Universal Health Services at Wells Fargo Conference: Strategic Insights

On Friday, 05 September 2025, Universal Health Services (NYSE:UHS) presented at the Wells Fargo 20th Annual Healthcare Conference 2025, providing a strategic overview of its operations. While the company highlighted stable volume trends and labor market stabilization, it also addressed challenges such as the potential expiration of ACA subsidies and the need for Medicaid supplemental payments.

Key Takeaways

• UHS estimates a potential $50 million to $100 million impact from the expiration of ACA subsidies, mainly affecting the acute care division.
• Pending Medicaid supplemental payments could significantly boost revenue, with approvals expected in Florida and confirmed in Texas.
• UHS is leveraging AI to improve operational efficiency and is exploring M&A opportunities, focusing on the acute care sector.

Financial Results

UHS reported a target for same-store revenue growth of 6%, evenly split between price and volume. However, surgical volumes have been softer due to challenging year-over-year comparisons. The company anticipates improvement in surgical volumes towards the end of the year.

Operational Updates

In the acute care division, UHS is preparing for potential impacts from ACA subsidy expirations, estimating a $50 million to $100 million annual impact. The company is also awaiting CMS approval for Medicaid supplemental payments, which could provide $90 million to $100 million annually from a new program in Washington, DC, and $150 million to $200 million from expansions in Florida and Texas.

Cost management remains a priority, with labor market stabilization and wage inflation running at 3% to 4%. Professional fees have stabilized after significant increases in 2023 and 2024. UHS is using AI to enhance revenue cycle efficiency, including coding and claim submissions.

Future Outlook

In the behavioral health segment, UHS is addressing labor vacancies and aims for a 7% revenue growth model driven by price and volume increases. The company is focused on capturing a greater share of the outpatient market and expanding access through alternative care sites. Despite potential Medicaid rate pressures, UHS sees sustainable pricing due to limited industry capacity.

Regarding capital deployment, UHS remains open to M&A opportunities, particularly in acquiring underperforming not-for-profit acute care hospitals. However, the company is cautious about high valuations in the behavioral health market.

Q&A Highlights

During the conference call, CFO Steve Filton addressed various questions, emphasizing the company’s strategic focus on leveraging AI technology and exploring acquisition opportunities in the acute care space. He also highlighted the challenges and opportunities in the behavioral health sector, noting the presence of niche providers backed by private equity.

Filton provided insights into the ongoing situation with Cedar Hill Hospital, which experienced a $25 million EBITDA loss in Q2 due to delayed DEEM status approval. He expressed optimism about obtaining approval soon and achieving break-even within 18 to 24 months.

In conclusion, readers are encouraged to refer to the full transcript for a comprehensive understanding of UHS’s strategic discussions at the conference.

Full transcript - Wells Fargo 20th Annual Healthcare Conference 2025:

Steve Baxter, Health Care Services Analyst, Wells Fargo: Okay. Good morning, everyone. I’m Steve Baxter, the Health Care Services Analyst here at Wells Fargo. Very pleased to have Universal Health Services with us today. As I’m sure you know, UHS operates a portfolio of acute care hospitals and behavioral assets. From the company, we have CFO Steve Filton. Steve, thanks again for being here. Did you want to make any opening remarks, or should we just get right into the questions?

Steve Filton, CFO, Universal Health Services: Just jump right into it.

Steve Baxter, Health Care Services Analyst, Wells Fargo: Okay, maybe we will start on the policy side of things, as I’m sure you’ve got a lot of questions in your meetings thus far. The most front and center issue, seemingly in front of the acute care hospital industry in particular, is the potential expiration of enhanced subsidies. I think you still remain the only company that’s been willing to put an estimate out there about the potential impact of enhanced subsidy expiration. Maybe update us on your latest thinking there and just remind us the assumptions that go into developing that type of estimate that you put out.

Steve Filton, CFO, Universal Health Services: Sure. I think it’s worth noting that, in the last couple of days, there seems to be increasing reporting at least suggesting there’s a potential for some sort of extension of the subsidies either as part of a continuing resolution or as a separate bill, but certainly no assurance. I think part of the reason that we decided to try and frame what the impact was is that when we were talking to investors, it seemed to us that they were overstating or often overestimating what the potential impact could be. To be fair, I think the most important assumption to be made in sort of doing the analysis of what the impact could be is exactly how many people would lose their coverage, whether they would be able to get other coverage, etc.

When we first did the analysis, I think we used a sort of a smaller estimate than maybe some third parties had used, etc. We came up with a number in the kind of $50 million range. I think last quarter we suggested that based on what we were seeing from other third-party estimates of how many people would lose their coverage, we were increasing our estimate from $50 million to about $50 million to $100 million. This is for us mostly or almost exclusively in the acute care division because we really don’t feel like we get a substantial number of exchange patients in the behavioral division, largely because so many of these exchange products carry with them a significant copay and deductible that generally render them sort of irrelevant or not terribly useful or efficient for use in a behavioral hospital.

Once we sort of hone in on a number of people who would lose their coverage, then the analysis becomes somewhat easier because we do know what our exchange population is. We do know what their utilization patterns are. We’ve made the point that it appears to us that the exchange population tends to behave more like what I’ll call the Medicaid population than, let’s say, the Medicare or the commercial population, meaning they tend to use the hospitals, the acute hospitals mostly from an emergency room perspective and not use them terribly significantly for elective procedures, etc. What we do is we identify whatever elective procedures that population would use and assume that we would not have access to those anymore. They would not have access, and we’d lose the profits from those.

We do assume that they would continue to use the emergency room in the same patterns that they had been, only now they would be non-paying patients rather than paying patients. That’s the way we ultimately arrive at, you know, our guesstimate. Again, I’ll stress the guesstimate piece of it because I’m still not convinced that really anybody fully understands exactly who, you know, who and how many would lose their coverage.

Steve Baxter, Health Care Services Analyst, Wells Fargo: Is there a way to think about, you know, how much volume you think moves to another type of a payer versus becomes uninsured versus just doesn’t occur going forward in your thought process?

Steve Filton, CFO, Universal Health Services: Yeah, like I said, you know, roughly, we have said that about 6% of our adjusted acute admissions are exchange patients. That’s somewhat lower than, you know, our big public peers like Tenet and HCA. I think that’s a question of geography. Tenet and HCA tend to have a bigger footprint in states like Texas and Florida, which tend to have a greater percentage of exchange patients. The notion is, or our assumption is, we would lose some volume, but not much because these patients tend not to do a lot of elective or have a lot of elective work, etc., and that the main impact would be volumes would remain the same, particularly volumes would remain the same, only those would become now uncompensated rather than compensated.

Steve Baxter, Health Care Services Analyst, Wells Fargo: Okay. As the company approaches this potential headwind, do you feel like there’s areas of either cost efficiencies or other programs you can drive that might be able to offset some or maybe all of this as we think about planning for next year? I guess, what are you doing to potentially respond?

Steve Filton, CFO, Universal Health Services: We’ve been asked that question both in the context of the loss of exchange volumes or exchange patients, as well as the further loss further out of some of these Medicaid supplemental payments, the directed payment programs, which would start to be reduced based on the Big Beautiful Bill starting in 2028. While I don’t know that we, and honestly, I don’t know that any of our peers have very specific plans to offset those revenue reductions, I think, and we point to, and I think it’s a legitimate sort of analogy. It’s not perfect by any means, but I think it’s a useful analogy to what we were able to do with the onset of COVID back in 2020, in the spring of 2020. All of you will remember that was a much more dramatic occurrence.

It happened very quickly with only a few weeks really notice of what was happening and a very dramatic decline almost overnight in the amount of revenue and demand, etc. We did a great many things, both we as an industry, but UHS specifically. We reduced headcount and made productivity improvements. We froze wages, we froze 401(k) matches, we reduced capital spending, amongst a host of other initiatives. I don’t know that we would really need to do all those same things, and certainly to the same degree. We’ll have more time to react here. The numbers are not as great. I think what it demonstrated is a flexibility and agility to react to modify the cost structure, etc., of the company to fit the operating environment or the, I’ll call it the regulatory environment.

We certainly sort of have kind of that menu of options out there, unwilling to sort of commit to a specific plan because we don’t really know what the need is going to be, but certainly are prepared to react to whatever pressures sort of play out over the next few years.

Steve Baxter, Health Care Services Analyst, Wells Fargo: Okay. Just on Medicaid supplemental payments, I guess we’ll see what happens or doesn’t happen when we get out to 2028. In terms of the near term, there’s definitely been some focus about whether additional programs could get across the finish line before this kind of grandfathering provision kicks in. What’s the latest company expectations around what else you might see on Medicaid supplemental payments?

Steve Filton, CFO, Universal Health Services: Yeah. For us specifically, I think there are three programs, all of which we’ve disclosed in our most recent 10-Q, that are pending approval from CMS. One is a new program in Washington, DC, that we’ve been disclosing for a while now and has been awaiting approval for some time. The District of Columbia continues to anticipate that approval will be forthcoming. We’ve sized that benefit to us in the, you know, kind of $90 to $100 million a year timeframe. Then expansions to existing programs in Florida and Texas. We’ve outlined both of those in our most recent 10-Q. I believe that the approval of the Texas expansion actually came through in the last day or two. Florida is expecting that theirs will come through as well.

On a combined basis, those three programs add another $150 to $200 million of annual benefit to us if they are all approved. There are supposedly some other states that have also submitted programs or what they call preprints under the deadline of the Big Beautiful Bill. I don’t know that any of those are material to us, but could incrementally improve our Medicaid supplemental payments as well.

Steve Baxter, Health Care Services Analyst, Wells Fargo: Okay. That’s great. If we were to pivot to volumes, as we look and compare your results across the group, you probably had the steadiest volume trends in the second quarter as we compare them to what you reported out in the first quarter. How would you characterize demand in your markets and any color across the different payer types? Remind us how you’re thinking about the sustainability of those trends into Q3 and the back half of the year.

Steve Filton, CFO, Universal Health Services: Yeah. I think we have generally described the operating environment in 2024 and now in 2025 as really the first kind of clean, if you will, post-COVID years. I think our sense, particularly in the acute business, has been that we would return to, again, what we would describe as sort of a historically normative growth model. That is, same-store revenue growth in the 5%, 6%, 7% range. We’ll call it 6% at the midpoint, which would be split pretty evenly between price and volume. As you suggest, Steve, I think those were close to the numbers that we ran in the second quarter. I think they are sustainable numbers. One of the dynamics I think that has stood out both for us and for some of our peers is that surgical volumes within that growth rate have been somewhat soft, surgical procedural volumes.

I think we largely attribute that to a challenging comparison that in 2024 and certainly in 2023, we were seeing hospitals emerging from the pandemic, more importantly, patients emerging from the pandemic and returning to some of their pre-pandemic patterns of utilization. We saw a kind of a surge in procedural and surgical volume. When we’re now comparing our current procedural and surgical volume to the prior year or prior two years, it seems a little bit soft. I think that as we get away from those sort of catch-up volumes, if you will, this 6% growth rate split pretty evenly between price and volume and including surgical volumes returning to kind of a more normative level is definitely sustainable.

Steve Baxter, Health Care Services Analyst, Wells Fargo: Okay. Do you think the surgical volume, like, do you think that in the back half can get better, or do you think it’s more likely that it remains, you know, kind of closer to the first half trends?

Steve Filton, CFO, Universal Health Services: Yeah, I mean, I think in the third quarter, I don’t know that we’ve seen trends change dramatically. I think they’ll begin to incrementally appear more positive as we get to the end of the year and certainly as we get into next year.

Steve Baxter, Health Care Services Analyst, Wells Fargo: Okay. You have a pretty, you know, sort of chunky new hospital impact on the P&L this year with Cedar Hill Hospital. Can you maybe give us an update on where Cedar Hill stands, both in terms of, I guess, licensing status and how you’re thinking about the financial progression of that business over the next couple of years?

Steve Filton, CFO, Universal Health Services: Yep. Cedar Hill Hospital is a new hospital in Washington, DC that was built by the district and is leased and operated by us. It opened, I believe, in April. We discussed at some extended length in our Q2 call that getting what’s described as DEEM status from CMS after a Joint Commission survey had been a slower process than we originally anticipated. We did not get that approval in the second quarter, and it led to a $25 million EBITDA loss in the second quarter, basically because effectively you’re not getting paid for the patients you’re treating. You’re not getting paid by Medicare or Medicaid, nor most of your commercial payers. That DEEM status still has not been obtained, but we have had our Joint Commission survey in the last couple of weeks.

Joint Commission raised some issues and cited some issues, which is a relatively normal part of the routine. We’ve responded with plans of correction, etc., and believe that we should be getting our DEEM status within the next couple of days, maybe early next week. As a consequence, what we had said in Q2 or in our Q2 conference call was we had this $25 million EBITDA loss in Q2. We estimated in our guidance for the rest of the year there’d be another $25 million loss in the back half of the year combined. I think we feel like given the timing of the DEEM status approval, we’re tracking that and should see improvements in the Cedar Hill Hospital performance as soon as we get our DEEM status, very quickly and should ramp up very quickly.

Steve Baxter, Health Care Services Analyst, Wells Fargo: Okay. Is there a way to think about, you know, for Cedar Hill, what the progress towards, you know, maybe more of like a break-even is? You know, is there a way to think about what you might think the long-term potential of the hospital is just to think about the swing over the next couple of years?

Steve Filton, CFO, Universal Health Services: Yeah. I mean, I think that, you know, we generally have the view that the only reason we would build and open and invest in a new hospital is that at a minimum, it would run at sort of divisional margin averages, etc. If you think of Cedar Hill Hospital as a 100-bed hospital, generally, it takes 18 to 24 months for a hospital to ramp up to what we would describe as full occupancy, something in the 65% to 70% range, and generate kind of the normal divisional margin from that. Maybe we’re a little bit elongated, instead of 18 to 24 months, maybe we’re trending more in the 24-month period. The general notion, I think, is that this would be a hospital operating in a market where we already have a hospital. We’ve had George Washington University Hospital for many years in that market.

We have a nice network now that within two years of opening, so April of 2027, should be operating at something close to divisional margins and divisional averages, both in terms of occupancy and margin percentage.

Steve Baxter, Health Care Services Analyst, Wells Fargo: Okay. That’s helpful. As we think about, you know, where you are with cost, obviously, it feels like things have stabilized a lot. Maybe spend a minute about what you’re seeing on the labor side. It feels like some of the macro data points out there suggest that, you know, maybe things are slowing a little bit and maybe there’s, you know, like less pressure on quit rate and things like that that have driven up labor in the past. I guess, how are you thinking about the labor side of the business? If there are any pressure points, you know, where are they on the cost side?

Steve Filton, CFO, Universal Health Services: No, I think that, you know, labor has generally stabilized. What we had seen during the pandemic was both a pretty dramatic increase in wage inflation, acceleration in wage inflation, as well as difficulty in some cases in just even hiring and filling all of our vacancies. That I think was more of a challenge on the behavioral side than on the acute side, but challenging, honestly, in both segments. I think those pressures have eased dramatically since the height of the pandemic. I think wage inflation is much more kind of running at more normative levels. I’ll call it in the sort of 3% to 4% range depending on the market. I don’t think we’re feeling any really sort of significant pressure points. Some have asked if there’s some evidence of a softening economy and if that’s really even further decelerating wage inflation.

That I don’t know that we’ve seen yet. I think the other issue we sometimes get asked in conjunction with wage inflation and salaries, although I think it is a separate issue, is professional fees, physician fees, mostly physician fees related to the physicians that we describe as hospital-based physicians. These are physicians who provide emergency room care, anesthesiology, radiology. Effectively, these are doctors who see patients in the hospital. They don’t have their own roster of patients outside the hospital, etc., and hence the term hospital-based physicians. The industry broadly saw significant increases in those professional fees in 2023 and 2024, particularly amongst emergency room physicians and anesthesiologists. We’ve said, and continue to say, that we’ve seen that pressure kind of level off.

We’re seeing those cost increases going up by roughly, I’ll call it an inflation rate, 5% or 6%, maybe slightly higher than the overall inflation rate, but not seeing true. Now we are seeing more radiologists asking for subsidies, etc., but I will say that when it comes to solving, I’ll call it the radiology coverage problem, hospitals have more optionality than they do with anesthesiologists and docs. Meaning, I think AI can play a role in providing radiology coverage. Radiology coverage can be provided remotely. Radiologists don’t have to be at a facility to read X-rays and MRIs and CAT scans, etc., which is a different dynamic than a doctor or an anesthesiologist who has to physically be present at a facility to do his or her job. Yeah, not so much, I think we’ve seen the pressure ease on those professional fees as well.

Steve Baxter, Health Care Services Analyst, Wells Fargo: That makes sense. Just on the rate side, thinking about commercial in particular, you’ve had a few years now of above-trend updates on the commercial side to reflect the wage pressure the industry went through. It feels like we could be getting to the end of lapping some of those larger increases. I guess, how do you think about the outlook for commercial rates and whether you might be able to sustain this, or should we think about something that’s closer to maybe the pre-COVID norm as the right way to think about the next couple of years?

Steve Filton, CFO, Universal Health Services: No, I think that you’ve described it fairly, Steve. I mean, I think we think about going forward, price increases or contractual price increases in the 4% to 5% range from payers. I think over the last couple of years, we’ve seen probably that number elevated a little bit, as you suggest, largely to acknowledge and compensate hospitals for the fact that wage inflation was increasing at a faster rate than that. The other question I get, which you haven’t and you may be getting ready to ask, is whether we’re seeing any real change in payer behavior, not so much just from a contractual rate perspective, but also from what I sort of call their day-to-day payment behavior. Are they paying more slowly? Are they denying more claims? Are they not approving as many denial appeals?

Are they putting more pressure on the behavioral side on length of stay than they had been? To be fair, while I think we’ve always had the view that payers pursue pretty aggressive techniques and initiatives in their payment policies, etc., I don’t think we’ve seen that change in a material way in the last few years or even the last few quarters. I would note that I think we ourselves have focused on broadly what we would describe as our revenue cycle procedures, the way that we code, the way that we get bills out, the way that we get pre-authorizations, the way that we appeal denials when we get denied, all those sort of things. I think we’ve become more efficient. We’ve used technology to be more efficient, etc.

It may well be that the payers have gotten somewhat more aggressive in the last or in the recent past, but I think we’ve probably countered that as well. We’re at least not seeing an impact from that in any sort of material way.

Steve Baxter, Health Care Services Analyst, Wells Fargo: Okay, I guess, how much more do you think there is to do with, I guess, advanced technologies and improvements to the revenue cycle? Do you think that at some point, you know, this becomes actually a net positive rather than this just becoming like an offset to increased pressure and friction elsewhere in the system?

Steve Filton, CFO, Universal Health Services: Yeah. Look, I think we are in the early stages of leveraging technology. Excuse me. Some of that’s AI, not all of it. I mean, I think there’s continued opportunities from a revenue cycle perspective. There’s just a lot of things that are done kind of routinely or by rote that I think can be done more efficiently through technology, making sure that we’ve got our pre-authorizations, making sure that claims go out as we describe them as clean claims. I think that can really be aided by technology. On the clinical side of things, I think there are productivity improvements to be made. One example that I’ve cited is we have sort of AI agents making what we describe as post-discharge calls.

After a patient is discharged a day or two later, they often will get a call from what historically has been a nurse, to make sure that they’ve done whatever they’re supposed to do. They’ve filled their prescriptions, they’ve changed their diet, they’ve made follow-up physician appointments as appropriate. They want to see if the patients are experiencing any sort of distress, discomfort, pain, etc. We’ve started to do that now through AI technology and an AI agent making that call. I’ve actually listened into a number of them, and actually, I’m kind of stunned at how seamless the AI agent identifies itself as one right at the beginning of the call, and yet people have a very kind of seamless conversation, etc. Again, it’s just an example of a relatively sort of routinized activity that used to require a nurse or a fairly highly skilled professional.

Now we free that nurse up to do other activities. Same thing, coding. We use a third party who in turn uses AI technology now to do a significant amount of our coding. Again, it just is something that I think is just more efficient. The company does it more cheaply, more efficiently, with less mistakes than, quite frankly, we were doing it using human beings.

Steve Baxter, Health Care Services Analyst, Wells Fargo: Okay. To pivot to the behavioral business, and I guess maybe starting with volume, you did see an improvement in the same-store adjusted patient-day growth in the second quarter. It’s still below the range that you’d hope to deliver on over a longer period of time. How are you thinking about growth as we move into the back half of the year? I guess one thing that’s come up amongst some of the companies has just been the continued sort of pressure on Medicaid enrollments across the industry. Do you feel like you’re seeing any kind of impact from that? Is that hampering your ability to deliver on volume improvement at all in the back half?

Steve Filton, CFO, Universal Health Services: Yeah. It feels to me like in the last couple of quarters, there have been two sort of overarching dynamics that we’ve discussed at length as it relates to behavioral demand and our ability to meet that behavioral demand. The first, which is not really a new topic, is the issue of labor vacancies, the inability to hire all the labor that we need, not in all of our behavioral facilities, but in a measurable number of them. I’m going to say a quarter to a third of our behavioral facilities continue to experience shortages of often nurses, but also sometimes therapists, psychologists, counselors. Honestly, in a number of cases, non-professionals, the people that we describe or we call mental health technicians, these are non-degreed people who are providing a critical aspect of the behavioral treatment plan, really keeping track of patients.

Keep in mind that behavioral patients are generally physically healthy. They’re up and about. They’re moving around. They’re participating in activities, much different than an acute care patient who’s often in bed for most of their stay. The behavioral patient, quite frankly, shouldn’t be in bed other than to sleep. The mental health technicians play a critical role in making sure that they’re where they should be. They’re in therapy. They’re in other supervised activities. They’re not where they shouldn’t be. They’re not consorting with people they shouldn’t be, all that sort of thing. That’s critical. While I think recruitment and retention has improved dramatically from the height of the pandemic, it still remains a challenge. We continue to believe there’s room for improvement there.

I think we’re making steady room for improvement, and that improvement will allow us to see and treat more patients, and grow our patient days or adjusted patient days. The other aspect, and I think this has really been highlighted by this sort of disconnect of, as many of you know, payers, I don’t know that it’s all the payers, but many of the payers in talking about their increased medical loss payments, their medical loss ratios have cited or attributed some of that growth to behavioral care and behavioral treatment. Yet, we’re not seeing really many of the public companies that provide behavioral care, Universal Health Services, Acadia, in terms of inpatient care, but even the providers of outpatient sort of consumer, direct-to-consumer care, the Talkspaces and LifeStance of the world, they’re not necessarily reporting significant increases in volumes.

As we have tried to reconcile that or square that circle, if you will, we’re seeing to the degree that we have access to databases that report on this, that care is being delivered in a lot of very fragmented ways in a lot of very fragmented spaces. If an urgent care center can employ a behavioral therapist, they can deliver care. Nursing homes can deliver care. These mom-and-pop outpatient providers can deliver care. We believe that we have an opportunity to capture more of that, particularly outpatient care, but more of that care that’s being delivered in a very fragmented way, based on our relationship with referral sources, based on our relationship with payers, we ought to be able to capture a greater part of that market share and have a number of focused initiatives to do that.

Honestly, the ability to do that is also tied with our ability to recruit and retain because part of what hampers our ability to provide that care up to now is that we simply haven’t had the people to do it. As we get better at doing that, we’ll get better at delivering care in, I’ll call them alternative sites or alternative means. As far as your question about, are we really, is the softness in or our inability to sort of get to the behavioral volume targets that we’ve set for ourselves, is it a function of people being disenrolled from the Medicaid program? I’m going to say not much.

If you think about what we’re saying, which is the biggest challenge we have is that in a number of facilities, we can’t treat all the patients that are being presented to us to the degree that there are fewer Medicaid patients. In theory, there are other patients, either other Medicaid patients, Medicare patients, commercial patients to take the place of those Medicaid disenrolled leaves as long as we have the means to treat them.

Steve Baxter, Health Care Services Analyst, Wells Fargo: Okay, and then just the outlook for, you know, rates on behavioral and just give us an update there. I guess it’s been a pretty strong few years there, but starting to see, you know, especially on the Medicaid side, some interest in, you know, from the states of potentially making fee schedule changes to kind of help improve the overall sustainability of their Medicaid budgets. I guess, what’s the latest that you’re seeing as you look across a broader portfolio of states?

Steve Filton, CFO, Universal Health Services: As we think about the sustainable model, growth model for the behavioral business, we think about a same-store revenue growth target in the 6%, 7%, 8% range. Again, I’m going to say 7% at the midpoint. On the behavioral side, we think about that as sort of 4% to 5% price, you know, 3%, 3.5% volume growth. The 4% to 5% price aspect of it, quite frankly, you know, as you know, Steven, I think your question sort of alludes to this, we’ve been largely exceeding that number for much of the last several years, even excluding the benefit that we’ve had from some of these Medicaid supplemental payment programs. I’ll call it core behavioral pricing has been over the last couple of years in some periods, in some quarters, as high as 7% or 8%, maybe even higher.

I think we’ve always said that we’re likely to moderate to sort of a 4% to 5% pricing environment. That’s kind of where we were in Q2. I think we think that’s a pretty sustainable level. Part of the reason that it’s sustainable at that level, which may be a little bit higher than it’s been historically, is because of the limited capacity, not just for us, but in the industry. If a payer wants to be guaranteed access for their subscribers, their enrollees, they’re going to have to be an in-network provider. They’re going to have to pay what we consider to be a competitive in-network rate, etc. I think you’re seeing some of this dynamic.

If those scarcity issues really become much more alleviated over the next few years, then I think, you know, you might see pricing decline from that 4% to 5% target that we’re talking about now. I think you’ll see, obviously, volumes grow to offset that. Broadly, we have a view that, again, 7% revenue growth model is a sustainable model. It remains today a little bit more skewed towards price than to volume. Over time, I think, much like we saw on the acute side, I think those numbers will even out a little bit more.

Steve Baxter, Health Care Services Analyst, Wells Fargo: Okay. Maybe this is the last question. We could talk about capital deployment. At one point in the company’s history, M&A was a much bigger use of capital than maybe it’s been over the past few years. I guess, how do you think about the outlook for maybe doing more M&A over the next few years? Is that realistic? If you thought about that, what would you be targeting? If not, like priorities for capital?

Steve Filton, CFO, Universal Health Services: I think the answer to that question is different for the two business segments. On the acute side, where the most attractive M&A historically for us has been to acquire a not-for-profit hospital that is underperforming, has been under-capitalized, has not been running efficiently. We’ve had a number of those examples over the years, but as you suggest, not many in the last 5 or 10 years. There haven’t been many examples of those sorts of transactions in the acute space writ large. Whether some of the pressures that we’ve talked about from the potential lapsing of exchange subsidies or reduction in Medicaid supplemental payments will create some further financial pressure on acute, not-for-profit acute hospitals, that remains to be seen. We are still certainly in the market for those opportunities if they come to the fore. On the behavioral side, I think it’s been a little bit different.

There have been a number of what I would describe as niche providers. In many cases, these are sort of private equity-sponsored providers of, I’ll call them limited care. It could be telehealth. It could be specific diagnoses like eating disorders or autism, this or that. The challenge for us has been those transactions have often gone off at multiples of 13, 14, 15 times EBITDA. For a company like us, it’s trading at 7 or 8 times or maybe even a little bit less than that at the current moment. That’s been a difficult economic sort of equation to make work. In the current environment, whether we’ll see some of those transactions going off at more reasonable rates, I think that’s possible, although I don’t know that it’s guaranteed.

We’d certainly be interested if the prices for some of those opportunities do start to come into a more reasonable realm.

Steve Baxter, Health Care Services Analyst, Wells Fargo: Okay. I think it’s a great place to leave it. I think that’s what I have time for today. Thanks so much for being here, Steve.

Steve Filton, CFO, Universal Health Services: Thank you. Thanks, everybody.

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