Universal Health Services UHS Form 10-Q filing Q2 FY2026

This Quarterly Report on Form 10-Q is for the quarter ended June 30, 2026. This Report modifies and supersedes documents filed prior to this Report. Information that we file with the Securities and Exchange Commission (the “SEC”) in the future will automatically update and supersede information contained in this Report.

In this Quarterly Report, “we,” “us,” “our” “UHS” and the “Company” refer to Universal Health Services, Inc. and its subsidiaries. UHS is a registered trademark of UHS of Delaware, Inc., the management company for, and a wholly-owned subsidiary of Universal Health Services, Inc. Universal Health Services, Inc. is a holding company and operates through its subsidiaries including its management company, UHS of Delaware, Inc. All healthcare and management operations are conducted by subsidiaries of Universal Health Services, Inc. To the extent any reference to “UHS” or “UHS facilities” in this report including letters, narratives or other forms contained herein relates to our healthcare or management operations it is referring to Universal Health Services, Inc.’s subsidiaries including UHS of Delaware, Inc. Further, the terms “we,” “us,” “our” or the “Company” in such context similarly refer to the operations of Universal Health Services Inc.’s subsidiaries including UHS of Delaware, Inc. Any reference to employees or employment contained herein refers to employment with or employees of the subsidiaries of Universal Health Services, Inc. including UHS of Delaware, Inc.

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PART I. FINANCIAL INFORMATION

The accompanying notes are an integral part of these condensed consolidated financial statements.

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The accompanying notes are an integral part of these condensed consolidated financial statements.

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The accompanying notes are an integral part of these condensed consolidated financial statements.

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UNIVERSAL HEALTH SERVICES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

For the Three and Six Months ended June 30, 2026

(amounts in thousands, unaudited)

The accompanying notes are an integral part of these condensed consolidated financial statements.

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UNIVERSAL HEALTH SERVICES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

For the Three and Six Months ended June 30, 2025

(amounts in thousands, unaudited)

The accompanying notes are an integral part of these condensed consolidated financial statements.

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The accompanying notes are an integral part of these condensed consolidated financial statements.

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UNIVERSAL HEALTH SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(1) General

This Quarterly Report on Form 10-Q is for the quarterly period ended June 30, 2026. In this Quarterly Report, “we,” “us,” “our” “UHS” and the “Company” refer to Universal Health Services, Inc. and its subsidiaries.

The condensed consolidated interim financial statements include the accounts of our majority-owned subsidiaries and partnerships and limited liability companies controlled by us, or our subsidiaries, as managing general partner or managing member. The condensed consolidated interim financial statements included herein have been prepared by us, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) and reflect all adjustments (consisting only of normal recurring adjustments) which, in our opinion, are necessary to fairly state results for the interim periods. Certain information and footnote disclosures normally included in audited consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to such rules and regulations, although we believe that the accompanying disclosures are adequate to make the information presented not misleading. These condensed consolidated interim financial statements should be read in conjunction with the audited consolidated financial statements, significant accounting policies and the notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2025 as filed with the SEC on February 25, 2026.

(2) Relationship with Universal Health Realty Income Trust, Other Related Party Transactions and Other Investments

Relationship with Universal Health Realty Income Trust:

At June 30, 2026, we held approximately 5.7% of the outstanding shares of Universal Health Realty Income Trust (the “Trust”). We serve as Advisor to the Trust under an annually renewable advisory agreement, which is scheduled to expire on December 31st of each year, pursuant to the terms of which we conduct the Trust’s day-to-day affairs, provide administrative services and present investment opportunities. The advisory agreement was renewed by the Trust for 2026 at the same rate in place for 2025, 2024 and 2023, providing for an advisory computation at 0.70% of the Trust’s average invested real estate assets. We earned an advisory fee from the Trust, which is included in net revenues in the accompanying condensed consolidated statements of income, of approximately $1.4 million during each of the three-month periods ended June, 2026 and 2025, and approximately $2.8 million during each of the six-month periods ended June 30, 2026 and 2025, respectively.

In addition, certain of our officers and directors are also officers and/or directors of the Trust. Management believes that it has the ability to exercise significant influence over the Trust, therefore we account for our investment in the Trust using the equity method of accounting.

Our pre-tax share of income from the Trust was $284,000 and $268,000 during the three-month periods ended June 30, 2026 and 2025, respectively, and $584,000 and $568,000 during the six-month periods ended June 30, 2026 and 2025, respectively, and is included in other income (expense), net, on the accompanying condensed consolidated statements of income for each period. We received dividends from the Trust amounting to $591,000 and $583,000 during the three-month periods ended June 30, 2026 and 2025, respectively, and approximately $1.2 million during each of the six-month periods ended June 30, 2026 and 2025. The carrying value of our investment in the Trust was $3.8 million and $4.4 million at June 30, 2026 and December 31, 2025, respectively, and is included in other assets in the accompanying condensed consolidated balance sheets. The market value of our investment in the Trust was $34.5 million at June 30, 2026 and $30.9 million at December 31, 2025, based on the closing price of the Trust’s stock on the respective dates.

The Trust commenced operations in 1986 by purchasing certain hospital properties from us and immediately leasing the properties back to our respective subsidiaries. The base rents are paid monthly and the bonus rents, which effective as of January 1, 2022 are applicable only to McAllen Medical Center, are computed and paid on a quarterly basis, based upon a computation that compares current quarter revenue to a corresponding quarter in the base year. The leases with those subsidiaries are unconditionally guaranteed by us and are cross-defaulted with one another.

On December 31, 2021, we entered into an asset purchase and sale agreement with the Trust, which was amended during the first quarter of 2022, pursuant to the terms of which: (i) a wholly-owned subsidiary of ours purchased from the Trust the real estate assets of the Inland Valley Campus of Southwest Healthcare System located in Wildomar, California, at its fair market value; (ii) two wholly-owned subsidiaries of ours transferred to the Trust, at their respective fair-market values, the real estate assets of Aiken Regional Medical Center (“Aiken”), located in Aiken, South Carolina (which includes a 211-bed acute care hospital and a 62-bed behavioral health facility), and Canyon Creek Behavioral Health (“Canyon Creek”), located in Temple, Texas, and; (iii) we received approximately $4.1 million in cash from the Trust.

As a result of the purchase options within the lease agreements for Aiken and Canyon Creek, the asset purchase and sale transaction is accounted for as a failed sale leaseback in accordance with U.S. GAAP. We have accounted for the asset exchange and substitution

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transaction with the Trust as a financing arrangement and, since we did not derecognize the real property related to Aiken and Canyon Creek, we will continue to depreciate the assets. Our consolidated balance sheets at June 30, 2026 and December 31, 2025 reflect financial liabilities, which are included in debt, of approximately $68 million and $70 million, respectively, which is included in debt, for the fair value of real estate assets that we exchanged as part of the transaction. Our monthly lease payments payable to the Trust will be recorded to interest expense and as a reduction to the outstanding financial liability. The amount allocated to interest expense is determined using our incremental borrowing rate and is based on the outstanding financial liability.

The aggregate rent payable to the Trust in connection with the leases on McAllen Medical Center, Wellington Regional Medical Center, Aiken Regional Medical Center and Canyon Creek Behavioral Health was approximately $5.7 million and $5.4 million during the three-month periods ended June 30, 2026 and 2025, respectively and approximately $11.2 million and $10.8 million during the six-month periods ended June 30, 2026 and 2025, respectively.

Pursuant to the Master Leases by certain subsidiaries of ours and the Trust as described in the table below, dated 1986 and 2021 (“the Master Leases”) which govern the leases of McAllen Medical Center and Wellington Regional Medical Center (each of which is governed by the Master Lease dated 1986), and Aiken Regional Medical Center and Canyon Creek Behavioral Health (each of which is governed by the Master Lease dated 2021), we have the option to renew the leases at the lease terms described above and below by providing notice to the Trust at least 90 days prior to the termination of the then current term. We also have the right to purchase the respective leased hospitals at their appraised fair market value upon any of the following: (i) at the end of the lease terms or any renewal terms; (ii) upon one month’s notice should a change of control of the Trust occur, or; (iii) within the time period as specified in the lease in the event that we provide notice to the Trust of our intent to offer a substitution property/properties in exchange for one (or more) of the hospital properties leased from the Trust should we be unable to reach an agreement with the Trust on the properties to be substituted. In addition, we have rights of first refusal to: (i) purchase the respective leased facilities during and for a specified period after the lease terms at the same price, terms and conditions of any third-party offer, or; (ii) renew the lease on the respective leased facility at the end of, and for a specified period after, the lease term at the same terms and conditions pursuant to any third-party offer.

In addition, we are the managing, majority member in a joint venture with an unrelated third-party that operates Clive Behavioral Health, a 100-bed behavioral health care facility located in Clive, Iowa. The real property of this facility, which was completed and opened in late 2020, is also leased from the Trust (annual rental of approximately $2.9 million, $2.9 million and $2.8 million during 2026, 2025 and 2024, respectively) pursuant to the lease terms as provided in the table below. In connection with the lease on this facility, the joint venture has the right to purchase the leased facility from the Trust at its appraised fair market value upon either of the following: (i) by providing notice at least 270 days prior to the end of the lease terms or any renewal terms, or; (ii) upon 30 days' notice anytime within 12 months of a change of control of the Trust (UHS also has this right should the joint venture decline to exercise its purchase right). Additionally, the joint venture has rights of first offer to purchase the facility prior to any third-party sale.

The table below provides certain details for each of the hospitals leased from the Trust as of June 30, 2026:

(a)

We have one 5-year renewal option at existing lease rates (through 2031).

(b)

We have one 5-year renewal option at fair market value lease rates (through 2031). On each January 1st through 2026, the annual rent will increase by 2.5% on a cumulative and compounded basis.

(c)

We have seven 5-year renewal options at fair market value lease rates (2034 through 2068). On each January 1st through 2033, the annual rent will increase by 2.25% on a cumulative and compounded basis.

(d)

This facility is operated by a joint venture in which we are the managing, majority member and an unrelated third-party holds a minority ownership interest. The joint venture has three, 10-year renewal options at computed lease rates as stipulated in the lease (2041 through 2070) and two additional, 10-year renewal options at fair market value lease rates (2071 through 2090). In each January through 2040 (and potentially through 2070 if three, 10-year renewal options are exercised), the annual rental will increase by 2.75% on a cumulative and compounded basis.

In addition, certain of our subsidiaries are tenants in several medical office buildings (“MOBs”) and two free-standing emergency departments ("FED") owned by the Trust or by limited liability companies in which the Trust holds 95% to 100% of the ownership interest. The current lease terms on these two FEDs, which are located in Weslaco and Mission, Texas, are scheduled to end on January 31, 2030. Pursuant to terms of the leases, the lease rates are scheduled to increase 2% per year through the end of the lease terms. Our subsidiaries have four, 5-year renewal options remaining on each of these FEDs, with the first three renewal options

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(covering the years 2030 through 2044) providing for 2% annual increases to the lease rates, and the remaining two, 5-year renewal options (covering the years 2045 through 2054) providing for lease rates at the then fair market value. These leases are cross-defaulted with one another and our subsidiaries have the option to purchase the leased properties upon the expiration of each five-year extended term at the fair market value at that time.

In October, 2025, a ground lease and a master flex lease were executed between a wholly-owned subsidiary of ours and the Trust. On this land, the Trust intends to develop, construct and own the real property of the Miller Medical Plaza, a MOB located in Palm Beach Gardens, Florida. This multi-tenant MOB, consisting of 80,000 rentable square feet, is scheduled to be completed in December, 2026. The MOB will be located on the campus of the Alan B. Miller Medical Center, a newly constructed acute care hospital owned and operated by a wholly-owned subsidiary of ours, which was completed and opened during the second quarter of 2026. The 10-year master flex lease agreement, which is subject to reduction based on the execution of third-party leases with the Trust, was executed for approximately 75% of the rentable square feet of the MOB. The Trust has engaged a wholly-owned subsidiary of UHS to act as project manager, and construction of the MOB commenced in February, 2026.

Other Related Party Transactions:

In December, 2010, our Board of Directors approved the Company’s entering into supplemental life insurance plans and agreements on the lives of Alan B. Miller (our Executive Chairman of the Board) and his wife. As a result of these agreements, as amended in October, 2016, based on actuarial tables and other assumptions, during the life expectancies of the insureds, we would pay approximately $28 million in premiums, and certain trusts owned by our Executive Chairman of the Board, would pay approximately $9 million in premiums. Based on the projected premiums mentioned above, and assuming the policies remain in effect until the death of the insureds, we will be entitled to receive death benefit proceeds of no less than approximately $37 million representing the $28 million of aggregate premiums paid by us as well as the $9 million of aggregate premiums paid by the trusts. In connection with these policies, we will pay/we paid approximately $1 million, net, in premium payments during 2026 and 2025.

Marc D. Miller, our President and Chief Executive Officer and member of our Board of Directors, was a member of the Board of Directors of Premier, Inc. (“Premier”) from 2015 until Premier was sold in November, 2025, as discussed below. In conjunction with our GPO agreement with Premier, we had previously received shares of restricted stock of Premier which vested ratably over a seven-year period (2014 through 2020). During 2020, we entered into an agreement with Premier pursuant to the terms of which, among other things, our ownership interest in Premier was converted into shares of Class A Common Stock of Premier. We elected to retain a portion of the previously vested shares of Premier, the carrying value of which was adjusted for changes in the market value of Premier, which were included in other assets on our consolidated balance sheets. In September, 2025, Premier entered into an agreement and plan of merger providing for the acquisition of Premier by Patient Square Capital. In November, 2025 we received approximately $63 million for our remaining shares of Premier. Included in Other (income) expense, net, in our condensed consolidated statements of income, were gains recorded to adjust for changes in the market value of our shares of Premier amounting to $5.9 million and $1.6 million during the three and six-months ended June 30, 2025. Additionally, we received cash dividends from Premier amounting to $470,000 and $937,000 during the three and six-months ended June 30, 2025, which is included in “Other (income) expense, net” in our condensed consolidated statements of income.

A member of our Board of Directors and member of the Executive Committee and Finance Committee is Of Counsel to Norton Rose Fulbright US LLP, a law firm engaged by us for a variety of legal services. The Board member and his law firm also provide personal legal services to our Executive Chairman and he acts as trustee of certain trusts for the benefit of our Executive Chairman and his family.

Other Investments:

At various times from July, 2023 to November, 2025, we invested in non-marketable securities of a healthcare generative artificial intelligence company, in which we hold a small minority ownership percentage. As of June 30, 2026 and December 31, 2025, the current market value of these non-marketable securities was approximately $115 million and is included in other assets on our condensed consolidated balance sheets.

(3) Other Noncurrent liabilities and Redeemable/Noncontrolling Interests

Other noncurrent liabilities include the long-term portion of our professional and general liability, workers’ compensation reserves, pension and deferred compensation liabilities, and liabilities incurred in connection with split-dollar life insurance agreements on the lives of our chief executive officer and his wife.

Generally accepted accounting principles require that noncontrolling interests be classified as equity and we have presented noncontrolling interests in total equity. However, since certain of our noncontrolling interests have redemption rights outside of our control, those noncontrolling interests are classified outside of permanent equity.

As of June 30, 2026, outside owners held noncontrolling, minority ownership interests of: (i) approximately 7% in an acute care facility located in Texas; (ii) 49%, 49%, 30%, 20%, 25%, and 48% in six behavioral health care facilities located in Arizona,

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Pennsylvania, Ohio, Washington, Missouri, and Iowa, respectively, (iii) 26% and 49% in two behavioral health care facilities located in Michigan and; (iv) approximately 5% in an acute care facility and 49% in a surgery center, located in Nevada. The noncontrolling interest and redeemable noncontrolling interest balances of $68 million and $74 million, respectively, as of June 30, 2026, consist primarily of the third-party ownership interests in these hospitals.

In connection with certain of the behavioral health care facilities mentioned above, the outside owners have “put options” to potentially put their entire ownership interest to us either in the future upon the occurrence of certain triggering events (as specified in the agreements), or at the present time. If exercised, the put option requires us to purchase the minority member’s interest at fair market value. Amounts recorded as redeemable noncontrolling interests on our condensed consolidated balance sheet as of June 30, 2026 and December 31, 2025 reflect the estimated fair market value of the minority ownership interests that contain such put options.

The minority owners of a 20% interest in a behavioral health care facility located in Pennsylvania had previously exercised their put option and we purchased their ownership interest in April, 2025.

(4) Treasury

Credit Facilities and Outstanding Debt Securities

In April, 2026, we entered into the Eleventh Amendment and Increased Facility Activation Notice (the “Eleventh Amendment”) to our credit agreement ("Credit Agreement"), dated as of November 15, 2010, and as amended and restated at various times from March, 2011 to September, 2024, among UHS, as borrower, the several banks and other financial institutions or entities from time to time parties thereto, as lenders, and JPMorgan Chase Bank, N.A., as administrative agent. The Eleventh Amendment, among other things, increased our borrowing capacity by an aggregate of $900 million as follows: (i) increased the borrowing capacity of the revolving credit facility by $200 million to $1.5 billion (from $1.3 billion previously); (ii) increased the existing term loan A by $300 million to $1.455 billion ($1.448 billion outstanding as of June 30, 2026) from $1.155 billion previously, and; (iii) initiated a new $400 million delayed draw term loan A which is expected to be drawn upon the closing of our acquisition of Talkspace, Inc. (expected to be consummated during the third quarter of 2026). The maturity date for our Credit Agreement is September 26, 2029.

In July, 2026, we entered into the Twelfth Amendment and Increased Facility Activation Notice (the "Twelfth Amendment") to our Credit Agreement which added a new $700 million delayed draw short term loan which, if we elect to utilize, would be funded on or prior to September 30, 2026, with a maturity date 364 days after the initial funding. Potential future borrowings pursuant to this facility would be used for general corporate purposes, including, should we elect, repayment at maturity of our $700 million principal amount of 1.650% Senior Secured Notes due on September 1, 2026.

As of June 30, 2026, we had $1.272 billion of available borrowing capacity pursuant to the terms of our $1.5 billion revolving credit facility (net of $225 million of outstanding borrowings and $3 million of letters of credit) and $400 million of borrowing capacity pursuant to the terms of the delayed draw term loan A facility (expected to be drawn upon closing of our acquisition of Talkspace, Inc.).

After giving effect to the terms of the Eleventh Amendment, the term loan A, which had an outstanding balance of $1.448 billion as June 30, 2026, provides for aggregate installment payments of $9.4 million on September 30, 2026, $16.9 million per quarter commencing on December 31, 2026 through June 30, 2028, and $18.8 million per quarter commencing on September 30, 2028 through June 30, 2029. The unpaid principal balance at June 30, 2029 (scheduled to be $1.245 billion) is payable on September 26, 2029 (maturity date of the Credit Agreement). Once drawn, the principal balance on the $400 million delayed draw term loan A facility (as provided for by the Eleventh Amendment) will be payable on the September 26, 2029 maturity date of the Credit Agreement.

Revolving credit and existing term loan A borrowings under the Credit Agreement, after giving effect to the Eleventh Amendment, bear interest at our election at either (1) the ABR rate which is defined as the rate per annum equal to the greatest of (a) the lender’s prime rate, (b) the greater of the federal funds effective rate and the overnight bank funding rate, plus 0.5% and (c) one month term SOFR rate plus 1.0%, in each case, plus an applicable margin based upon our consolidated leverage ratio at the end of each quarter ranging from 0.25% to 0.625%, or (2) the one, three or six month term SOFR rate (at our election), plus an applicable margin based upon our consolidated leverage ratio at the end of each quarter ranging from 1.25% to 1.625%. As of June 30, 2026, the applicable margins were 0.25% for ABR-based loans and 1.25% for SOFR-based loans under the revolving credit and term loan A facilities. The revolving credit facility includes a $125 million sub-limit for letters of credit. The Credit Agreement is secured by certain assets of the Company and our material wholly-owned subsidiaries (which generally excludes asset classes such as substantially all of the patient-related accounts receivable of our acute care hospitals, if sold to a receivables facility pursuant to the Credit Agreement, and certain real estate assets and assets held in joint-ventures with third parties) and is guaranteed by our material subsidiaries.

The Credit Agreement includes a material adverse change clause that must be represented at each draw. The Credit Agreement also contains covenants that include a limitation on sales of assets, mergers, change of ownership, liens, indebtedness, transactions with affiliates, dividends and stock repurchases; and requires compliance with financial covenants including maximum leverage. We were in compliance with all required covenants as of June 30, 2026 and December 31, 2025.

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As of June 30, 2026, we had combined aggregate principal of $3.0 billion from the following senior secured notes:

• $700 million of aggregate principal amount of 1.65% senior secured notes due in September, 2026 ("2026 Notes") which were issued on August 24, 2021. Interest on the 2026 Notes is payable on March 1st and September 1st until the maturity date of September 1, 2026.
• $500 million of aggregate principal amount of 4.625% senior secured notes due in October, 2029 ("2029 Notes") which were issued on September 26, 2024. Interest on the 2029 Notes is payable on April 15th and October 15th, commencing April 15, 2025 until the maturity date of October 15, 2029.
• $800 million of aggregate principal amount of 2.65% senior secured notes due in October, 2030 ("2030 Notes") which were issued on September 21, 2020. Interest on the 2030 Notes is payable on April 15th and October 15th, until the maturity date of October 15, 2030.
• $500 million of aggregate principal amount of 2.65% senior secured notes due in January, 2032 ("2032 Notes") which were issued on August 24, 2021. Interest on the 2032 Notes is payable on January 15th and July 15th until the maturity date of January 15, 2032.
• $500 million of aggregate principal amount of 5.050% senior secured notes due in October, 2034 ("2034 Notes") which were issued on September 26, 2024. Interest on the 2034 Notes is payable on April 15th and October 15th, commencing on April 15, 2025 until the maturity date of October 15, 2034.

The 2026, 2029, 2030, 2032 and 2034 Notes (collectively "All the Notes") are guaranteed (the “Guarantees”) on a senior secured basis by all of our existing and future direct and indirect subsidiaries that guarantee our Credit Agreement, other first lien obligations, or any junior lien obligations (the "Subsidiary Guarantors"). All the Notes and the Guarantees are secured by first-priority liens, subject to permitted liens, on certain of the Company’s and the Subsidiary Guarantors’ assets now owned or acquired in the future by the Company or the Subsidiary Guarantors (other than real property, accounts receivable sold pursuant to a Company-related receivables facility (as defined in the Indentures pursuant to which All the Notes were issued (the “Indentures”), and certain other excluded assets). The Company’s obligations with respect to All the Notes, the obligations of the Subsidiary Guarantors under the Guarantees, and the performance of all of the Company’s and the Subsidiary Guarantors’ other obligations under the Indentures, are secured equally and ratably with the Company’s and the Subsidiary Guarantors’ obligations under the Credit Agreement. However, the liens on the collateral securing All the Notes and the Guarantees will be released if: (i) All the Notes have investment grade ratings; (ii) no default has occurred and is continuing, and; (iii) the liens on the collateral securing all first lien obligations (including the Credit Agreement and All the Notes) and any junior lien obligations are released or the collateral under the Credit Agreement, any other first lien obligations and any junior lien obligations is released or no longer required to be pledged. The liens on any collateral securing All the Notes and the Guarantees will also be released if the liens on that collateral securing the Credit Agreement, other first lien obligations and any junior lien obligations are released.

The average outstanding borrowings and the average effective interest rate, which includes amortization of deferred financing costs and original issue discount, under our revolving credit, term loan A and senior notes, were approximately $4.61 billion and 3.9%, respectively, during the second quarter of 2026, and $4.34 billion and 4.1%, respectively, during the second quarter of 2025. The average outstanding borrowings and average effective interest rate on these facilities were approximately $4.60 billion and 4.0%, respectively, during the first six months of 2026, and $4.31 billion and 4.1%, respectively, during the first six months of 2025.

In connection with an asset purchase and sale agreement, and related lease agreements, completed with Universal Health Realty Income Trust ("Trust") in December 2021, our consolidated balance sheets at June 30, 2026 and December 31, 2025 reflect financial liabilities, which are included in debt, of approximately $68 million and $70 million, respectively. In connection with that transaction, as a result of our purchase option within the lease agreements related to two of our facilities, the asset purchase and sale transaction was accounted for as a failed sale leaseback in accordance with U.S. GAAP and we have accounted for the transaction as a financing arrangement. Our lease payments payable to the Trust are recorded to interest expense and as a reduction of the outstanding financial liability, and the amount allocated to interest expense is determined based upon our incremental borrowing rate and the outstanding financial liability.

At June 30, 2026, the carrying value and fair value of our debt were approximately $4.9 billion and $4.7 billion, respectively. At December 31, 2025, the carrying value and fair value of our debt were approximately $4.8 billion and $4.6 billion, respectively. The fair value of our debt was computed based upon quotes received from financial institutions. We consider these to be “level 2” in the fair value hierarchy as outlined in the authoritative guidance for disclosures in connection with debt instruments.

The aggregate scheduled maturities of our $4.9 billion total debt outstanding as of June 30, 2026, are as follows: (i) $772 million due during the next 12 months; (ii) $79 million due during months 13 to 24; (iii) $87 million due during months 25 to 36; (iv) $1.98 billion due during months 37 to 48; (v) $809 million due during months 49 to 60, and; (vi) $1.13 billion due in greater than 60 months.

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Foreign Currency Forward Exchange Contracts:

We use forward exchange contracts to hedge our net investment in foreign operations against movements in exchange rates. The effective portion of the unrealized gains or losses on these contracts is recorded in foreign currency translation adjustment within accumulated other comprehensive income and remains there until either the sale or liquidation of the subsidiary. In connection with these forward exchange contracts, we recorded net cash inflows of $12 million and net cash outflows of $66 million during the six-month periods ended June 30, 2026 and 2025, respectively.

Derivatives Hedging Relationships:

The following table presents the effects of our foreign currency forward exchange contracts on our results of operations for the three and six-month periods ended June 30, 2026 and 2025 (in thousands):

No other gains or losses were recognized in income related to derivatives in Subtopic 815-20.

Cash, Cash Equivalents and Restricted Cash:

Cash, cash equivalents, and restricted cash as reported in the condensed consolidated statements of cash flows are presented separately on our condensed consolidated balance sheets as follows (in thousands):

(a) Restricted cash is included in other assets on the accompanying condensed consolidated balance sheets and consists of statutorily required capital reserves related to our commercial insurance subsidiary.

The fair value of our restricted cash was computed based upon quotes received from financial institutions. We consider these to be “level 1” in the fair value hierarchy as outlined in the authoritative guidance for disclosures in connection with financial securities.

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(5) Fair Value Measurement

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The following fair value hierarchy classifies the inputs to valuation techniques used to measure fair value into one of three levels:

• Level 1: Unadjusted quoted prices in active markets for identical assets or liabilities.
• Level 2: Inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly. These included quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active.
• Level 3: Unobservable inputs that reflect the reporting entity’s own assumptions.

The following tables present the assets and liabilities recorded at fair value on a recurring basis:

The fair value of our money market mutual funds and certificates of deposit with a readily determinable fair value are computed based upon quoted market prices in an active market. The fair value of deferred compensation assets and the offsetting liability are computed based on market prices in an active market held in a rabbi trust. The fair value of our foreign currency exchange contracts is valued using quoted forward exchange rates and spot rates at the reporting date. The fair value of the non-marketable securities that we hold are accounted for under the measurement alternative. Under the measurement alternative, the carrying value is measured at cost, less any impairment, plus or minus changes resulting from observable price changes in orderly transactions for identical or similar investments of the same issuer. Adjustments are determined primarily based on a market approach as of the transaction date and are recorded in other (income) expense, net.

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(6) Commitments and Contingencies

Professional and General Liability, Workers’ Compensation Liability

The vast majority of our subsidiaries are self-insured for professional and general liability exposure up to: (i) $20 million for professional liability and $3 million for general liability per occurrence in 2026, 2025, 2024, 2023, 2022 and 2021; (ii) $10 million and $3 million per occurrence, respectively, in 2020; (iii) $5 million and $3 million per occurrence, respectively, during 2019, 2018 and 2017, and; (iv) $10 million and $3 million per occurrence, respectively, prior to 2017. For each of the years indicated above, through February 2025, for claims involving multiple plaintiffs, a single self-insured retention may apply, as stipulated in and subject to the terms and conditions of the applicable commercial policies, for claims qualifying as group related integrated occurrences and/or medical incidents. As of March 1, 2025, the single self-insured retention no longer applies in connection with claims made by multiple plaintiffs against our behavioral health care facilities.

These subsidiaries are provided with several excess policies through commercial insurance carriers which provide for coverage in excess of the applicable per occurrence and aggregate self-insured retention or underlying policy limits up to approximately $120 million in 2026; $110 million in 2025; $175 million in 2024; $165 million in 2023; $162 million in 2022; $155 million in 2021 and $250 million during each of 2014 through 2020. All professional and general liability commercial insurance we purchase is subject to policy limitations. Effective March, 2025, our commercial insurance coverage contains less favorable terms than previous years including coverage exclusions for incidents involving sexual molestation or abuse, higher premiums and lower aggregate limitations.

In addition, from time to time based upon marketplace conditions, we may elect to purchase additional commercial coverage for certain of our facilities or businesses. Our behavioral health care facilities located in the U.K. have policies through a commercial insurance carrier located in the U.K. that provides for £20 million of professional liability coverage and £25 million of general liability coverage.

The commercial insurance limits indicated above for each policy year may have been reduced due to payment of covered claims or suits, subject to the policy terms and conditions.

As of June 30, 2026, the total net accrual for our self-insured professional and general liability claims was $499 million, of which $150 million was included in current liabilities. As of December 31, 2025, the total net accrual for our self-insured professional and general liability claims was $449 million, of which $125 million was included in current liabilities.

As a result of unfavorable trends experienced during the past several years, our results of operations for the three and six-month periods ended June 30, 2026 included a $28 million pre-tax increase to our reserves for professional and general liability claims. There were no adjustments recorded to our reserves for self-insured professional and general liability claims during the three and six-month periods ended June 30, 2025. Our estimated liability for self-insured professional and general liability claims is based on a number of factors including, among other things, the number of asserted claims and reported incidents, estimates of losses for these claims based on recent and historical settlement amounts and jury verdicts, estimates of incurred but not reported claims based on historical experience, and estimates of amounts recoverable under our commercial insurance policies. All relevant information, including our own historical experience, applicable per occurrence and aggregate self-insured retentions, and limitations and exclusions pursuant to our commercial insurance policies, is used in estimating our expected liability for self-insured claims. While we continuously monitor these factors, our ultimate liability for professional and general liability claims could change materially from our current estimates due to inherent uncertainties involved in making this estimate. Given our significant exposure to professional and general liability claims, there can be no assurance that a sharp increase in the number and/or severity of claims asserted against us, and/or reductions in the amount of commercial coverage available to us, will not have a material adverse effect on our future results of operations.

As of June 30, 2026, the total accrual for our workers’ compensation liability claims was $160 million, $70 million of which was included in current liabilities. As of December 31, 2025, the total accrual for our workers’ compensation liability claims was $152 million, $64 million of which was included in current liabilities.

Although we are unable to predict whether or not our future financial statements will require updates to estimates for our prior year reserves for self-insured general and professional and workers’ compensation claims, given the relatively unpredictable nature of these potential liabilities and the factors impacting these reserves, as discussed above, it is reasonably likely that our future financial results may include material adjustments to prior period reserves.

As disclosed below in Legal Proceedings, Cumberland Hospital for Children and Adolescents (“Cumberland”), an indirect subsidiary of the Company, is a defendant in multi-plaintiff lawsuits filed in the Circuit Court for Richmond, Virginia (the “Cumberland Litigation”), relating to allegations of inappropriate sexual contact during medical examinations by Dr. Daniel Davidow, an independent contractor and the former medical director for Cumberland. The Company and UHS of Delaware, Inc., our administrative services subsidiary (“UHS Delaware”), were also named as co-defendants in the Cumberland Litigation. Plaintiffs have asserted claims of negligence, assault and battery (against Dr. Davidow), false imprisonment, violations of the Virginia Consumer Protection

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Act (“VCPA”), and vicarious liability for Dr. Davidow’s conduct against Cumberland, the Company, and UHS Delaware. The Company and UHS Delaware were dismissed from the trial on the first three plaintiffs’ claims, which occurred in September, 2024. On September 27, 2024, a jury entered a verdict finding Dr. Davidow and Cumberland liable and awarded these three plaintiffs combined compensatory damages of $60 million for all liability theories, an additional combined $180 million in trebled damages for violation of the VCPA, and an additional combined $120 million in punitive damages. Cumberland filed post-trial motions challenging this verdict, including the amounts awarded in the verdict. Based upon Virginia law, the Court reduced the punitive damage amount to a combined maximum of $1.05 million ($350,000 per plaintiff). Cumberland filed a notice of appeal on the remaining verdict. Plaintiffs separately filed a notice of appeal seeking to challenge the dismissal of the Company and UHS Delaware during trial, and the Court’s order reducing the punitive damages award against Cumberland. These appeals were dismissed by the appellate court without prejudice as premature because the judgments in favor of the first three plaintiffs are neither final nor enforceable at this time.

There are approximately 43 additional plaintiffs making similar allegations with claims pending in the Cumberland Litigation. In April 2026, the Court entered a Scheduling Order setting a consolidated three-week jury trial for three plaintiffs to begin in August 2026. The Company has been dismissed without prejudice from the trial scheduled for August 2026 and most of the remaining cases. UHS Delaware remains a defendant with respect to all remaining plaintiffs. We expect that the trials for the remaining plaintiffs, as well as any additional plaintiffs, will be scheduled at various times over the next several years.

We can make no assurances regarding the ultimate financial exposure, timing, substance or outcome of the Cumberland matter (which related to occurrences in the 2020 policy year), or the amount of damages that may be ultimately held recoverable after post-judgment proceedings and appeals. As of June 30, 2026, without reduction for any potential amounts related to the Cumberland matter, the Company and its subsidiaries have aggregate insurance coverage of approximately $143 million remaining under commercial policies for matters applicable to the 2020 policy year (in excess of the applicable self-insured retention amounts of $10 million per single occurrence/$25 million for multi-plaintiff matters for professional liability claims and $3 million per occurrence for general liability claims). In the event the resolution of the Cumberland matter exhausts all or a significant portion of our/our subsidiaries' remaining commercial insurance coverage related to the 2020 policy year, or the Cumberland matter causes the posting of large bonds or other collateral during the appeal processes, our future results of operations and capital resources would be materially adversely impacted.

We have received lawsuits in various jurisdictions on behalf of numerous former patients spanning decades claiming to be the victims of sexual assaults while patients at our facilities. Many of these lawsuits have been brought in conjunction with various states extending their statute of limitations to allow alleged victims of sexual assaults or abuse to file claims many years after the alleged incidents occurred. We are uncertain as to potential liability in connection with these matters.

Property Insurance

We have commercial property insurance policies for our properties, covering the period of June 1, 2026 to June 1, 2027, providing property and business interruption coverage for losses in excess of $10 million per occurrence or per location (as applicable based upon the event) up to a $1 billion annual policy limitation for certain catastrophic events or perils. These commercial policies provide for coverage of up to $250 million of annual aggregate coverage for losses resulting from windstorm damage at all facilities except those in Puerto Rico where $100 million of annual aggregate coverage is provided. Losses resulting from named windstorms are subject to deductibles between 3% and 5% of the total insurable value of the property. In addition, we have commercial property insurance policies covering catastrophic losses resulting from earthquake and flood damage, each subject to aggregated loss limits (as opposed to per occurrence losses). Commercially insured earthquake coverage for our facilities is subject to various deductibles and limitations including: (i) $150 million limitation for our facilities located in California and Alaska; (ii) $100 million limitation for our facilities in New Madrid Seismic Zone, Pacific Northwest Seismic Zone, South Carolina, Utah and certain counties in Nevada; (iii) $40 million limitation for our facilities located in Puerto Rico, and; (iv) $250 million limitation for our facilities located in other states. Our commercially insured flood coverage has a limit of $100 million annually. There is also a $10 million sublimit for one of our facilities located in Houston, Texas, and a $1 million sublimit for our facilities located in Puerto Rico.

These commercial property policies are subject to a deductible of: (i) $5 million per location for damage resulting from earthquake, wind, hail and flood, and; (ii) $5 million per occurrence for all other events. For per location or per occurrence losses in excess of the applicable deductible, we are self-insured, through our wholly-owned captive insurance company, for up to $5 million of annual aggregate losses. Should the $5 million self-insured annual aggregate limitation be exhausted during the policy year, we have commercial reinsurance coverage for the next $35 million of annual aggregate losses in excess of the applicable deductible. In the event the $35 million of commercial reinsurance coverage is also exhausted, we are self-insured for all per location or per occurrence losses up to $25 million, including the $5 million deductible.

As of January 1, 2026, property insurance for our behavioral health facilities located in the U.K. are provided on an all-risk basis up to a £2.7 billion, with a coverage cap per location of £150 million for any one occurrence, that includes coverage for real and personal property as well as business interruption losses.

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Commitment to Develop, Lease and Operate an Acute Care Hospital in Washington, D.C.

During 2020, we entered into various agreements with the District of Columbia (the “District”) related to the development, leasing and operation of an acute care hospital and certain other facilities/structures on land owned by the District (“District Facilities”). Pursuant to the agreements, on behalf of the District, we served as manager for development and construction of the District Facilities, which were funded entirely by the District. Construction of the acute care hospital (Cedar Hill Regional Medical Center) was completed and the hospital opened on April 15, 2025.

We are leasing the District Facilities for a nominal rental amount for a period of 75 years and are obligated to operate the District Facilities during the lease term. We have certain lease termination rights in connection with the District Facilities beginning on the tenth anniversary of the lease commencement date for various and decreasing amounts as provided for in the agreements. Additionally, any time after the 10th anniversary of the lease term, we have a right to purchase the District Facilities for a price equal to the greater of fair market value of the District Facilities or the amount necessary to defease the bonds issued by the District to fund the construction of the District Facilities. The lease agreement also entitles the District to participation rent should certain specified earnings before interest, taxes, depreciation and amortization thresholds be achieved by the acute care hospital.

Additionally, we have committed to expend no less than $75 million (approximately $23 million of which has been incurred as of June 30, 2026), over a projected 12-year period, in healthcare infrastructure including expenditures related to the District Facilities as well as other healthcare related expenditures in certain specified areas of Washington, D.C. Pursuant to the agreements, the District is entitled to certain termination fees and other amounts as specified in the agreements in the event we, within certain specified periods of time, cease to operate the acute care hospital or there is a transfer of control of us or our subsidiary operating the hospital.

Acquisition of Talkspace, Inc.

On March 9, 2026, we announced that we entered into a definitive agreement to acquire Talkspace, Inc. ("Talkspace") for $5.25 per share, or approximately $835 million in the aggregate. The transaction was approved by Talkspace's stockholders during the second quarter of 2026. The transaction is expected to close during the third quarter of 2026 and is subject to satisfaction of regulatory approvals and other customary closing conditions. Talkspace is a virtual behavioral healthcare company, with a network of approximately 6,000 licensed professionals that serve all 50 states, Washington, D.C., and Puerto Rico. We intend to finance the acquisition of Talkspace with additional borrowings pursuant to our Credit Agreement, as amended in April, 2026, as discussed in Note 4 - Treasury, Credit Facilities and Outstanding Debt Securities.

Legal Proceedings

We operate in a highly regulated and litigious industry which subjects us to various claims and lawsuits in the ordinary course of business as well as regulatory proceedings and government investigations. These claims or suits include claims for damages for personal injuries, medical malpractice, commercial/contractual disputes, wrongful restriction of, or interference with, physicians’ staff privileges, and employment related claims. In addition, health care companies are subject to investigations and/or actions by various state and federal governmental agencies or those bringing claims on their behalf. Government action has increased with respect to investigations and/or allegations against healthcare providers concerning possible violations of fraud and abuse and false claims statutes as well as compliance with clinical and operational regulations. Currently, and from time to time, we and some of our facilities are subjected to inquiries in the form of subpoenas, Civil Investigative Demands, audits and other document requests from various federal and state agencies. These inquiries can lead to notices and/or actions including repayment obligations from state and federal government agencies associated with potential non-compliance with laws and regulations. Further, the federal False Claims Act allows private individuals to bring lawsuits (qui tam actions) against healthcare providers that submit claims for payments to the government. Various states have also adopted similar statutes. When such a claim is filed, the government will investigate the matter and decide if they are going to intervene in the pending case. These qui tam lawsuits are placed under seal by the court to comply with the False Claims Act’s requirements. If the government chooses not to intervene, the private individual(s) can proceed independently on behalf of the government. Health care providers that are found to violate the False Claims Act may be subject to substantial monetary fines/penalties as well as face potential exclusion from participating in government health care programs or be required to comply with Corporate Integrity Agreements as a condition of a settlement of a False Claims Act matter. In September 2014, the Criminal Division of the Department of Justice (“DOJ”) announced that all qui tam cases will be shared with their Division to determine if a parallel criminal investigation should be opened. The DOJ has also announced an intention to pursue civil and criminal actions against individuals within a company as well as the corporate entity or entities. In addition, health care facilities are subject to monitoring by state and federal surveyors to ensure compliance with program Conditions of Participation. In the event a facility is found to be out of compliance with a Condition of Participation and unable to remedy the alleged deficiency(s), the facility faces termination from the Medicare and Medicaid programs or compliance with a System Improvement Agreement to remedy deficiencies and ensure compliance.

The laws and regulations governing the healthcare industry are complex covering, among other things, government healthcare participation requirements, licensure, certification and accreditation, privacy of patient information, reimbursement for patient services as well as fraud and abuse compliance. These laws and regulations are constantly evolving and expanding. Further, the original Patient

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Protection and Affordable Care Act, as amended by the Health and Education Reconciliation Act, has added additional obligations on healthcare providers to report and refund overpayments by government healthcare programs and authorizes the suspension of Medicare and Medicaid payments “pending an investigation of a credible allegation of fraud.” We monitor our business and have developed an ethics and compliance program with respect to these complex laws, rules and regulations. Although we believe our policies, procedures and practices comply with government regulations, there is no assurance that we will not be faced with the sanctions referenced above which include fines, penalties and/or substantial damages, repayment obligations, payment suspensions, licensure revocation, and expulsion from government healthcare programs. Even if we were to ultimately prevail in any action brought against us or our facilities or in responding to any inquiry, such action or inquiry could have a material adverse effect on us.

Certain legal matters are described below:

K.E.E., et al., Plaintiffs v. Cumberland Hospital, LLC d/b/a Cumberland Hospital for Children and Adolescents, et al. (and related lawsuits)

Cumberland Hospital for Children and Adolescents (“Cumberland”), an indirect subsidiary of the Company, is a defendant in multi-plaintiff lawsuits filed in the Circuit Court for Richmond, Virginia (the “Cumberland Litigation”), relating to allegations of inappropriate sexual contact during medical examinations by Dr. Daniel Davidow, an independent contractor and the former medical director for Cumberland. The Company and UHS of Delaware, Inc., our administrative services subsidiary (“UHS Delaware”), were also named as co-defendants in the Cumberland Litigation. Plaintiffs have asserted claims of negligence, assault and battery (against Dr. Davidow), false imprisonment, violations of the Virginia Consumer Protection Act (“VCPA”), and vicarious liability for Dr. Davidow’s conduct against Cumberland, the Company, and UHS Delaware. All defendants have denied liability.

The claims asserted by three of the plaintiffs in the Cumberland Litigation were consolidated for trial in September of 2024. The Company and UHS Delaware were dismissed from the trial on the first three plaintiffs' claims. On September 27, 2024, a jury entered a verdict finding Dr. Davidow and Cumberland liable and awarded these three plaintiffs combined compensatory damages of $60 million for all liability theories, an additional combined $180 million in trebled damages for violation of the VCPA, and an additional combined $120 million in punitive damages. Cumberland filed post-trial motions challenging this verdict. Based upon Virginia law, the Court reduced the punitive damage amount to a combined maximum of $1.05 million ($350,000 per plaintiff). Cumberland filed a notice of appeal on the remaining verdict. Plaintiffs have separately filed a notice of appeal seeking to challenge the dismissal of the Company and UHS Delaware during trial, and the Court’s order reducing the punitive damages award against Cumberland. These appeals were recently dismissed by the appellate court without prejudice as premature because the judgments in favor of the first three plaintiffs are neither final nor enforceable at this time.

There are approximately 43 additional plaintiffs making similar allegations with claims pending in the Cumberland Litigation. In April 2026, the Court entered a Scheduling Order setting a consolidated three-week jury trial for three plaintiffs to begin in August 2026. The Company has been dismissed without prejudice from the trial scheduled for August 2026 and most of the remaining cases. UHS Delaware remains a defendant with respect to all remaining plaintiffs. We expect that the trials for the remaining plaintiffs, as well as any additional plaintiffs, will be scheduled at various times over the next several years.

In the event the resolution of the Cumberland matter exhausts all or a significant portion of our/our subsidiaries' remaining commercial insurance coverage related to the 2020 policy year, or the Cumberland matter causes the posting of large bonds or other collateral during the appeal processes, our future results of operations and capital resources would be materially adversely impacted.

St. Mary’s Medical Group, Inc. et. al. v. Pinnacle Medical Group, Northern Nevada, et. al.

UHS of Delaware, Inc., the wholly-owned administrative services subsidiary of the Company is a defendant in a lawsuit filed in Washoe County, Nevada, along with Pinnacle Management Group NV, LLC ("Pinnacle Medical Group", in which a subsidiary of the Company holds a 50% interest) and several individuals. The Company was previously dismissed from the lawsuit. The lawsuit contains allegations of intentional interference with contractual relationships and prospective economic advantage resulting from the departure of several physicians and advance practice providers from St. Mary’s Medical Group in Reno, Nevada, who joined Pinnacle Medical Group in 2021.

A trial of this matter was concluded on September 26, 2025, with a verdict rendered against UHS of Delaware, Inc. and the other defendants for approximately $4.7 million in compensatory damages. The jury also awarded punitive damages against UHS of Delaware, Inc. of $500 million and lesser amounts against some of the other defendants. Based upon Nevada statutory law, we expected the punitive damages to be reduced to a maximum of approximately $14 million. UHS of Delaware, Inc. and the other defendants filed post-trial motions. In March 2026, the trial court granted a motion for a new trial based upon juror misconduct.

During the second quarter of 2026, the trial court entered an order vacating the verdict. Plaintiffs did not file an appeal of that order. A re-trial of this matter is expected to be scheduled in 2028. During the second quarter of 2026 we recorded a reduction to other

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operating expenses to reduce the $18 million reserve, which was previously recorded in connection with this matter, to an amount that is not material to our consolidated financial statements.

Laurel Ridge Treatment Center

In April 2026, Laurel Ridge Treatment Center ("Laurel Ridge"), a 330-bed, behavioral health care facility located in San Antonio, Texas, received notice from the Centers for Medicare and Medicaid Services that it was terminating Laurel Ridge’s Medicare provider agreement effective as of April 30, 2026. Laurel Ridge filed an administrative appeal contesting the decision and also filed a lawsuit in federal court for the Western District of Texas seeking a temporary restraining order to prevent the termination from taking effect pending completion of the administrative appeal process. The Court denied the request for the temporary restraining order. As such, Laurel Ridge has been terminated from the Medicare and Medicaid program. During the second quarter of 2026, the facility submitted its re-application for Medicare/Medicaid certification and intends to remain open during the reapplication process although there is no assurance that recertification will be granted. During the reapplication process, we expect to incur operating losses and cash flow deficits. During the year ended December 31, 2025, Laurel Ridge's income before income taxes was approximately $23 million.

Provo Canyon School

On July 6, 2026, our Springville Campus at Provo Canyon School in Springville, Utah received notice from the Utah Department of Health and Human Services (" Utah DHHS") that its license was being revoked effective July 6, 2026. We subsequently received a notice on July 17, 2026, that the Utah DHHS was revoking the license of the Provo campus of the Provo Canyon School effective July 17, 2026. Pursuant to these actions, we are required to discharge all remaining patients at these facilities by early to mid-August, 2026. We have filed appeals of both actions and we are assessing various alternatives regarding future operations at these facilities. During the year ended December 31, 2025, the aggregate income before income taxes generated by these facilities was approximately $2 million.

Other Matters

Various other suits, claims and investigations, including government subpoenas, arising against, or issued to, us are pending and additional such matters may arise in the future. Management will consider additional disclosure from time to time to the extent it believes such matters may be or become material. The outcome of any current or future litigation or governmental or internal investigations, including the matters described above, cannot be accurately predicted, nor can we predict any resulting penalties, fines or other sanctions that may be imposed at the discretion of federal or state regulatory authorities. We record accruals for such contingencies to the extent that we conclude it is probable that a liability has been incurred and the amount of the loss can be reasonably estimated. No estimate of the possible loss or range of loss in excess of amounts accrued, if any, can be made at this time regarding the matters described above or that are otherwise pending because the inherently unpredictable nature of legal proceedings may be exacerbated by various factors, including, but not limited to: (i) the damages sought in the proceedings are unsubstantiated or indeterminate; (ii) discovery is not complete; (iii) the matter is in its early stages; (iv) the matters present legal uncertainties; (v) there are significant facts in dispute; (vi) there are a large number of parties, or; (vii) there is a wide range of potential outcomes. It is possible that the outcome of these matters, individually or in the aggregate, could have a material adverse impact on our future results of operations, financial position, cash flows and, potentially, our reputation.

(7) Segment Reporting

We operate in two reportable segments: Acute Care Hospital Services and Behavioral Health Care Services. Our chief operating decision making (“CODM”) group is comprised of our President and Chief Executive Officer and each of our respective division Presidents for our Acute Care Hospital Services and Behavioral Health Care Services. As a result of a recent resignation of our President of Behavioral Health Care Services, our Chief Executive Officer and President has assumed interim responsibilities for the segment until the position is filled. The operating segments are managed separately because each operating segment represents a business unit that offers different types of healthcare services or operates in different healthcare environments. The primary profitability measurement utilized by the President and Chief Executive Officer as well as the Presidents of each operating segment is segment income before income taxes. Segment income before income taxes is utilized by the CODM group during the annual budgeting process and during their reviews of our monthly operating results to monitor each segment’s operating results as compared to prior periods, and the respective operating budgets.

The expenses included in our non-segment operating expenses below include centralized services including, but not limited to, information technology, purchasing, reimbursement, accounting and finance, taxation, legal, advertising and design and construction. The accounting policies of the operating segments are the same as those described in the summary of significant accounting policies included in our Annual Report on Form 10-K for the year ended December 31, 2025. We do not present asset information for our segments as this information is not used to allocate resources.

Note: prior year amounts related to certain facilities previously included in our Behavioral Health Care Services’ results have been reclassified into our Acute Care Hospital Services' results as of January 1, 2025 to conform with current year presentation.

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(a)

Other segment operating expenses for each period includes other operating expenses, supplies expense and lease and rental expense.

(b)

Non-segment operating expenses for each period includes salaries, wages and benefits, other operating expenses, supplies expense and lease and rental expense.

(c)

Includes net revenues generated from our behavioral health care facilities located in the U.K. amounting to approximately $269 million and $247 million for the three-month periods ended June 30, 2026 and 2025, respectively, and approximately $530 million and $474 million for the six-month periods ended June 30, 2026 and 2025, respectively.

(8) Earnings Per Share Data and Stock Based Compensation

Basic earnings per share are based on the weighted average number of common shares outstanding during the period. Diluted earnings per share are based on the weighted average number of common shares outstanding during the period adjusted to give effect to common stock equivalents.

The following table sets forth the computation of basic and diluted earnings per share for the periods indicated (in thousands, except per share data):

The “Net effect of dilutive stock options and grants based on the treasury stock method” for all periods presented above, excludes certain outstanding stock options applicable to each period since the effect would have been anti-dilutive. The excluded weighted-average stock options totaled 10,625 for the three-months ended June 30, 2026 and 5,313 for the six-months ended June 30, 2026. The excluded weighted-average stock options totaled 7,500 for both the three and six-months ended June 30, 2025. All classes of our common stock have the same dividend rights.

Stock-Based Compensation:

During the three-month periods ended June 30, 2026 and 2025, pre-tax compensation costs of approximately $18.6 million and $15.5 million, respectively, was recognized related to awards of restricted stock, restricted stock units ("RSUs") and performance based restricted stock units ("PBRSUs"). During the six-month periods ending June 30, 2026 and 2025, pre-tax compensation costs of $36.0 million and $27.3 million, respectively, was recognized related to awards of restricted stock, RSUs and PBRSUs.

In addition, during the three-month periods ended June, 2026 and 2025, pre-tax compensation costs of $3.7 million and $8.1 million, respectively, was recognized related to outstanding stock options. During the six-month periods ended June 30, 2026 and 2025, pre-tax compensation costs of $8.5 million and $17.5 million, respectively, was recognized related to outstanding stock options.

As of June 30, 2026 there was approximately $199.2 million of unrecognized compensation cost related to unvested options, restricted stock, RSUs and PBRSUs which is expected to be recognized over the remaining weighted average vesting period of 2.8 years. There were an aggregate of 554,228 RSUs, net of cancellations, granted during the first six months of 2026 under the 2020 Stock Incentive Plan, including 57,122 PBRSUs, with a weighted-average grant date fair value of $184.94 per share. The expense associated with stock-based compensation arrangements is a non-cash charge. In the condensed consolidated statements of cash flows, stock-based compensation expense is an adjustment to reconcile net income to cash provided by operating activities and aggregated to $45.4 million and $45.7 million during the six-month periods ended June 30, 2026 and 2025, respectively.

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(9) Dispositions and Acquisitions

In July 2026, we acquired 39 residential and community homes and 2 facilities that provide day services located in Ireland for a net purchase price of approximately $188 million.

Six-month period ended June 30, 2026:

Acquisitions:

During the first six months of 2026, we spent $5 million on the acquisition of businesses and property.

Divestitures:

During the first six months of 2026, we received $16 million from the sales of assets and businesses.

Six-month period ended June 30, 2025:

Acquisitions:

During the first six months of 2025, we spent $8 million on the acquisition of businesses and property.

Divestitures:

During the first six months of 2025, we received $3 million from the sales of assets and businesses.

(10) Dividends

We declared and paid dividends of $11.8 million, or $.20 per share, during the second quarter of 2026 and $12.9 million, or $.20 per share, during the second quarter of 2025. We declared and paid dividends of $24.8 million, or $.40 per share, during the six-month period ended June 30, 2026 and $26.4 million, or $.40 per share, during the six-month period ended June 30, 2025.

(11) Income Taxes

Our effective income tax rates were 23.9% and 23.4% during the three-month periods ended June 30, 2026 and 2025, respectively, and 23.7% and 23.4% during the six-month periods ended June 30, 2026 and 2025, respectively.

As of January 1, 2026, our unrecognized tax benefits were approximately $2 million. The amount, if recognized, that would favorably affect the effective tax rate is approximately $2 million. During the six months ended June 30, 2026, changes to the estimated liabilities for uncertain tax positions (including accrued interest) relating to tax positions taken during prior and current periods did not have a material impact on our financial statements.

We recognize accrued interest and penalties associated with uncertain tax positions as part of the tax provision. As of June 30, 2026, we have less than $1 million of accrued interest and penalties. The U.S. federal statute of limitations remains open for 2022 and subsequent years. Foreign and U.S. state and local jurisdictions have statutes of limitations generally ranging from 3 to 4 years.

We operate in multiple jurisdictions with varying tax laws. The Internal Revenue Service (“IRS”) has recently commenced an audit for the tax year ended December 31, 2024. We believe that adequate accruals have been provided for federal, foreign and state taxes.

(12) Revenue Recognition

We recognize revenue when services/goods have been provided to patients/customers in an amount that reflects the consideration to which we expect to be entitled in exchange for those goods or services. Our estimate for amounts not expected to be collected based on historical experience will continue to be recognized as a reduction to net revenue. However, subsequent changes in estimate of collectability due to a change in the financial status of a payer, for example a bankruptcy, will be recognized as bad debt expense in operating charges.

The performance obligation is separately identifiable from other promises in the customer contract. As the performance obligations are met (i.e.: room, board, ancillary services, level of care), revenue is recognized based upon allocated transaction price. The transaction price is allocated to separate performance obligations based upon the relative standalone selling price. In instances where we determine there are multiple performance obligations across multiple months, the transaction price will be allocated by applying an estimated implicit and explicit rate to gross charges based on the separate performance obligations.

In assessing collectability, we have elected the portfolio approach. This portfolio approach is being used as we have large volume of similar contracts with similar classes of customers. We reasonably expect that the effect of applying a portfolio approach to a group of contracts would not differ materially from considering each contract separately. Management’s judgment to group the contracts by portfolio is based on the payment behavior expected in each portfolio category. As a result, aggregating all of the contracts (which are at the patient level) by the particular payer or group of payers, will result in the recognition of the same amount of revenue as applying the analysis at the individual patient level.

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We group our revenues into categories based on payment behaviors. Each component has its own reimbursement structure which allows us to disaggregate the revenue into categories that share the nature and timing of payments. The other patient revenue consists primarily of self-pay, government-funded non-Medicaid, and other.

The following table disaggregates our revenue by major source for the three and six-month periods ended June 30, 2026 and 2025 (in thousands):

Note: prior year amounts related to certain facilities previously included in our Behavioral Health Care Services’ results have been reclassified into our Acute Care Hospital Services' results as of January 1, 2025 to conform with current year presentation.

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(13) Lease Accounting

We follow FASB ASU 2016-02 ("Topic 842") "Leases." Under Topic 842, lessees are required to recognize assets and liabilities on the balance sheets for most leases and provide enhanced disclosures. Leases will be classified as either finance or operating.

We have elected the policy exemption that allows lessees to choose to not separate lease and non-lease components by class of underlying asset and are applying this expedient to all relevant asset classes.

We determine if an arrangement is or contains a lease at inception of the contract. Our right-of-use assets represent our right to use the underlying assets for the lease term and our lease liabilities represent our obligation to make lease payments arising from the leases. Right-of-use assets and lease liabilities are recognized at commencement date based on the present value of lease payments over the lease term. We use the implicit rate noted within the contract if known or determinable. If the implicit rate is not readily available, we use our estimated incremental borrowing rate, which is derived using a collateralized borrowing rate for the same currency and term as the associated lease. A right-of-use asset and lease liability is not recognized for leases with an initial term of 12 months or less and we recognize lease expense for these leases on a straight-line basis over the lease term within lease and rental expense.

Our operating leases are primarily for real estate, including certain acute care facilities, off-campus outpatient facilities, medical office buildings, and corporate and other administrative offices. Our real estate lease agreements typically have initial terms of five to ten years. These real estate leases may include one or more options to renew, with renewals that can extend the lease term from five to ten years. The exercise of lease renewal options is at our sole discretion. When determining the lease term, we included options to extend or terminate the lease when it is reasonably certain that we will exercise that option.

Five of our hospital facilities are held under operating leases with Universal Health Realty Income Trust (the “Trust”) with two hospital lease terms expiring in 2026, two expiring in 2033, and one expiring in 2040 (see Note 2 for additional disclosure). We also lease the real property of certain other facilities from the Trust or other non-related parties.

Supplemental cash flow information related to leases for the six-month periods ended June 30, 2026 and 2025 are as follows (in thousands):

(14) Recent Accounting Standards

In November 2025, the FASB issued ASU 2025-09, “Derivatives and Hedging (Topic 815), Hedging Accounting Improvements. ASU 2025-09 intends to more closely align hedge accounting with the economics of an entity's risk management activities. This ASU is effective for fiscal years beginning after December 15, 2026, including interim periods within those fiscal years. We are currently evaluating the impact this new standard will have on the consolidated financial statements.

In September 2025, the FASB issued ASU 2025-06, “Intangibles—Goodwill and Other— Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software”. ASU 2025-06 intends to modernize the accounting guidance for the costs to develop software for internal use. The new guidance amends the existing standard that refers to various stages of a software development project to align better with current software development methods, such as agile programming. The ASU is effective for fiscal years beginning after December 15, 2027, including interim periods within those fiscal years. We are currently evaluating the impact this new standard will have on the consolidated financial statements.

In November 2024, the FASB issued ASU 2024-03, “Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures (subtopic 220-40)". ASU 2024-03 requires disclosures, in the notes to financial statements, of specified information about certain costs and expenses. This ASU is effective for fiscal years beginning after December 15, 2026, and interim periods within

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those fiscal years beginning after December 15, 2027. We are currently evaluating the impact this new standard will have on the related disclosures in the consolidated financial statements.

From time to time, new accounting guidance is issued by the FASB or other standard setting bodies that is adopted by us as of the effective date or, in some cases where early adoption is permitted, in advance of the effective date. We have assessed the recently issued guidance that is not yet effective and, unless otherwise indicated above, we believe the new guidance will not have a material impact on our results of operations, cash flows or financial position.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Overview

As of June 30, 2026, we owned and/or operated 376 inpatient facilities and 168 outpatient and other facilities located in 40 states, Washington, D.C., the United Kingdom and Puerto Rico.

Our facilities include the following:

Acute care facilities located in the U.S.:

• 30 inpatient acute care hospitals;
• 35 free-standing emergency departments, and;
• 13 outpatient centers & 1 surgical hospital.

Behavioral health care facilities (346 inpatient facilities and 119 outpatient facilities):

Located in the U.S.:

• 182 inpatient behavioral health care facilities, and;
• 110 outpatient behavioral health care facilities.

Located in the U.K.:

• 161 inpatient behavioral health care facilities, and;
• 2 outpatient behavioral health care facilities.

Located in Puerto Rico:

• 3 inpatient behavioral health care facilities.
• 7 outpatient behavioral health care facilities.

Net revenues from our acute care hospitals, outpatient facilities and commercial health insurer accounted for 56% of our consolidated net revenues during each of the three-month periods ended June 30, 2026 and 2025, and 57% of our consolidated net revenues during each of the six-month periods ended June 30, 2026 and 2025. Net revenues from our behavioral health care facilities and commercial health insurer accounted for 44% of our consolidated net revenues during each of the three-month periods ended June 30, 2026 and 2025, and 43% of our consolidated net revenues during each of the six-month periods ended June 30, 2026 and 2025.

Our behavioral health care facilities located in the U.K. generated net revenues of approximately $269 million and $247 million during the three-month periods ended June 30, 2026 and 2025, respectively, and $530 million and $474 million during the six-month periods ended June 30, 2026 and 2025, respectively. Total assets at our U.K. behavioral health care facilities were approximately $1.530 billion as of June 30, 2026 and $1.531 billion as of December 31, 2025.

Services provided by our hospitals include general and specialty surgery, internal medicine, obstetrics, emergency room care, radiology, oncology, diagnostic care, coronary care, pediatric services, pharmacy services and/or behavioral health services. We provide capital resources as well as a variety of management services to our facilities, including central purchasing, information services, finance and control systems, facilities planning, physician recruitment services, administrative personnel management, marketing and public relations.

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Critical Accounting Policies and Estimates

There have been no significant changes to our critical accounting policies or estimates from those disclosed in our 2025 Annual Report on Form 10-K.

Recent Accounting Standards: For a summary of accounting standards, please see Note 14 to the Condensed Consolidated Financial Statements, as included herein.

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Results of Operations

Clinical Staffing, Inflation, Future Medicaid Reductions and Tariffs:

The healthcare industry is labor intensive and salaries, wages and benefits are subject to inflationary pressures, as are supplies expense and other operating expenses. In the past, staffing shortages have, at times, required us to hire expensive temporary personnel and/or enhance wages and benefits to recruit and retain nurses and other clinical staff and support personnel. At certain facilities, particularly within our behavioral health care segment, there have been occasions when we were unable to fill all vacant positions and, consequently, we were required to limit patient volumes. We have also experienced general inflationary cost increases related to certain of our other operating expenses. Many of these factors, which had a material unfavorable impact on our results of operations in prior years, have moderated more recently. However, we cannot predict future inflationary increases, which if significant, could have a material unfavorable impact on our future results of operations.

We have experienced inflationary pressures, primarily in personnel costs, although those pressures have moderated more recently. The extent of any future impacts from inflation on our business and our results of operations will be dependent upon how long the elevated inflation levels persist and the extent to which the rate of inflation further increases, if at all, neither of which we are able to predict. If elevated levels of inflation were to persist or if the rate of inflation were to accelerate, our expenses could increase faster than anticipated and we may utilize our capital resources sooner than expected. Further, given the complexities of the reimbursement landscape in which we operate, our ability to pass on increased costs associated with providing healthcare to Medicare and Medicaid patients is limited due to various federal, state and local laws, which in certain circumstances, limit our ability to increase prices.

Legislation adopted on July 4, 2025 attaches work and community service requirements to eligibility for Medicaid benefits that will have the effect of limiting Medicaid enrollment and expenditures and the legislation also places limits on provider taxes used to increase federal Medicaid funding to states. In addition, insurance exchange subsidies expired on December 31, 2025 which has unfavorably impacted insurance exchange enrollment and has increased the level of uncompensated care that we provide. As these provisions become effective over the next several years, they may be expected to reduce our revenues and likely further increase the level of uncompensated care provided by our facilities. Please see Sources of Revenue below for additional disclosure related to Medicaid supplemental payment programs in various states in which we operate.

Significant tariffs or other restrictions, if imposed on our imported pharmaceutical ingredients, medical devices, medical equipment and their ingredients and components, could escalate costs of medications, medical devices and medical equipment and disrupt our supply chains. While we continue to evaluate the potential impact of new tariffs on our business, given the uncertainty regarding the scope and duration of any new tariffs, as well as the potential for additional tariffs or trade barriers by the U.S. and the impacted foreign countries, we can provide no assurance that any strategies we implement to mitigate the impact of such tariffs or other trade actions will be successful. Therefore, changes in laws or policies governing the terms of foreign trade, and in particular, increased trade restrictions, tariffs or taxes on imports from where our products or materials are made (either directly or through our suppliers) could have an impact on our competitive position, business operations and financial results.

Although our ability to pass on increased costs associated with providing healthcare to Medicare and Medicaid patients is limited, as discussed above, we have been requesting and negotiating increased rates from commercial insurers to defray our increased cost of providing patient care. In addition, we have implemented various productivity enhancement programs and cost reduction initiatives including, but not limited to, the following: team-based patient care initiatives designed to optimize the level of patient care services provided by our licensed nurses/clinicians; efforts to reduce utilization of, and rates paid for, premium pay labor; consolidation of medical supply vendors to increase purchasing discounts; review and reduction of clinical variation in connection with the utilization of medical supplies, and; various other efforts to increase productivity and/or reduce costs including investments in new information technology applications.

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Financial results for the three-month periods ended June 30, 2026 and 2025:

The following table summarizes our results of operations and is used in the discussion below for the three-month periods ended June 30, 2026 and 2025 (dollar amounts in thousands):

Net revenues increased by 8.3%, or $354 million, to $4.638 billion during the three-month period ended June 30, 2026, as compared to $4.284 billion during the second quarter of 2025. The net increase was primarily attributable to: (i) a $322 million, or 7.8%, increase in net revenues generated from our acute care hospital services and behavioral health services operated during both periods (which we refer to as “Same Facility”), and; (ii) an other combined net increase of $32 million, consisting of primarily of a $47 million increase in provider tax assessments (which had no impact on income before income taxes since the amounts offset between net revenues and other operating expenses).

Income before income taxes (before income attributable to noncontrolling interests) increased by $6 million, or 1%, to $479 million during the three-month period ended June 30, 2026 as compared to $473 million during the second quarter of 2025. The net increase was due to:

• a decrease of $1 million at our acute care facilities, as discussed below in Acute Care Hospital Services;
• an increase of $15 million at our behavioral health care facilities, as discussed below in Behavioral Health Care Services, and;
• an $8 million other combined net decrease.

Net income attributable to UHS increased by $5 million, or 2%, to $358 million during the three-month period ended June 30, 2026, as compared to $353 million during the second quarter of 2025. This increase was primarily attributable to:

• a $6 million increase in income before income taxes, as discussed above;
• a $3 million increase due to a decrease in income attributable to noncontrolling interests, and;
• a decrease of $4 million resulting from an increase in the provision for income taxes resulting primarily from the $9 million increase in income before income taxes ($6 million increase in income before income taxes and a $3 million decrease in income attributable to noncontrolling interests).

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Financial results for the six-month periods ended June 30, 2026 and 2025:

The following table summarizes our results of operations and is used in the discussion below for the six-month periods ended June 30, 2026 and 2025 (dollar amounts in thousands):

Net revenues increased by 8.9%, or $750 million, to $9.133 billion during the six-month period ended June 30, 2026, as compared to $8.384 billion during the first six months of 2025. The net increase was primarily attributable to: (i) a $635 million, or 7.8%, increase in net revenues generated on a Same Facility, and; (ii) an other combined net increase of $115 million, consisting of primarily of a $95 million increase in provider tax assessments (which had no impact on income before income taxes since the amounts offset between net revenues and other operating expenses).

Income before income taxes (before income attributable to noncontrolling interests) increased by $54 million, or 6%, to $948 million during the six-month period ended June 30, 2026 as compared to $894 million during the first six months of 2025. The net increase was due to:

• an increase of $24 million at our acute care facilities, as discussed below in Acute Care Hospital Services;
• an increase of $42 million at our behavioral health care facilities, as discussed below in Behavioral Health Care Services, and;
• a $12 million other combined net decrease.

Net income attributable to UHS increased by $37 million, or 6%, to $707 million during the six-month period ended June 30, 2026, as compared to $670 million during the first six months of 2025. This increase was primarily attributable to:

• a $54 million increase in income before income taxes, as discussed above;
• a $2 million decrease due to an increase in income attributable to noncontrolling interests, and;
• a decrease of $15 million resulting from an increase in the provision for income taxes resulting primarily from the $53 million increase in income before income taxes ($54 million increase in income before income taxes less a $2 million increase in income attributable to noncontrolling interests).

Adjustments to self-insured professional and general liability reserves:

Our estimated liability for self-insured professional and general liability claims is based on a number of factors including, among other things, the number of asserted claims and reported incidents, estimates of losses for these claims based on recent and historical settlement amounts, estimates of incurred but not reported claims based on historical experience, and estimates of amounts recoverable under our commercial insurance policies.

As a result of unfavorable trends experienced, included in our results of operations was an increase to our reserves for self-insured professional and general liability claims amounting to $28 million during each of the three and six-month periods ended June 30, 2026. Approximately $17 million of the increase is included in our same facility basis acute care hospital services' results during each of the three and six-month periods ended June 30, 2026, and approximately $11 million is included in our same facility basis

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behavioral health services' results during each of the three and six-month periods ended June 30, 2026. There were no adjustments recorded to our reserves for self-insured professional and general liability claims during the first six months of 2025.

Acute Care Hospital Services

The following table sets forth certain operating statistics for our acute care hospital services for the three and six-month periods ended June 30, 2026 and 2025.

Acute Care Hospital Services-Same Facility Basis

We believe that providing our results on a “Same Facility” basis (which is a non-GAAP measure), which includes the operating results for facilities and businesses operated in both the current year and prior year periods, is helpful to our investors as a measure of our operating performance. Our Same Facility results also neutralize (if applicable) the effect of items that are non-operational in nature including items such as, but not limited to, gains/losses on sales of assets and businesses, impacts of settlements, legal judgments and lawsuits, impairments of long-lived and intangible assets and other amounts that may be reflected in the current or prior year financial statements that relate to prior periods.

Our Same Facility basis results reflected on the table below also exclude from net revenues and other operating expenses, provider tax assessments incurred in each period as discussed below Sources of Revenue-Summary of Various State Medicaid Supplemental Payment Programs. However, these provider tax assessments are included in net revenues and other operating expenses as reflected in the table below under All Acute Care Hospital Services. The provider tax assessments had no impact on the income before income taxes as reflected on the tables below since the amounts offset between net revenues and other operating expenses. Prior year amounts related to certain facilities previously included in our Behavioral Health Care Services’ results have been reclassified into our Acute Care Hospital Services' results as of January 1, 2025 to conform with current year presentation. To obtain a complete understanding of our financial performance, the Same Facility results should be examined in connection with our net income as determined in accordance with U.S. GAAP and as presented in the condensed consolidated financial statements and notes thereto as contained in this Quarterly Report on Form 10-Q.

The following table summarizes the results of operations for our acute care facilities on a Same Facility basis and is used in the discussion below for the three and six-month periods ended June 30, 2026 and 2025 (dollar amounts in thousands):

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Three-month periods ended June 30, 2026 and 2025:

During the three-month period ended June 30, 2026, as compared to the comparable prior year quarter, net revenues from our acute care hospital services, on a Same Facility basis, increased by $189 million or 8.2%.

Income before income taxes (and before income attributable to noncontrolling interests) increased by $17 million, or 7%, amounting to $246 million, or 9.8% of net revenues during the second quarter of 2026, as compared to $229 million, or 9.9% of net revenues during the second quarter of 2025.

During the three-month period ended June 30, 2026, net revenue per adjusted admission increased by 3.0% while net revenue per adjusted patient day increased 2.8%, as compared to the comparable quarter of 2025. During the three-month period ended June 30, 2026, as compared to the comparable prior year quarter, inpatient admissions to our acute care hospitals increased by 1.5% while adjusted admissions (adjusted for outpatient activity) increased by 2.9%. Patient days at these facilities increased by 1.7% and adjusted patient days increased by 3.1% during the three-month period ended June 30, 2026, as compared to the comparable prior year quarter. The average length of inpatient stay at these facilities was 4.7 days during each of the three-month periods ended June 30, 2026 and 2025, respectively. The occupancy rate, based on the average available beds at these facilities, was 64% and 65% during the three-month periods ended June 30, 2026 and 2025, respectively.

On a Same Facility basis, during the three-month period ended June 30, 2026, as compared to the comparable quarter of 2025, salaries, wages and benefits expense increased by $53 million, or 5.7% due, in part, to the increased patient volumes. As a percentage of net revenues, salaries, wages and benefits expense decreased to 39.5% during the second quarter of 2026 as compared to 40.5% during the second quarter of 2025.

Other operating expenses increased by $107 million, or 15.9%, during the second quarter of 2026, as compared to the comparable quarter of 2025. Operating expenses incurred by our commercial health insurer, consisting primarily of medical costs, increased by $53 million, or 30.6% (due to an increase in membership), during the second quarter of 2026, as compared to the comparable quarter of 2025. Excluding the operating costs of our commercial insurer from each period, other operating expenses increased by $54 million, or 10.8%. Contributing to the increased operating expenses during the second quarter of 2026, as compared to the comparable quarter of 2025, was a $22 million, or 12.4%, aggregate increase in physician expenses incurred at certain hospitals. Also contributing to the increased operating expenses during the second quarter of 2026, as compared to the comparable quarter of 2025, was $17 million of expense recorded in connection with an increase to our reserves for self-insured professional and general liability claims, as discussed above in Adjustments to self-insured professional and general liability reserves. As a percentage of net revenues, other operating expenses increased to 31.1% during the second quarter of 2026, as compared to 29.0% during the comparable quarter of 2025.

Supplies expense increased by $1 million, or 0.3%, during the second quarter of 2026, as compared to the comparable quarter of 2025. As a percentage of net revenues, supplies expense decreased to 14.4% during the three-month period ended June 30, 2026, as compared to 15.6% during the second quarter of 2025.

Six-month periods ended June 30, 2026 and 2025:

During the six-month period ended June 30, 2026, as compared to the comparable prior year quarter, net revenues from our acute care hospital services, on a Same Facility basis, increased by $377 million or 8.2%.

Income before income taxes (and before income attributable to noncontrolling interests) increased by $53 million, or 10.7%, amounting to $549 million, or 11.0% of net revenues during the first six months of 2026, as compared to $496 million, or 10.8% of net revenues during the comparable period of 2025.

During the six-month period ended June 30, 2026, net revenue per adjusted admission increased by 4.6% while net revenue per adjusted patient day increased by 4.2%, as compared to the comparable period of 2025. During the six-month period ended June 30, 2026, as compared to the comparable prior year period, inpatient admissions to our acute care hospitals were unchanged while adjusted admissions increased by 1.4%. Patient days at these facilities increased by 0.4% and adjusted patient days increased by 1.9% during the six-month period ended June 30, 2026, as compared to the comparable prior year period. The average length of inpatient stay at these facilities was 4.8 days during each of the six-month periods ended June 30, 2026 and 2025, respectively. The occupancy rate, based on the average available beds at these facilities, was 67% during each of the six-month periods ended June 30, 2026 and 2025, respectively.

On a Same Facility basis, during the six-month period ended June 30, 2026, as compared to the comparable period of 2025, salaries, wages and benefits expense increased by $92 million, or 5.0%. As a percentage of net revenues, salaries, wages and benefits expense decreased to 39.1% during the first six months of 2026 as compared to 40.3% during the comparable period of 2025.

Other operating expenses increased by $196 million, or 15.0%, during the first six months of 2026, as compared to the comparable period of 2025. Operating expenses incurred by our commercial health insurer, consisting primarily of medical costs, increased by $98 million, or 29.1% (due to an increase in membership), during the first six months of 2026 as compared to the comparable period of 2025. Excluding the operating costs of our commercial insurer from each period, other operating expenses increased by $98 million,

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or 10.1%. Contributing to the increased operating expenses during the first six months of 2026, as compared to the comparable period of 2025, was a $43 million, or 12.4%, aggregate increase in physician expenses incurred at certain hospitals. As a percentage of net revenues, other operating expenses increased to 30.3% during the first six months of 2026, as compared to 28.5% during the comparable period of 2025.

Supplies expense increased by $18 million, or 2.5%, during the first six months of 2026, as compared to the comparable period of 2025. As a percentage of net revenues, supplies expense decreased to 14.6% during the six-month period ended June 30, 2026, as compared to 15.4% during the first six months of 2025.

All Acute Care Hospital Services

The following table summarizes the results of operations for all our acute care operations during the three and six-month periods ended June 30, 2026 and 2025. These amounts include: (i) our acute care results on a Same Facility basis, as indicated above; (ii) the impact of provider tax assessments which increased net revenues and other operating expenses but had no impact on income before income taxes, and; (iii) certain other amounts including the results of recently acquired and/or opened facilities and businesses. Dollar amounts below are reflected in thousands.

Three-month periods ended June 30, 2026 and 2025:

During the three-month period ended June 30, 2026, as compared to the comparable prior year quarter, net revenues from our acute care hospital services increased by $206 million, or 8.6%, due to: (i) the $189 million, or 8.2% increase in Same Facility revenues, as discussed above, and; (ii) an other combined net increase of $17 million consisting of increased provider tax assessments.

Income before income taxes remained relatively unchanged at $228 million, or 8.7% of net revenues during the second quarter of 2026, as compared to $228 million, or 9.5% of net revenues during the comparable quarter of 2025. The $17 million, or 7%, increase in income before income taxes from our acute care hospital services, on a Same Facility basis, as discussed above, was offset by the pre-tax losses incurred during the second quarter of 2026 at the recently completed and opened Alan B. Miller Medical Center located in Palm Beach Gardens, FL.

During the three-month period ended June 30, 2026, as compared to the comparable quarter of 2025, salaries, wages and benefits expense increased by $61 million, or 6.5%. The increase was due primarily to the above-mentioned $53 million, or 5.7%, increase related to our acute care hospital services, on a Same Facility basis, as well as the salaries, wages and benefits expense incurred at the above-mentioned newly constructed and recently opened acute care hospital.

Other operating expenses increased by $128 million, or 16.9%, during the second quarter of 2026, as compared to the comparable quarter of 2025. The increase was due primarily to: (i) the $107 million, or 15.9% above-mentioned increase related to our acute care hospital services, on a Same Facility basis; (ii) a $17 million increase in provider tax assessments, and; (iii) a $4 million increase related to the operating expenses incurred at the Alan B. Miller Medical Center.

Supplies expense increased by $2 million, or 0.7%, during the second quarter of 2026, as compared to the comparable quarter of 2025. The increase was due to the above-mentioned increase related to our acute care hospital services, on a Same Facility basis, as well as the supplies expense incurred during the second quarter of 2026 at the Alan B. Miller Medical Center.

Six-month periods ended June 30, 2026 and 2025:

During the six-month period ended June 30, 2026, as compared to the comparable prior year period, net revenues from our acute care hospital services increased by $458 million, or 9.6%, due to: (i) the $377 million, or 8.2% increase in Same Facility revenues, as discussed above, and; (ii) an other combined net increase of $81 million consisting of increased provider tax assessments and the net

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revenues generated during the first six months of 2026 at a newly constructed acute care hospital located in Washington, D.C. (Cedar Hill Regional Medical Center which opened during the second quarter of 2025).

Income before income taxes increased by $24 million, or 5.0%, to $515 million, or 9.9% of net revenues during the first six months of 2026, as compared to $491 million, or 10.3% of net revenues during the comparable period of 2025. The increase resulted from: the $53 million, or 10.7% increase in income before income taxes from our acute care hospital services, on a Same Facility basis, as discussed above, partially offset by; (ii) an increase of $29 million in aggregate pre-tax losses incurred during the first six months of 2026, as compared to the comparable period of 2025, at the recently completed and opened Alan B. Miller Medical Center located in Palm Beach Gardens, FL., and Cedar Hill Medical Center located in Washington, D.C., which was completed and opened during the second quarter of 2025 (this facility's results of operations are reflected in our acute care hospital services, on a Same Facility basis, as of April 1st. of each year).

During the six-month period ended June 30, 2026, as compared to the comparable period of 2025, salaries, wages and benefits expense increased by $118 million, or 6.4%. The increase was due primarily to the above-mentioned $92 million, or 5.0%, increase related to our acute care hospital services, on a Same Facility basis, as well as the salaries, wages and benefits expense incurred at the above-mentioned newly constructed acute care hospitals located in Florida and Washington, D.C.

Other operating expenses increased by $272 million, or 18.4%, during the first six months of 2026, as compared to the comparable period of 2025. The increase was due primarily to: (i) the $196 million, or 15.0% above-mentioned increase related to our acute care hospital services, on a Same Facility basis; (ii) a $52 million increase in provider tax assessments, and; (iii) a $22 million increase related to the operating expenses incurred at the above-mentioned newly constructed acute care hospitals.

Supplies expense increased by $22 million, or 3.0%, during the first six months of 2026, as compared to the comparable period of 2025. The increase was due to the $18 million, or 2.5%, increase related to our acute care hospital services, on a Same Facility basis, as well as the supplies expense incurred during the first six months of 2026 at the above-mentioned newly constructed acute care hospitals.

Charity Care and Uninsured Discounts:

The following tables show the amounts recorded at our acute care hospitals for charity care and uninsured discounts, based on charges at established rates, for the three and six-month periods ended June 30, 2026 and 2025:

Uncompensated care:

Estimated cost of providing uncompensated care:

The estimated costs of providing uncompensated care as reflected below were based on a calculation which multiplied the percentage of operating expenses for our acute care hospitals to gross charges for those hospitals by the above-mentioned total uncompensated care amounts. The percentage of cost to gross charges is calculated based on the total operating expenses for our acute care facilities divided by gross patient service revenue for those facilities.

Behavioral Health Care Services

The following table sets forth certain operating statistics for our behavioral health care services for the three and six-month periods ended June 30, 2026 and 2025.

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Behavioral Health Care Services-Same Facility Basis

We believe that providing our results on a Same Facility basis, which includes the operating results for facilities and businesses operated in both the current year and prior year periods, is helpful to our investors as a measure of our operating performance. Our Same Facility results also neutralize (if applicable) the effect of items that are non-operational in nature including items such as, but not limited to, gains/losses on sales of assets and businesses, impacts of settlements, legal judgments and lawsuits, impairments of long-lived and intangible assets and other amounts that may be reflected in the current or prior year financial statements that relate to prior periods.

Our Same Facility basis results reflected on the table below also excludes from net revenues and other operating expenses, provider tax assessments incurred in each period as discussed below Sources of Revenue-Summary of Various State Medicaid Supplemental Payment Programs. However, these provider tax assessments are included in net revenues and other operating expenses as reflected in the table below under All Behavioral Health Care Services. The provider tax assessments had no impact on the income before income taxes as reflected on the tables below since the amounts offset between net revenues and other operating expenses. Prior year amounts related to certain facilities previously included in our Behavioral Health Care Services’ results have been reclassified into our Acute Care Hospital Services' results as of January 1, 2025 to conform with current year presentation. To obtain a complete understanding of our financial performance, the Same Facility results should be examined in connection with our net income as determined in accordance with U.S. GAAP and as presented in the condensed consolidated financial statements and notes thereto as contained in this Quarterly Report on Form 10-Q.

The following table summarizes the results of operations for our behavioral health care facilities, on a Same Facility basis, and is used in the discussions below for the three and six-month periods ended June 30, 2026 and 2025 (dollar amounts in thousands):

Three-month periods ended June 30, 2026 and 2025:

During the three-month period ended June 30, 2026, as compared to the comparable prior year quarter, net revenues from our behavioral health services, on a Same Facility basis, increased by $133 million or 7.4%.

Income before income taxes increased by $35 million, or 9.0%, amounting to $427 million or 22.2% of net revenues during the second quarter of 2026, as compared to $392 million or 21.8% of net revenues during the second quarter of 2025.

During the three-month period ended June 30, 2026, net revenue per adjusted admission increased by 7.1% while net revenue per adjusted patient day increased by 6.1%, as compared to the comparable quarter of 2025. During the three-month period ended June 30, 2026, as compared to the comparable prior year quarter, inpatient admissions and adjusted admissions to our behavioral health care hospitals increased by 0.4% and 0.5%, respectively. Patient days at these facilities increased by 1.3% and adjusted patient days increased by 1.4% during the three-month period ended June 30, 2026, as compared to the comparable prior year quarter. The average

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length of inpatient stay at these facilities was 13.9 days and 13.8 days during the three-month periods ended June 30, 2026 and 2025, respectively. The occupancy rate, based on the average available beds at these facilities, was 74% during each of the three-month periods ended June 30, 2026 and 2025.

On a Same Facility basis during the three-month period ended June 30, 2026, as compared to the comparable quarter of 2025, salaries, wages and benefits expense increased by $60 million or 6.3%. The increase during the second quarter of 2026, as compared to the comparable quarter of 2025, was due to a 4.2% increase in salaries, wages and benefits expense per average full time equivalent employee, as well as a 2.0% increase in the average number of full-time equivalent employees. As a percentage of net revenues during each quarter, salaries, wages and benefits expense decreased to 52.8% during the second quarter of 2026 as compared to 53.4% during the second quarter of 2025.

Other operating expenses increased by $30 million, or 9.2%, during the second quarter of 2026, as compared to the comparable quarter of 2025. Contributing to the increased operating expenses during the second quarter of 2026, as compared to the comparable quarter of 2025, was $11 million of expense recorded in connection with an increase to our reserves for self-insured professional and general liability claims, as discussed above in Adjustments to self-insured professional and general liability reserves. As a percentage of net revenues during each quarter, other operating expenses increased to 18.4% during the second quarter of 2026, as compared to 18.1% during the second quarter of 2025.

Supplies expense increased by $1 million, or 1.6%, during the second quarter of 2026, as compared to the comparable quarter of 2025. As a percentage of net revenues during each quarter, supplies expense decreased to 3.0% during the second quarter of 2026 as compared to 3.2% during the second quarter of 2025.

Six-month periods ended June 30, 2026 and 2025:

During the six-month period ended June 30, 2026, as compared to the comparable prior year period, net revenues from our behavioral health services, on a Same Facility basis, increased by $257 million or 7.4%.

Income before income taxes increased by $63 million, or 8.7%, amounting to $793 million or 21.2% of net revenues during the first six months of 2026, as compared to $729 million or 20.9% of net revenues during the first six months of 2025.

During the six-month period ended June 30, 2026, net revenue per adjusted admission increased by 6.6% while net revenue per adjusted patient day increased by 6.0%, as compared to the comparable period of 2025. During the six-month period ended June 30, 2026, as compared to the comparable prior year period, inpatient admissions and adjusted admissions to our behavioral health care hospitals increased by 0.7% and 0.9%, respectively. Patient days at these facilities increased by 1.4% and adjusted patient days increased by 1.5% during the six-month period ended June 30, 2026, as compared to the comparable prior year period. The average length of inpatient stay at these facilities was 13.8 days and 13.7 days during the six-month periods ended June 30, 2026 and 2025, respectively. The occupancy rate, based on the average available beds at these facilities, was 74% during each of the six-month periods ended June 30, 2026 and 2025.

On a Same Facility basis during the six-month period ended June 30, 2026, as compared to the comparable period of 2025, salaries, wages and benefits expense increased by $134 million or 7.1%. The increase during the first six months of 2026, as compared to the comparable period of 2025, was due to a 4.7% increase in salaries, wages and benefits expense per average full time equivalent employee, as well as a 2.3% increase in the average number of full-time equivalent employees. As a percentage of net revenues during each period, salaries, wages and benefits expense decreased to 53.7% during the first six months of 2026 as compared to 53.8% during the comparable period of 2025.

Other operating expenses increased by $45 million, or 6.9%, during the first six months of 2026, as compared to the comparable period of 2025. Contributing to the increased operating expenses during the first six months of 2026, as compared to the comparable period of 2025, was the above-mentioned $11 million of expense recorded during the second quarter of 2026 in connection with an increase to our reserves for self-insured professional and general liability claims. As a percentage of net revenues during each period, other operating expenses decreased to 18.4% during the first six months of 2026, as compared to 18.5% during the comparable period of 2025.

Supplies expense increased by $4 million, or 3.9%, during the first six months of 2026, as compared to the comparable period of 2025. As a percentage of net revenues during each period, supplies expense decreased to 3.1% during the first six months of 2026 as compared to 3.2% during the comparable period of 2025.

All Behavioral Health Care Services

The following table summarizes the results of operations for all our behavioral health care services during the three and six-month periods ended June 30, 2026 and 2025. These amounts include: (i) our behavioral health care results on a Same Facility basis, as indicated above; (ii) the impact of provider tax assessments which increased net revenues and other operating expenses but had no impact on income before income taxes, and; (iii) certain other amounts including the results of facilities that were acquired/divested,

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opened/closed or had changes in governmental certifications/licensure status during the past year. Dollar amounts below are reflected in thousands.

Three-month periods ended June 30, 2026 and 2025:

During the three-month period ended June 30, 2026, as compared to the comparable prior year quarter, net revenues generated from our behavioral health services increased by $148 million, or 7.9%. The increase was attributable to: (i) the above-mentioned $133 million, or 7.4%, increase in net revenues at our behavioral health facilities, on a Same Facility basis; (ii) a $30 million increase in provider tax assessments, partially offset by; (iii) an other combined net aggregate decrease of $15 million consisting primarily of a decrease in revenues generated at Laurel Ridge Treatment Center, a 330-bed facility located in San Antonio, Texas (for additional disclosure related to this facility see Note 6 to the Condensed Consolidated Financial Statements, Commitments and Contingencies-Legal Proceedings).

Income before income taxes increased by $15 million, or 3.8%, to $411 million or 20.3% of net revenues during the second quarter of 2026, as compared to $396 million or 21.1% of net revenues during the second quarter of 2025. The increase in income before income taxes at our behavioral health facilities during the second quarter of 2026, as compared to the comparable quarter of 2025, was attributable to: (i) the above-mentioned $35 million, or 9.0%, increase in income before income taxes generated at our behavioral health facilities, on a Same Facility basis, partially offset by; (ii) an other combined net aggregate decrease of $20 million consisting primarily of an unfavorable change in the pre-tax income/loss generated at Laurel Ridge Treatment Center.

During the three-month period ended June 30, 2026, as compared to the comparable quarter of 2025, salaries, wages and benefits expense increased by $65 million or 6.7%. The increase was due primarily to the above-mentioned $60 million, or 6.3%, increase related to our behavioral health facilities, on a Same Facility basis.

Other operating expenses increased by $60 million, or 15.7%, during the second quarter of 2026, as compared to the comparable quarter of 2025. The increase was due primarily to the above-mentioned $30 million, or 9.2% increase related to our behavioral health facilities, on a Same Facility basis, as well as a $30 million increase in provider tax assessments.

Supplies expense remained relatively unchanged during the second quarter of 2026, as compared to the comparable quarter of 2025, amounting to approximately $58 million during each of the three month periods ended June 30, 2026 and 2025.

Six-month periods ended June 30, 2026 and 2025:

During the six-month period ended June 30, 2026, as compared to the comparable prior year period, net revenues generated from our behavioral health services increased by $291 million, or 8.0%. The increase was primarily attributable to the above-mentioned $257 million, or 7.4%, increase in net revenues at our behavioral health facilities, on a Same Facility basis, and a $43 million increase in provider tax assessments.

Income before income taxes increased by $42 million, or 5.7%, to $773 million or 19.8% of net revenues during the first six months of 2026, as compared to $731 million or 20.2% of net revenues during the comparable period of 2025. The increase in income before income taxes at our behavioral health facilities during the first six months of 2026, as compared to the comparable period of 2025, was attributable to: (i) the $63 million, or 8.7%, increase in income before income taxes generated at our behavioral health facilities, on a Same Facility basis, partially offset by; (ii) an other combined net aggregate decrease of $21 million consisting primarily of an unfavorable change in the pre-tax income/loss generated at Laurel Ridge Treatment Center.

During the six-month period ended June 30, 2026, as compared to the comparable period of 2025, salaries, wages and benefits expense increased by $143 million or 7.5%. The increase was due primarily to the above-mentioned $134 million, or 7.1%, increase related to our behavioral health facilities, on a Same Facility basis.

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Other operating expenses increased by $90 million, or 12.1%, during the first six months of 2026, as compared to the comparable period of 2025. The increase was due primarily to the above-mentioned $45 million, or 6.9%, increase related to our behavioral health facilities, on a Same Facility basis, as well as a $43 million increase in provider tax assessments.

Supplies expense increased by $4 million, or 3.4%, during the first six months of 2026, as compared to the comparable period of 2025.

Sources of Revenue

Overview: We receive payments for services rendered from private insurers, including managed care plans, the federal government under the Medicare program, state governments under their respective Medicaid programs and directly from patients.

Hospital revenues depend upon inpatient occupancy levels, the medical and ancillary services and therapy programs ordered by physicians and provided to patients, the volume of outpatient procedures and the charges or negotiated payment rates for such services. Charges and reimbursement rates for inpatient routine services vary depending on the type of services provided (e.g., medical/surgical, intensive care or behavioral health) and the geographic location of the hospital. Inpatient occupancy levels fluctuate for various reasons, many of which are beyond our control. The percentage of patient service revenue attributable to outpatient services has generally increased in recent years, primarily as a result of advances in medical technology that allow more services to be provided on an outpatient basis, as well as increased pressure from Medicare, Medicaid and private insurers to reduce hospital stays and provide services, where possible, on a less expensive outpatient basis. We believe that our experience with respect to our increased outpatient levels mirrors the general trend occurring in the health care industry and we are unable to predict the rate of growth and resulting impact on our future revenues.

Patients are generally not responsible for any difference between customary hospital charges and amounts reimbursed for such services under Medicare, Medicaid, some private insurance plans, and managed care plans, but are responsible for services not covered by such plans, exclusions, deductibles or co-insurance features of their coverage. The amount of such exclusions, deductibles and co-insurance has generally been increasing each year. Indications from recent federal and state legislation are that this trend will continue. Collection of amounts due from individuals is typically more difficult than from governmental or business payers which unfavorably impacts the collectability of our patient accounts.

Sources of Revenues and Health Care Reform: Given increasing budget deficits, the federal government and many states are currently considering additional ways to limit increases in levels of Medicare and Medicaid funding, which could also adversely affect future payments received by our hospitals. In addition, the uncertainty and fiscal pressures placed upon the federal government as a result of, among other things, economic recovery stimulus packages, responses to natural disasters, and the federal and state budget deficits in general may affect the availability of government funds to provide additional relief in the future. Changes resulting from the outcome of the 2024 elections include work requirements for Medicaid waiver program eligibility, increased focus on hospital outpatient site neutral payment policies, and similar initiatives that may reduce the availability of funding for federal healthcare programs or make eligibility for benefits more difficult. Legislation adopted on July 4, 2025, commonly known as the One Big Beautiful Bill Act (“OBBBA”), will have the effect of substantially decreasing federal funding for state Medicaid Programs. Any significant reduction in federal Medicaid funding to states would likely result in states reducing Medicaid payments to us which would have a material adverse effect on us. We are unable to predict the effect of future policy changes on our operations.

In 2010, the Patient Protection and Affordable Care Act, as amended by the Health and Education Reconciliation Act (collectively, the “ACA”) was enacted and its two primary goals were to provide for increased access to coverage for healthcare and to reduce healthcare-related expenses. The ACA revised reimbursement under the Medicare and Medicaid programs to emphasize the efficient delivery of high-quality care and contains a number of incentives and penalties under these programs to achieve these goals. The ACA provides for reductions to Medicaid DSH payments which are now scheduled to begin in federal fiscal year 2028.

A 2012 U.S. Supreme Court ruling limited the federal government’s ability to expand health insurance coverage by holding unconstitutional sections of the ACA that sought to withdraw federal funding for state noncompliance with certain Medicaid coverage requirements. Pursuant to that decision, the federal government may not penalize states that choose not to participate in the Medicaid expansion by reducing their existing Medicaid funding. Therefore, states can choose whether to expand or not to expand their Medicaid program without risking the loss of federal Medicaid funding. As a result, many states, including Texas, have not expanded their Medicaid programs without the threat of loss of federal funding. CMS has previously granted section 1115 demonstration waivers providing for work and community engagement requirements for certain Medicaid eligible individuals. CMS has also released guidance to states interested in receiving their Medicaid funding through a block grant mechanism. The Biden administration withdrew certain previously issued section 1115 demonstrations aligned with these policies, but Georgia has imposed work and community engagement requirements under a Medicaid demonstration program that launched July 1, 2023. President Trump, who favored work and community engagement requirements in his first administration, sought and obtained legislation under the OBBBA that applies such requirements to a significant percentage of Medicaid program beneficiaries. We anticipate this change will lead to reductions in Medicaid coverage and likely increases in uncompensated care.

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On December 14, 2018, a Texas Federal District Court deemed the ACA to be unconstitutional in its entirety. The Court concluded that the Individual Mandate is no longer permissible under Congress’s taxing power as a result of the Tax Cut and Jobs Act of 2017 reducing the individual mandate’s tax to $0 (i.e., it no longer produces revenue, which is an essential feature of a tax), rendering the ACA unconstitutional. The Court also held that because the individual mandate is “essential” to the ACA and is inseverable from the rest of the law, the entire ACA is unconstitutional. That ruling was ultimately appealed to the United States Supreme Court, which decided in California v. Texas that the plaintiffs in the matter lacked standing to bring their constitutionality claims. The Court did not reach the plaintiffs’ merits arguments, which specifically challenged the constitutionality of the ACA’s individual mandate and the entirety of the ACA itself. As a result, the ACA will continue to be law, and the Department of Health and Human Services ("HHS") and its respective agencies will continue to enforce regulations implementing the law. However, on September 7, 2022, the ACA faced its most recent challenge when a Texas Federal District Court judge, in the case of Braidwood Management v. Becerra, ruled that a requirement that certain health plans cover services without cost sharing violates the Appointments Clause of the U.S. Constitution and that the coverage of certain HIV prevention medication violates the Religious Freedom Restoration Act. The decision was ultimately appealed to the U.S. Supreme Court, which in its June 2025 Kennedy v. Braidwood Management decision, opined in favor of HIV preventive care coverage. The impact of this decision on us cannot be predicted.

The ACA also contained provisions aimed at reducing fraud and abuse in healthcare. The ACA amends several existing laws, including the federal Anti-Kickback Statute and the False Claims Act, making it easier for government agencies and private plaintiffs to prevail in lawsuits brought against healthcare providers. While Congress had previously revised the intent requirement of the Anti-Kickback Statute to provide that a person is not required to “have actual knowledge or specific intent to commit a violation of” the Anti-Kickback Statute in order to be found in violation of such law, the ACA also provides that any claims for items or services that violate the Anti-Kickback Statute are also considered false claims for purposes of the federal civil False Claims Act. The ACA provides that a healthcare provider that retains an overpayment in excess of 60 days is subject to the federal civil False Claims Act. In December, 2024, CMS changed the standard for identification of an overpayment and now requires the report and return of an overpayment if a provider or supplier has actual knowledge of the existence of an overpayment or acts in reckless disregard or deliberate ignorance of an overpayment. The ACA also expanded the Recovery Audit Contractor program to Medicaid. These amendments also make it easier for severe fines and penalties to be imposed on healthcare providers that violate applicable laws and regulations.

We have partnered with local physicians in the ownership of certain of our facilities. These investments have been permitted under an exception to the physician self-referral law. The ACA permits existing physician investments in a hospital to continue under a “grandfather” clause if the arrangement satisfies certain requirements and restrictions, but physicians are prohibited from increasing the aggregate percentage of their ownership in the hospital. The ACA also imposes certain compliance and disclosure requirements upon existing physician-owned hospitals and restricts the ability of physician-owned hospitals to expand the capacity of their facilities. A repeal of the ACA, in whole or in relevant part, may result in physicians being able to expand ownership interest in hospitals.

In addition to legislative changes, the ACA can be significantly impacted by executive branch actions. The Biden administration had issued executive orders implementing a special enrollment period permitting individuals to enroll in health plans outside of the annual open enrollment period and reexamining policies that may undermine the ACA or the Medicaid program. The American Rescue Plan Act of 2021's expansion of subsidies to purchase coverage through an exchange contributed to increased exchange enrollment in 2021. The Inflation Reduction Act (IRA)’s extension of subsidies through 2025 increased exchange enrollment in years subsequent to 2021. These enhanced subsidies expired on December 31, 2025. It remains unclear what portions of the ACA may remain, or whether any replacement or alternative programs may be created by any future legislation. Any such future repeal or replacement may have significant impact on the reimbursement for healthcare services generally, and may create reimbursement for services competing with the services offered by our hospitals. Accordingly, there can be no assurance that the adoption of any future federal or state healthcare reform legislation will not have a negative financial impact on our hospitals, including their ability to compete with alternative healthcare services funded by such potential legislation, or for our hospitals to receive payment for services.

For additional disclosure related to our revenues including a disaggregation of our consolidated net revenues by major source for each of the periods presented herein, please see Note 12 to the Consolidated Financial Statements-Revenue Recognition.

Medicare: Medicare is a federal program that provides certain hospital and medical insurance benefits to persons aged 65 and over, some disabled persons and persons with end-stage renal disease. All of our acute care hospitals and many of our behavioral health centers are certified as providers of Medicare services by the appropriate governmental authorities. Amounts received under the Medicare program are generally significantly less than a hospital’s customary charges for services provided. Since a substantial portion of our revenues will come from patients under the Medicare program, our ability to operate our business successfully in the future will depend in large measure on our ability to adapt to changes in this program.

Under the Medicare program, for inpatient services, our general acute care hospitals receive reimbursement under the inpatient prospective payment system (“IPPS”). Under the IPPS, hospitals are paid a predetermined fixed payment amount for each hospital discharge. The fixed payment amount is based upon each patient’s Medicare severity diagnosis related group (“MS-DRG”). Every MS-DRG is assigned a payment rate based upon the estimated intensity of hospital resources necessary to treat the average patient with that particular diagnosis. The MS-DRG payment rates are based upon historical national average costs and do not consider the

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actual costs incurred by a hospital in providing care. This MS-DRG assignment also affects the predetermined capital rate paid with each MS-DRG. The MS-DRG and capital payment rates are adjusted annually by the predetermined geographic adjustment factor for the geographic region in which a particular hospital is located and are weighted based upon a statistically normal distribution of severity. While we generally will not receive payment from Medicare for inpatient services, other than the MS-DRG payment, a hospital may qualify for an “outlier” payment if a particular patient’s treatment costs are extraordinarily high and exceed a specified threshold. MS-DRG rates are adjusted by an update factor each federal fiscal year, which begins on October 1. The index used to adjust the MS-DRG rates, known as the “hospital market basket index,” gives consideration to the inflation experienced by hospitals in purchasing goods and services. Generally, however, the percentage increases in the MS-DRG payments have been lower than the projected increase in the cost of goods and services purchased by hospitals.

In August, 2026, CMS published its IPPS 2027 final payment rule which provides for a 3.2% market basket increase to the base Medicare MS-DRG blended rate. When statutorily mandated budget neutrality factors, annual geographic wage index updates, documenting and coding adjustments, and adjustments mandated by the ACA are considered (including a .09% productivity adjustment offset), without consideration for the required Medicare DSH payments changes and increase to the Medicare Outlier threshold, the overall increase in IPPS payments is approximately 0.4%. Including DSH payments, an increase to the Medicare Outlier threshold and certain other adjustments, we estimate our overall increase from the final IPPS 2027 rule (covering the period of October 1, 2026 through September 30, 2027) will approximate 0.1%.

In July, 2025, CMS published its IPPS 2026 final payment rule which provides for a 3.3% market basket increase to the base Medicare MS-DRG blended rate. When statutorily mandated budget neutrality factors, annual geographic wage index updates, documenting and coding adjustments, and adjustments mandated by the ACA are considered (including a -0.7% productivity adjustment offset), without consideration for the required Medicare DSH payments changes and increase to the Medicare Outlier threshold, the overall increase in IPPS payments is approximately 1.0%. Instead of applying a state-level rural floor budget neutrality adjustment to the wage index, the final rule has applied a uniform, national budget neutrality adjustment to the FY 2026 wage index for the rural floor. Nevada will be subject to a 5.0% reduction in the wage index adjustment as a result of a decrease in the wage index rural floor in that state. Including DSH payments, a decrease to the Medicare Outlier threshold and certain other adjustments, we estimate our overall increase from the final IPPS 2026 rule (covering the period of October 1, 2025 through September 30, 2026) will approximate 2.7%.

In June, 2019, the Supreme Court of the United States issued a decision favorable to hospitals impacting prior year Medicare DSH payments (Azar v. Allina Health Services, No. 17-1484 (U.S. Jun. 3, 2019)). In Allina, the hospitals challenged the Medicare DSH adjustments for federal fiscal year 2012, specifically challenging CMS’s decision to include inpatient hospital days attributable to Medicare Part C enrollee patients in the numerator and denominator of the Medicare/SSI fraction used to calculate a hospital’s DSH payments. This ruling addresses CMS’s attempts to impose the policy espoused in its vacated 2004 rulemaking to a fiscal year in the 2004–2013 time period without using notice-and-comment rulemaking. This decision should require CMS to recalculate hospitals’ DSH Medicare/SSI fractions, with Medicare Part C days excluded, for at least federal fiscal year 2012, but likely federal fiscal years 2005 through 2013. In August, 2020, CMS issued a rule that proposed to retroactively negate the effects of the aforementioned Supreme Court decision, which rule has yet to be finalized. Although we can provide no assurance that we will ultimately receive additional funds, we estimate that the favorable impact of this court ruling on certain prior year hospital Medicare DSH payments could range between $18 million to $28 million in the aggregate.

The 2011 Act included the imposition of annual spending limits for most federal agencies and programs aimed at reducing budget deficits by $917 billion between 2012 and 2021, according to a report released by the Congressional Budget Office. Among its other provisions, the law established a bipartisan Congressional committee, known as the Joint Committee, which was responsible for developing recommendations aimed at reducing future federal budget deficits by an additional $1.5 trillion over 10 years. The Joint Committee was unable to reach an agreement by the November 23, 2011 deadline and, as a result, across-the-board cuts to discretionary, national defense and Medicare spending were implemented on March 1, 2013 resulting in Medicare payment reductions of up to 2% per fiscal year. Subsequent legislation has extended this sequestration through 2032.

Inpatient services furnished by psychiatric hospitals under the Medicare program are paid under a Psychiatric Prospective Payment System (“Psych PPS”). Medicare payments to psychiatric hospitals are based on a prospective per diem rate with adjustments to account for certain facility and patient characteristics. The Psych PPS also contains provisions for outlier payments and an adjustment to a psychiatric hospital’s base payment if it maintains a full-service emergency department.

In July, 2026, CMS published its Psych PPS final rule for the federal fiscal year 2027. Under this proposed rule, payments to our behavioral health care hospitals and units from the market basket update are estimated to increase by 2.3% compared to federal fiscal year 2026. This amount includes the effect of the 3.2% net market basket update which reflects the offset of a 0.9% productivity adjustment. When all of the final patient level adjustments described below as well as proposed wage index values are considered, we estimate that Psych PPS payments will increase by 2.0% in FFY 2027.

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The 2027 Psych PPS final rule also implements the new standardized Inpatient Psychiatric Facility ("IPF") Patient Assessment Instrument, required by the CAA of 2023, which IPFs participating in the IPF Quality Reporting Program will be required to report for Rate Year 2028.

In July, 2026, CMS issued its OPPS proposed rule for 2027. The hospital market basket increase is 3.2% and the productivity adjustment reduction is 0.8% for a net market basket increase of 2.4%. Based upon the proposal, when other statutorily required adjustments (including a 3.0% reduction for the 340B remedy discussed below and a favorable 340B Drug Cost Survey budget neutrality adjustment of 8.44%) and hospital patient service mix are considered, we estimate that our overall Medicare OPPS update for 2027 will aggregate to a net increase of 8.2%.

Below are changes included in the 2027 OPPS proposed rule:

• 340B-Acquired Drugs Budget Neutrality Adjustment: This proposal is estimated to reduce Original Medicare drug payment by $4.55 billion dollars in the first year. Federal statute requires that this policy be implemented in a budget neutral manner, so this proposal would increase OPPS payments for non-drug services by an equivalent amount and is included in the above-mentioned OPPS increase percentage.
• 340B Remedy Recoupment: CMS is proposing to revise the annual offset percentage for non-drug items and services from 0.5% to 3% effective CY 2027, excluding hospitals that enrolled in Medicare after January 1, 2018.
• Eliminating the Inpatient Only (IPO) List: CMS is continuing to phase out the IPO list over a 3-year period. For this second year of the phase-out, CMS is proposing to remove 638 services from the following clinical families: auditory, digestive, endocrine, female genital, hemic and lymphatic systems, integumentary, male genital, maternity care and delivery, mediastinum and diaphragm, respiratory, and urinary. The above-mentioned OPPS increase percentage does not reflect the potential impact of this proposal. The policy will have the effect of reducing the volume of certain inpatient services included in the proposal and migrating them to hospital outpatient settings or freestanding outpatient settings.

In November, 2025, CMS issued its OPPS final rule for 2026. The hospital market basket increase is 3.3% and the productivity adjustment reduction is 0.7% for a net market basket increase of 2.6%. When other statutorily required adjustments (including a 0.5% reduction for the 340B remedy discussed below) and hospital patient service mix are considered, we estimate that our overall Medicare OPPS update for 2026 will aggregate to a net increase of 2.0%

Below are changes included in the 2026 OPPS final rule:

• 340B Remedy Recoupment: CMS anticipates shortening the 340B Remedy recoupment transition from the previously established 16-year schedule beginning 2027; however the revised duration has not yet been determined. A 2023 CMS final rule had implemented a negative OPPS recoupment adjustment of 0.5 percent for approximately 16 years to offset $7.8 billion paid to hospitals for non-drug OPPS payments between 2018 and 2022 – following the US Supreme Court decision overturning the Trump Administration’s 340B reduction policy. CMS will maintain the annual offset of 0.5 percent in calendar year ("CY") 2026 with a plan to increase the reduction amount above the 0.5% in CY 2027 and with an unspecified reduction to remain in effect until the estimated payment reduction reaches $7.8 billion.
• Eliminating the Inpatient Only (IPO) List: CMS will phase out the IPO list over a 3-year period, beginning with removing 285 mostly musculoskeletal procedures for CY 2026. Procedures removed from the IPO list would be exempted from certain medical review activities related to the two-midnight policy for CY 2026 and subsequent years until CMS determines the service or procedure is more commonly performed in the Medicare population in the outpatient setting. For CY 2026, we do not expect the impact to have a material impact on our results of operations. For calendar years 2027 and later, the estimated potential impact on our results of operations cannot be determined until future CMS rulemaking process related to changes in the IPO list occurs.

On November 2, 2023, in light of the Supreme Court’s decision in American Hospital Association v. Becerra (142 S. Ct. 1896 (2022)) and the district court’s remand to the agency, CMS issued a final rule outlining the remedy for the 340B-acquired drug payment policy for calendar years 2018-2022. CMS published the final rule to remedy the payment rates the Court held were invalid aspects of their past policy and will affect nearly all hospitals paid under the OPPS. As part of the final remedy, CMS made an adjustment to the update factor to maintain budget neutrality as required by statute. CMS finalized the 340B policy for calendar year 2018 in 2017 in a budget neutral manner that included increasing payments for non-drug items and services; this payment increase was in effect from calendar years 2018 through 2022. CMS estimates that hospitals were paid $7.8 billion more for non-drug items and services during this time period than they would have been paid in the absence of the 340B payment policy. Because CMS is now making additional payments to affected 340B covered entity hospitals to pay them what they would have been paid had the 340B policy never been implemented, CMS will make a corresponding offset to maintain budget neutrality as if the 340B payment policy had never been in effect. To carry out this required $7.8 billion budget neutrality adjustment, CMS reduced future non-drug item and service payments by adjusting the OPPS conversion factor by minus 0.5% starting in calendar year 2026 and continuing for an estimated 16 years. However, as discussed above and as noted in the 2027 OPPS proposed rule, CMS has proposed to increase the reduction to non-drug item and service payments from 0.5% to 3%.

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In November, 2019, CMS finalized its Hospital Price Transparency rule that implements certain requirements under the June 24, 2019 Presidential Executive Order related to Improving Price and Quality Transparency in American Healthcare to Put Patients First. Under this final rule, effective January 1, 2021, CMS will require: hospitals to make public: (1) their standard changes (both gross charges and payer-specific negotiated charges) for all items and services online in a machine-readable format, and; (2) standard charge data for a limited set of “shoppable services” the hospital provides in a form and manner that is more consumer friendly. On November 2, 2021, CMS released a final rule increasing the monetary penalty that CMS can impose on hospitals that fail to comply with the price transparency requirements. We believe that our hospitals are in full compliance with the applicable federal regulations. In November, 2023, CMS finalized multiple provisions, effective as of January 1, 2024, focused on increasing hospital price transparency and compliance enforcement including but not limited to: (1) standard charges data would be posted online using a CMS template, instead of using the hospital’s own form/format; (2) all standard charge information would be encoded with a specified set of data elements (e.g., hospital name, license number, payer/plan name, description of service and billing codes, among others); (3) other technical changes related to increasing consumers’ automated accessibility to hospital standard charges, and; (4) certifications regarding accuracy of standard charge data and related compliance warning notices from CMS and requiring accessibility to health system leadership regarding transparency noncompliance.

In September, 2024, the Departments of Labor, Health and Human Services and the Treasury published final rules that:

• Mandate that insurers analyze the outcomes of their coverage to ensure there's equivalent access to mental health care, including provider networks, prior authorization rates and payment for out-of-network providers, and take action to get in compliance;
• Establish when health plans can’t use prior authorization or other tactics to make it more difficult to access mental health and substance use treatment, and;
• Require additional insurers to comply with the 2008 Mental Health Parity and Addiction Equity Act.

While these rules would likely improve patient access to inpatient and outpatient mental health services, we are unable to estimate the related potential impact on our results of operations. In particular, the status of future implementation remains unclear due to the current administration’s announcement of an enforcement pause.

Medicare Advantage Payment Annual Update:

In April, 2026, CMS released the calendar year 2027 ("CY 2027") rate announcement for the MA that finalizes the payment policies for this program. Payments from the government to MA plans are expected to increase on average by 2.48% from 2026 to 2027 excluding the CMS estimate of Medicare Advantage risk score trend. This change represents an increase of 2.39% since the CY 2027 announcement, which is largely attributable to a favorable change in risk model adjustment factor percentage.

In April, 2025, CMS released the calendar year 2026 ("CY 2026") rate announcement for the MA that finalizes the payment policies for this program. Payments from the government to MA plans are expected to increase on average by 5.06% from 2025 to 2026 excluding the CMS estimate of Medicare Advantage risk score trend. This change represents an increase of 2.83% since the CY 2026 announcement, which is largely attributable to an increase in the effective growth rate.

Medicaid: Medicaid is a joint federal-state funded health care benefit program that is administered by the states to provide benefits to qualifying individuals. Most state Medicaid payments are made under a PPS-like system, or under programs that negotiate payment levels with individual hospitals. Amounts received under the Medicaid program are generally significantly less than a hospital’s customary charges for services provided. In addition to revenues received pursuant to the Medicare program, we receive a large portion of our revenues either directly from Medicaid programs or from managed care companies managing Medicaid. All of our acute care hospitals and most of our behavioral health centers are certified as providers of Medicaid services by the appropriate governmental authorities.

We receive revenues from various state and county-based programs, including Medicaid in all the states in which we operate. We receive annual Medicaid revenues of approximately $100 million, or greater, from each of California, Texas, Nevada, Florida, Washington, D.C., Illinois, Pennsylvania, Kentucky, Mississippi, Virginia, Michigan, Massachusetts, Tennessee, Arizona, Ohio, and Washington. We also receive Medicaid disproportionate share hospital payments in certain states including, most significantly, Texas. Many of these programs have a Medicaid supplemental payment component that are subject to approval on a year-to-year basis and there is no assurance that these supplemental payment revenues will continue at their current rates or at all. We are therefore particularly sensitive to potential reductions in Medicaid and other state-based revenue programs as well as regulatory, economic, environmental and competitive changes in those states. We can provide no assurance that reductions to revenues earned pursuant to these programs, particularly in the above-mentioned states, will not have a material adverse effect on our future results of operations.

The ACA substantially increases the federally and state-funded Medicaid insurance program, and authorizes states to establish federally subsidized non-Medicaid health plans for low-income residents not eligible for Medicaid starting in 2014. However, the Supreme Court has struck down portions of the ACA requiring states to expand their Medicaid programs in exchange for increased federal funding. Accordingly, many states in which we operate have not expanded Medicaid coverage to individuals at 133% of the

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federal poverty level. Facilities in states not opting to expand Medicaid coverage under the ACA may be additionally penalized by corresponding reductions to Medicaid disproportionate share hospital payments beginning in fiscal year 2024, as discussed below. We can provide no assurance that further reductions to Medicaid revenues, particularly in the above-mentioned states, will not have a material adverse effect on our future results of operations.

Summary of Various State Medicaid Supplemental Payment Programs:

As noted elsewhere herein, the OBBBA has specific legislative language that will reduce Medicaid supplemental payments as well as limit Provider Taxes used by states to finance the non-federal share of Medicaid supplemental payments. The following table summarizes the revenues, healthcare provider taxes (“Provider Taxes”) and net benefit related to each of the below-mentioned Medicaid supplemental programs for the three and six-month periods ended June 30, 2026 and 2025. The Provider Taxes are recorded in other operating expenses on the consolidated statements of income, as included herein. The "Projected Full Year 2026" amounts reflected on the table below are, in many cases, subject to federal and potentially state approval and may be affected by any reductions or other changes in federal funding for these programs. Approximately 25% of the “Projected Full Year 2026” amount will not be materially impacted by the OBBBA legislation as the current payments are: (1) Medicare Fee For Service Upper Payment Limit (“UPL”) which is already based on a Medicare equivalent reimbursement level, or: (2) the current Medicare state directed payments level are at or below Medicare payment equivalent rates.

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Texas Supplemental Payment Programs:

Certain of our acute care hospitals located in various counties of Texas participate in Medicaid supplemental payment Section 1115 Waiver indigent care programs. The 1115 Waiver has been approved by CMS through September 30, 2030. These hospitals also have affiliation agreements with third-party hospitals to provide free hospital and physician care to qualifying indigent residents of these counties. Our hospitals receive both supplemental payments from the Medicaid program and indigent care payments from third-party, affiliated hospitals. The supplemental payments are contingent on the county or hospital district making an Inter-Governmental Transfer (“IGT”) to the state Medicaid program while the indigent care payment is contingent on a transfer of funds from the applicable affiliated hospitals. However, the county or hospital district is prohibited from entering into an agreement to condition any IGT on the amount of any private hospital’s indigent care obligation.

CHIRP (including QIF)

On July 31, 2023, CMS approved the Comprehensive Hospital Increase Reimbursement Program ("CHIRP"), with a pool of $6.5 billion, for the rate period of September 1, 2023 to August 31, 2024. On September 13, 2024, CMS approved the CHIRP program with a pool of $6.5 billion for the rate period September 1, 2024 to August 31, 2025 (with an amended CMS approval on October 1, 2024). A CHIRP preprint for the rate period September 1, 2025 to August 31, 2026 was approved by CMS in August, 2025 with a pool size of $9.2 billion.

CHIRP payments beginning with the state fiscal year 2025 rate period included modifications to promote the advancement of the quality goals and strategies the program is designed to advance.

The final modifications include:

• Creation of a new pay-for-performance incentive payment through a third component in CHIRP, the Alternate Participating Hospital Reimbursement for Improving Quality Award ("APHRIQA"). For state fiscal years beginning with SFY 2025, behavioral health hospitals and rural hospitals will not be included in the pay-for-performance program, and;
• The funds for payment of the APHRIQA component will be transitioned from the existing uniform rate increase components of the Uniform Hospital Rate Increase Percentage and the Average Commercial Incentive Award and will be paid using a scorecard that directs managed care organizations to pay providers for performance achievements on quality outcome measures. Payments will be distributed under APHRIQA on a semi-annual basis that aligns with the measurement period determined for quality metrics reporting.

CHIRP payment levels could be reduced materially if our hospitals are not able meet the required APHRIQA pay-for-performance metrics.

In connection with the Quality Incentive Fund (“QIF”), certain of our acute care hospitals located in Texas may earn incentive payments pursuant to contractual arrangements with Medicaid managed care plans. No QIF revenues were recorded during the three and six-month periods ended June 30, 2026 and 2025. These amounts were earned pursuant to contract terms with various Medicaid managed care plans which requires the annual payout of QIF funds when a managed care service delivery area’s actual claims-based CHIRP payments are less than targeted CHIRP payments for a specific rate year.

We estimate that these hospitals will be entitled to approximately $18 million of aggregate QIF revenues during the year ended December 31, 2026.

UC

Included in these provider tax programs are reimbursements received in connection with the Texas Uncompensated Care program ("UC"). The size and distribution of the UC pool are determined based on charity care costs reported to THHSC in accordance with Medicare cost report Worksheet S-10 principles.

HARP

The Hospital Augmented Reimbursement Program (“HARP”) provides additional funding to hospitals to help offset the cost hospitals incur while providing Medicaid services. HARP is technically a Medicaid Upper Payment Limit as payment under this program is based on a reasonable estimate of the amount that would be paid for the services under Medicare payment principles but is referred to as HARP by THHSC.

In connection with this program, included in our results of operations was approximately $5 million and $6 million during the three-month periods ended June 30, 2026 and 2025, respectively and, approximately $9 million and $12 million during the six-month periods ended June 30, 2026 and 2025, respectively.

We expect our net reimbursements pursuant to HARP to approximate $19 million during the year ended December 31, 2026.

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ATLIS

In March 2026, the HHSC initiated plans to restart the Aligning Technology by Linking Interoperable Systems ("ATLIS") program for program year 2 covering FFY 2026. Although our acute care hospitals in Texas participated in the ATLIS program during year 1, the impact was not material to our results of operations. For year 2, the ATLIS pool will be comparable in size to the year 1 pool amounting to approximately $930 million. The year 2 program was restructured to allow for a broader distribution of funds among ATLIS participating hospitals and expanded the program to include freestanding psychiatric hospitals. We estimate that our aggregate net reimbursements pursuant to the ATLIS program (net of related provider taxes) will approximate $24 million during the year ended December 31, 2026.

Nevada State Directed Payment Program ("SDP"):

Beginning with the period of January 1, 2024 through December 31, 2024 CMS approved a new hospital SDP in Nevada. Payments made pursuant to this component of the Nevada SDP program, which requires annual approval by CMS, are subject to reconciliation by the Division of Health Care Financing and Policy ("DHCFP") based on actual Medicaid managed care utilization during 2024 and each year thereafter. The Nevada SDP (as revised in February, 2026) for the period of January 1, 2025 through December 31, 2025 was approved by CMS. In March 2026, CMS also approved the preprint for the period January 1, 2026 to December 31, 2026. There can be no assurance that the Medicaid managed care component of the Nevada SDP will continue for any period after December 31, 2026, or that it will not be modified.

In connection with this program, included in our results of operations was approximately $68 million and $57 million during the three-month periods ended June 30, 2026 and 2025, respectively, and approximately $164 million and $113 million during the six-month periods ended June 30, 2026 and 2025, respectively. Approximately $30 million of the amount recorded during the first six months of 2026 relates to the period of January 1, 2025 to December 31, 2025 (recorded during the first quarter of 2026).

We estimate that our aggregate net reimbursements pursuant to both components of the Nevada SDP program (net of related provider taxes) will approximate $297 million during the year ended December 31, 2026.

Various Other State Programs:

We receive substantial reimbursement from multiple states in connection with various supplemental Medicaid payment programs. The states include, but are not limited to, the state programs listed below from which we receive significant reimbursements.

Kentucky Hospital Rate Increase Program (“HRIP”)

In early 2021, CMS approved the Kentucky Medicaid Managed Care Hospital Rate Increase Program. In February, 2026, CMS approved the program for the period of January 1, 2026 through December 31, 2026 whereby the HRIP pool size will increase from $2.4 billion to $2.8 billion.

In connection with this program, included in our results of operations was $25 million and $21 million during the three-month periods ended June 30, 2026 and 2025, respectively, and approximately $49 million and $43 million during the six-month periods ended June 30, 2026 and 2025, respectively. We estimate that our net reimbursements pursuant to HRIP will approximate $104 million during the year ended December 31, 2026.

California Supplemental Payments

In California, the state continues to operate Medicaid supplemental payment programs consisting of three components: Fee For Service Payment, Managed Care-Pass-Through Payment and Managed Care-Directed Payment. The non-federal share for these programs are financed by a statewide provider tax. The Directed Payment method will be based on actual concurrent hospital Medicaid managed care in-network patient volume whereas the other programs are based on prior year Medicaid utilization. The CMS program approval status is outlined in the table below.

California Hospital Fee Program CMS Approval Status:

Hospital Fee Program Component CMS Methodology Approval CMS Rate Setting Approval Status

Status

Fee For Service Payment Approved through December 31, 2024 Approved through December 31, 2024; Paid through December 31, 2024

Managed Care-Pass-Through Payment Approved through December 31, 2025 Approved through December 31, 2023 and paid in advance through December 31, 2024

Managed Care-Directed Payment Approved through December 31, 2025 Approved through December 31, 2023 and paid in advance through June 30, 2024

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In connection with this program, included in our results of operations was $17 million and $16 million during the three-month periods ended June 30, 2026 and 2025, respectively, and approximately $34 million and $32 million during the six-month periods ended June 30, 2026 and 2025, respectively. In June 2026, CMS approved the preprint for the program period January 1, 2025 to December 31, 2025.

We estimate that our net reimbursements pursuant to this program will approximate $68 million during the year ended December 31, 2026.

Mississippi Hospital Access Program

Beginning July 1, 2023, Mississippi implemented a two part Medicaid payment program that is funded by annual hospital assessments to the state's Medicaid program. These hospital assessments are calculated using a formula provided under state law. The first part of the program, known as the Mississippi Hospital Access Program (“MHAP”), provides direct payments for hospitals that serve patients in the state's Medicaid managed care delivery system. Hospitals are reimbursed near the average commercial rate, which is the UPL for Medicaid managed care reimbursements. The second part of the program supplements traditional Medicaid payment rates for hospitals providing inpatient and outpatient services up to Medicaid's regulated UPL. In June 2024, CMS approved the MHAP program component for the period July 1, 2024 to June 30, 2025. The UPL component was approved in April, 2024. In September 2025, CMS approved the MHAP program component for the period July 1, 2025 to June 30, 2026. The UPL component was approved in April 2024.

In connection with this program, included in our results of operations was approximately $24 million and $19 million during the three-month periods ended June 30, 2026 and 2025, respectively, and approximately $36 million and $29 million during the six-month periods ended June 30, 2026 and 2025, respectively.

We estimate that our net reimbursements pursuant to these supplemental payment programs will approximate $62 million during the year ended December 31, 2026.

Florida Medicaid Managed Care Directed Payment Program (“DPP”)

The Florida DPP provides for an additional payment for Medicaid managed care contracted services which is typically recorded during the fourth quarter of each year.

In April, 2026, CMS approved the Florida DPP for the period of October 1, 2024 to September 30, 2025. The approved DPP preprint includes: (i) a request to increase the size of the program and related DPP add-on payment levels based on a percentage of average commercial rates, and; (ii) change in the provider tax structure which in the aggregate was favorable to our hospitals.

Pursuant to this recently approved program, the annual aggregate net benefit applicable to our facilities increased by approximately $100 million (applicable to the period of October 1, 2024 through September 30, 2025), which was recorded during the second quarter of 2026.

Excluding the $100 million increase as discussed above, we estimate that our reimbursements pursuant to this DPP will approximate $53 million during the year ended December 31, 2026 (applicable to the period of October 1, 2025 to September 30, 2026). However, the DPP program preprint for the period October 1, 2025 to September 30, 2026 is pending the state Medicaid agency's submission for CMS approval. The state agency submitted provider tax waivers from the federal provider tax broad based requirement. We are uncertain as to whether or not CMS will approve the DPP program preprint for the period October 1, 2025 to September 30, 2026, or the ultimate amount and timing of such approval.

Illinois Medicaid Supplemental Payment Programs

The Illinois Medicaid Supplemental Payment Programs are comprised of three components: (1) Medicaid managed care directed payment program; (2) Medicaid managed care pass-through program, and; (3) Medicaid fee for service supplemental payment program. These programs require various related legislative and regulatory approvals each year.

In connection with this program, included in our results of operations was approximately $9 million and $8 million during the three-month periods ended June 30, 2026 and 2025, respectively, and approximately $17 million and $18 million during the six-month periods ended June 30, 2026 and 2025, respectively.

We estimate that our net reimbursements pursuant to these supplemental payment programs will approximate $36 million during the year ended December 31, 2026. Approval of these programs for the period of January 1, 2026 to December 31, 2026 is under CMS' review.

Indiana Medicaid Managed Care DPP

The Indiana DPP provides for an additional payment for Medicaid managed care contracted services. In connection with this program, included in our results of operations was approximately $12 million and $8 million during the three-month periods ended June 30, 2026 and 2025, respectively, and approximately $22 million and $16 million during the six-month periods ended June 30, 2026 and 2025, respectively. In May 2026, CMS approved the preprint for the program period January 1, 2026 to December 31, 2026.

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We estimate that our net reimbursements pursuant to this program will approximate $39 million during the year ended December 31, 2026.

Oklahoma (Transition to Managed Care and Implementation of a Medicaid Managed Care DPP)

The current Oklahoma Medicaid supplemental payment program in effect, prior to the planned implementation of the new DPP in 2024, is the Supplemental Hospital Offset Payment Program (“SHOPP”). The SHOPP component will remain in place for certain categories of Medicaid patients that will continue to be enrolled in the traditional Medicaid Fee for Service program.

In May, 2022, Oklahoma enacted legislation that directs the Oklahoma Health Care Authority ("OHCA") to: (i) transition its Medicaid program from a fee for service payment model to a managed care payment model by no later than October 1, 2023, and: (ii) concurrently implement a Medicaid managed care DPP using a managed care gap of 90% of average commercial rates. In December, 2022, the OHCA delayed the implementation date of the Medicaid managed care change and related DPP until April 1, 2024. In September, 2023, CMS approved the DPP program for the 15-month period effective as of April 1, 2024 through June 30, 2025. CMS granted approval of the DPP program for the period July 1, 2025 to June 30, 2026 on July 31, 2026.

In connection with this program, included in our results of operations was approximately $7 million and $5 million during the three-month periods ended June 30, 2026 and 2025, respectively, and approximately $14 million and $12 million during the six-month periods ended June 30, 2026 and 2025, respectively.

We estimate that our net reimbursements pursuant to these two supplemental payment programs (i.e. SHOPP and DPP) will approximate $26 million during the year ended December 31, 2026.

South Carolina Health Access, Workforce and Quality (“HAWQ”) Program

In September 2023, CMS approved the South Carolina HAWQ Program retroactive to July 1, 2023 and subsequently approved by CMS in July, 2024 for the period of July 1, 2024 to June 30, 2025. In December 2025, CMS approved the period July 1, 2025 to June 30, 2026. This program is a Medicaid managed care directed payment program that provides for a rate enhancement to Medicaid managed care encounters. In connection with this program, included in our results of operations was approximately $7 million and $9 million during the three-month periods ended June 30, 2026 and 2025, respectively, and approximately $13 million and $18 million during the six-month periods ended June 30, 2026 and 2025, respectively.

We estimate that our net reimbursements pursuant to this program will approximate $28 million during the year ended December 31, 2026.

Michigan Directed Payment Program (“DPP”)

In March 2024, CMS approved the Michigan Medicaid DPP retroactive to October 1, 2023 based on average commercial rates. The Michigan DPP provides for an additional payment for Medicaid managed care contracted services. In connection with this program, included in our results of operations was approximately $15 million and $15 million during the three-month periods ended June 30, 2026 and 2025, respectively, and approximately $26 million and $22 million during the six-month periods ended June 30, 2026 and 2025, respectively.

We estimate that our net reimbursements pursuant to this program will approximate $50 million during the year ended December 31, 2026. The Michigan DPP for the period of October 1, 2025 to September 30, 2026 was approved by CMS.

Idaho Upper Payment Limit (“UPL”)

In April 2024, the Idaho Department of Health and Welfare (“IDHW”) released its updated Medicaid UPL calculation for SFY 2024 (July 1, 2023 to June 30, 2024) and revised its SFY 2023 (July 1, 2022 to June 30, 2023) UPL calculation. Subject to CMS approval, the IDHW plans to continue this UPL program through SFY 2026 (July 1, 2025 to June 30, 2026). Due to the transition to Medicaid managed care on July 1, 2024 and the end of the two year run out, the UPL program sunset on June 30, 2026. For SFY 2026, the IDHW will not replace the UPL program with a Medicaid managed care state directed payment program.

In connection with this program, included in our results of operations was approximately $4 million and $11 million during the three-month periods ended June 30, 2026 and 2025, respectively, and approximately $8 million and $16 million during the six-month periods ended June 30, 2026 and 2025, respectively.

We estimate that our net reimbursements pursuant to this program will approximate $8 million during the year ended December 31, 2026.

Washington Safety Net Assessment Program

On April 2, 2024, CMS approved an expanded state directed payment program in Washington whereby payments will now be based on the average commercial rates. The program was approved retroactively for the period January 1, 2024 to December 31, 2024.

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In connection with this program, included in our results of operations was approximately $11 million and $14 million during the three-month periods ended June 30, 2026 and 2025, respectively, and approximately $21 million and $26 million during the six-month periods ended June 30, 2026 and 2025, respectively.

We estimate that our net reimbursements pursuant to this expanded program will approximate $41 million during the year ended December 31, 2026. The program for the period of January 1, 2025 to December 31, 2025 was approved by CMS.

New Mexico State Directed Payment Program (“SDP”)

In November, 2024, CMS approved the New Mexico Medicaid SDP, retroactive to July 1, 2024, based on average commercial rates. The New Mexico SDP provides for an additional payment for Medicaid managed care contracted services. The program requires the submission of an annual report that demonstrates that 75% of the incremental net funds were used for the delivery of and access to healthcare services in the state.

The New Mexico SDP for the period of January 1, 2026 to December 31, 2026 was approved by CMS.

In connection with this program, included in our results of operations was approximately $6 million and $10 million during the three-month periods ended June 30, 2026 and 2025, respectively, and approximately $16 million and $15 million during the six-month periods ended June 30, 2026 and 2025, respectively.

We estimate that our net reimbursements pursuant to this program will approximate $27 million during the year ended December 31, 2026.

Tennessee Directed Payment Program (“DPP”)

Tennessee SB1740, enacted in May, 2024, imposes an annual coverage assessment on covered hospitals for fiscal year 2024-2025. The total assessment on all covered hospitals in the aggregate will be equal to 6% of the federally recognized annual coverage assessment base. The assessment proceeds will be used to fund an increase to the state’s DPP payment pool to be based on average commercial rates. CMS has approved the program for the period of January 1, 2026 to December 31, 2026.

In connection with this program, included in our results of operations was approximately $17 million and $58 million during the three-month periods ended June 30, 2026 and 2025, respectively, and approximately $34 million and $58 million during the six-month periods ended June 30, 2026 and 2025, respectively.

We estimate that our net reimbursements pursuant to this program will approximate $61 million during the year ended December 31, 2026.

Washington, D.C. State Directed Payment program (“SDP”)

In September, 2025, CMS approved the SDP program for the period October 1, 2024 to September 30, 2025. This SDP program provides for an add-on to in-network Medicaid managed care paid claims.

In connection with this program, included in our results of operations was approximately $27 million during the three-month period ended June 30, 2026 and, approximately $53 million during the six-month period ended June 30, 2026. During both the three-month and six-month periods ended June 30, 2025, no revenue was recorded for this SDP program.

We estimate that our net reimbursements pursuant to this program will approximate $107 million during the year ended December 31, 2026.

Ohio Medicaid Managed Care DPP

The Ohio DPP provides for an additional payment for Medicaid managed care contracted services. In connection with this program, included in our results of operations was approximately $8 million and $6 million during the three-month periods ended June 30, 2026 and 2025, respectively, and approximately $34 million and $10 million during the six-month periods ended June 30, 2026 and 2025, respectively. On June 12, 2026, CMS approved the program period January 1, 2026 to December 31, 2026.

We estimate that our net reimbursements pursuant to this program will approximate $50 million during the year ended December 31, 2026, approximately $16 million of which relates to the period January through December, 2025.

Texas DSH and Nevada SPA Programs:

Texas DSH

Upon meeting certain conditions and serving a disproportionately high share of Texas’ low income patients, our qualifying facilities located in Texas receive additional reimbursement from the state’s DSH fund. The Texas DSH program was renewed for the state’s 2026 DSH fiscal year (covering the period of October 1, 2025 through September 30, 2026).

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In connection with this program, included in our results of operations was approximately $5 million and $8 million during the three-month periods ended June 30, 2026 and 2025, respectively, and approximately $14 million and $15 million during the six-month periods ended June 30, 2026 and 2025, respectively.

We estimate that our aggregate net reimbursements earned pursuant to the Texas DSH program will approximate $21 million during the year ended December 31, 2026.

The ACA and subsequent federal legislation provides for a significant reduction in Medicaid disproportionate share payments beginning in federal fiscal year 2028 (see above in Sources of Revenues and Health Care Reform-Medicaid for additional disclosure related to the delay of these DSH reductions). HHS is to determine the amount of Medicaid DSH payment cuts imposed on each state based on a defined methodology. As Medicaid DSH payments to states will be cut, consequently, payments to Medicaid-participating providers, including our hospitals in Texas, will be reduced in the coming years. Based on the CMS final rule published in September, 2019 (as amended by the CARES Act, the CAA and most recently, the Consolidated Appropriations Act, 2026), beginning in fiscal year 2028, annual Medicaid DSH payments could be reduced by $8 billion from current DSH payment levels. However, states have discretion in the allocation of their respective federal DSH allotment and we do not believe the state's allocation will result in a material decrease to DSH payment levels to our hospitals located in Texas. A series of federal continuing resolutions were passed by the federal government which provided for ongoing federal funding.

In connection with certain previous DSH and UC adverse federal court decisions, including the Children’s Hospital Association of Texas v. Azar, we continue to maintain reserves in the financial statements for cumulative Medicaid DSH and UC reimbursements related to our behavioral health hospitals located in Texas that amounted to $35 million as of June 30, 2026 and $33 million as of December 31, 2025, respectively.

Nevada State Plan Amendment ("SPA")

CMS initially approved an SPA in Nevada in August, 2014 and this SPA has been approved for additional state fiscal years, including the 2024 fiscal year covering the period of July 1, 2023 through June 30, 2024. CMS approval for the 2025 and 2026 fiscal years, which is still pending, is expected to occur.

In connection with this program, included in our results of operations was approximately $5 million and $4 million during the three-month periods ended June 30, 2026 and 2025, respectively, and approximately $9 million during both the six-month periods ended June 30, 2026 and 2025.

We estimate that our net reimbursements pursuant to this program will approximate $18 million during the year ended December 31, 2026

Legislation Commonly Known as the One Big Beautiful Bill Act ("OBBBA")

The OBBBA was enacted into law on July 4, 2025. This legislation includes material changes to the Medicaid program and other healthcare related programs including but not limited to:

Medicaid State Directed Payments (“SDP”)

• In states that expanded their Medicaid programs under the ACA ("Expansion States"), the SDP payment rate is capped at 100% of Medicare.
• For states that did not expand Medicaid under the ACA ("Non-Expansion States"), the SDP rate is capped at 110% of Medicare.
• These provisions grandfathered SDP programs already in existence or pending approval from CMS. Beginning with the 2028 state fiscal years, SDP provisions pursuant to the OBBBA are being phased in whereby grandfathered payment plans will be reduced by no more than 10% annually until the applicable Medicare rate is reached.

Limits on Provider Taxes

• Prior law capped Provider Taxes at 6% of net patient revenue. The new law reduces the percentage of revenue that can be taxed as a Provider Tax.
• The Provider Tax provisions pursuant to the OBBBA are largely being phased in over a 5-year period.
• In Expansion States, beginning with the 2028 state fiscal years, this percentage will be reduced by 0.5% each year until it reaches 3.5%. In Non-Expansion States, the Provider Tax percentage will remain unchanged.
• Establishes new discretion for CMS to refuse waivers of Provider Tax uniformity requirement.
• In January 2026, CMS issued its Medicaid Provider Tax Rule final rule changing how state provider taxes are evaluated for compliance with federal requirements. Transition periods for state compliance with the new requirements will vary

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based on state specific circumstances. We are unable to determine the financial impact on our future Medicaid supplemental payments.

Rural Health Transformation Program

• Establishes a $50 billion rural health grant program for states between fiscal years 2026 and 2030 to be used for payments to rural health facilities. 50% of the fund will go to states equally and 50% will be allocated based on a rural formula determined by the HHS Secretary.
• In December 2025, CMS announced that all 50 states will receive awards under the Rural Health Transformation Program. In 2026, states will receive first-year awards from CMS averaging $200 million within a range of $147 million to $281 million. The state of Texas received the highest award amount.
• We have applied for grants under this program totaling $33 million to date. The actual amounts to be awarded by each state is largely unknown. The grant funds received by our eligible hospitals would be used for various purposes required under each respective grant terms. Uses for these funds would include, but are not limited to, capital equipment purchases and implementation of electronic medical records at our freestanding psychiatric hospitals.

Medicaid Eligibility:

• Institutes an 80-hour a month work requirement for all Medicaid individuals ages 19-64 at least every 6 months, with some exceptions.
• Requires states to conduct eligibility redeterminations at least every 6 months for Medicaid expansion adults effective no later than January 1, 2027.
• Although we cannot predict the potential unfavorable impact on our future results of operations from these changes to Medicaid eligibility requirements, these changes could reduce the overall number of Medicaid enrollees thereby potentially decreasing our Medicaid revenues (including revenues earned pursuant to various state Medicaid supplemental payment programs) while potentially increasing the level of uncompensated care provided by our facilities.

As noted above, the OBBBA has specific legislative language that will reduce SDP payments as well as limit Provider Taxes used by states to finance the non-federal share of Medicaid supplemental payments. However, certain OBBBA provisions that would impact payment levels could be subject to some interpretation by CMS and related future federal rulemaking such as the definition of an SDP grandfathered program.

Based upon our current 2026 full year net benefit related to various state Medicaid supplemental payment programs, amounting to approximately $1.520 billion, as reflected on the table above under the caption "Summary of Various State Medicaid Supplemental Payment Table Programs", we estimate that, commencing with the 2028 state fiscal years, our aggregate annual net benefit will be reduced, on an annually increasing and relatively pro rata basis, by approximately $500 million by 2032. We cannot predict, among other things, if this legislation will ultimately be implemented as enacted, or if certain states may attempt to modify their respective SDP program in response to the OBBBA legislation. Given the various uncertainties and evolving state-by-state interpretations and computations related to this legislation, our forecasted estimates are subject to change, potentially by material amounts.

Other Risk Factors Related To State Supplemental Medicaid Payments:

As outlined above, we receive substantial reimbursement from multiple states in connection with various supplemental Medicaid payment programs. Failure to renew these programs beyond their scheduled termination dates, failure of the public hospitals to provide the necessary IGTs for the states’ share of the DSH programs, failure of our hospitals that currently receive supplemental Medicaid revenues to qualify for future funds under these programs, or reductions in reimbursements, could cause our estimates to differ by material amounts which could have a material adverse effect on our future results of operations.

In April, 2016, CMS published its final Medicaid Managed Care Rule which explicitly permits but phases out the use of pass-through payments (including supplemental payments) by Medicaid Managed Care Organizations (“MCO”) to hospitals over ten years but allows for a transition of the pass-through payments into value-based payment structures, delivery system reform initiatives or payments tied to services under a MCO contract. Since we are unable to determine the financial impact of this aspect of the final rule, we can provide no assurance that the final rule will not have a material adverse effect on our future results of operations. In November, 2020, CMS issued a final rule permitting pass-through supplemental provider payments during a time-limited period when states transition populations or services from fee-for-service Medicaid to managed care.

We receive Medicaid SDP payments from MCOs authorized by CMS under 42 CFR § 438.6(c). Consistent with capitated rates paid by Medicaid state agencies to MCO’s for managing Medicaid beneficiary lives under a risk-based arrangement, SDP program related capitated rates must also be developed by the state in accordance with actuarial soundness standards noted at 42 CFR § 438.4 and non-compliance could result in a reduction to SDP payment levels. In general, Medicaid SDP payments under 42 CFR § 438.6(c) are subject to annual CMS approval via the submission of a preprint application by a state agency which provides details of the SDP

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payment methodology and conformity with applicable federal regulations. CMS SDP preprint approval, and the timing of such approval, if it occurs, are not certain which can affect the both the SDP payment level and timing of SDP revenue recorded by us.

We incur Provider Taxes imposed by states in the form of a licensing fee, assessment or other mandatory payment which are related to: (i) healthcare items or services; (ii) the provision of, or the authority to provide, the health care items or services, or; (iii) the payment for the health care items or services that are used by respective states to finance the non-federal share of SDP’s (or other Medicaid supplemental payment programs). Such Provider Taxes are subject to various federal regulations that limit the scope and amount of the taxes that can be levied by states in order to secure federal matching funds as part of their respective state Medicaid supplemental payment programs. States are subject to CMS both concurrent and retrospective review for their compliance with the applicable Provider Tax regulations and related federal statute. If CMS determines Provider Taxes used by a state Medicaid program to finance the non-federal share of a SDP (or other Medicaid supplemental payment programs) are not in compliance with the applicable Provider Tax regulations and related federal statutes, our SDP payments (and other Medicaid supplemental payments) could be subject to recoupment by the respective state agency when non-compliance is determined by CMS to exist.

We believe that the SDP (and other state supplemental payment) programs are designed by each state to be in full compliance with the applicable federal regulations and federal statutes. However, we are unable to provide assurance CMS will determine on a retroactive basis that a state’s SDP (or other Medicaid supplemental payment program) design and Medicaid financing structures is in full compliance with the applicable federal regulations and federal statute(s).

On April 22, 2024, CMS issued Medicaid and Children’s Health Insurance Program ("CHIP") Managed Care Access, Finance, and Quality Final Rule (“Managed Care Rule”). CMS intends for the Managed Care Rule to:

• Strengthen standard for timely access to care and states’ monitoring and enforcement efforts;
• Enhance quality and fiscal and program integrity standards for state directed payments (“SDPs”);
• Specify the scope of in lieu of services and settings to better address health-related social needs;
• Further specify medical loss ratio requirements, and;
• Establish a quality rating system for Medicaid and CHIP managed care plans.

The SDP provisions included in the Managed Care Rule:

• Requires that provider payment levels for state directed payments for inpatient and outpatient hospital services, nursing facility services, and the professional services at an academic medical center not exceed the average commercial rate;
• Prohibits the use of post-payment reconciliation processes for state directed payments that are based on fee schedules;
• Makes explicit in regulation the existing requirement that state directed payments must comply with all federal laws concerning funding sources of the non-federal share, and;
• Requires that states ensure each provider receiving a state directed payment attest that it does not participate in any arrangement that holds taxpayers harmless for the cost of a tax. CMS concurrently released an informational bulletin regarding CMS’ exercise of enforcement discretion until calendar year 2028 for existing health-care related tax programs with certain hold-harmless arrangements involving the redistribution of Medicaid payments.

Fee-For-Service Short-Doyle Medi-Cal (“SD/MC”) Hospitals Change In Payment Methodology:

Under the California Medicaid prepaid inpatient health plan program, counties are required to ensure delivery of mental health services utilizing a system of county operated and contract providers. The California Medicaid program has adopted a new reimbursement method for inpatient psychiatric services with an effective date of December 12, 2023, incorporated a cost-based ceiling to negotiated rates. This change may require renegotiation of contracts our hospitals have had with counties, retroactive to December 12, 2023, and may also impact prospective rate negotiations. New California Medicaid rates could be materially lower than prior payment rates particularly if counties look to limit payment rates to a cost-based methodology rather than a market-based negotiated rate. We are awaiting formal guidance from California as to the manner in which this change will be implemented and whether the reimbursement method will change prospectively. Further, it is uncertain at this time whether and how counties will retroactively apply this change in method retroactively to December 12, 2023, given the previously negotiated payment terms. We are unable to predict with certainty the impact of this SPA at this time. However, under some scenarios, the adverse financial impact could be material.

As disclosed herein, we receive a significant amount of Medicaid and Medicaid managed care revenue from both base payments and supplemental payments. Although we are unable to estimate the impact of the Managed Care Rule on our future results of operations, if implemented as proposed, Managed Care Rule related changes could have a material adverse impact on our future results of operations.

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Future changes to the terms and conditions of the various programs outlined above could materially reduce our net benefit derived from the programs which could have a material adverse impact on our future results of operations. In addition, Provider Taxes are governed by both federal and state laws and are subject to future legislative changes that, if reduced from current rates in several states, could have a material adverse impact on our future results of operations.

HITECH Act: In July 2010, HHS published final regulations implementing the health information technology provisions of the American Recovery and Reinvestment Act (referred to as the “HITECH Act”). The final regulation defines the “meaningful use” of Electronic Health Records (“EHR”) and establishes the requirements for the Medicare and Medicaid EHR payment incentive programs. The final rule established an initial set of standards and certification criteria. The implementation period for these Medicare and Medicaid incentive payments started in federal fiscal year 2011 and can end as late as 2016 for Medicare and 2021 for the state Medicaid programs. State Medicaid program participation in this federally funded incentive program is voluntary but all of the states in which our eligible hospitals operate have chosen to participate. Our acute care hospitals qualified for these EHR incentive payments upon implementation of the EHR application assuming they meet the “meaningful use” criteria. The government’s ultimate goal is to promote more effective (quality) and efficient healthcare delivery through the use of technology to reduce the total cost of healthcare for all Americans and utilizing the cost savings to expand access to the healthcare system.

All of our acute care hospitals have met the applicable meaningful use criteria. However, under the HITECH Act, hospitals must continue to meet the applicable meaningful use criteria in each fiscal year or they will be subject to a market basket update reduction in a subsequent fiscal year. Failure of our acute care hospitals to continue to meet the applicable meaningful use criteria would have an adverse effect on our future net revenues and results of operations.

In the 2019 IPPS final rule, CMS overhauled the Medicare and Medicaid EHR Incentive Program to focus on interoperability, improve flexibility, relieve burden and place emphasis on measures that require the electronic exchange of health information between providers and patients. We can provide no assurance that the changes will not have a material adverse effect on our future results of operations.

Managed Care: A significant portion of our net patient revenues are generated from managed care companies, which include health maintenance organizations, preferred provider organizations and managed Medicare (referred to as Medicare Part C or Medicare Advantage) and Medicaid programs. In general, we expect the percentage of our business from managed care programs to continue to grow. The consequent growth in managed care networks and the resulting impact of these networks on the operating results of our facilities vary among the markets in which we operate. Typically, we receive lower payments per patient from managed care payers than we do from traditional indemnity insurers, however, during the past few years we have secured price increases from many of our commercial payers including managed care companies.

Commercial Insurance: Our hospitals also provide services to individuals covered by private health care insurance. Private insurance carriers typically make direct payments to hospitals or, in some cases, reimburse their policy holders, based upon the particular hospital’s established charges and the particular coverage provided in the insurance policy. Private insurance reimbursement varies among payers and states and is generally based on contracts negotiated between the hospital and the payer.

Commercial insurers are continuing efforts to limit the payments for hospital services by adopting discounted payment mechanisms, including predetermined payment or DRG-based payment systems, for more inpatient and outpatient services. To the extent that such efforts are successful and reduce the insurers’ reimbursement to hospitals and the costs of providing services to their beneficiaries, such reduced levels of reimbursement may have a negative impact on the operating results of our hospitals.

Surprise Billing Interim Final Rule: On September 30, 2021, the Department of Labor, and the Department of the Treasury, along with the Office of Personnel Management (“OPM”), released an interim final rule with comment period, entitled “Requirements Related to Surprise Billing; Part II.” This rule is related to Title I (the “No Surprises Act”) of Division BB of the Consolidated Appropriations Act, 2021, and establishes new protections from surprise billing and excessive cost sharing for consumers receiving health care items/services. It implements additional protections against surprise medical bills under the No Surprises Act, including provisions related to the independent dispute resolution ("IDR") process, good faith estimates for uninsured (or self-pay) individuals, the patient-provider dispute resolution process, and expanded rights to external review. On February 28, 2022, a district judge in the Eastern District of Texas invalidated portions of the rule governing aspects of the IDR process. In light of this decision, the government issued a final rule on August 19, 2022 eliminating the rebuttable presumption in favor of the qualifying payment amount by the IDR entity and providing additional factors the IDR entity should consider when choosing between two competing offers. CMS regulations and guidance implementing the IDR process has been subject to a significant amount of provider-initiated litigation. As a result, portions of those regulations and guidance materials have been vacated by a federal district court, causing CMS to, on several occasions, pause and resume IDR process operations, causing significant delay in the processing of claims. On June 4, 2026, HHS, the Department of Labor, the Department of the Treasury, and OPM issued a final rule intended to improve the functioning of the federal IDR process. Additionally, arguments made by the plaintiffs in such litigation have included allegations that CMS’s regulations and guidance materials are favorable to payers. We cannot predict the impact of the final rule on our operations at this time.

Other Sources: Our hospitals provide services to individuals that do not have any form of health care coverage. Such patients are evaluated, at the time of service or shortly thereafter, for their ability to pay based upon federal and state poverty guidelines,

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qualifications for Medicaid or other state assistance programs, as well as our local hospitals’ indigent and charity care policy. Patients without health care coverage who do not qualify for Medicaid or indigent care write-offs are offered substantial discounts in an effort to settle their outstanding account balances.

Health Care Reform: Listed below are the Medicare, Medicaid and other health care industry changes which have been, or are scheduled to be, implemented as a result of the ACA.

Medicaid Federal DSH Allotment:

The ACA (amended by subsequent federal legislation) requires annual aggregate reductions in federal Medicaid DSH allotment. In FFY 2028, DSH payments are scheduled to be reduced by $8 billion.

Value-Based Purchasing:

There is a trend in the healthcare industry toward value-based purchasing of healthcare services. These value-based purchasing programs include both public reporting of quality data and preventable adverse events tied to the quality and efficiency of care provided by facilities. Governmental programs including Medicare and Medicaid currently require hospitals to report certain quality data to receive full reimbursement updates. In addition, Medicare does not reimburse for care related to certain preventable adverse events. Many large commercial payers currently require hospitals to report quality data, and several commercial payers do not reimburse hospitals for certain preventable adverse events.

The ACA required HHS to implement a value-based purchasing program for inpatient hospital services which became effective on October 1, 2012. The ACA requires HHS to reduce inpatient hospital payments for all discharges by 2% in FFY 2017 and subsequent years. HHS will pool the amount collected from these reductions to fund payments to reward hospitals that meet or exceed certain quality performance standards established by HHS. HHS will determine the amount each hospital that meets or exceeds the quality performance standards will receive from the pool of dollars created by these payment reductions.

Hospital Acquired Conditions:

The ACA prohibits the use of federal funds under the Medicaid program to reimburse providers for medical assistance provided to treat hospital acquired conditions (“HAC”). Beginning in FFY 2015, hospitals that fall into the top 25% of national risk-adjusted HAC rates for all hospitals in the previous year will receive a 1% reduction in their total Medicare payments.

Readmission Reduction Program:

In the ACA, Congress also mandated implementation of the hospital readmission reduction program (“HRRP”). Hospitals with excessive readmissions for conditions designated by HHS will receive reduced payments for all inpatient discharges, not just discharges relating to the conditions subject to the excessive readmission standard. The HRRP currently assesses penalties on hospitals having excess readmission rates for heart failure, myocardial infarction, pneumonia, acute exacerbation of chronic obstructive pulmonary disease ("COPD") and elective total hip arthroplasty ("THA") and/or total knee arthroplasty ("TKA"), excluding planned readmissions, when compared to expected rates. In the fiscal year 2015 IPPS final rule, CMS added readmissions for coronary artery bypass graft ("CABG") surgical procedures beginning in fiscal year 2017. To account for excess readmissions, an applicable hospital's base operating DRG payment amount is adjusted for each discharge occurring during the fiscal year. Readmissions payment adjustment factors can be no more than a 3% reduction.

Accountable Care Organizations:

The ACA requires HHS to establish a Medicare Shared Savings Program that promotes accountability and coordination of care through the creation of accountable care organizations (“ACOs”). The ACO program allows providers (including hospitals), physicians and other designated professionals and suppliers to voluntarily work together to invest in infrastructure and redesign delivery processes to achieve high quality and efficient delivery of services. The program is intended to produce savings as a result of improved quality and operational efficiency. ACOs that achieve quality performance standards established by HHS will be eligible to share in a portion of the amounts saved by the Medicare program. CMS also developed and implemented more advanced ACO payment models that require ACOs to assume greater risk for attributed beneficiaries. Through various subsidiaries, we participate in ACOs in many of our acute care hospital markets.

Infectious Disease Outbreaks, Pandemics, or Other Public Health Emergencies or Crisis:

Our business and financial results may be harmed by an international, national or localized outbreak of a highly contagious or epidemic disease, including but not limited to, COVID-19 or similar corona viruses, Ebola or Zika. Such outbreaks may stress the capacity of all or a part of our health care facilities, could result in an abnormally high demand for health care services which may require that resources be diverted from one part of operations to another, or disrupt the supply chain for equipment and supplies necessary for operations. In addition, unaffected individuals may decide to defer elective procedures or otherwise avoid medical treatment, resulting in reduced patient volumes and operating revenues.

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In addition to statutory and regulatory changes to the Medicare program and each of the state Medicaid programs, our operations and reimbursement may be affected by administrative rulings, new or novel interpretations and determinations of existing laws and regulations, post-payment audits, requirements for utilization review and new governmental funding restrictions, all of which may materially increase or decrease program payments as well as affect the cost of providing services and the timing of payments to our facilities. The final determination of amounts we receive under the Medicare and Medicaid programs often takes many years, because of audits by the program representatives, providers’ rights of appeal and the application of numerous technical reimbursement provisions. We believe that we have made adequate provisions for such potential adjustments. Nevertheless, until final adjustments are made, certain issues remain unresolved and previously determined allowances could become either inadequate or more than ultimately required.

Finally, we expect continued third-party efforts to aggressively manage reimbursement levels and cost controls. Reductions in reimbursement amounts received from third-party payers could have a material adverse effect on our financial position and our results.

Other Operating Results

Interest Expense:

As reflected on the schedule below, interest expense was $40 million and $35 million for the three-months ended June 30, 2026 and 2025, respectively, and $77 million and $75 million during the six-month periods ended June 30, 2026 and 2025, respectively (amounts in thousands):

(a.)

Interest on outstanding borrowings pursuant to our Credit Agreement, as discussed herein.

Interest expense increased by $5 million, or 13%, during the three-month period ended June 30, 2026, as compared to the three-month period ended June 30, 2025. The increase was due to: (i) a $1 million net increase in aggregate interest expense on our revolving credit, term loan A and senior notes resulting from a decrease in our aggregate average cost of borrowings pursuant to these facilities (3.79% during the second quarter of 2026 as compared to 3.95% during the comparable quarter of 2025), partially offset by an increase in the aggregate average outstanding borrowings pursuant to these facilities ($4.61 billion during the second quarter of 2026 as compared to $4.34 billion during the second quarter of 2025), and; (ii) a net $4 million increase in other combined interest expense.

Interest expense increased by $2 million, or 2%, during the six-month period ended June 30, 2026, as compared to the six-month period ended June 30, 2025. The increase included a net $2 million increase in aggregate interest expense on our revolving credit, term loan A and senior notes resulting from a decrease in our aggregate average cost of borrowings pursuant to these facilities (3.82% during the first six months of 2026 as compared to 3.96% during the comparable period of 2025), partially offset by an increase in the aggregate average outstanding borrowings pursuant to these facilities ($4.60 billion during the first six months of 2026 as compared to $4.31 billion during the first six months of 2025).

The average outstanding borrowings and the average effective interest rate, which includes amortization of deferred financing costs and original issue discount, under our revolving credit, term loan A and senior notes, were approximately $4.61 billion and 3.9%, respectively, during the second quarter of 2026, and $4.34 billion and 4.1%, respectively, during the second quarter of 2025. The average outstanding borrowings and average effective interest rate on these facilities were approximately $4.60 billion and 4.0%, respectively, during the first six months of 2026, and $4.31 billion and 4.1%, respectively, during the first six months of 2025.

Provision for Income Taxes and Effective Tax Rates:

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The effective tax rates, as calculated by dividing the provision for income taxes by income before income taxes, were as follows for the three and six-month periods ended June 30, 2026 and 2025 (dollar amounts in thousands):

The provision for income taxes increased $4 million during the second quarter of 2026, as compared to the comparable quarter of 2025, due primarily to an increase in the provision for income taxes resulting from the $9 million increase in income before income taxes ($6 million increase in income before income taxes and a $3 million decrease in income attributable to noncontrolling interests).

The provision for income taxes increased $15 million during the first six months of 2026, as compared to the comparable period of 2025, due primarily to an increase in the provision for income taxes resulting from the $53 million increase in income before income taxes ($54 million increase in income before income taxes less a $2 million increase in income to noncontrolling interests).

Liquidity

Net cash provided by operating activities

Net cash provided by operating activities was $845 million during the six-month period ended June 30, 2026 and $909 million during the first six months of 2025. The net decrease of $64 million was attributable to the following:

• an unfavorable change of $207 million in other working capital accounts due primarily to the timing of accounts payable disbursements;
• a favorable change of $86 million in accrued and deferred income taxes;
• a favorable change of $53 million resulting from an increase in net income plus/minus depreciation and amortization expense, stock-based compensation expense and gains on sales of assets and businesses;
• a favorable change of $47 million in accrued insurance expense, net of payments made in settlement of self-insured claims;
• an unfavorable change of $45 million in accounts receivable, and;
• $2 million of other combined net favorable changes.

Days sales outstanding (“DSO”): Our DSO are calculated by dividing our net revenue by the number of days in the six-month periods. The result is divided into the accounts receivable balance at June 30th of each year to obtain the DSO. Our DSO were 56 days and 50 days at June 30, 2026 and 2025, respectively.

Net cash used in investing activities

During the first six months of 2026, we used $432 million of net cash in investing activities as follows:

• $445 million spent on capital expenditures including costs related to a newly constructed acute care hospital located in Florida that was completed and opened during the second quarter of 2026 as well as capital expenditures for equipment, renovations and new projects at existing facilities;
• $16 million received from the sales of assets and businesses;
• $12 million received in connection with net cash inflows from forward exchange contracts that hedge our investment in the U.K. against movements in exchange rates;
• $10 million paid in connection with the purchase and development of an enterprise resource planning application, and;
• $5 million spent on the acquisition of businesses and property.

During the first six months of 2025, we used $577 million of net cash in investing activities as follows:

• $505 million spent on capital expenditures including capital expenditures for equipment, renovations and new projects at various existing facilities;
• $66 million paid in connection with net cash outflows from forward exchange contracts that hedge our investment in the U.K. against movements in exchange rates;
• $8 million spent on the acquisition of businesses and property, and;

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• $3 million received from the sales of assets and businesses.

Net cash used in financing activities

During the first six months of 2026, we used $411 million of net cash in financing activities as follows:

• spent $485 million to repurchase shares of our Class B Common Stock in connection with: (i) open market purchases pursuant to our stock repurchase program ($448 million), and; (ii) income tax withholding obligations related to stock-based compensation programs ($37 million);
• generated $300 million of additional borrowings pursuant to our term loan A which was increased to $1.46 billion in April, 2026 (from $1.16 billion previously), as discussed in Note 4 to the Condensed Consolidated Financial Statements, Treasury-Credit Facilities and Outstanding Debt Securities;
• spent $202 million on net repayments of debt as follows: (i) $183 million related to our revolving credit facility; (ii) $15 million related to our term loan A, and; (iii) $3 million related to other debt facilities;
• spent $25 million to pay quarterly cash dividends of $.20 per share;
• spent $12 million to pay profit distributions related to noncontrolling interests in majority owned businesses;
• generated $9 million from the issuance of shares of our Class B Common Stock pursuant to the terms of employee stock purchase plans, and;
• received $4 million from the sale of ownership interests to minority members.

During the first six months of 2025, we used $319 million of net cash in financing activities as follows:

• spent $379 million to repurchase shares of our Class B Common Stock in connection with: (i) open market purchases pursuant to our stock repurchase program ($332 million), and; (ii) income tax withholding obligations related to stock-based compensation programs ($47 million);
• generated $95 million of additional borrowings as follows: (i) $89 million pursuant to our revolving credit facility, and; (ii) $6 million related to other debt facilities;
• spent $26 million to pay quarterly cash dividends of $.20 per share;
• spent $19 million on net repayments of debt as follows: (i) $15 million related to our term loan A, and; (ii) $4 million related to other debt facilities;
• spent $10 million to pay profit distributions related to noncontrolling interests in majority owned businesses;
• received $11 million from the sale of ownership interests to minority members, and;
• generated $8 million from the issuance of shares of our Class B Common Stock pursuant to the terms of employee stock purchase plans.

Expected capital expenditures during remainder of 2026

During the full year of 2026, we expect to spend approximately $950 million to $1.1 billion on capital expenditures which includes expenditures for capital equipment, construction of new facilities, and renovations and expansions at existing hospitals. During the first six months of 2026 we spent approximately $445 million on capital expenditures and expect to spend approximately $505 million to $655 million during the remainder of 2026.

We believe that our capital expenditure program is adequate to expand, improve and equip our existing hospitals. We expect to finance all capital expenditures and acquisitions with internally generated funds and/or additional funds, as discussed below.

On March 9, 2026, we announced that we entered into a definitive agreement to acquire Talkspace, Inc. ("Talkspace") for $5.25 per share, or approximately $835 million in the aggregate. The transaction was approved by Talkspace's stockholders during the second quarter of 2026. The transaction is expected to close during the third quarter of 2026 and is subject to satisfaction of regulatory approvals and other customary closing conditions. Talkspace is a virtual behavioral healthcare company, with a network of approximately 6,000 licensed professionals that serve all 50 states, Washington, D.C., and Puerto Rico. We intend to finance the acquisition of Talkspace with additional borrowings pursuant to our Credit Agreement, as amended in April, 2026, as discussed in Note 4 – Treasury - Credit Facilities and Outstanding Debt Securities.

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In July 2026, we acquired 39 residential and community homes and 2 facilities that provide day services located in Ireland for a net purchase price of approximately $188 million.

Capital Resources

Credit Facilities and Outstanding Debt Securities

In April, 2026, we entered into the Eleventh Amendment and Increased Facility Activation Notice (the “Eleventh Amendment”) to our credit agreement ("Credit Agreement"), dated as of November 15, 2010, and as amended and restated at various times from March, 2011 to September, 2024, among UHS, as borrower, the several banks and other financial institutions or entities from time to time parties thereto, as lenders, and JPMorgan Chase Bank, N.A., as administrative agent. The Eleventh Amendment, among other things, increased our borrowing capacity by an aggregate of $900 million as follows: (i) increased the borrowing capacity of the revolving credit facility by $200 million to $1.5 billion (from $1.3 billion previously); (ii) increased the existing term loan A by $300 million to $1.455 billion ($1.448 billion outstanding as of June 30, 2026) from $1.155 billion previously, and; (iii) initiated a new $400 million delayed draw term loan A which is expected to be drawn upon the closing of our acquisition of Talkspace, Inc. (expected to be consummated during the third quarter of 2026). The maturity date for our Credit Agreement is September 26, 2029.

In July, 2026, we entered into the Twelfth Amendment and Increased Facility Activation Notice (the "Twelfth Amendment") to our Credit Agreement which added a new $700 million delayed draw short term loan which, if we elect to utilize, would be funded on or prior to September 30, 2026, with a maturity date 364 days after the initial funding. Potential future borrowings pursuant to this facility would be used for general corporate purposes, including, should we elect, repayment at maturity of our $700 million principal amount of 1.650% Senior Secured Notes due on September 1, 2026.

As of June 30, 2026, we had $1.272 billion of available borrowing capacity pursuant to the terms of our $1.5 billion revolving credit facility (net of $225 million of outstanding borrowings and $3 million of letters of credit) and $400 million of borrowing capacity pursuant to the terms of the delayed draw term loan A facility (expected to be drawn upon closing of our acquisition of Talkspace, Inc.).

After giving effect to the terms of the Eleventh Amendment, the term loan A, which had an outstanding balance of $1.448 billion as June 30, 2026, provides for aggregate installment payments of $9.4 million on September 30, 2026, $16.9 million per quarter commencing on December 31, 2026 through June 30, 2028, and $18.8 million per quarter commencing on September 30, 2028 through June 30, 2029. The unpaid principal balance at June 30, 2029 (scheduled to be $1.245 billion) is payable on September 26, 2029 (maturity date of the Credit Agreement). Once drawn, the principal balance on the $400 million delayed draw term loan A facility (as provided for by the Eleventh Amendment) will be payable on the September 26, 2029 maturity date of the Credit Agreement.

Revolving credit and existing term loan A borrowings under the Credit Agreement, after giving effect to the Eleventh Amendment, bear interest at our election at either (1) the ABR rate which is defined as the rate per annum equal to the greatest of (a) the lender’s prime rate, (b) the greater of the federal funds effective rate and the overnight bank funding rate, plus 0.5% and (c) one month term SOFR rate plus 1.0%, in each case, plus an applicable margin based upon our consolidated leverage ratio at the end of each quarter ranging from 0.25% to 0.625%, or (2) the one, three or six month term SOFR rate (at our election), plus an applicable margin based upon our consolidated leverage ratio at the end of each quarter ranging from 1.25% to 1.625%. As of June 30, 2026, the applicable margins were 0.25% for ABR-based loans and 1.25% for SOFR-based loans under the revolving credit and term loan A facilities. The revolving credit facility includes a $125 million sub-limit for letters of credit. The Credit Agreement is secured by certain assets of the Company and our material wholly-owned subsidiaries (which generally excludes asset classes such as substantially all of the patient-related accounts receivable of our acute care hospitals, if sold to a receivables facility pursuant to the Credit Agreement, and certain real estate assets and assets held in joint-ventures with third parties) and is guaranteed by our material subsidiaries.

The Credit Agreement includes a material adverse change clause that must be represented at each draw. The Credit Agreement also contains covenants that include a limitation on sales of assets, mergers, change of ownership, liens, indebtedness, transactions with affiliates, dividends and stock repurchases; and requires compliance with financial covenants including maximum leverage. We were in compliance with all required covenants as of June 30, 2026 and December 31, 2025.

As of June 30, 2026, we had combined aggregate principal of $3.0 billion from the following senior secured notes:

• $700 million of aggregate principal amount of 1.65% senior secured notes due in September, 2026 ("2026 Notes") which were issued on August 24, 2021. Interest on the 2026 Notes is payable on March 1st and September 1st until the maturity date of September 1, 2026.
• $500 million of aggregate principal amount of 4.625% senior secured notes due in October, 2029 ("2029 Notes") which were issued on September 26, 2024. Interest on the 2029 Notes is payable on April 15th and October 15th, commencing April 15, 2025 until the maturity date of October 15, 2029.

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• $800 million of aggregate principal amount of 2.65% senior secured notes due in October, 2030 ("2030 Notes") which were issued on September 21, 2020. Interest on the 2030 Notes is payable on April 15th and October 15th, until the maturity date of October 15, 2030.
• $500 million of aggregate principal amount of 2.65% senior secured notes due in January, 2032 ("2032 Notes") which were issued on August 24, 2021. Interest on the 2032 Notes is payable on January 15th and July 15th until the maturity date of January 15, 2032.
• $500 million of aggregate principal amount of 5.050% senior secured notes due in October, 2034 ("2034 Notes") which were issued on September 26, 2024. Interest on the 2034 Notes is payable on April 15th and October 15th, commencing on April 15, 2025 until the maturity date of October 15, 2034.

The 2026, 2029, 2030, 2032 and 2034 Notes (collectively "All the Notes") are guaranteed (the “Guarantees”) on a senior secured basis by all of our existing and future direct and indirect subsidiaries that guarantee our Credit Agreement, other first lien obligations, or any junior lien obligations (the "Subsidiary Guarantors"). All the Notes and the Guarantees are secured by first-priority liens, subject to permitted liens, on certain of the Company’s and the Subsidiary Guarantors’ assets now owned or acquired in the future by the Company or the Subsidiary Guarantors (other than real property, accounts receivable sold pursuant to a Company-related receivables facility (as defined in the Indentures pursuant to which All the Notes were issued (the “Indentures”), and certain other excluded assets). The Company’s obligations with respect to All the Notes, the obligations of the Subsidiary Guarantors under the Guarantees, and the performance of all of the Company’s and the Subsidiary Guarantors’ other obligations under the Indentures, are secured equally and ratably with the Company’s and the Subsidiary Guarantors’ obligations under the Credit Agreement. However, the liens on the collateral securing All the Notes and the Guarantees will be released if: (i) All the Notes have investment grade ratings; (ii) no default has occurred and is continuing, and; (iii) the liens on the collateral securing all first lien obligations (including the Credit Agreement and All the Notes) and any junior lien obligations are released or the collateral under the Credit Agreement, any other first lien obligations and any junior lien obligations is released or no longer required to be pledged. The liens on any collateral securing All the Notes and the Guarantees will also be released if the liens on that collateral securing the Credit Agreement, other first lien obligations and any junior lien obligations are released.

In connection with an asset purchase and sale agreement, and related lease agreements, completed with Universal Health Realty Income Trust ("Trust") in December 2021, our consolidated balance sheets at June 30, 2026 and December 31, 2025 reflect financial liabilities, which are included in debt, of approximately $68 million and $70 million, respectively. In connection with that transaction, as a result of our purchase option within the lease agreements related to two of our facilities, the asset purchase and sale transaction was accounted for as a failed sale leaseback in accordance with U.S. GAAP and we have accounted for the transaction as a financing arrangement. Our lease payments payable to the Trust are recorded to interest expense and as a reduction of the outstanding financial liability, and the amount allocated to interest expense is determined based upon our incremental borrowing rate and the outstanding financial liability.

At June 30, 2026, the carrying value and fair value of our debt were approximately $4.9 billion and $4.7 billion, respectively. At December 31, 2025, the carrying value and fair value of our debt were approximately $4.8 billion and $4.6 billion, respectively. The fair value of our debt was computed based upon quotes received from financial institutions. We consider these to be “level 2” in the fair value hierarchy as outlined in the authoritative guidance for disclosures in connection with debt instruments.

Our total debt as a percentage of total capitalization was approximately 39% and 40% as of June 30, 2026 and December 31, 2025, respectively.

We expect to finance all capital expenditures and acquisitions and pay dividends and potentially repurchase shares of our common stock utilizing internally generated and additional funds. Additional funds may be obtained through: (i) borrowings under our $1.5 billion revolving credit facility, which had $1.272 billion of available borrowing capacity as of June 30, 2026; (ii) borrowings under our $400 million delayed draw term loan A facility (as provided for by the Eleventh Amendment) which is expected to be drawn upon the closing of our acquisition of Talkspace, Inc. (expected to be consummated during the third quarter of 2026); (iii) through refinancing the existing Credit Agreement (including the $700 million of potential additional borrowing capacity provided for by the Twelfth Amendment in July, 2026); (iv) the issuance of other short-term and/or long-term debt, and/or; (v) the issuance of equity. We believe that our operating cash flows, cash and cash equivalents, available commitments under existing agreements, as well as access to the capital markets, provide us with sufficient capital resources to fund our operating, investing and financing requirements for the next twelve months. However, in the event we need to access the capital markets or other sources of financing, there can be no assurance that we will be able to obtain financing on acceptable terms or within an acceptable time. Our inability to obtain financing on terms acceptable to us could have a material unfavorable impact on our results of operations, financial condition and liquidity.

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Supplemental Guarantor Financial Information

As of June 30, 2026, we had combined aggregate principal of $3.0 billion from All the Notes:

• $700 million of aggregate principal amount of the 2026 Notes;
• $500 million of aggregate principal amount of the 2029 Notes;
• $800 million of aggregate principal amount of the 2030 Notes;
• $500 million of aggregate principal amount of the 2032 Notes, and;
• $500 million of aggregate principal amount of the 2034 Notes.

All the Notes are fully and unconditionally guaranteed pursuant to the Guarantees on a senior secured basis by the Subsidiary Guarantors. All the Notes and the Guarantees are secured by first-priority liens, subject to permitted liens, on certain of the Company’s and the Subsidiary Guarantors’ assets now owned or acquired in the future by the Company or the Subsidiary Guarantors (other than real property, accounts receivable sold pursuant to the Company’s existing receivables facility (as defined in the Indentures pursuant to which All the Notes were issued ), and certain other excluded assets). The Company’s obligations with respect to All the Notes, the obligations of the Subsidiary Guarantors under the Guarantees, and the performance of all of the Company’s and the Subsidiary Guarantors’ other obligations under the Indentures, are secured equally and ratably with the Company’s and the Subsidiary Guarantors’ obligations under the Credit Agreement. However, the liens on the collateral securing All the Notes and the Guarantees will be released if: (i) All the Notes have investment grade ratings; (ii) no default has occurred and is continuing, and; (iii) the liens on the collateral securing all first lien obligations (including the Credit Agreement and All the Notes) and any junior lien obligations are released or the collateral under the Credit Agreement, any other first lien obligations and any junior lien obligations is released or no longer required to be pledged. The liens on any collateral securing All the Notes and the Guarantees will also be released if the liens on that collateral securing the Credit Agreement, other first lien obligations and any junior lien obligations are released.

All the Notes will be structurally subordinated to all obligations of our existing and future subsidiaries that are not and do not become Subsidiary Guarantors of All the Notes. No appraisal of the value of the collateral has been made, and the value of the collateral in the event of liquidation will depend on market and economic conditions, the availability of buyers and other factors. Consequently, liquidating the collateral securing All the Notes may not produce proceeds in an amount sufficient to pay any amounts due on All the Notes.

We and our subsidiaries may be able to incur significant additional indebtedness in the future. Although our Credit Agreement contains restrictions on the incurrence of additional indebtedness and our Credit Agreement and All the Notes contain restrictions on our ability to incur liens to secure additional indebtedness, these restrictions are subject to a number of qualifications and exceptions, and the additional indebtedness incurred in compliance with these restrictions could be substantial. These restrictions also will not prevent us from incurring obligations that do not constitute indebtedness. In addition, if we incur any additional indebtedness secured by liens that rank equally with All the Notes, subject to collateral arrangements, the holders of that debt will be entitled to share ratably with holders of All the Notes in any proceeds distributed in connection with any insolvency, liquidation, reorganization, dissolution or other winding up of our company. This may have the effect of reducing the amount of proceeds paid to holders of All the Notes.

Federal and state fraudulent transfer and conveyance statutes may apply to the issuance of All the Notes and the incurrence of the Guarantees. Under federal bankruptcy law and comparable provisions of state fraudulent transfer or conveyance laws, which may vary from state to state, All the Notes or the Guarantees (or the grant of collateral securing any such obligations) could be voided as a fraudulent transfer or conveyance if we or any of the Subsidiary Guarantors, as applicable, (a) issued All the Notes or incurred the Guarantees with the intent of hindering, delaying or defrauding creditors or (b) under certain circumstances received less than reasonably equivalent value or fair consideration in return for either issuing All the Notes or incurring the Guarantees.

Basis of Presentation

The following tables include summarized financial information of Universal Health Services, Inc. and the other obligors in respect of debt issued by Universal Health Services, Inc. The summarized financial information of each obligor group is presented on a combined basis with balances and transactions within the obligor group eliminated. Investments in and the equity in earnings of non-guarantor subsidiaries, which would otherwise be consolidated in accordance with GAAP, are excluded from the below summarized financial information pursuant to SEC Regulation S-X Rule 13-01.

The summarized balance sheet information for the consolidated obligor group of debt issued by Universal Health Services, Inc. is presented in the table below:

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The summarized results of operations information for the consolidated obligor group of debt issued by Universal Health Services, Inc. is presented in the table below:

Affiliates Whose Securities Collateralize the Senior Secured Notes

All the Notes and the Guarantees are secured by, among other things, pledges of the capital stock of our subsidiaries held by us or by our secured Guarantors, in each case other than certain excluded assets and subject to permitted liens. Such collateral securities are secured equally and ratably with our and the Guarantors’ obligations under our Credit Agreement. For a list of our subsidiaries the capital stock of which has been pledged to secure All the Notes, see Exhibit 22.1 to this Report.

Upon the occurrence and during the continuance of an event of default under the indentures governing All the Notes, subject to the terms of the Security Agreement relating to All the Notes provide for (among other available remedies) the foreclosure upon and sale of the Collateral (including the pledged stock) and the distribution of the net proceeds of any such sale to the holders of All the Notes, the lenders under the Credit Agreement and the holders of any other permitted first priority secured obligations on a pro rata basis, subject to any prior liens on the collateral.

No appraisal of the value of the collateral securities has been made, and the value of the collateral securities in the event of liquidation will depend on market and economic conditions, the availability of buyers and other factors. Consequently, liquidating the collateral securities securing All the Notes may not produce proceeds in an amount sufficient to pay any amounts due on All the Notes.

The security agreement relating to All the Notes provides that the representative of the lenders under our Credit Agreement will initially control actions with respect to that collateral and, consequently, exercise of any right, remedy or power with respect to enforcing interests in or realizing upon such collateral will initially be at the direction of the representative of the lenders.

No trading market exists for the capital stock pledged as collateral.

The assets, liabilities and results of operations of the combined affiliates whose securities are pledged as collateral are not materially different than the corresponding amounts presented in the consolidated financial information of Universal Health Services, Inc.

Off-Balance Sheet Arrangements

During the three months ended June 30, 2026 there have been no material changes in the off-balance sheet arrangements consisting of standby letters of credit and surety bonds.

As of June 30, 2026 we were party to certain off balance sheet arrangements consisting of standby letters of credit and surety bonds which totaled $182 million consisting of: (i) $163 million related to our self-insurance programs, and; (ii) $19 million of other debt and public utility guarantees.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

There have been no material changes in the quantitative and qualitative disclosures about market risk during the six months ended June 30, 2026. Reference is made to Item 7A. Quantitative and Qualitative Disclosures About Market Risk in our Annual Report on Form 10-K for the year ended December 31, 2025.

Item 4. Controls and Procedures

As of June 30, 2026, under the supervision and with the participation of our management, including our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), we performed an evaluation of the effectiveness of our disclosure controls and

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procedures, as defined in Rule 13a-15(e) or Rule 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “1934 Act”). Based on this evaluation, the CEO and CFO have concluded that our disclosure controls and procedures are effective to ensure that material information is recorded, processed, summarized and reported by management on a timely basis in order to comply with our disclosure obligations under the 1934 Act and the SEC rules thereunder.

Changes in Internal Control Over Financial Reporting

There have been no changes in our internal control over financial reporting during the second quarter of 2026 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II. OTHER INFORMATION

Item 1. Legal Proceedings

See Note 6 to the Condensed Consolidated Financial Statements-Commitments and Contingencies to our condensed consolidated financial statements in Item 1 of Part I of this report for a description of our legal proceedings. Such information is hereby incorporated by reference.

Item 1A. Risk Factors

The following is an update to the risk factors set forth in our Annual Report on Form 10-K for the fiscal year ended December 31, 2025. Other than the following updates, there have been no material changes to the risk factors previously disclosed under the heading “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2025. You should carefully consider the risk factors contained in our Annual Report on Form 10-K, our Quarterly Reports on Form 10-Q and our other filings made with the Securities and Exchange Commission.

The success of our acquisition of Talkspace, Inc. is subject to numerous risks and uncertainties.

On March 9, 2026, we announced that we entered into a definitive agreement to acquire Talkspace, Inc. ("Talkspace") for $5.25 per share, or approximately $835 million in the aggregate. The transaction was approved by Talkspace's stockholders during the second quarter of 2026. The transaction is expected to close during the third quarter of 2026 and is subject to satisfaction of regulatory approvals and other customary closing conditions. Talkspace is a virtual behavioral healthcare company, with a network of approximately 6,000 licensed professionals that serve all 50 states, Washington, D.C., and Puerto Rico. We intend to finance the acquisition of Talkspace with additional borrowings pursuant to our Credit Agreement, as amended in April, 2026, as discussed in Note 4 to Condensed Consolidated Financial Statements – Treasury - Credit Facilities and Outstanding Debt Securities.

The acquisition is subject to numerous risks and uncertainties including the occurrence of any event, change or other circumstances that could give rise to the termination of the merger agreement or the failure to satisfy the closing conditions; the possibility that the consummation of the proposed acquisition is delayed or does not occur; uncertainty as to whether the parties will be able to complete the merger on the terms set forth in the merger agreement; uncertainty regarding the timing of the receipt of required regulatory approvals for the merger and the possibility that the parties may be required to accept conditions that could reduce or eliminate the anticipated benefits of the merger as a condition to obtaining the outcome of any legal proceedings that may be instituted against the parties or others following announcement of the transactions contemplated by the merger agreement; challenges, disruptions and costs of closing, integrating the business and achieving anticipated synergies, or that such synergies will take longer to realize than expected; failure to retain key employees of Talkspace during the period prior to closing or thereafter; failure to retain a significant portion of Talkspace’s providers or relationships with payors, risks that the merger and other transactions contemplated by the merger agreement disrupt current plans and operations that may harm the parties’ businesses or divert management’s attention from the parties’ ongoing business operations; and the amount of any costs, fees, expenses, impairments and charges related to the merger including costs and use of capital related to financing the merger.

Our performance depends on our ability to recruit and retain quality physicians.

Typically, physicians are responsible for making hospital admissions decisions and for directing the course of patient treatment. As a result, the success and competitive advantage of our hospitals depends, in part, on the number and quality of the physicians on the medical staffs of our hospitals, the admitting practices of those physicians and our maintenance of good relations with those physicians. Physicians generally are not employees of our hospitals, and, in a number of our markets, physicians have admitting privileges at other hospitals in addition to our hospitals. They may terminate their affiliation with us at any time. If we are unable to maintain high ethical and professional standards, adequate support personnel and technologically advanced equipment and facilities that meet the needs of those physicians, they may be discouraged from referring patients to our facilities and our results of operations may decline.

It may become difficult for us to attract and retain an adequate number of physicians to practice in certain communities in which our hospitals are located. Our failure to recruit physicians to these communities or the loss of physicians in these communities could make it more difficult to attract patients to our hospitals and thereby may have a material adverse effect on our business, financial condition and results of operations. The loss of one or more of these physicians, even if temporary, could cause a material reduction in our revenues, which could take significant time to replace given the difficulty and cost associated with recruiting and retaining physicians.

In connection with the operations at our George Washington University Hospital and Cedar Hill Regional Medical Center located in Washington, D. C. (the “District Hospitals”), in late May 2026, we finalized negotiations and executed agreements with The George Washington University (the “University”) and the faculty medical group, The Medical Faculty Associates, Inc. (“MFA”), to change the arrangement among the parties. On August 1, 2026, Foggy Bottom Physicians Group d/b/a/ Capital Medical Group (“CMG”) began operations as a physician led non-profit entity employing all transitioning former MFA physicians, advanced practice providers and staff. A wholly-owned subsidiary of ours is the entity's sole member. The District of Columbia’s Office of the Attorney General

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(“OAG”) is reviewing the transaction under their assertion of authority pursuant to the Healthcare Equity Conversion Act. Although we dispute the OAG’s jurisdiction over this matter, we are cooperating with the OAG as they conduct their review which is expected to be completed by the end of the third quarter of 2026. Once the OAG’s review has been completed, the OAG may approve the transaction as currently structured, reject the transaction, or approve the transaction subject to certain conditions.

Although the OAG's review is ongoing, we have assumed management and financial responsibility for the operations of CMG effective as of August 1, 2026. If the transaction is not approved, or approved subject to conditions that are not acceptable to us, the transaction may have to be unwound. In addition, since not all of the physicians affiliated with the MFA joined CMG, there is a risk that some physicians who have traditionally treated their patients at the District Hospitals may choose to not treat their patients at the District Hospitals.

If as a result of the OAG's review the transaction is ultimately unwound, or significantly changed from its current form, and/or the anticipated benefits of the transition are not realized, the operations and financial performance of the District Hospitals could be materially adversely impacted which could potentially result in a material adverse effect on our consolidated results of operations.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

As of December 31, 2025, we had an aggregate available repurchase authorization of $1.4 billion pursuant to our stock repurchase program. Pursuant to this program, shares of our Class B Common Stock may be repurchased, from time to time as conditions allow, on the open market or in negotiated private transactions. There is no expiration date for our stock repurchase program.

As reflected below, during the three-month period ended June 30, 2026, we have repurchased approximately 1,890,298 shares at an aggregate cost of approximately $320.3 million (average price of approximately $169.43 per share) pursuant to the terms of our stock repurchase program. In addition, during the three-month period ended June 30, 2026, 2,800 shares were repurchased in connection with income tax withholding obligations resulting from stock-based compensation programs.

During the period of April 1, 2026 through June 30, 2026, we repurchased the following shares:

Dividends

During the quarter ended June 30, 2026, we declared and paid dividends of $.20 per share. Dividend equivalents are accrued on unvested restricted stock units and will be paid upon vesting of the restricted stock unit.

Item 5. Other Information

(c) None of the Company’s directors or officers adopted, modified or terminated a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement during the Company’s quarter ended June 30, 2026, as such terms are defined under Item 408(a) of Regulation S-K.

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Item 6. Exhibits

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UNIVERSAL HEALTH SERVICES, INC. AND SUBSIDIARIES

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