This audio is generated automatically. Please let us know if you have any comments.
Dive summary:
- For-profit hospital operator Universal Health Services expects to increase admissions and hit long-standing growth goals in its behavioral health unit this year, executives said on a fourth-quarter earnings conference call Thursday.
- Executives said 2026 would be the year its behavioral health unit would achieve 2% to 3% growth in adjusted patient days, a figure the system has struggled to reach as it tries to address lagging growth at its behavioral facilities. The system initially hoped to reach that goal last year but postponed it due to labor and personnel issues.
- Still, executives said they anticipate multiple headwinds this year, including losses from the expiration of more generous subsidies in Affordable Care Act plans and a new staffing law in California.
Diving information:
UHS has embarked on multiple different growth strategies for its behavioral health unit, the largest segment of its portfolio. It has tried to improve staffing and labor, a key focus last year, after executives said staffing shortages slowed the unit’s growth.
The operator also sought to increase its outpatient portfolio, which executives said should help it capture more volumes and improve its margins. Currently, UHS’s portfolio leans heavily toward inpatient: it has 345 inpatient behavioral facilities and 119 outpatient locations. Outpatient services represent 10% of revenue in its behavioral segment, CEO Marc Miller said on the earnings call.
Still, the improvements were not enough to reach its growth target of between 2% and 3% of daily patient admissions last year. Executives began speculating that UHS might miss its target during the second quarter and confirmed in the next that its growth was a “reasonable target for [2026].”
To reach that goal this year and improve growth, UHS said it hopes improvements made last year in staffing and headcount will begin to pay off.
Priority has also been given to expanding “in-house” facilities: outpatient centers for patients who have not yet been admitted to a hospital facility (as opposed to “in-house” facilities, for patients transitioning from inpatient care to outpatient care). UHS plans to open 10 more freestanding outpatient locations under its “Thousand Branches Wellness” brand this year, executives said.
Behavioral health-adjusted patient days grew 1.5% in the fourth quarter compared with the same period a year earlier, “within striking distance” of its broader target, Chief Financial Officer Steve Filton said.
Growth in its behavioral unit supports UHS’s overall 2026 guidance. The hospital operator expects to grow adjusted revenues between 2% and 3% both in its acute and behavioral segments. Executives said they also expect to grow revenue 6% to 8%, to $18.4 billion to $18.8 billion for the full year.
Their guidance takes into account a $75 million loss due to the expiration of ACA subsidies. The enhanced subsidies, passed during the COVID-19 pandemic, expired late last year after Congress refused to extend them.
Without the subsidies, premiums for millions of Americans are expected to double on average this year. Millions more expected to lose insuranceresulting in less revenue and more uncompensated care for U.S. providers.
UHS’s loss is in line with its peers. Due to the size and location of their hospital portfolios, operators such as Tenet and HCA have expected losses of $250 million to $900 million, while CHS expects to lose up to $30 million over the span.
The loss will be concentrated in its acute care portfolio of 29 hospitals. Exchange volumes represented about 6% of its critical care admissions in 2025 and just under 5% of its revenue, Filton said.
Its guidance also includes a $35 million impact on its behavioral unit this year from a New California law requiring more staff in the state’s acute psychiatric hospitals.. The law, which goes into effect in June, requires facilities to have at least one licensed nurse for every six adult patients, or one nurse for every five pediatric patients, at all times.
UHS expects to incur higher labor costs to recruit and train new personnel. Beyond 2026, UHS expects an ongoing annual cost of $30 million to comply with the law.
In the fourth quarter of 2025, UHS reported stable volumes in its acute hospital unit, reversing a trend in which UHS hospitals generally outperform in admissions compared to its behavioral facilities.
The reversal caused UHS to fall below Wall Street expectations in its acute unit, while outperforming them in its behavioral unit, according to a Friday note from TD Cowen analyst Ryan Langston. Adjusted earnings before interest, taxes, depreciation and amortization reached $679 million in the fourth quarter, compared with $615 million in the same period a year earlier.
UHS shares fell about 10% following the release of its results, a drop Langston called “exaggerated.”
