sort of from core results. That's on the high side for sure. I think we think that sustainable acute care pricing is more in the 3%, maybe 3+% range. I think the excess in the quarter is a result of some revenue cycle initiatives that we've undertaken to ensure that our billing is clean and complete, that our denial appeals are as appropriate and aggressive as they should be, dispute resolutions with a number of payers, all that sort of stuff. There are a few small one-time items in terms of an opioid settlement, and we've disclosed our accountable care organization profits.
I think our general sense is that acute care pricing in the 3% range is sort of that sustainable level. On the behavioral side, we've been in the 4%-5% range when you adjust out. I think the DPP impacts, we've been running that, and probably in the quarter, we're again at the higher end of that range because of, I think, some of the things we've discussed already, some pressure from Medicaid state reductions. I think we believe that the sustainable level of behavioral pricing is probably a notch below that, maybe 3.5%-4.5%, but still should continue to be quite positive and a good tailwind for that business.
AJ Rice — Managing Director, UBS
Okay, thanks a lot.
Craig Hettenbach — Executive Director, Morgan Stanley
Yes, thank you. On the behavioral side, you mentioned kind of a slight improvement in the hiring. Can you just talk about more broadly how you think about capacity versus demand in behavioral and what that means for volume growth?
Steve Filton — CFO, Universal Health Services
Yeah. I mean, we've said that I think we think a reasonable level of volume growth in the behavioral business in the intermediate and long term is sort of 2%-3% in adjusted patient day growth. We're still a little shy of that and feel like there's a chance we can get there exiting this year. If we don't, I think it's a reasonable target for next year, particularly at the lower end of that range. To get there, we need to continue to be able to fill our vacancies and reduce our turnover, things that have been happening, and I think we can improve. I think we can see that process has been somewhat slower than we expected, but we continue to make incremental progress and expect that we'll continue to make incremental progress.
Craig Hettenbach — Executive Director, Morgan Stanley
Got it. Just to follow up on capital allocation on the back of the increased buyback authorization, your net leverage, is that kind of the low end of history? Just how you're thinking about that and any targets there and how that might influence capital deployment going forward.
Steve Filton — CFO, Universal Health Services
Yeah. I mean, we've been an active acquirer of our shares for a number of years now. We said in our prepared remarks that since 2019, we've repurchased more than a third of our shares. We continue to view share repurchase, particularly at these current stock price levels, as a compelling use of our capital. We have seen an elevation in our activity in share repurchases, largely, I think, tied to the increase in our free cash flow. I think our expectation is that at a minimum, we'll continue to devote most, if not all, of our free cash flow to share repurchase absent any other compelling opportunities. You know, might we choose to increase that and lever up even more to do that? We might. It's something that we'll make that judgment as we move along.
Craig Hettenbach — Executive Director, Morgan Stanley
Helpful. Thank you.
Kevin Fischbeck — Analyst, Bank of America
Great. Thanks. Maybe I'll ask the behavioral question again, maybe slightly differently. I guess, like, you know, when we've historically thought about this long-term supply-demand imbalance within behavioral, you know, you at least had a competitor who was growing very quickly. Now it seems like they're slowing, they're closing down capacity in certain locations. Is there anything else that you're seeing more broadly? Because 2%-3% isn't a Herculean number, I don't think, but it also was easier to underwrite when someone else was growing much faster. Is there a competitive dynamic that's going on that's maybe skewing things as part of the market that we don't see every day? Anything else that you would kind of point to that might say that the broader market is, in fact, growing faster than we can see from the outside?
Steve Filton — CFO, Universal Health Services
Yeah. I mean, Kevin, the first thing is, you know, it's difficult for us, I think, to comment on operating trends in a competitor. We just don't have access to enough detail to really have, I think, useful insight in that regard. In terms of sort of what, and maybe I'm rephrasing a little bit the question you asked, in terms of what gives us confidence that there is increasing demand out there, I did reference before, I think, I'm not going to say every single managed care entity, but a great many of the managed care entities over the last several quarters in explaining an increase in their medical loss ratios and utilization have cited behavioral health care as a significant chunk of that. We obviously don't have access to their data, but we do have access to claims data and things that we look at fairly carefully.
What we see is increased behavioral health utilization, as I said earlier, on the outpatient side in particular, being delivered in a lot of, I'm going to sort of call them non-traditional, some not necessarily in dedicated behavioral health facilities, but in emergency rooms and urgent care centers and nursing homes, etc. I think, given the clinical product that we can offer in our inpatient and outpatient facilities, given our in-network position with many of these managed care companies, etc., we believe that there's an opportunity for us to capture an incremental amount of that. As you point out, it's not a Herculean effort. We're at 1.3% patient day, adjusted patient day growth in the quarter. We're sort of targeting 2%. That's obviously not a huge gap to fill.
Marc Miller — President and CEO, Universal Health Services
Let me just add also, you know, Steve's made the point, I mean, some of the limitations have been on staffing. As that stabilizes, we do think that there are significant opportunities that we can take advantage of. We've been very responsible the last few years in our growth. Other competitors, multiple competitors, have been a little bit more aggressive, and now, you know, probably, it didn't make sense, some of the moves that they've made, and they're having to temper that and go backwards. We're on the same path that we've been on. We've been responsible in the way we've looked at it. We've held on some supply increases, so adding beds because of maybe a lack of staffing in some of those markets. As that stabilizes, we're going to have even more opportunities to grow going forward. We feel really good about where we are with that.
Kevin Fischbeck — Analyst, Bank of America
Okay. Maybe just to then follow up on the outpatient side of the equation, because you know, to your point, you do have some advantages here as far as your in-network location, position, and contracts, and things like that. It sounds like you're not capitalizing or you haven't capitalized on it historically. Can you talk a little bit about the barriers? Was it just lack of focus? Are there markets where you are doing it well and that are blueprints? How can we get confidence that you're going to get that if hiring's been the issue? Hiring's been kind of an issue for a while now. Why will you be able to kind of capture that volume going forward? Thanks.
Steve Filton — CFO, Universal Health Services
What we've talked about, I think, in the last couple of quarters, Kevin, is, I think, two things. One is just an increased focus. We have conceded that for most of our decades-long history as a behavioral health provider, it has been a very inpatient-centric business. While we have always had, or in most of our markets, outpatient programs, they just haven't been a focus. What we've done, I think, that I think will wind up being quite effective is we reorganized such that throughout the organization now, there's really dedicated personnel or personnel that are dedicated to developing clinical programs, business development, referral sources, etc., that are dedicated outpatient-focused. I think that's going to make a big difference because historically, when you have inpatient-centric facilities that have sort of, on the side, outpatient programs, the outpatient programs just don't get the attention that they need.
I think focus, reorganization of personnel, etc., will be a big help in that regard. The second piece, which we've talked about quite a bit in the last few calls, is there's really two components of behavioral outpatient. One is what we describe as step-down business. These are folks who are generally discharged from our facilities, but who require follow-up care, either partial hospitalization or intensive outpatient therapy. We've always had that. I think that business will benefit from increased focus. Where we haven't really had much of a presence historically is what we describe as step-in business. These are patients who enter the behavioral system in an outpatient setting and often are not comfortable doing that and entering the system on a hospital campus. They'd much prefer to get that care in a freestanding outpatient setting.
I think that's where Marc was referring in his prepared remarks to our Thousand Branches branded program. We branded that way because we don't want to necessarily associate it with an existing inpatient hospital. As you said, and repeating what I had said, we have advantages. We already have existing referral relationships, referral source relationships. We have existing managed care contracts, etc., that should help us establish a footprint in that step-in freestanding business a lot faster than a competitor might be able to do.
Kevin Fischbeck — Analyst, Bank of America
Great. Thanks.
Matthew Gillmor — Analyst, KeyBank
Hey, thanks for the question. I wanted to ask about the acute performance. As you think about the volume trends and the expense trends that Steve discussed, is there any geographic variation to call out to highlight, particularly in some of your larger markets like Las Vegas?
Steve Filton — CFO, Universal Health Services
Yeah. I mean, obviously, there's always some variation in performance. We've been asked, I think, about the Vegas economy in the last couple of calls. I think it's fair to say that our Vegas or the results in the Vegas market are very similar to our overall results. Again, as we pointed out, I think West Henderson in particular is ramping up quite nicely. We do acknowledge that there's been a lot of data that suggests that tourist volume is down in Las Vegas. It's something we're watching. If that decline in tourist volume starts to have a ripple effect on the Vegas economy and unemployment rises, etc., that, I think, could be challenging in the future. At the moment, we're not seeing those impacts. Unemployment, honestly, I think is remaining relatively stable at the moment in Vegas.
Again, I think our performance in that market is remaining pretty stable and pretty consistent with our overall portfolio in the acute care business. Other than that, no, I don't think there's anything real significant from a geographic perspective.
Matthew Gillmor — Analyst, KeyBank
Okay. Fair enough. A quick follow-up on the pending SDP approvals. You mentioned Florida and Nevada. Is there a way for us to think about how that breaks down the net benefit between acute and behavioral?
Steve Filton — CFO, Universal Health Services
First, I would say that the Las Vegas number is predominantly acute. I don't have a breakout in front of me for the Florida number. We can provide that in the future.
Matthew Gillmor — Analyst, KeyBank
Okay, thank you.
Benjamin Rossi — Equity Research Associate, JPMorgan
Hey, good morning. Thanks for taking my question. I just wanted to touch on operating cash flow development. You noted that some of the drag due to date has been coming from unfavorable changes in AR. I know you're expecting to get some of that back next quarter as you collect on the DC approval, but do you have any theories as to the drivers behind this unfavorable trend? Is it fair to attribute some of this to broader payer utilization management trends?
Steve Filton — CFO, Universal Health Services
Yeah. I think our belief, Ben, is that the increase in our AR is almost exclusively a function of the $90 million of DC DPP that we intend to collect or expect to collect in the fourth quarter. The new receivables, both in DC, you know, we didn't get our Medicare certification and ability to bill until early September, so there's virtually no collections in at Cedar Hill in the third quarter. Even West Henderson, as its business continues to grow, its AR continues to grow. I think once we sort of factor in those dynamics, we're finding our days and receivables to be quite consistent with historical levels.
Benjamin Rossi — Equity Research Associate, JPMorgan
Okay. Appreciate the confirmation. I guess just a follow-up on some of your acute volume commentary. Specific to your self-pay category, how did volumes trend during 3Q? How have your self-pay volumes developed year to date relative to your expectations coming into the year? Thanks.
Steve Filton — CFO, Universal Health Services
I think, as we said in a previous comment, the one sort of identifiable change in payer mix is we saw an increase in exchange volumes that seemed to come at the expense or as a shift on Medicaid. Exchange volumes are up a little bit on an overall basis, and Medicaid volumes are down. In terms of our other payer classes, Medicare, commercial, and self-pay that you're asking about specifically, we haven't seen any major changes in those other payer classes.
Benjamin Rossi — Equity Research Associate, JPMorgan
Got it. Appreciate it.
Stephen Baxter — Analyst, Wells Fargo
Yeah. Hi. Thanks. I think you touched on this a little bit, but just hoping you could elaborate more on the change in surgical trends you saw in the quarter, going from down slightly as of last quarter to up slightly this quarter. I guess, where are you seeing that improvement come from? I think this has kind of been danced around a little bit, but just wondering if you feel like there's been any kind of pull forward evidence that we've seen of that for maybe like exchanges, other populations where coverage loss is a bit of a concern going forward. Thank you.
Steve Filton — CFO, Universal Health Services
Yeah. I mean, I think we've seen the improvement in surgical volumes relatively across the board. I would say cardiology and cardiac services have been particularly strong. As far as sort of pull through, which I think, the crux of that question is, does it seem like exchange patients are sort of accelerating care in anticipation of potentially losing their coverage? I don't think we're really seeing that. I think we've made the comment before that that exchange population seems to behave, or their utilization behavior sort of mirrors or is more closely tied to the Medicaid population, meaning it tends to be emergency room-centric as opposed to a lot of elective cases. Yeah, we don't think, I think, that there's this significant pull-through impact.
Michael Ha — Analyst, Baird
Thank you. On behavioral volumes, I just wanted to confirm you're now expecting 2-3% growth in fourth quarter to clear some of the low end. Should we expect next year to be consistently in that 2%-3% range? On acute pricing strength, even excluding the DC DPP, 5% is pretty strong, especially off the tough prior year comp. I know, Steve, you mentioned case mix, revenue cycle initiatives, other one-timers. How much did exchange volumes contribute to pricing? I know you mentioned 2%-3% is still a pretty good long-term target. Just to confirm, you're still confident on 2%-3%, even in the face of exchange volume declines over the next couple of years? Thank you.
Steve Filton — CFO, Universal Health Services
Yeah. You threw out a lot of numbers, Michael. I'm not sure that I follow all of them. Again, I'll repeat. I think that our view of the sustainable acute care model is, you know, 5%-6% revenue, same-store revenue growth split pretty evenly between price and volume. You know, 2.5%-3% price, 2.5%-3% volume. I think on the behavioral side, maybe 6% or 7% same-store revenue growth, you know, 2%-3% volume, 3.5%-4.5% price.
Ryan Langston — Analyst, TD Cowen
Great. Thanks. Good morning. I appreciate the commentary on capital deployment, but the leverage ratios just keep coming down despite the share repurchase activity. I know you mentioned the new Florida Medical Center, but have you sort of contemplated any additional areas you could increase capital spending or sort of absent M&A and, again, additional spending? Are you just kind of comfortable letting those ratios decline? Thanks.
Steve Filton — CFO, Universal Health Services
Yeah. I don't think we anticipate our leverage ratios getting any lower than they currently are. Obviously, we're not looking for ways to spend capital just to increase our leverage ratios, whether that's acquisition-type opportunities or CapEx. We'll continue to invest where we think we can earn a compelling return. I think we've intentionally kept our leverage ratios low in an environment where there has been some level of uncertainty at the policy, regulatory, legislative level. I think that's been a prudent approach. As I think we start to experience, and hopefully we do start to experience more certainty, you know, we may be more comfortable increasing those leverage levels.
Ryan Langston — Analyst, TD Cowen
Okay. Thanks.
Joshua Raskin — Analyst, Nephron Research
I guess one that just left, maybe an updated view on where you think margins can trend in the next few years, you know, sort of thinking about pre-pandemic levels versus the progress you guys have made since the pandemic, and maybe specific areas where you think there's opportunity to expand margin in each segment.
Steve Filton — CFO, Universal Health Services
Yeah. I think just sort of mathematically, Josh, you know, the general sense is if we can achieve the revenue targets that I just outlined in my last response, you know, 5%-6% on the acute side, 6%-7% on the behavioral side, clearly costs at the moment are not rising faster than that. They're rising to more at the 4% range. As I think has been the case with the historical model for these two businesses for many years, you know, there should be an opportunity for EBITDA growth and margin expansion. In an environment of relatively stable operating costs and I think relatively stable demand and pricing, you know, we're looking at margins in both businesses able to continue to improve.
Joshua Raskin — Analyst, Nephron Research
Maybe the follow-up, and it's probably a silly question, but you know, how do you go back to, I know, you know, let's exclude some of the government segments that are paid, but you know, when you're negotiating with managed care companies, if you're seeing that revenue number, I think the core or acute number of 5% that you guys are throwing out, you know, if you're seeing, you know, numbers in that ballpark and costs are not going up as high, what's sort of the conversation with the payers and the justification around above-average rate increases that we've been seeing lately?
Marc Miller — President and CEO, Universal Health Services
The point that I would make on this is not exactly what you're pointing to, but when we sit down with these managed care companies, we've got much better information these days than maybe we had years ago. Even though we feel like we're doing well in a number of our areas, we still see some of our pricing lagging competitors in certain markets. That's what we really point out and hone in on, and that's where we're able to have a positive effect for ourselves because we're still behind what they're paying some of our competitors. That's one big area that we bring up in our negotiations.
Joshua Raskin — Analyst, Nephron Research
That's helpful. Thank you.
Darren Lehrich — VP of Investor Relations, Universal Health Services
Thank you, everyone, for participating in today's call and also for your interest in UHS. Hope you have a great rest of your day. Thanks.