In addition, we may reference during today's call measures such as EBITDA, adjusted EBITDA, adjusted EBITDA net of NCI, and adjusted net income attributable to UHS, which are non-GAAP financial measures. Turning to our third quarter 2025 results, we reported adjusted net income attributable to UHS of $5.69 per share, representing a 53% increase from the third quarter of 2024. Our third quarter performance reflects continued growth in our acute care operating environment, modest volume improvement in our behavioral health segment, and solid pricing across both segments. We have a long track record of expanding presence in core markets with new state-of-the-art hospitals and are excited to build on our existing presence on the East Coast of Florida.

Same-facility revenue growth was driven by a 7.9% increase in revenue per adjusted patient day as compared to the prior year. Excluding the prior period impact of the District of Columbia Supplemental Revenue, same-facility revenue per adjusted patient day increased 7.1% during the third quarter of 2025. During the first nine months of 2025, we spent $734 million on capital expenditures, close to 30% of which related to the new hospital in Florida and a replacement facility in California. Today, our Board of Directors authorized a new $1.5 billion increase to our stock repurchase program, bringing our total authorization to $1.759 billion, including amounts remaining under the previous authorization.

In the absence of compelling acquisition opportunities over the near term, we expect to continue to prioritize our excess free cash flow for share buyback and dividends. Turning to an update on Medicaid supplemental payment programs, our current projected 2025 full-year net benefit from various previously approved programs is $1.3 billion. As we discussed during our second quarter 2025 earnings call, the OB3 legislation includes several significant changes in the Medicaid program, including changes to state-directed payment programs and provider taxes. What's the kind of run rate on the exchange volume and revenue year to date?

What went well
  • Third-quarter adjusted net income was $5.69 per diluted share, a 53% increase from the third quarter of 2024, on revenue growth of 13.4% year over year.
  • The company raised the midpoint of its 2025 adjusted EPS guidance by 6% to $21.80 from $20.50, driven largely by the newly approved District of Columbia supplemental Medicaid program.
  • A $90 million net benefit from the District of Columbia supplemental Medicaid program was recognized in the quarter (about $73 million in acute care, the remainder in behavioral).
  • Acute care same-facility adjusted admissions rose 2.0%, and same-facility EBITDA margin improved 190 basis points year over year to 15.8% (excluding the prior-period D.C. benefit) on solid revenues and effective expense control.
  • Behavioral health same-facility net revenues increased 9.3% (8.5% excluding the D.C. benefit) with adjusted patient days up 1.3%, continuing sequential volume improvement from 1.2% in Q2 and 0.4% in the first half.
  • Cedar Hill Regional Medical Center achieved accreditation in early September and is expected to exit the year at breakeven or better, while West Henderson Hospital continued to generate positive EBITDA since opening.
  • The Board authorized a new $1.5 billion buyback increase (total authorization $1.759 billion), and the company repurchased 3.19 million shares for about $566 million year to date, having bought back roughly 36% of shares since 2019.
What went wrong
  • The quarter absorbed a $35 million increase in professional and general liability (malpractice) reserves.
  • Results also included an $18 million legal settlement recorded in non-same-store acute results.
  • Behavioral adjusted patient day growth of 1.3% remained below the 2%-3% target, with continued labor tightness constraining volumes in some markets.
  • Cash generated from operating activities declined to approximately $1.3 billion for the first nine months from about $1.4 billion a year earlier, largely due to the $90 million D.C. receivable not yet collected.
  • West Henderson Hospital continued to cannibalize roughly 50 to 60 basis points of same-facility acute adjusted admissions and revenues from existing market hospitals.
  • The estimated OB3-related reduction to aggregate net Medicaid benefit beginning in 2028 was increased to approximately $420 million-$470 million by 2032, reflecting recent supplemental program approvals.

Guidance Changes

MetricPeriodCurrent guidance
Adjusted EPS (FY2025)Full year 2025$21.80 midpoint (up 6%)
Medicaid supplemental payments net benefit (FY2025)Full year 2025~$1.3B (excludes programs pending CMS approval)
Behavioral adjusted patient day growthQ4 2025 / intermediate term2%-3% range, near-term at the lower end
Pending Florida DPP programUpon CMS approval~$47M annual (still pending, not in guidance)
Pending Nevada DPP increaseUpon CMS approval~$30M (pending, not in guidance)
Exchange subsidy expiration impactAnnual, if subsidies expireTrending toward the higher end of $50M-$100M
OB3 aggregate net benefit reduction2028 onset, ramping to 2032~$420M-$470M by 2032 (increased for recent approvals)

Performance Breakdown

MetricYoYNote
Adjusted EPS (Q3) +53% D.C. supplemental benefit, acute growth, and share repurchase; $5.69 per share
Revenue (Q3) +13.4% Acute growth, pricing, and supplemental Medicaid benefits
Acute same-facility net revenues (Q3) +12.8% Pricing and D.C. benefit; +9.4% excluding insurance subsidiary and prior-period D.C. benefit
Acute revenue per adjusted admission (Q3) +9.8% Acuity, revenue-cycle initiatives, and D.C. benefit; +7.3% on a core basis
Acute same-facility EBITDA margin (Q3) +190 bps to 15.8% Revenue growth combined with 4.0% opex-per-admission growth (excluding D.C.)
Behavioral same-facility net revenues (Q3) +9.3% 7.9% revenue per adjusted patient day and 1.3% patient day growth; +8.5% excluding D.C.
Behavioral same-facility EBITDA (Q3) +7.6% Revenue growth with stable margins (excluding prior-period D.C. benefit)
Acute same-facility adjusted admissions (Q3) +2.0% Solid inpatient medical and outpatient growth; surgical volumes up slightly

Earnings Call Themes & Trends

TopicPrevious mentionCurrent periodTrend
Outpatient behavioral strategyBuilding step-down and step-in programs; roughly 100 access points~100 behavioral access points, on track to open 10 step-in programs this year under Thousand Branches Wellness; dedicated outpatient personnel reorganization
Medicaid supplemental payments (DPP)2025 net benefit tracking toward ~$1.2BFY2025 net benefit ~$1.3B including D.C.; Florida (~$47M) and Nevada (~$30M) still pending CMS approval
OB3 / DPP cliff$360M-$400M reduction by 2032 (Q2 estimate)Increased to $420M-$470M by 2032 to reflect recent program approvals
Exchange (HIX) exposureExchange 6%-6.5% of acute admissions; $50M-$100M subsidy-expiry riskExchange volumes ticking up (concentrated in Texas and Florida); trending toward the higher end of the $50M-$100M risk range
Behavioral supply-demand and staffingVolumes muted by labor scarcity in a quarter to a third of hospitalsHiring improving steadily; national behavioral utilization rising, much on the outpatient side, which UHS aims to capture
Capital allocation and leveragePrioritizing buybacks; leverage at low end of historyNew $1.5B authorization; expects to devote most/all free cash flow to buybacks and dividends absent compelling M&A; open to levering up

Q&A Summary

What potential DPP benefit could Florida and Nevada add, and what is the exchange run-rate and subsidy-expiry impact?
Florida ~$47M and Nevada ~$30M (combined ~$75M-$80M) remain pending CMS approval; exchange is 6%-6.5% of acute admissions (mostly Texas and Florida), and the $50M-$100M subsidy-expiry estimate is trending toward the higher end.
Can you bridge the ~$90M-$95M guidance increase and what drives the high versus low end?
The raise reflects $140M of increased DPP (mostly $115M D.C.), less a $35M malpractice increase and an $18M legal settlement; reaching the high end requires both segments running same-store revenue growth in the 5%-7% range.
Are you seeing different managed care behavior in behavioral and how are state budgets affecting it?
Payers remain aggressive on utilization/length-of-stay management but behavior has not materially changed; the only Medicaid behavioral rate cut noted was North Carolina (~2% of behavioral beds), not material to UHS.
How is West Henderson performing and can Cedar Hill offset its startup drag going forward?
West Henderson has had positive EBITDA since opening but cannibalizes ~50-60 bps of same-store admissions; Cedar Hill lost $25M in Q2 and $25M in Q3, is expected to break even in Q4, and its 2025 ~$50M loss should be a 2026 tailwind, largely offsetting Palm Beach Gardens startup losses.
What is driving behavioral salary/wage growth relative to soft volumes, and is it building capacity?
Two dynamics: labor scarcity in a quarter to a third of hospitals mutes volumes, and rising national behavioral utilization (much of it outpatient, delivered in fragmented settings) that UHS is staffing up to capture.
Is elevated pricing in both segments sustainable?
Sustainable acute pricing is ~3%+ (Q3's ~5% core reflected revenue-cycle initiatives and one-time items); sustainable behavioral pricing is ~3.5%-4.5%, a notch below recent 4%-5% levels.
Given a slowing competitor, is the broader behavioral market really growing faster than outsiders can see?
Management cannot comment on competitors but points to managed care companies citing behavioral as a key driver of rising medical loss ratios and utilization, much of it outpatient, supporting the 2%-3% volume target.
What are the historical barriers to capturing outpatient behavioral share and why will it change?
The business was historically inpatient-centric; dedicated outpatient personnel/reorganization plus existing referral relationships and managed care contracts should accelerate both step-down and step-in (Thousand Branches) growth.
Any geographic variation to call out, particularly Las Vegas?
Vegas results are similar to the overall portfolio; tourist volume is down but employment is stable, so no material geographic outliers, with West Henderson ramping nicely.
Where can segment margins trend in the next few years?
With acute revenue growth of 5%-6% and behavioral 6%-7% against costs rising ~4%, both segments should continue to see EBITDA growth and margin expansion.

More on Universal Health Services Inc

Reported 2025-10-28 · figures from the Universal Health Services Inc Q3 2025 earnings call.

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