Universal Health Services, Inc. Class B 2026 Global Healthcare Conference

Yeah, I'll make just a couple of quick things, maybe a recap a bit of Q2, which I know seems like a long time ago. We were pleased in Q2 with the rebounded volumes in both of our business segments. The continued, we think, effective cost control in both segments. We had the benefit of the Florida Directed Payment Program monies that related to calendar year 2025. Offsetting those favorable items were some unfavorable exogenous items, which I'm guessing we'll get into in a little bit more detail. As a result of all those items, we did revise our guidance in Q2, our full-year guidance for 2026. From the midpoint of an EBITDA less NCI perspective down about 3% at that midpoint, leading us to a projection for the year of EBITDA growth of about 3% and EPS growth of about 6%.

Subsequent to the second quarter, probably the two most significant items are we closed the Talkspace transaction, which I'm sure we'll talk a little bit more about, and we completed a bond issuance of $1.1 billion, setting us up for the next several years. Very excited about the Talkspace acquisition. Really an opportunity for us to accelerate our outpatient growth and behavioral access to the 6,000 therapists that Talkspace has on their panel. Again, I'm sure we'll get into all that. Yeah, I'm happy to answer your questions, Michael.

Yeah. The slight downward revision in our projected acute adjusted admissions for the year was really, I think, just an acknowledgment of the real soft first quarter admissions. I think our original guidance, where the midpoint was about 2.5%, would be difficult to achieve given the softer first quarter volumes. The 2% midpoint for the year seems just more reasonable and achievable. And I put that in the context of, if you look at our last 10 years of experience, I think acute care adjusted admissions have basically traded in a sort of 2%-2.5% range. So the 2% that we've got for this year is well within that range. It's, I think, reflective of the fact that we think that overall volumes are relatively solid.

As far as your question about what would drive it to be on the upside or the downside, I think it's to some degree the continued ramp of the de novo facilities, particularly Cedar Hill. It's how quickly the 177 beds that we added in the second quarter to our existing facilities ramp up, and we think that'll happen relatively quickly. But generally view the demand environment in acute to be relatively stable and fairly consistent with historical norms.

Yeah. I think it's worth just providing just a tad bit of perspective. The impetus to build that Cedar Hill facility really came from the District of Columbia government itself. They viewed that part of the district, which is Ward 7 and 8, as a historically underserved part of the district from a healthcare perspective, and they were extremely anxious to build a state-of-the-art facility operated by an experienced mature operator. We have a long history with the district at GW Hospital. And so the district undertook the capital commitment. They put up the funds to build the hospital, several hundred million USD worth of investment. We have a long-term operating and management agreement with them.

When we opened the facility back about a year and a half ago in April of 2025, what we found was almost immediately, and you alluded to this in your question, Michael, emergency room volumes were quite strong, which I think was reflective of the fact that, in fact, the residents of that part of the district really were hungering for this opportunity to have their own facility, one that they could go to for quality care, et cetera. Honestly, I would say we were almost overwhelmed by the emergency room volumes at the outset. What we were lacking, and again, I know your question addressed this, was a balance of more elective procedures.

I think the reason for that is that because historically, most people in Ward 7 and 8 were leaving that part of the city to get their healthcare elsewhere, there really was a lack of what I would describe as physician infrastructure. Primary care physicians, specialists, they just didn't have their offices in Ward 7 and 8, and that's what really needs to happen. We need to have more physicians based in and around the hospital. We're recruiting physicians. We are doing our best, not just necessarily recruiting new physicians, but getting physicians who have a presence elsewhere in the district to open offices in Ward 7 and 8, et cetera. That's what I think will happen. It's taking some time, maybe a little bit longer than we expected.

I think we normally view the ramp-up of a de novo hospital to take about 18 or 36 months before it reaches divisional averages. In the case of Cedar Hill, it's taking somewhat longer than that. We do project and have said that we expect to get to breakeven in Q4. The one nuance that I'd highlight, however, is that because we didn't provide the capital to build the hospital, to get to our target rate of returns for this particular project, we'll be able to do so without getting to necessarily average margins or average absolute levels of profitability. Your last question, or the last part of your question was, how does the migration of the medical faculty group that was owned and run by The George Washington University Hospital for many years, and that we took over for that early in the third quarter.

How does that affect the Cedar Hill ramp-up? I think we'll have some of those physicians helping us in Cedar Hill. But the reality is most of those physicians will practice at GW. They have practiced at GW historically and will continue to. So I don't think that's going to have a big impact. I think it'll be mostly non-GW or non-medical faculty, or we call it Capital Medical Group physicians, that'll staff the Cedar Hill facility.

Yeah. If you go back to just the previous question and the comment that I made about it usually takes 18-36 months for a facility to ramp up and get to divisional averages. West Henderson, and we've commented on this before, became profitable in its first full quarter of operation. It opened in December 2024, and it was profitable by the first quarter of 2025. Not necessarily divisional averages, but even that accelerated ramp-up is really extraordinary, and honestly, we've only experienced that in hospitals in Las Vegas. To your point, there was demand. Henderson and now West Henderson are located in the southeast part of the market. That's a market that was really owned by a competitor for the longest time. Nobody else competed there. Henderson opened and was very busy, and then the population continued to move west, and we saw the need to open yet another hospital.