Editor's note: This story was updated on Oct. 28 at 11:30 a.m. with executive commentary from Universal Health Services' third quarter earnings call.
Universal Health Services grew revenues 5.3% year over year but saw its earnings slow during this year’s third quarter due to soft surgical activity, a rise in cash pay and a few underperforming facilities, executives said during the company's Wednesday morning analyst call.
The acute and behavioral health company reported net income of $308.7 million ($5.22 per diluted share), as opposed to last year’s $373 million ($5.86 per diluted share), while its net revenue grew 5.3% year over year to about $4.7 billion.
The consensus estimate for earnings and revenue, per a Zacks Investment Research consensus from last week, was $5.33 per diluted share and $4.7 billion, though more recent analyst consensus from investing.com outlined a $5.20 per share expectation.
While executives described the performance as evidence of growth since the year's earlier quarters—thanks to broad care demand and capacity investments recently brought online—they're currently expecting the year's financial results to land "towards the lower end" of the forecast ranges provided last quarter.
They also acknowledged continued pressure on the health insurance exchanges (a $15 million headwind if current trends continue), a reduction in Medicaid supplemental payments (expected to be $175 million to $200 million less than 2026) and other policy-related uncertainties such as the rollout of Medicaid work requirements will be "the biggest swing factors" that could drag UHS in 2027.
On the work requirements portion specifically, Chief Financial Officer Steve Filton told analysts that any impact would be most greatly felt in Medicaid expansion states, but hedged by noting that "a vast majority of behavioral health patients and a meaningful portion of our acute care patients could be exempt" due to the medical frailty exemption.
On the flip side, Filton said any improvement in a slower-than-anticipated ramp-up for two newly opened acute care facilities and the recertification of a behavioral facility—which in 2026 are expected to collectively bring an $80 million to $100 million operating loss—would be the clearest opportunity for improvement in 2027 earnings.
At the beginning of Wednesday's trading session, which followed the morning call, UHS' shares were initially trading about 4% below the prior day's close before rallying through the morning. The activity has moderated to roughly the prior day's close as of noon.
Investor sentiment was somewhat dour following the quarterly report from fellow for-profit chain HCA Healthcare, whose executive commentary similarly described payer mix difficulties and tepid 2027 optimism.
UHS’ latest numbers outlined a substantial, capacity-fueled volume uptick in its acute care business, but a drop in payments, compared to its performance during the first half of the year.
During the third quarter, same-facility adjusted admissions and adjusted patient days both rose 4.9% year over year, whereas during the year’s first six months, it had reported 1.4% and 1.9% year-over-year growth. On the other hand, same-facility net revenue per adjusted admission and per adjusted patient day fell by 1.7% (compared to the first six months’ 4.6% and 4.2% growth) and overall same-facility acute care revenue.
Of note, UHS’ third quarter in 2025 marked a spike in revenue metrics that executives admitted likely wasn’t entirely sustainable, making it a tough comparison to the latest quarter’s performance. Still, executives on Wednesday acknowledged a weakened payer mix stemming from changes on the exchanges and slowed surgical volumes.
For the former, executives said insurance exchange drop-offs had an impact of just under $25 million during the third quarter, "which was consistent with the updated outlook provided in July." This stemmed from a 17% decline in exchange volumes and a "similar" rise in self-pay volumes.
Slowed surgical volumes, meanwhile, are "an acceleration of existing trends" where procedures are moving out of the hospital and into alternative settings. This is particularly true for elective procedures, with Filton calling out gastrointestinal procedures as a standout, as "even the emergency procedures that would have traditionally come to our emergency rooms are being diverted elsewhere." He described the trend as a "compounding" issue, adding that "we have found it difficult even to get GIs to cover our emergency rooms. We either cannot get them to do it at all."
On the expense side, UHS reported an increase in salaries, wages and benefits (SWB) spending relative to net revenues (from 39.1% to 40%) on a same-facility basis. Filton said that temporary and traveling labor costs were "well controlled" with just a 3% rise, while general wage inflation has slowed.
Across 2026’s nine months, and all on a same-facility basis, UHS reported year-over-year increases of 2.6% for adjusted admissions, 2.9% for adjusted patient days, 2.4% for net revenue per adjusted admission, 2.1% for net revenue per adjusted patient day and 7% for overall acute care revenues. Same-facility SWB as a percentage of net revenues declined slightly from 39.8% to 39.4%.
Year-over-year growth was more steady, though less substantial, within the behavioral health segment. For the quarter and on a same-facility basis, adjusted admissions rose 2.5%, and adjusted patient days increased 2.1%. Net revenue per adjusted admission rose by 1.7%, net revenue per adjusted patient day by 2.1%, and overall net revenues by 4%. Same-facility SWB as a percentage of net revenues rose from 54.6% to 55.6%.
Over nine months and on a same-facility basis, UHS reported year-over-year growth of 1.4% for adjusted admissions, 1.7% for adjusted patient days, 4.9% for revenue per adjusted admission, 4.7% for revenue per adjusted patient day and 6.2% for overall revenue. Same-facility SWB rose from 54.1% to 54.3%, with Filton noting that UHS' push to hire more staff at behavioral facilities to relieve a capacity bottleneck has now started to slow.
Compared to the forecast UHS shared at the year’s halfway mark, its operating performance included an extra $47 million pre-tax boost from states’ Medicaid supplemental payment programs, partially offset by $8.5 million of costs related to its Talkspace buy and $26 million the company spent to bolster its liability reserves after a tentative legal settlement reached during the quarter.
UHS comprises 30 inpatient acute care facilities, 388 inpatient behavioral health facilities, 169 outpatient facilities and, as of the close of August’s $835 million Talkspace acquisition, a virtual behavioral health services platform. It reported $17.4 billion in revenue in 2025.