Dive Brief:
- For-profit hospital operator Universal Health Services expects to increase admissions and hit long-standing growth targets in its behavioral health unit this year, executives said on a fourth-quarter earnings call Thursday.
- Executives said 2026 would be the year its behavioral health unit achieved 2% to 3% growth in adjusted patient days — a number the system has struggled to hit as it tries to address lagging growth at its behavioral facilities. The system initially expected to hit that target last year, but deferred due to challenges with labor and staffing.
- Still, executives said they anticipate multiple headwinds this year, including losses from the lapse of more generous subsidies in Affordable Care Act plans and a new staffing law in California.
Dive Insight:
UHS has embarked on multiple different growth strategies for its behavioral health unit, the largest segment of its portfolio. It’s attempted to improve staffing and labor, a key focus last year, after executives said staffing shortages held back growth in the unit.
The operator also tried increasing its outpatient portfolio, which executives said should help it capture more volumes and improve its margins. UHS’ portfolio currently skews heavily inpatient — it has 345 inpatient behavioral facilities and 119 outpatient locations. Outpatient services represent 10% of revenue in its behavioral segment, CEO Marc Miller said on the earnings call.
Still, improvements weren’t enough to meet its 2% to 3% patient day admissions growth target last year. Executives started hedging that UHS might not meet its goal during the second quarter and confirmed in the next that its growth was a “reasonable target for [2026].”
To hit that goal this year and improve growth, UHS said it hopes improvements made last year in staffing and headcount would start to pay off.
It’s also prioritized expanding “step-in” facilities — outpatient centers for patients that have not yet entered an inpatient facility (that’s in contrast to “step-down” facilities, for patients transitioning to outpatient from inpatient care). UHS plans to open 10 more freestanding outpatient locations under its “Thousand Branches Wellness” brand this year, executives said.
Behavioral health adjusted patient days grew 1.5% in the fourth quarter compared to the prior year period, within “shouting distance” of its larger target, CFO Steve Filton said.
Growth in its behavioral unit underpins UHS’ 2026 overall guidance. The hospital operator expects to grow adjusted admissions 2% to 3% in both its acute and behavioral segments. Executives said they also expect to increase revenue between 6% to 8%, to hit between $18.4 billion and $18.8 billion for the full year.
Its guidance factors in a $75 million loss due to the expiration of ACA subsidies. The enhanced subsidies, passed during the COVID-19 pandemic, lapsed at the end of last year after Congress declined to extend them.
Without the subsidies, premiums for millions of Americans are expected to more than double on average this year. Millions more are expected to lose insurance, leading to less revenue and more uncompensated care for U.S. providers.
UHS’ loss is about in-line with its peers. Due to the size and location of their hospital portfolios, operators like Tenet and HCA have expected losses from $250 million to up to $900 million, while CHS expects to lose up to $30 million from the lapse.
The loss will be concentrated in its 29-hospital acute care portfolio. Exchange volumes represented about 6% of its acute care admissions in 2025 and slightly less than 5% of its revenue, Filton said.
Its guidance also includes a $35 million hit in its behavioral unit this year from a new California law that mandates more staffing in the state’s acute psychiatric hospitals. The law, which will go into effect in June, requires facilities to have at least one licensed nurse per six adult patients, or one nurse per five pediatric patients, at all times.
UHS expects to incur higher labor costs to recruit and train new staff. Beyond 2026, UHS expects an annual $30 million ongoing cost to comply with the law.
In the fourth quarter of 2025, UHS reported flat volumes in its acute hospital unit, reversing a trend where UHS’ hospitals usually outperform on admissions compared to its behavioral facilities.
The reversal caused UHS to fall below Wall Street expectations in its acute unit, while outpacing them in its behavioral unit, according to a Friday note from TD Cowen analyst Ryan Langston. Adjusted earnings before interest, taxes, depreciation and amortization reached $679 million in the fourth quarter, compared with $615 million in the prior-year period.
Shares in UHS dropped roughly 10% following the release of its earnings, a drop Langston called “overdone.”
