Universal Health Services at Leerink Conference: Strategic Focus on Growth

On Monday, 10 March 2025, Universal Health Services (NYSE: UHS) presented at the Leerink Global Healthcare Conference 2025. The company showcased a robust financial performance, surpassing its 2024 guidance by $200 million, while also addressing challenges such as regulatory oversight and potential impacts from changes in ACA subsidies. Strategic investments in technology and capital deployment were highlighted as key drivers for future growth.

Key Takeaways

• UHS exceeded its 2024 financial guidance by approximately $200 million, a 10% beat.
• The company is investing $60-80 million in EMR implementation in behavioral facilities.
• UHS is expanding its presence in outpatient services to meet growing demand.
• Potential expiration of ACA subsidies could impact UHS by $45-50 million.
• UHS’s margins are expected to return to pre-pandemic levels within the next couple of years.

Financial Results

• 2024 Performance:

- Surpassed original guidance by about $200 million, driven by a return to normative operating models.

• Revenue Growth:

- Acute care same-store revenue increased 5-7%.

- Bay Area saw a slightly higher growth of 6-8%.

- Behavioral segment experienced a midpoint growth of 7%, with more emphasis on pricing.

• Margins:

- Consolidated margins are targeted to return to pre-pandemic levels soon.

- Behavioral margins have already recovered, supported by DPP payments.

- Acute margins have room for improvement but face structural challenges.

Operational Updates

• Service Line Performance:

- Strong demand for behavioral services, with challenges in staffing and insurance.

• Technology Investments:

- EMR implementation in behavioral hospitals is 20% complete, expected to take 2-3 years.

- Adoption of patient rounding technology to enhance safety and efficiency.

• Corporate Overhead:

- Costs are approximately $500 million, including equity compensation.

• Las Vegas Market:

- West Henderson Hospital opened in December, expected to outperform Henderson Hospital.

- Holds a mid-40% market share.

• Outpatient Strategy:

- Expanding freestanding emergency departments and ambulatory surgery centers.

Future Outlook

• Guidance Assumptions:

- Acute care revenue growth projected at 5-7%, evenly split between price and volume.

- Behavioral growth expected at a 7% midpoint, with a focus on pricing.

• DPP Programs:

- Tennessee and Washington D.C. programs could be worth $160 million if fully approved.

• Margin Improvement:

- Consolidated margins are anticipated to return to pre-pandemic levels.

• Capital Deployment:

- Focused on organic expansion and share repurchases.

Q&A Highlights

• Legal Cases and Investigations:

- Increase in malpractice reserves, equally divided between acute and behavioral segments.

• ACA Subsidies:

- Potential impact of subsidies expiring is estimated at $45-50 million.

• Health Plan Strategy:

- Operates near breakeven to align physicians and steer patients, open to partnerships.

For more details, please refer to the full transcript below.

Full transcript - Leerink Global Healthcare Conference 2025:

Whit Mayo, Lead, Lyric’s efforts covering healthcare providers and managed care, Lyric: Alright. We’ll go ahead and get, started. Thanks for joining us this afternoon. I’m Whit Mayo. I lead Lyric’s efforts covering healthcare providers and managed care.

My pleasure to have Steve Filton, chief financial officer with UHS, here today. If anyone has any questions, just raise your hand. We can try to keep it interactive. But, Steve, as you reflect back on 2024, you exceeded the midpoint of your original guidance by 200,000,000 or so, roughly a 10% beat versus your original targets. Maybe where did the sources of outperformance really come from when you look back at the year?

Steve Filton, Chief Financial Officer, UHS: Yeah. We talked about this a little bit on our recent earnings call, and I think that it feels to us like both of our business segments have returned to sort of an operating model that is more historically normative than it’s been in, you know, a number of years probably dating all the way back to pre pandemic levels. And that is, you know, same store revenue growth in the, you know, mid to upper single digits. I would say acute care revenue growth 5%, six %, seven %, same store. Bay Area maybe a little bit higher 6%, seven %, eight %.

And I think that in the current environment, if you’re able to grow revenues at that level, which we were able to do in 2024, expenses have definitely stabilized, moderated, wage inflation is modified moderated from where it was at the height of the pandemic. Physician expenses on the acute side have stabilized. And so as a consequence, I think what you’re seeing with that mid single digit growth mid single digit revenue growth is stabilization of and the ability to grow EBITDA and expand margins. And I think, you know, you certainly saw that in 2024. Obviously, we were also helped in some cases by some, Medicaid supplemental payments or DPP payment increases in ’24.

That’s certainly a part of the upside in 2024 as well.

Whit Mayo, Lead, Lyric’s efforts covering healthcare providers and managed care, Lyric: What are the actual underpinning assumptions that you have within the guidance for both segments on same store volumes and revenue?

Steve Filton, Chief Financial Officer, UHS: Yeah. So what we talked about is a again, in terms of the underlying business, something that I think is pretty historically normative. So let I mean, I’m going to go back to acute care revenue growth in the 5%, six %, seven % range. I’ll use 6% as the midpoint. I would say that’s split pretty evenly between price and volume in our assumptions.

So 2.5% adjusted emission two and a half, 3% adjusted emission growth, two and a half, 3% pricing growth. On behavioral, I use 7% as the midpoint and say that skewed a little bit more to price, probably, you know, four, four and a half percent price and, you know, two and a half, 3%, you know, volume. Obviously, and I think we talked about this on the call. You know, we’ve really done little to sort of forecast those kind of exogenous variables that are out of our control, Medicaid reimbursement, exchange subsidies, tariffs, site neutrality. There’s there’s a, you know, a bunch of, you know, potential impacts in in the in the health care or hospital space that, because we don’t have any real clarity on, you know, we’ve tried not to.

I think we have suggested that I think we tried to make our overall under or our underlying guidance a bit more conservative so that we could absorb some amount of headwinds from some of these other issues. But obviously it depends on the order of magnitude we could see.

Whit Mayo, Lead, Lyric’s efforts covering healthcare providers and managed care, Lyric: Yeah. If I could see all of the different service lines within the behavioral segment, you’ve got acute psych, you’ve got residential, you’ve got the, addiction business, UK. You still have a UK business, and then you have, you know, military services as well. How would you, characterize the outperformance and underperformance or headwinds and tailwinds, there?

Steve Filton, Chief Financial Officer, UHS: So I think it’s fair to say, and and we certainly have talked about this for some time. I think we believe, and and I think most of our peers suggest that, and and I think the the the broader macro metrics suggest that underlying demand for behavioral services remains quite strong, and I think that crosses all diagnoses. You know, you ticked off some, you know, whether it’s general psych or eating disorders or autism or, you know, illnesses of the elderly, like to mention, Alzheimer’s, that sort of thing. I think I think we find it to be pretty strong, you know, throughout. I think we we see outpatient growing.

We we talked about this a little bit on our recent earnings call, trying to expand more in the freestanding outpatient business. But, you know, just generally, you know, I don’t know that any, I’ll call them, diagnosis sort of categories or service line categories are growing faster than others. I think most are are quite strong. You know, the challenges for us are, you know, being able to hire all the people we need to service the patients, you know, dealing with insurance companies and and the limits that they’re trying to place on sites of service and, you know, patient day restrictions, that sort of thing. But just broadly, I would describe the demand dynamic across, again, the whole sort of portfolio of diagnoses as relatively strong.

Whit Mayo, Lead, Lyric’s efforts covering healthcare providers and managed care, Lyric: This past year, we’ve had, the widened, you know, investigation around the residential treatment industry. Paris Hilton was been very visible around advancing that. How are you internally, you know, dealing with that? Is this, anything that your team focuses a lot on? I mean, to me, it seems like it’s a a broader focus on industry oversight than any individual company or specific issue for you or some of your peers.

But how do you internally talk about this as an issue?

Steve Filton, Chief Financial Officer, UHS: So I think the challenge is that a lot of the attention, whether it’s media attention and articles in the media, or regulatory attention in this case. You talked about the Senate Finance Committee hearings back in June, I believe. I don’t know that there’s a great deal the industry can do to proactively kind of defer or avoid that that sort of coverage. I mean, I think, you know, look, you you point out, I think, honestly, the Senate Finance Committee hearings were largely driven by Paris Hilton. And I think if, you know, that was somebody who had a different name, I’m not sure that we would have had Senate hearings.

But it was sort of a, you know, kind of a, a newsworthy thing. You know, I think the the flaw in a lot of these articles and coverage and even the, the regulatory oversight is, you know, kind of focus on individual incidents. You know, we treat in our behavioral segment in excess of 600,000 patients a year. And while, obviously, it is our goal that in doing so, you know, there’s never a negative incident, there’s never harm that comes to a patient, realistically, it would be difficult to treat that level and that magnitude of patients without having, you know, the the occasional negative outcome as much as we try and avoid it. You know, we have provided again to the senate to, you know, you know, news sources that are writing articles, you know, more of that broad data that suggests, you know, the vast majority of patients that we treat, you know, have positive outcomes, have a very positive patient experience.

We see meaningful improvements in our patient experience scores year over year. But, you know, they tend to avoid, I think, that sort of reporting for, you know, kind of what’s what’s the more sensational thing. Although, you know, interestingly, at the end of the day, even though the Senate Finance Committee, you know, held hearings and pointed to a number of companies that had, you know, very specific issues, etcetera, The ultimate, sort of suggestions or recommendations they had, were sort of more community based, more family based care. And the reality is there have been a lot of issues with family based care, foster care, community care, etcetera. And then their other suggestion was just sort of more transparency, meaning more reporting from the industry on incidents, etcetera.

So people who are seeking care, you know, have that data available to them and we welcome that. We’re happy to have greater transparency and sort of more comparisons between providers because we ultimately think we will be advantaged by that. We think that the care we render is as good as anybody else in the industry.

Whit Mayo, Lead, Lyric’s efforts covering healthcare providers and managed care, Lyric: I get asked a lot around the frequency of some of the legal cases and the investigations. And does it feel like this is is this a pattern that’s growing here? And where do we go with them? Do do you agree that there’s a heightened level of sort of investigative stuff happening right now and legal issues for the industry?

Steve Filton, Chief Financial Officer, UHS: So I I think there those are two separate issues. You know, you already asked about one. I’m not sure that the oversight and regulatory issues are directly related to the litigation issues. I think sometimes they can be somewhat related. But, you know, at the end of the day, you know, we’ve talked about the fact, you know, we increased our malpractice reserve and our malpractice expense this year.

We did so based on the third party estimates we get, which, you know, we have always, you know, based our reserves on a third party actuarial analysis. We we we did so again this year, and we’ve actually conservatively moved, you know, our actuary gives us a range of sort of outcomes, a range of reserves that they’re recommending. We have historically sort of targeted the midpoint of that range. This year, we moved to the upper end to some degree, I think, to to kind of respond to sort of the, you know, the trends that we’re seeing in that business. But interestingly, and and I think we’ve made this point, and I, you know, I think, you know, you heard it.

The the increase in our reserves and the increase in our expense based on the actuarial feedback is split pretty evenly between acute and behavioral even though to your point, more of the sort of headline news in the last year has been on the behavioral side of the business. And I think that’s because the actuary tends to take a kind of a longer term view based on our specific experience, you know, broader trends in the industry. And I think quite frankly, the malpractice trends are not even not even part of a broader malpractice trend, which I think is on the upswing, but I think part of a broader sort of litigation trend broadly in the sense of all kinds of tort cases, product liability, other sort of third party liability cases have all been on the uptick. And I think we’re responding to that. But again, I think that goes beyond our industry.

The way that we, you know and then you sort of talked about it before when you asked how we respond to sort of the the media kinds of attention. I mean, we are very focused on, you know, what we describe as a zero harm policy. No patient who comes to us who’s within our control should should ever be harmed, you know, while they’re in our care. And I think we have a pretty strong track record of being that so. Now again, if we’re going to see hundreds and hundreds of thousands of patients a year, there will be some exceptions.

We try and make sure that those exceptions are as absolutely minimal as possible, but that is always going to be our focus.

Whit Mayo, Lead, Lyric’s efforts covering healthcare providers and managed care, Lyric: You invested in, an EMR two years ago, last year, two years ago?

Steve Filton, Chief Financial Officer, UHS: Eighteen months maybe.

Whit Mayo, Lead, Lyric’s efforts covering healthcare providers and managed care, Lyric: Where are we in the rollout? How much capital have you spent? How much do you need to spend? How long is this gonna take? And any tangible benefits that you’ve seen?

And I’m particularly interested on, like, recruiting, if that’s been, any anecdotal positive for you.

Steve Filton, Chief Financial Officer, UHS: Yeah. So, you know, I think it’s worth noting that I think the behavioral industry broadly is, you know, fairly, you know, candidly behind the curve, particularly when compared to the acute care industry in terms of information technology, etcetera. And I think there’s a couple of reasons for that. I mean, the acute care industry is much, much, much larger than the behavioral industry. The acute care industry, particularly from an EMR or electronic health record perspective, really benefited.

People may not remember, but at the beginning of the Obama term, there was a stimulus bill. And part of the stimulus bill was, you know, $20,000,000,000, I believe, was the number to to encourage, you know, acute care hospitals to, install electronic medical records. So, you know, in other words, the federal government for us picked up, I’m gonna say, somewhere like 75, 80 percent of the tab for us of implementing an electronic medical record in the acute care space. There’s no similar support or subsidy for the behavioral hospitals. It will probably cost us, I’m going to say, somewhere in the $60,000,000 70 million dollars 80 million dollars range to fully implement all of our behavioral hospitals on an EMR.

I think we’re about probably 20% of the way through that. The pace, I think, picks up the more experience we get and the more implementations we do. So I think we’re probably two and three years out from being fully implemented. The other sort of technology that we’ve talked about and mentioned, I think, you know, more on our recent call as well is sort of what we we describe as patient rounding technology. So, you know, patients in in a behavioral hospital, you know, are different than patients in an acute care hospital.

Most patients in an acute care hospital are in their rooms and in their beds for most of the day. If they get up, they, you know, take a few steps and they’re back in their bed. I mean but they’re not moving around. They’re easy to keep track of. Behavioral patients or patients in a behavioral hospital really shouldn’t be in their rooms at all during the day, you know, other than to sleep.

And so keeping track of them and and keeping in mind that they’re generally physically healthy, etcetera, you know, is a real, sort of, focus of of the behavioral business and behavioral care. And so historically, we’ve done that in a very manual way. You know, eyes on patients, somebody laying eyes on a patient literally every 15 minutes that they’re in the hospital. But that technology is improving, you know, using, you know, sort of what I’ll call Apple Watch technology, you know, wearable, you know, device technology where the patients can wear that. That allows us to keep track of them and knowing where they are.

It also allows us to keep track of when a staff member lays eyes on them or is close enough to lay eyes on them, etcetera. So so we can get much more efficient in that. And that, I think, really increases patient safety and increases our efficiency. So along with the electronic medical record, and you talked about sort of recruiting, etcetera. And I think, you know, the issue there is, I think this is very much a generational thing.

I think folks who graduate from nursing school or from medical school today, you know, younger people, they’re expecting, you know, electronic medical record as, you know, that’s sort of their standard. And so, you know, if you want to recruit from that, you know, subset of of the, you know, the the the target, you know, employee population, I think you need to be technologically competitive. And that’s part of another part of the reason why we’re investing in both electronic medical record technology and this patient rounding technology. When I

Whit Mayo, Lead, Lyric’s efforts covering healthcare providers and managed care, Lyric: look, I’m sorry, I’m bouncing around. Essentially, my question is you need to probably tell beforehand what’s bouncing around a lot here. But when I look at the corporate overhead costs, it’s not really you don’t have a corporate overhead line. I mean, we just subtract the numbers and it’s what’s implied. That is now up to about $500,000,000 I don’t believe you have the health plan in that.

I think it’s in the acute segment. But is there anything else inside that, that is contributing to that level of growth that we’ve seen? You used to have a construction business. I don’t think there’s much activity there anymore. But I’m just trying to square my head around like a $500,000,000 implied number.

Yes.

Steve Filton, Chief Financial Officer, UHS: So the answer is we don’t have that construction management business anymore. So that’s not contributing to it. And you are correct that the insurance subsidiary is recorded in our acute care results. No, I think the only thing that has really risen probably sort of beyond the rate of inflation in recent years, We do include the bulk of our sort of equity compensation in that and that number, I guess, fortunately has increased with the relatively dramatic increase in our stock price over the last several years. That’s really the only thing.

Other than that, the main thing that’s in there is our corporate overhead expense, which is mostly salaries, quite frankly. Obviously, that has increased with the size of the business, but I don’t think has increased faster than the size of the business. And I don’t think we would expect that it would.

Whit Mayo, Lead, Lyric’s efforts covering healthcare providers and managed care, Lyric: On the health plan, since I’ve said it, just maybe remind the room the size of that business, how you look at the strategic value of that. I don’t think you’ll look to sell it, but maybe just talk a little bit more about how you look at that as an asset.

Steve Filton, Chief Financial Officer, UHS: So I think as is true with most provider based insurance plans, we don’t view our insurance plan as sort of a standalone profit contributor. We’ve talked a number of times that it largely runs at something close to a breakeven, maybe a small profit or small loss. But the main rationale for the business is to create more physician alignment, create physician alignment in a way that we actually think is less expensive than sometimes employing physicians or other arrangements where physicians are being paid or subsidized. The nice thing about having physicians as part of a network or a Medicare Advantage Plan or Medicare Advantage savings is there sort of a shared incentive for you to treat patients and to treat them efficiently, etcetera. And so that physician alignment, using the physician alignment as a way to create a narrow network for more effective steerage of patients.

All those things are really the reasons why we and I think any other provider operates a provider based plan. To your point, if there was another way of accomplishing that by, for instance, having some either an insurance company, a stand alone insurance company owning that business or partnering with us, as long as we could meet our goals of keeping the physician alignment in place, keeping the network in place, largely sort of along the lines of narrow network that favors our facilities and our providers, I think we’d be willing to do that. And I’ve had some conversations over the years in exploring that. The challenge is the standalone insurance companies have a different sort of incentive model where they’re more interested in the pure profit of it. But if we could find a way to align those incentives, I think we would be open to

Whit Mayo, Lead, Lyric’s efforts covering healthcare providers and managed care, Lyric: that. You had a good STARS year by the way.

Steve Filton, Chief Financial Officer, UHS: We did. I mean, our insurance company increased their STAR level. It’s a little bit of a kind of an ebb and flow. We talked about this year, we’ve added or projecting adding a significant amount of Medicare Advantage enrollment on a small scale. But generally, when you add Medicare Advantage enrollment, it’s put some pressure on your star ratings in the short run, although we expect to be able to raise in the long run.

But yes, you are absolutely correct that we have increased our star ratings, which should help us in our 2026 premiums.

Whit Mayo, Lead, Lyric’s efforts covering healthcare providers and managed care, Lyric: Acute margins. Costs are obviously have rebased materially higher since 2019. Your margins, I think, are still kind of below where you were. But how do you view the trajectory of margins on the business, excluding like directed payment programs and all of those factors that are certainly influencing it higher?

Steve Filton, Chief Financial Officer, UHS: Yes. So we’ve talked at some point in time that our consolidated margins should be able to return to pre pandemic levels. I think that is still our view. If you look at the two segments separately, I think behavioral margins have already done that. I mean, that to some degree that is with the help of DBP payments.

But I think what we’ve said going forward is, I still think we believe within the next couple of years, we should be able to return our consolidated margins to pre pandemic levels. I think if there’s an upside to that, it’s probably on the behavioral side, more likely to get to above pre pandemic levels. On the behavioral side, a little bit more challenging on the acute side, and the acute side has some structural hurdles. One of the things that has been talked about a lot in the last few years is physician expense, which is probably increased by about 150 basis points and difficult to recover. We also talk on the acute side of a more dramatic shift from inpatient to outpatient care.

There’s some of that on the behavioral side, but it’s clearly I think more dramatic, more impactful on the acute side. So, yes, I think we have a view that we can acute margins still have a runway of improvement, may not get all the way back to pre pandemic or 2019 margins. But again, I think consolidated margins should get there and sometime within the next couple of years.

Whit Mayo, Lead, Lyric’s efforts covering healthcare providers and managed care, Lyric: Just maybe a second on directed payment programs. You’ve once again materially exceeded your preliminary forecast that you put in your 10 K every year. I know your views are on the risk of the program. You’ve excluded Tennessee and D. C, so maybe just size that amount and maybe when you think you may have some visibility on those two programs?

Steve Filton, Chief Financial Officer, UHS: Yes. So as we disclosed in our 10 K, the Tennessee and Washington D. C. Programs, which are new and are awaiting CMS approval or full CMS approval, are probably we estimate worth about $160,000,000 in total, the two to combine, if they become fully approved and would be retroactive to July one of twenty four for the Tennessee program and October one of twenty four for the District Of Columbia program. More broadly, all of these DPP programs have to get reapproved every year.

We think about half of the programs have been reapproved for 2025. There’s clearly been a sort of a pause in the approval of these programs as the administration transition has been occurring. The feedback that CMS gives the states who I think they routinely communicate with is that they believe that these programs meet the requirements. They’ve been approved before. They will likely be reapproved, although they don’t necessarily provide a time estimate of exactly when that’s going to be in terms of when the new political appointees are in place, etcetera.

The way that we’ve handled this and you kind of alluded to it is we’ve and this is consistent with our historical practice. Once the DBP program has been approved, we assume that it will continue to be approved and we continue to accrue and recognize that those revenues going forward until at some point somebody would tell us that there’s evidence that they will not be reapproved etcetera. We certainly are not there at this point. For new programs, we have waited historically until they’re fully approved at which point we would start to include them in our earnings results, which we have not for 2024 and in our forecast, which we have not for 2025.

Whit Mayo, Lead, Lyric’s efforts covering healthcare providers and managed care, Lyric: So you wait for the full approval or do you wait for the cash receipt of the program?

Steve Filton, Chief Financial Officer, UHS: Really, it’s an approval issue. It’s not a cash issue. But it comes up here because people have rightly asked about Tennessee and specifically because HCA so HCA has made the point that the Tennessee program has been has been approved for the last six months of 2024 from July to December. And we agree with that. We believe that that in order for those monies to be paid, CMS also has to approve what’s called the eleven fifteen Medicaid waiver.

Waiver. And we’re waiting for that to happen before approving those Tennessee dollars. We believe and I think our reimbursement folks have confirmed this with their counterparts at HCA. HCA sees it the exact same way factually that the eleven fifteen Medicaid waiver is necessary. They just take the position that they think that’s a more routine sort of approval likely to happen, and so they’ve recorded that in the back half of ’24.

Again, I think we both agree on the facts. We’ve taken, I think, a slightly more conservative position in how we’re going to treat that. But, yes, I think that the general sense that HCA has, which I hope is absolutely right, is more likely than that the program gets approved and will be able to record that at some point in 2025.

Whit Mayo, Lead, Lyric’s efforts covering healthcare providers and managed care, Lyric: You’ve got a couple big states that benefited the behavioral business. As we talked to at least one state Medicaid director, one of the things he told me was like, as more of the states are coming around to go through the reapproval process, there’s a greater desire to include behavioral health providers. And frankly, there’s a larger desert that’s out there. There are access points that just aren’t available. And it makes a lot of sense to give providers the money so that the economics work.

Do you believe that is an accurate statement that we’re seeing more or that behavioral health providers are being included at a larger pace right now in these programs?

Steve Filton, Chief Financial Officer, UHS: Yes. No, I think that’s true. Look, I think we have a view that from a legislative perspective, there’s probably more bipartisan support for behavioral reimbursement and behavioral access to care and other, again, macro issues than even on the acute side. And as I said, I think it tends to be a relatively bipartisan support. But I think that’s specifically true of the, the DPP program so that a number of states that have had existing programs have revised their programs to include either behavioral coverage where behavioral coverage didn’t exist or more generous behavioral coverage.

And there still are some states, North Carolina is an example that I can think of that implemented a program but still doesn’t cover freestanding behavioral facilities. So I think there is still more upside. But yes, I think your general sort of observation and general statement that more and more states are covering behavioral care, both in DBP payments and in other ways, I think is a fair statement.

Whit Mayo, Lead, Lyric’s efforts covering healthcare providers and managed care, Lyric: You’ve opened a new acute care hospital in Las Vegas. And Vegas does not nearly get as much attention as it used to, Steve, when I think about the earnings calls. But how is that or how is that new hospital kind of change any of the dynamics within that market? Is that volumes being redistributed? And how is it performing relative to maybe the internal expectations?

Steve Filton, Chief Financial Officer, UHS: Yes. So I think your first comment or your comment about Vegas not getting as much attention as it used to is probably fair. Vegas, I think, is anyone who follows the company sort of closely knows is our single biggest market. And as a consequence, it always been a focus. I just think there’s so many other issues that people are focused on now.

They tend not to focus on those geographic issues. But, yes, so we opened West Henderson Hospital, which is our sixth acute care hospital in the market back in early December. So it’s been open for a few months. It’s gotten off to a quick start. We expected that.

The West Henderson, which is kind of the Southeast quadrant of Las Vegas has been growing very quickly. We opened Henderson Hospital, East of West Henderson, as you might imagine, like five years ago, and it got off to probably the quickest start of any hospital we’ve ever opened. I think West Henderson will do even better than that. We continue to be the largest market share provider in Las Vegas with a market share in the sort of mid 40%. So we will continue to expand not necessarily with brand new hospitals, but with capacity and access points.

We’ve got, I think, 10 freestanding emergency departments now in Las Vegas and other access points. And we’ll continue to do that as we like that market. We like its growth trajectory. There’s just a lot to like and there’s a lot to like about our market position in that market. But yes, it’s opened strongly.

I think it will continue to do well. It may and we mentioned this on the call, I think it may distort a little bit negatively some of our same store data, particularly admissions data or adjusted admissions data in 2024 because some of that business is being cannibalized from our existing hospitals. But I think most of the business is new and incremental. So it should be a very successful as pretty much every opening we’ve had in Las Vegas in the last twenty years been.

Whit Mayo, Lead, Lyric’s efforts covering healthcare providers and managed care, Lyric: And then you’ve got startup costs obviously that you’re incurring as that’s ramping, but you view that as offset by what was the

Steve Filton, Chief Financial Officer, UHS: Yes. So most of the startup costs, quite frankly, were already incurred in 2024. We opened, as I said, in December. There is a ramp up. I mean, not in no hospital opens at sort of the average margins in the market.

But what we have always found in Las Vegas is our hospitals in Las Vegas ramp up faster than any other market that we operate in.

Whit Mayo, Lead, Lyric’s efforts covering healthcare providers and managed care, Lyric: You mentioned micro hospitals. I just had me thinking, you have a network strategy. Each of your markets, you’re thinking about developing ambulatory capabilities. Maybe just share some of the areas where you are actively deploying capital and advancing an ambitious outpatient strategy?

Steve Filton, Chief Financial Officer, UHS: Yes. So I mentioned freestanding emergency departments, and we’ve had great success with that strategy. I’m going to say five years ago, we didn’t have a single freestanding emergency department in the country. And today, we probably have in excess of 30 and probably another 10 under development that will open sometime in the next, you know, in twelve to twenty four months. And that’s kind of a whole access point strategy.

The nice part about freestanding EDs is that you can open them, in many places around the market that they don’t have to be in geographic approximation to your existing facilities. And it’s a way to draw in business that you might not otherwise get. So that’s been a big focus of ours. But I think broadly expanding the continuum beyond more traditional inpatient has been a focus of both of our businesses. We want to have more of an outpatient presence on the acute side.

I think that means things like ambulatory surgery centers and freestanding imaging centers and physician practices, all of which I think we’ve got an expanded presence in over the last several years. We talked a little bit on our recent earnings call about more of a present on the outpatient continuum on the behavioral side, especially again the freestanding part of it. Because historically, we’ve always had an outpatient practice and behavioral based on patients who are discharged from our inpatient facilities require outpatient care as many of them do. That’s kind of a natural for us. We control that flow of patients.

But patients sort of going the other way, entering the system on a freestanding basis, they’re not usually as interested in getting their care on the campus of behavioral hospital necessarily. They sometimes view that as a more acutely ill population, maybe they don’t feel like they belong there, etcetera. And so I think there’s an opportunity to capture more freestanding outpatient business over the next several years on the behavioral side.

Whit Mayo, Lead, Lyric’s efforts covering healthcare providers and managed care, Lyric: Maybe just capital deployment in general, like larger scale capital deployment, thinking kind of three to five years. There’s nothing that’s out there for sale that I’m aware of. You’ve got very low leverage today. You could buy back a bunch of stock. You could raise your dividend maybe to a level that could be of interest to a different set of investors.

What are all the I know you go through a process every year sort thinking about like taking the dividend up or do we buy back more stocks or where do you guys land internally on that?

Steve Filton, Chief Financial Officer, UHS: So I think on the issue of capital deployment, past is likely to be sort of prologue for UHS. If you look at our capital deployment over the last five years, even ten years, it has been heavily skewed towards CapEx, organic expansion, either building new capacity as we were discussing in West Henderson or capacity additional capacity to our existing facilities, new ER capacity, new OR capacity, that sort of thing, new beds on the behavioral side of the business. We’ve also been, I think as you suggested, a relatively active acquire of our own shares. And again, I think that’s likely to continue. So the area where we have not been terribly active is in M and A.

And I think part of the challenge is there are independently owned, a lot of private equity owned businesses out there, particularly in the behavioral space. I think the challenge from an expectation perspective is we find that those private equity owners generally have a view that those businesses are worth twelve, thirteen, 14 times EBITDA. That’s a challenge for us economically when our own stock is trading at seven or eight times. But we’ll look at those. We’ll continue to look at those businesses and see if any of them make sense.

But I think again, most likely, we’re going to continue CapEx at right around the same level that we’re currently at. Maybe that level goes down a little bit in the next few years as we open up some of these bigger particularly acute care projects. We’ll continue to be an active acquirer of shares. I think one of the questions that came up a lot on the most recent call was, would we consider accelerating our share repurchases, levering up to some degree to do that. I will note that our leverage levels are at, if not at historic lows, they’re at pretty low levels.

And I don’t think we have generally operated at these low levels for an extended period of time. So I think if no other opportunities come up, the likelihood that we would sort of accelerate and become a more active acquire of our own shares is probably a likely outcome.

Whit Mayo, Lead, Lyric’s efforts covering healthcare providers and managed care, Lyric: On the ACA subsidies, you’re one of the only CFOs that’s come out quantifying the exposure and I can’t remember the number, but something in the 50,000,000 ish range, something like that, maybe near the midpoint. Can you maybe elaborate more on the process that you went to and how you identified this person has an ACA plan? We think they’re going to find employer sponsored coverage or be uninsured. Just what was the level of rigor that you went through in that analysis?

Steve Filton, Chief Financial Officer, UHS: Yes. So look, I think it’s worth noting at the outset that I think we purposely sort of threw out this number or floated this number because it felt to us like people were overestimating the impact of the exchange subsidies, you know, expiring or allowed to lapse. The way we went about this, and I think we were very stressed very much that it was a, I don’t want to say back of the envelope, maybe too much of an exaggeration, but it was a relatively broad exercise, not a ton of precision. About five percent of our current acute care adjusted admissions are exchange patients. We assume that about half of them would lose coverage.

And we didn’t do the sort of nuanced analysis that you’re suggesting, which is how many might be able to get Medicaid, how many might be able to just sort of downgrade their plan from gold to silver to bronze. We just assume half would lose coverage, and then we went through the exercise in that population where we can do this to say, alright, how much of those people have brought us elective procedures in the past because we would assume we would lose those without coverage, And how much of those people would still come to the emergency room even though they didn’t have coverage and we’d have to provide care without being reimbursed for it. And that’s how we got to our sort of $45,000,000 50 million dollars number. Again, I would stress that I think it’s a pretty broad guesstimate, but I think we were responding to the fact that I think people were in some cases estimating numbers that were multiple times larger than that. I think that was a mistake.

Whit Mayo, Lead, Lyric’s efforts covering healthcare providers and managed care, Lyric: All right. Well, Steve, I have not realized, but we have run over time.

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