Universal Health Services skimmed the bottom range of its growth projections in 2026’s first quarter as solid rate increases and expense management clashed with expected and unexpected volume shortfalls.
The King of Prussia, Pennsylvania-based acute and behavioral care provider reported this week net income of $348.7 million ($5.65 per diluted share) during the quarter, up from last year’s $316.7 million ($4.80 per diluted share) and above consensus estimates. Net revenues during the quarter grew 9.6% year over year to about $4.5 billion, also above the market’s expectations.
However, similar to its for-profit hospital peers, the company dipped below its aims on volumes due to a one-two punch of a slow respiratory system and disruptive winter storms. Volumes on the acute side were also slowed by coverage changes within the health insurance exchanges, while behavioral numbers were still somewhat impacted by labor bottlenecks the company has been working to alleviate—though both those trends were anticipated in UHS’ full-year guidance.
Though the company did see a largely expected year-over-year benefit in Medicaid state-directed payments, analysts on its Tuesday earnings call were quick to point out that the performance leaves UHS an uphill battle to hit its 5% earnings growth expectation for the year.
Executives acknowledged the slower start, but said that volume activity appeared to be back on track in later February and March. More broadly, they expect a steady ramp up over the remainder of the year as new facilities and other capacity expansions begin to gain steam.
“We get it that we’re not at that core 5% growth—excluding all the [state-directed payments] and other non-recurring items in the quarter—but still believe that we’re going to get there for the full year,” Steve Filton, UHS’ chief finance officer, said during the call.
UHS’ shares fell nearly 10% over the course of Tuesday, but have partially recovered as of early afternoon Wednesday.
The quarter was a particularly flashy one for UHS, which recently unveiled plans to acquire virtual behavioral health company Talkspace for about $835 million in the third quarter. CEO Marc Miller reiterated the acquisition’s anticipated upsides for the company, such as Talkspace’s existing strong payer mix, the opportunity for bi-directional referrals between the service’s clinicians and UHS’ inpatient and outpatient sites, and the potential development of higher acuity virtual offerings such as virtual intensive outpatient programs (IOPs).
Miller again said UHS expects the deal to be accretive to earnings within 12 months of closing and added that after three years the company expects the effective EBITDA multiple for the Talkspace deal “to be in the single-digit range.” Those expectations come from “a full look at their business model” in recent years and what the company already had planned for the near future if it wasn’t being acquired, he said.
“Add that to what we think we can do to help them increase those achievements and earnings, that’s what gives us greater confidence,” Miller said. “… We’ve had folks ask us about it. It’s harder to understand the multiple if you just look at it from today’s earnings. In the next couple of years, again, they’re on a great growth path themselves, and we’re going to add to that once we combine resources.”
Beyond these topics, investors were curious to hear about UHS’ early observations around the health insurance exchange market, how additional potential state-directed payments could influence the year’s earnings and the company’s rollout of AI tools.
On the exchanges, where UHS had projected a $75 million pre-tax hit across the year, executives described a roughly $15 million earnings impact for the first quarter that is expected to ramp up in coming quarters. Adjusted admissions among exchange patients declined about 5%, though Filton noted that more patients that presented with coverage under the exchanges likely will reveal themselves as uninsured due to difficulties meeting premiums. Together, UHS’ true exchange volume decline is “probably something in the low double digits—you know, 10%, 11%, 12%,” he said.
On additional Medicaid supplemental payments, executives said they are expecting Florida’s program to be approved and, when it is, would likely record about a $50 million benefit. California’s program “is much less likely, or much less certain,” Filton said.
As for AI, Miller said UHS had rolled out eight implementations last year focused on administrative and revenue cycle functions that are bringing the company “significant benefits already.” The company is also targeting new deployments in 2026 focused on clinical capabilities, for which it has partnered with Hippocratic AI.
Within the acute business, same-facility adjusted admissions were flat compared to the prior year while adjusted patient days rose 0.8%. Filton outlined a 200-basis-point impact on volumes resulting from the weak flu season and winter weather, later noting that electives and surgeries postponed due to the storms are expected to be rescheduled over the course of the year.
Same-facility acute revenues, meanwhile, jumped 8.2% with net revenue per adjusted admission rising 6.3% and net revenue per adjusted patient day rising 5.5%. Filton attributed the rise to improved rates, and noted that some heightened revenues relative to volume was the natural result of fewer low-acuity respiratory cases. At the same time, he noted “reasonably healthy increases in some of the more acute service lines, including cardiology, orthopedics and neurology.”
In the behavioral segment, same-facility adjusted admissions rose 1.2% and adjusted patient days grew 1.6% year over year. The storms forced a 40-to-50 basis point decline in volumes, Filton said while attributing the remaining weak volumes to lingering workforce bottlenecks and shifting demand toward more outpatient services—both of which UHS has endeavored to address. Net revenues increased 7.3%, net revenue per adjusted admission rose 6.2% and net revenue per adjusted patient day grew by 5.8%.
Universal Health Services runs 29 inpatient acute care facilities, 346 inpatient behavioral health facilities and 168 outpatient and other facilities. It reported $17.4 billion in annual revenues during 2025.
The company’s Q1 volume headaches are shared by its for-profit peers. HCA Healthcare late last week similarly cited inclement weather and a soft flu season for its slowdown, while Community Health Systems pointed to broader factors like consumers’ macroeconomic fears and heightened payer pushback on payments.
On the latter, Filton said Tuesday that UHS hasn’t necessarily seen an uptick in denials but that it has made substantial technology investments within its acute business that “are allowing us to sort of keep pace with potentially more aggressive behavior on the part of payers.” Similar investments are planned in the next 12 to 18 months for the behavioral side of the business, he added.