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YoY shift: Neutral
Year-over-year tone shift - average net-tone change across Risk Factors and MD&A vs the prior 10-K. This filing is -0.09pp more bearish than last year's.
Why YoY instead of absolute: the LM lexicon has ~6.6× more negative words than positive (legal/risk-disclosure language is heavy on hedging), so every 10-K reads bearish on raw tone. Year-over-year change strips that bias and surfaces the actual shift in management's framing.
Tone shift by section
The two components the gauge averages: how Risk Factors and MD&A each shifted in net tone versus last year's 10-K. The headline above is their average, so a green needle over a soft section just means the other section carried it.
Risk Factors
-0.10pp
Flat
Net-tone change vs last year's 10-K.
MD&A
-0.08pp
Flat
Net-tone change vs last year's 10-K.
Per-snippet highlights
Sentence-level sentiment highlighting with category and subcategory filters is coming once the snippet-scoring pipeline lands. For now, dig into the actual section text on the Sections tab.
Language change vs prior 10-K
Risk Factors (Item 1A) - words with the biggest YoY frequency increase
Negative rising
incidents+3
incident+2
adverse+1
harm+1
failure+1
Positive rising
successful+1
greater+1
enable+1
enabled+1
Risk Factors (Item 1A)
10,424 words
ITEM 1A. RISK FACTORS
Our business is subject to a number of risks and uncertainties, many of which are beyond our control, that may cause our actual operating results or financial performance to be materially different from our expectations and make an investment in our securities risky. The disclosures in this section reflect our beliefs and opinions as to factors that could materially and adversely affect us in the future. References to past events are provided by way of example only and are not intended to be a complete listing or a representation as to whether or not such factors have occurred in the past. If one or more of the events discussed in this report were to occur, actual outcomes could differ materially from those expressed in or implied by any forward‑looking statements we make in this report or our other filings with the SEC, and our business, financial condition, results of operations or liquidity could be materially adversely affected; furthermore, the trading price of our common stock could decline and our shareholders could lose all or part of their investment. Additional risks and uncertainties not presently known, or currently deemed immaterial, may also constrain our business and operations.
Language change vs prior 10-K
MD&A (Item 7) - words with the biggest YoY frequency increase
Negative rising
losses+16
divestiture+3
terminated+2
denials+1
limitations+1
Positive rising
satisfied+1
favorable+1
greater+1
enhanced+1
beautiful+1
MD&A (Item 7)
22,879 words
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
INTRODUCTION TO MANAGEMENT’S DISCUSSION AND ANALYSIS
The purpose of this section, Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”), is to provide a narrative explanation of our financial statements that enables investors to better understand our business, to enhance our overall financial disclosures, to give context to the analysis of our financial information, and to provide information about the quality of, and potential variability of, our financial condition, results of operations and cash flows. MD&A, which should be read in conjunction with the accompanying Consolidated Financial Statements, includes the following sections:
• Management Overview
• Sources of Revenue for Our Hospital Operations and Services Segment
• Results of Operations
• Liquidity and Capital Resources
• Recently Issued Accounting Standards
• Critical Accounting Estimates
Our business consists of our Hospital Operations and Services (“Hospital Operations”) segment and our Ambulatory Care segment. Our Hospital Operations segment is comprised of our acute care and specialty hospitals, a network of employed physicians and ancillary outpatient facilities. At December 31, 2025, our subsidiaries operated 50 hospitals serving primarily urban and suburban communities in eight states. Our Hospital Operations segment also included 132 outpatient facilities, namely care centers, imaging centers, off-campus hospital emergency departments and micro‑hospitals, at December 31, 2025. In addition, our Hospital Operations segment provides revenue cycle management and value‑based care services to hospitals, health systems, physician practices, employers and other clients through Conifer Health Solutions, LLC.
If we are unable to enter into, maintain and renew managed care contractual arrangements on competitive terms, if we experience material reductions in the contracted rates we receive from managed care payers or if we have difficulty collecting from managed care payers, our results of operations could be adversely affected.
Our ability to enter into, maintain and renew favorable contracts with HMOs, insurers offering preferred provider arrangements and other managed care plans, as well as add new facilities to our existing agreements at contracted rates, significantly affects our revenues and operating results. For the year ended December 31, 2025, approximately 70%, or $9.696 billion, of our net patient service revenues for the hospitals and related outpatient facilities in our Hospital Operations segment was attributable to managed care payers, including Medicare and Medicaid managed care programs.
The ongoing trend toward consolidation among non‑government payers tends to increase their bargaining power over contract terms. Generally, we compete for these contracts on the basis of price, market reputation, geographic location, quality and range of services, caliber of the medical staff and convenience. If we are unable to negotiate increased reimbursement rates, maintain existing rates or other favorable contract terms, effectively respond to managed care payer cost controls and reimbursement policies, or comply with the terms of our contracts, the payments we receive for our services may be reduced. Also, in recent years, we have increasingly experienced payment denials from and other administrative challenges with managed care payers, both prospectively and retroactively.
We currently have thousands of managed care contracts with various HMOs and PPOs; however, our top 10 managed care payers generated 69% of our managed care net patient service revenues for the year ended December 31, 2025. Because of this concentration, we may experience a short‑ or long‑term adverse effect on our net operating revenues if we cannot renew, replace or otherwise mitigate the impact of expired contracts with significant payers. Furthermore, material payment delays and disputes between us and significant managed care payers could have a material adverse effect on our financial condition, results of operations or cash flows. At December 31, 2025, 67% of our Hospital Operations segment’s net accounts receivable was due from managed care payers.
In addition, managed care payers continue to seek to control healthcare costs by encouraging patients to use certain facilities in exchange for discounts from the facilities’ established charges, and through increased utilization reviews and greater enrollment in HMOs and PPOs. Any agreed-upon negotiated discount programs generally limit our ability to increase reimbursement rates to offset increasing costs. In addition, enrollment of individuals in high-deductible health plans has increased over the last decade. In comparison to traditional health plans, these plans have higher co-pays and deductibles due from patients, which subjects us to increased collection risk.
Our relationships with payers, and reimbursement for the care we provide, may be further impacted by clinical and price transparency initiatives and out‑of‑network billing restrictions, including those in the No Surprises Act. In general, any material reductions in the contracted or out-of-network rates we receive for our services or any significant difficulties in collecting receivables from managed care payers could have a material adverse effect on our financial condition, results of operations or cash flows.
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Recent and potential future changes to healthcare laws, regulations and policies could have an adverse effect on our business.
Over the past several years, various laws and regulations lengthened the enrollment period, expanded income eligibility, and provided EPTCs to eligible individuals purchasing Affordable Care Act coverage through state and federal health insurance marketplaces. Certain of these provisions expired at the end of 2025, resulting in significant increases in health insurance premiums. Such increases have led to decreases in enrollment and insurance coverage, and are expected to cause a corresponding rise in the uninsured or a shift of individuals from commercial coverage to government program coverage or other more limited coverage alternatives beginning in 2026. As such, we may experience decreased patient volumes, reduced revenues and an increase in uncompensated care, which would adversely affect our results of operations and cash flows.
Moreover, once the OBBBA is implemented, the Congressional Budget Office anticipates that millions of individuals could lose health insurance between now and 2034. At this time, we cannot estimate the OBBBA’s impact, nor can we predict the timing of that impact, on our future business, financial condition or results of operations, however, we may experience decreased payments (including supplemental payments) from Medicare, Medicaid and other government programs, as well as delays in the timing of payments to our facilities.
We also cannot predict whether or how Congress may further extend or modify provisions of or relating to the Affordable Care Act, the OBBBA or other laws affecting the healthcare industry generally, nor can we predict how government agencies or the current administration might further influence, promulgate or implement rules, regulations or executive orders that affect the healthcare industry directly or indirectly. Furthermore, we cannot predict the impact healthcare policy risks and uncertainties may have on the trading price of our common stock.
Changes to the Medicare and Medicaid programs or other government healthcare programs, including reductions in scale and scope, could have a material adverse effect on our business.
We are unable to predict the effect of future government healthcare funding policy changes on our business. If the rates paid by governmental payers are materially reduced, if the scope of services covered by governmental payers is significantly limited, if eligibility or enrollment is further restricted, if there are changes to align payment rates for certain procedures across various care settings in a site neutral manner, or if we or one or more of our hospitals are excluded from participation in the Medicare or Medicaid program or any other government healthcare program, there may be a material adverse effect on our business, financial condition, results of operations or cash flows. Future federal and state healthcare funding policy changes, along with other initiatives and requirements, may, among other things, adversely affect our patient volumes, case mix and revenue mix, increase our operating costs, materially reduce the reimbursement we receive for our services, diminish our competitive position or require us to expend resources to modify certain aspects of our operations.
For the year ended December 31, 2025, approximately 15% and 11% of our net patient service revenues for the hospitals and related outpatient facilities in our Hospital Operations segment were from the Medicare program and various state Medicaid programs, respectively, in each case excluding Medicare and Medicaid managed care programs. The Medicare and Medicaid programs are subject to:
• statutory and regulatory changes, administrative and judicial rulings, executive orders, interpretations and determinations concerning eligibility requirements, funding levels and the method of calculating reimbursements, among other things;
• requirements for utilization review; and
• federal and state funding restrictions.
Any of these factors could materially increase or decrease payments from these government programs in the future, as well as affect the cost of providing services to our patients and the timing of payments to our facilities, which could in turn adversely affect our overall business, financial condition, results of operations or cash flows.
Several states in which we operate continue to face budgetary challenges that have resulted in reduced Medicaid funding levels to hospitals and other providers. Because most states must operate with balanced budgets, and the Medicaid program is generally a significant portion of a state’s budget, states can be expected to reevaluate their financial plans for 2026 and beyond. The OBBBA’s legislative and forthcoming regulatory changes may result in material reductions to Medicaid payments, changes and reductions to Medicaid supplemental payment programs, and payment delays. Federal government denials or delayed approvals of state waiver applications or extension requests could also materially impact Medicaid funding levels, most significantly in those states that have expanded Medicaid.
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Because we cannot predict what actions the federal government or the states may take under existing or future legislation and/or regulatory changes to address budget gaps, deficits, Medicaid expansion, Medicaid eligibility redeterminations, provider fee programs, state‑directed payment programs or Medicaid Section 1115 waivers, we are unable to assess the effect that any such legislation or regulatory action might have on our business; however, the overall adverse impact on our future financial position, results of operations or cash flows could be material.
It is essential to our ongoing business that we attract an appropriate number of quality physicians in the specialties required to support our services and that we maintain good relations with those physicians.
The success of our business and clinical program development depends in large part on the number, quality, specialties, and admitting and scheduling practices of the licensed physicians who are members of the medical staffs of our hospitals and other facilities, as well as physicians who affiliate with us and use our facilities as an extension of their practices. Physicians are often not employees of the hospitals or surgery centers at which they practice. Members of the medical staffs of our facilities also often serve on the medical staffs of facilities we do not operate, and they are free to terminate their association with our facilities or admit their patients to competing facilities at any time. In addition, although physicians who own interests in our facilities are generally subject to agreements restricting them from owning an interest in competing facilities, we may not learn of, or may be unsuccessful in preventing, our physician partners from acquiring interests in such facilities.
We compete with system‑affiliated hospitals and healthcare companies, as well as health insurers and private equity companies, in recruiting physicians, acquiring physician practices and, where permitted by law, employing physicians. In 2025, we continued to experience challenges in recruiting and retaining physicians. In some of the regions where we operate, physician recruitment and retention are affected by a shortage of qualified physicians in certain higher-demand clinical service lines and specialties. Furthermore, our ability to recruit and employ physicians is closely regulated. For example, the types, amount and duration of compensation and assistance we can provide to recruited physicians are limited by the federal Anti‑kickback Statute and Stark law, as well as other applicable antifraud and abuse laws and regulations. All arrangements with physicians must also be fair market value and commercially reasonable. If we are unable to attract and retain sufficient numbers of quality physicians by providing adequate support personnel, technologically advanced equipment, and facilities that meet the needs of those physicians and their patients, physicians may choose not to refer patients to our facilities, admissions and outpatient visits may decrease, and our operating performance may decline.
Our labor costs have been, and may continue to be, adversely affected by competition for staffing, the shortage of experienced nurses and other healthcare professionals, and labor union activity.
Our operations are dependent on the availability, efforts, abilities and experience of management and medical support personnel, including nurses, therapists, pharmacists and lab technicians, among others. We compete with other healthcare providers in recruiting and retaining qualified personnel responsible for the operation of our facilities. There is limited availability of experienced medical support personnel nationwide, which drives up the wages and benefits required to recruit and retain employees. In particular, like others in the healthcare industry, we continue to experience shortages of advanced practice clinicians and critical‑care nurses in certain disciplines and geographic areas.
We also depend on the general labor pool of available workers in the areas where we operate. In some of our communities, employers across various industries have increased their minimum wage, which has created more competition and, in some cases, higher labor costs for this sector of employees. Furthermore, state-mandated minimum wage increases in California became effective for healthcare workers in October 2024, with further annual increases anticipated through 2028.
As a result of the aforementioned challenges, we have been, and we may continue to be, required to enhance wages and benefits to recruit and retain experienced employees, pay premiums above standard compensation for essential workers, make greater investments in education and training for newly licensed medical support personnel, or hire more expensive temporary or contract employees, which we also compete with other healthcare providers to secure. In addition, inflationary pressures, which we are unable to predict or control, may continue to impact our salaries, wages, benefits and other costs.
Increased labor union activity is another factor that can adversely affect our labor costs. At December 31, 2025, approximately 20% of the employees in our Hospital Operations segment were represented by labor unions. Unionized employees – primarily registered nurses and service, technical and maintenance workers – are located at 27 of our hospitals, the majority of which are in California, Florida and Michigan. Organizing activities by labor unions could increase our level of union representation in future periods. When we are negotiating collective bargaining agreements with unions (whether such agreements are renewals or first contracts), work stoppages and strikes may be threatened or occur. Extended strikes have had, and could in the future have, an adverse effect on our patient volumes, net operating revenues and labor costs at individual hospitals or in local markets.
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For the reasons stated above, our failure to successfully recruit qualified employees, manage attrition, avoid labor disruptions, control costs and plan for future labor needs could have a material adverse effect on our ability to treat patients and our overall business, financial condition, results of operations or cash flows.
Our hospitals, outpatient centers and other healthcare businesses operate in competitive environments, and this competition can adversely affect their performance.
We believe our hospitals and outpatient facilities compete within local areas and regions on the basis of many factors, including: quality of care; location and ease of access; the scope and breadth of services offered; reputation; and the caliber of the facilities, equipment and employees. Furthermore, healthcare consumers are able to access performance data on quality measures and patient satisfaction, as well as pricing information for services, to compare competing providers. In addition, the No Surprises Act requires providers to send to health plans of insured patients and to uninsured patients good faith estimates of the expected charges and diagnostic codes prior to the scheduled dates of services. If any of our facilities achievepoor results (or results that are lower than our competitors) on quality measures or patient satisfaction surveys, or if our pricing is or is perceived to be higher than our competitors, we may attract fewer patients. In addition, the competitive positions of hospitals and outpatient facilities depend in part on the number, quality, specialties, and admitting and scheduling practices of the licensed physicians who are members of the medical staffs of those facilities, as well as physicians who affiliate with and use outpatient centers as an extension of their practices. We compete with system‑affiliated hospitals and healthcare companies, as well as health insurers and private equity companies, in recruiting physicians, acquiring physician practices and, where permitted by law, employing physicians.
Some competing healthcare facilities are owned by tax‑supported government agencies, and many others are owned by not‑for‑profit organizations that may have financial advantages not available to our facilities, including (1) support through endowments, charitable contributions and tax revenues, (2) access to tax‑exempt financing, (3) exemptions from sales, property and income taxes and (4) discounted prescription drug pricing. In addition, in certain areas where we operate, large teaching hospitals provide highly specialized facilities, equipment and services that may not be available at most of our hospitals. The existence or absence of state laws that require findings of need for construction and expansion of healthcare facilities or services may also impact competition. In recent years, the number of freestanding specialty hospitals, surgery centers, EDs, imaging centers and UCCs in the geographic areas where we operate has increased significantly. Some of these facilities are physician‑owned.
Another factor in the competitive position of a hospital or outpatient facility is the scope and terms of its relationships with managed care plans given that HMOs, PPOs, third‑party administrators and other third‑party payers use managed care contracts to encourage patients to use certain facilities in exchange for discounts from the facilities’ established charges. Generally, we compete for managed care contracts on the basis of price, market reputation, geographic location, quality and range of services, caliber of the medical staff and convenience. Other healthcare providers may affect our ability to enter into acceptable managed care contractual arrangements or negotiate commercial rate increases. For example, some of our competitors may negotiate exclusivity provisions with managed care plans or otherwise restrict the ability of managed care companies to contract with us through the formation of narrow networks or other similar structures. Vertical integration efforts involving third‑party payers and healthcare providers, among other factors, may increase competitive challenges.
If our healthcare competitors are betterable to attract patients, recruit physicians, expand services or obtain favorable managed care contracts at their facilities than we are, we may experience an overall decline in patient volumes, which could have an adverse impact on our net operating revenues.
In addition, we face competition from existing participants and new entrants to the revenue cycle management market, as well as from the internal revenue cycle management staff of hospitals and other healthcare providers. To be successful, we must respond more quickly and effectively than our competitors to new or changing opportunities, technologies, standards, regulations and client requirements. There can be no assurance that we will be successful in generating new client relationships, maintaining current relationships on favorable terms, growing service revenues from existing clients, or replacing contracts when they expire or are terminated, which could have a material adverse impact on our results of operations and financial condition.
We cannot predict the potential emergence and effects of a future pandemic, epidemic or outbreak of an infectious disease on our operations, financial condition and liquidity.
The emergence or outbreak of an infectious disease could adversely impact our patient volumes, service mix, revenue mix, operating expenses and net operating revenues in some markets or broadly across our enterprise, depending on how widespread the illness becomes. As with the COVID-19 pandemic, we could experience spikes in admissions at our hospitals, which may put a strain on our resources and personnel, and increased case cancellations in our Ambulatory Care segment. We
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have been required, and we may in the future be required, to temporarily reduce overall operating capacity or suspend certain services at individual facilities due to staffing constraints and other infectious disease-related factors.
Further, future pandemics, epidemics or outbreaks could exacerbate existing workforce shortages, result in significant price increases in medical supplies, particularly for personal protective equipment, and worsen supply shortages and delays, all of which may impact our ability to see, admit and treat patients.
In general, the potential emergence and effects of a future pandemic, epidemic or outbreak of an infectious disease on our operational and financial performance is uncertain and will depend on many factors outside of our control, including, among others: the duration, severity and trajectory of the illness, including the possible spread of potentially more contagious and/or virulent forms of the infection; future economic conditions, as well as the impact of government actions and administrative regulations on the hospital industry and broader economy, including through stimulus efforts; the development, availability and widespread use of effective medical treatments and vaccines; the imposition of public safety measures; the volume of canceled or rescheduled procedures at our facilities; and the volume of affected patients across our care network.
Our business could be significantly and negatively impacted by security threats, catastrophic events and other disruptions affecting our information technology and related information systems and confidential business data.
Our information technology systems are critical to the day‑to‑day operation of our business and enable patient care. We rely on our information technology to process, transmit and store clinical, financial and operational data that includes PHI, PII, and proprietary and other confidential business data. We utilize electronic health records (“EHRs”) and other information technology in connection with all of our operations, including our billing and other financial systems, as well as our supply chain, scheduling and labor management tools. Our systems, in turn, interface with and rely on third‑party systems that store and transmit information integral to patient care and that we do not control, including medical devices and other processes supporting the interoperability of healthcare infrastructures. We rely on these third‑party providers to have appropriate controls to protect our systems, confidential information, and other sensitive or regulated data. While we seek to obtain assurances that third parties will protect our information and business operations, there is a risk the security of data held by such third parties could be breached or that systems are rendered unavailable, causing direct impacts to our business operations.
The information technology and infrastructure we use, the third‑party systems we interact with and the suppliers we use have been and continue to be subject to cyber-attacks, malware, computer viruses and breaches, including due to malfeasance or employee error. In April 2022, we experienced a cybersecurity incident that disrupted a subset of our hospital operations and involved the exfiltration of certain confidential company and patient information. Threat actors continue to proliferate, adapt and devote significant effort to attacking the information systems and electronically transmitted and stored data of healthcare providers and related entities. Cyber‑attacks against us and our suppliers and vendors have occurred in the past, including the April 2022 incident noted above, and will continue to occur in the future. As such, the risk of cyber-attack (including ransomware attack), breach or other disruption to healthcare systems, including ours, remains elevated in the current environment, and the frequency and sophistication of efforts to access or disrupt our systems could continue to increase.
Attacks on, or breaches or other disruptions to, our information technology assets or those of third parties that we rely upon could impact the integrity, security or availability of data (including PHI and PII) we process, transmit or store and could impact our operations, resulting in potential harm to our patients and clients. The preventive actions we take to reduce the risk of attacks, breaches and other incidents and protect our information technology systems and data may not be sufficient. As cybersecurity threats continue to evolve, we may not be able to anticipate certain attack methods, including those involving the integration of new or emerging technologies, such as artificial intelligence (“AI”) and Generative AI, in order to implement effective protective measures. We continue to be required to expend significant additional resources to modify and strengthen our security measures, investigate, detect and respond to cybersecurity incidents, remediate any vulnerabilities in our information systems and infrastructure, and invest in new technology designed to mitigate security risks. Our efforts at incident detection, prevention and mitigation may not be successful, and insurance intended to reduce our exposure to losses related to cybersecurity risks and cyber-attacks may not be sufficient or available to limit or offset the financial impact of a material loss caused by such risks or events. Moreover, certain expenses may not be covered by such insurance. In addition, the occurrence of cybersecurity incidents and the continued and elevated risk of attacks (including ransomware), system and data breaches, and other disruptions to information technology systems in the current environment have caused increases in our cyber insurance premiums and reductions in coverage.
Third parties to whom we outsource certain of our functions, with whom we share data for interoperability purposes or from whom we obtain or to whom we provide products and related services, including those that are part of our revenue cycle processes or supply chain, or other third parties with whom our systems interface (such as clients and their vendors, among others), in some instances, store our sensitive and confidential data; these third parties are also subject to the risks outlined
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above and may not have or use controls effective to protect such information. An attack, breach or other system disruption affecting any of these third parties could similarly harm our business or reputation, impact payment of claims, and potentially harm our patients and clients. Further, successful cyber-attacks at other healthcare services companies, whether or not we are impacted, could lead to a general loss of consumer confidence in our industry that could negatively affect us, including harming the market perception of the effectiveness of our security measures or of the healthcare industry in general, which could result in reduced use of our services.
Our networks and technology systems have also experienced disruption due to planned events, such as system implementations and upgrades, as well as other maintenance and improvements, and they are subject to disruption in the future for similar events, as well as catastrophic events, including a major earthquake, fire, hurricane, telecommunications failure, other technology systems interruption or outage, terrorist attack or the like.
Any ransomware attack, breach, system interruption or unavailability of our information systems or of third-party systems with access to our data could result in: the unauthorized disclosure, misuse, loss or corruption of such data; interruptions and delays in our normal business operations (including the collection of revenues); patient or client harm; potential liability under privacy, security, consumer protection or other applicable laws; regulatory penalties; legal damages and other payments; and negative publicity and harm to our reputation. Any of these could have a material adverse effect on our business, financial condition, results of operations or cash flows. Furthermore, because we have experienced cybersecurity incidents in the past, additional cybersecurity incidents, or the failure to detect or respond appropriately to additional cybersecurity incidents, could magnify the severity of adverse effects on our business.
We are subject to operational cybersecurity risks that could materially impact our business.
Because we operate an expansive, nationwide healthcare delivery network, changes to our information systems often take months or years to implement, are costly and, in some circumstances, are not compatible with other applications and devices in use. In addition, when we acquire facilities, physician practices and other operations, it takes time and resources to assess the security in place, and then implement and integrate our security practices at the acquired businesses. As a result, we operate these businesses for a period of time with their existing security programs, which may include deficiencies or vulnerabilities. We must prioritize changes and improvements to be made, and we may not be successful in identifying gaps or developing alternative methods to secure our systems and data. If we are not successful, we may be more vulnerable to cybersecurity incidents that could impact patient and client information, result in patient harm, or have a material adverse impact on our results of operations and financial condition. Moreover, not all standard cybersecurity tools and solutions we use are employed at all locations, as our decisions as to where to implement tools and solutions are based on numerous factors. There is no guarantee that we will employ the right tools and solutions at each location or that the tools and solutions that are implemented will be successful.
There are risks associated with our current and potential future use of AI.
Recent advancements in technology and applications in healthcare have allowed us to accelerate the adoption of AI and Generative AI-enabled tools in areas such as clinical care coordination, medical documentation, revenue cycle management and administrative services. When used responsibly, we believe AI has the potential to enhance our business processes and support efficient delivery of high-quality care. However, AI may not always operate as intended, and datasets may be insufficient or contain biased or harmful information. Moreover, Generative AI systems that require the collection and processing of sensitive patient data could present potential security and privacy risks, as well as risks related to output quality. If our current or future technologies or applications fail to operate as anticipated or do not perform as specified, including due to potential design defects and defects in the development of algorithms or other technologies, human error or otherwise, we may be subject to liability and reputational harm. Moreover, we could be subject to private claims and enforcement actions, even if AI systems we utilize operate as intended, relating to false advertising, unfair competition, privacy, anti-discrimination, intellectual property infringement or prohibitions on the corporate practice of medicine, among others. Conversely, if we are unable to successfully maintain, enhance or operate our information systems, including through the implementation of AI‑enabled technologies or applications in our operations, we may be, among other things, unable to efficiently adapt to evolving laws and requirements or remain competitive with others who successfully implement and advance current and emerging technologies, which could have a material adverse impact on our overall business, financial condition, results of operations or cash flows.
Alternative payment models and value-based purchasing initiatives may negatively impact our revenues.
Alternative payment models and value‑based purchasing initiatives of both governmental and private payers tying financial incentives to quality and efficiency of care can affect the results of operations of our hospitals and other healthcare facilities, and may negatively impact our revenues if we are unable to meet expected quality standards. Medicare requires
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providers to report certain quality measures in order to receive full reimbursement increases that were previously awarded automatically for inpatient and outpatient procedures; each year, CMS updates these measures through refinement or removal of existing measures and the addition of new measures. Hospitals that meet or exceed certain quality performance standards will receive increased reimbursement payments, and hospitals that have “excess readmissions” for specified conditions will receive reduced reimbursement. Furthermore, Medicare no longer pays hospitals additional amounts for the treatment of certain hospital‑acquired conditions (“HACs”), unless the conditions were present at admission. Hospitals that rank in the worst 25% of all hospitals nationally for HACs in the previous year receive reduced Medicare reimbursements. In addition, the Affordable Care Act prohibits the use of federal funds under the Medicaid program to reimburse providers for treating certain provider‑preventable conditions.
The Affordable Care Act also created the CMS Innovation Center to develop and test alternative payment models, including bundled payment models, designed to reduce certain government program expenditures while maintaining or improving quality of care. Bundled payment models hold hospitals financially accountable for the quality and cost of an entire episode of care for a specific diagnosis or procedure, from the date of the hospital admission or inpatient procedure through 90 days post‑discharge, and include services not provided by the hospital, such as physician services, inpatient rehabilitation, skilled nursing and home health care. Participation in certain bundled payment models is voluntary; however, other bundled payment models are mandatory for providers in selected geographic areas. Under the mandatory models, hospitals are eligible to receive incentive payments or will be subject to payment reductions within certain corridors based on their performance against quality and spending criteria. It is difficult to predict what impact, if any, these demonstration programs will have on our inpatient volumes, net revenues or cash flows.
Over the years, private payers have also sought to move toward value‑based purchasing and alternative payment models for healthcare services. Some large commercial payers expect hospitals to report quality data, and several of these payers will not reimburse hospitals for certain preventable adverse events. Value‑based purchasing programs, including programs that condition reimbursement on patient outcome measures, may become more common and may involve a higher percentage of reimbursement amounts.
We are unable at this time to predict how future alternative payment models and value-based purchasing initiatives will affect our results of operations, but they could negatively impact our revenues, particularly if we are unable to meet the quality and cost standards established by both governmental and private payers.
Violations of existing regulations or failure to comply with new or changed regulations could harm our business and financial results.
As described in Item 1, Business – Healthcare Regulation and Licensing, in Part I of this report, our hospitals, outpatient centers and related healthcare businesses are subject to an extensive and complex framework of government regulation at the federal, state and local levels. The policies and procedures we have in place to facilitate compliance with applicable laws, rules and regulations cannot ensure compliance in every case. Moreover, government regulations often change, and we may have to make adjustments to our facilities, equipment, personnel and services to remain in compliance. The potential consequences for failing to comply with applicable laws, rules and regulations include (1) required refunds of previously received government program payments, (2) the assessment of civil monetary penalties, including treble damages, (3) fines, which could be significant, (4) the imposition of operational restrictions, (5) exclusion from participation in federal healthcare programs and (6) criminal sanctions, including sanctions against current or former employees. Our Medicare and Medicaid payments may be suspended pending even an investigation of what the government determines to be a credible allegation of fraud. Any of the aforementioned consequences could have a material adverse effect on our business, financial condition, results of operations or cash flows. Furthermore, even a public announcement that we are being investigated for possible violations of law could have a material adverse effect on the trading price of our common stock and our business reputation could suffer.
As noted, the healthcare industry continues to attract legislative interest and public attention. We are unable to predict the future course of federal, state and local healthcare legislation, regulation or enforcement efforts. Further changes in the regulatory framework negatively affecting healthcare providers could have a material adverse effect on our business, financial condition, results of operations or cash flows.
Violations of existing consumer protection regulations or failure to comply with new or changed regulations could harm our revenue cycle management services business.
Conifer is subject to numerous federal, state and local consumer protection and other laws governing such topics as privacy, financial services, and billing and collections activities. Regulations related to such laws are subject to changing interpretations that may be inconsistent among different jurisdictions. In addition, a regulatory determination made by, or a
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settlement or consent decree entered into with, one regulatory agency may not be binding upon, or preclude, investigations or regulatory actions by other agencies. Conifer’s failure to comply with applicable consumer protection and other laws could result in, among other things, the issuance of cease and desist orders (which can include orders for restitution or rescission of contracts, as well as other kinds of affirmative relief), the imposition of fines or refunds, and other civil and criminalpenalties, some of which could be significant in the case of knowing or recklessviolations. In addition, Conifer’s failure to comply with the statutes and regulations applicable to it could result in a reduced demand for services, invalidate all or portions of some services agreements with clients, give clients the right to terminate services agreements or give rise to contractual liabilities, among other things, any of which could have a material adverse effect on our business. Furthermore, if Conifer becomes subject to fines or other penalties, it could harm Conifer’s reputation, thereby making it more difficult to retain existing clients or attract new clients.
We could be subject to substantial uninsured liabilities or increased insurance costs as a result of significant legal actions.
We operate in a highly regulated and litigious industry; as such, we are regularly named in various legal actions in the ordinary course of our business. We have been and expect to continue to be subject to regulatory proceedings and private litigation (including class action lawsuits) related to, among other things, the care and treatment provided at our hospitals and outpatient facilities; the application of various federal and state labor and privacy laws, rules and regulations; antitrustclaims; tax audits; contract disputes (including disagreements with joint venture partners); and other matters. Some of these actions involve large demands, as well as substantial defense costs. Even in states that have imposed caps on damages, litigants are seeking recoveries under theories of liability that might not be subject to such caps. Our commercial insurance does not cover all claimsagainst us and may not offset the financial impact of a material loss event. Moreover, the healthcare industry has seen significant increases in the cost of professional and general liability insurance and required amounts of self-insured retention due to high numbers of claims and lawsuits and large verdicts in certain jurisdictions. As such, commercial insurance may not continue to be available at a reasonable cost for us to maintain at adequate levels. We cannot predict the outcome of current or future legal actions against us or the effect that judgments or settlements in such matters may have on us or on our insurance costs. Additionally, professional and general liability insurance is subject to per-claim and policy period aggregate limits. If the policy period aggregate limit of any of these policies is exhausted, in whole or in part, it could deplete or reduce the limits available to pay other material claims applicable to that policy period. Any losses not covered by or in excess of the amounts maintained under insurance policies will be funded from our working capital or other sources of liquidity. Furthermore, one or more of our insurance carriers could become insolvent and unable to fulfill its or their obligations to defend, pay or reimburse us when those obligations become due. In that case or if payments of claims exceed our estimates or are not covered by insurance, it could have a material adverse effect on our business, financial condition, results of operations or cash flows.
Economic conditions and other factors have had, and may in the future have, an adverse impact on our business.
Risks we face during periods of economic weakness and high unemployment in the areas where we operate include potential declines in the population covered under managed care contracts, increased patient decisions to postpone or cancel elective and non-emergency healthcare procedures (including delaying surgical procedures), which may lead to poorer health and higher‑acuity interventions, potential increases in the uninsured and underinsured populations, increased adoption of health plan structures that shift financial responsibility to patients, and further difficulties in collecting patient co-pays and deductibles. Any significant deterioration in the collectability of patient accounts receivable could adversely affect our cash flows, results of operations and liquidity.
Inflationary pressures may increase operating expenses to a greater degree and faster than reflected in updates to the reimbursement systems of governmental and private payers. In recent years, our business has been impacted by inflation and its effects on salaries, wages and benefits, as well as other costs. Medical supply prices remain high due to current economic conditions and other factors. Moreover, national supply shortages have impacted and could in the future impact our ability to see and treat patients. In addition, the potential for new or increased tariffs on various goods, including, but not limited to, medical supplies, pharmaceuticals and capital equipment, have created further uncertainty within the healthcare sector.
We are unable to predict whether or to what extent current or future macroeconomic conditions, tariff actions, geopolitical dynamics, trade tensions, export control rules, weather events or other issues yet to emerge could materially impact our supply chain, capital expenditures or operating costs.
Any future cost-reduction initiatives may not deliver the benefits we expect, and actions taken may adversely affect our business.
Our future financial performance and level of profitability may depend, in part, on various cost‑reduction initiatives, including the outsourcing of certain functions unrelated to direct patient care. We may encounter challenges in executing
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cost‑reduction initiatives and not achieve the intended cost savings. In addition, we may face wrongfultermination, discrimination or other legal claims from employees affected by any workforce reductions, and we may incur substantial costs defendingagainst such claims, regardless of their merits. The threat of such claims may also significantly increase our severance costs. Workforce reductions, whether as a result of internal restructuring or in connection with outsourcing efforts, may result in the loss of numerous long‑term employees, the loss of institutional knowledge and expertise, the reallocation of certain job responsibilities and the disruption of business continuity, all of which could negatively affect operational efficiencies and increase our operating expenses in the short term. Moreover, outsourcing and offshoring expose us to additional risks, such as reduced control over operational quality and timing, foreign political and economic instability, compliance and regulatory challenges, and natural disasters not typically experienced in the United States, such as volcanic activity and tsunamis.
Adverse financial trends affecting our actual or anticipated results may require us to record impairment and restructuring charges that may negatively impact our results of operations.
As a result of factors that have negatively affected our industry generally and our business specifically, we have been, and in the future expect to be, required to record various charges in our results of operations. During the year ended December 31, 2025, we recorded $61 million of impairment charges and $44 million of restructuring charges. Our impairment tests presume stable, improving or, in some cases, declining operating results in our facilities, which are based on programs and initiatives being implemented that are designed to achieve each facility’s most recent projections. If these projections are not met, or negative trends occur that impact our future outlook, future impairments of long‑lived assets and goodwill may occur, and we may incur additional restructuring charges, which could be material. We believe significant factors that contribute to adverse financial trends include reductions in volumes of insured patients, shifts in payer mix from commercial to governmental payers combined with reductions in reimbursement rates from governmental payers, and high levels of uninsured patients. Future restructuring of our operating structure that changes our goodwill reporting units could also result in future impairments of our goodwill. Any such charges could negatively impact our results of operations.
Risks Related to Acquisitions, Divestitures and Joint Ventures
When we acquire new assets or businesses, we become subject to various risks and uncertainties that could adversely affect our results of operations and financial condition.
We have completed numerous acquisitions in recent years, and we expect to pursue additional transactions in the future. A key business strategy for USPI, in particular, is the acquisition and development of facilities, primarily through the formation of joint ventures with physicians and/or health system partners. With respect to future transactions, we cannot provide any assurances that we will be able to identify suitable candidates, consummate transactions on terms that are favorable to us, or achieve synergies or other benefits in a timely manner or at all. Furthermore, companies or operations we acquire may not be profitable or may not achieve the profitability that justifies the investments made. Businesses we acquire may also have pre‑existing unknown or contingent liabilities, including liabilities for failure to comply with applicable healthcare regulations. These liabilities could be significant, and, if we are unable to exclude them from the acquisition transaction or successfully obtain and pursue indemnification from a third party or insurance proceeds, they could harm our business and financial condition. In addition, we may be unable to timely and effectively integrate ASCs, physician practices and other businesses that we acquire with our ongoing operations, or we may experience delays implementing operating procedures, personnel and systems, which could impact the financial performance of the acquired business. Significant acquisitions have required, and may in the future require, a substantial investment of time and resources across our enterprise; these efforts may affect management focus and impact our ability to properly prioritize and successfully execute on our other strategic initiatives. Moreover, future acquisitions could result in the incurrence of additional debt and contingent liabilities, potentially dilutive issuances of equity securities, and increased operating expenses, any of which could adversely affect our results of operations and financial condition.
We cannot provide any assurances that we will be successful in divesting assets we wish to sell.
From time to time, we capitalize on opportunities to refine our portfolio of hospitals and other healthcare facilities or operations when we believe such refinements will help us improveprofitability, allocate capital more effectively in areas where we have a stronger presence, deploy proceeds toward higher-return investments across our business, enhance cash flow generation or reduce our debt, among other things. We also periodically exit service lines and businesses that are no longer a core part of our long‑term growth and synergy strategies. In addition, in certain transactions, we may acquire underperforming facilities located in areas where we do not operate, which may cause us to seek to close or sell such facilities – potentially at a price lower than what we effectively paid to acquire them. We cannot provide any assurances that we will be successful in divesting assets we wish to sell or that divestitures or other strategic transactions will achieve their business goals or the benefits we expect.
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We have in the past, and may in the future, fail to obtain applicable regulatory approvals, including state approvals or FTC clearances, with respect to potential divestitures of assets or businesses. Even in cases where such approvals are obtained, the process of obtaining them could delay the anticipated closing timeline, cause us to incur higher than expected out-of-pocket expenses, and potentially result in significant conditions or restrictions imposed by applicable authorities. Moreover, we may encounter difficulties in finding acquirers or alternative exit strategies on terms that are favorable to us, which could delay the receipt of anticipated proceeds necessary for us to complete our planned strategic objectives. In addition, our divestiture activities have required, and may in the future require, us to retain significant pre‑closing liabilities, recognize impairment charges (as discussed above) or agree to contractual restrictions that limit our ability to reenter a particular market. Many of our hospital divestitures also necessitate us entering into a transition services agreement with the buyer for information technology and other related services. As a consequence, we may be exposed to the financial status of the buyer for any payments under such transition services agreements or for transferred contractual liabilities, which could be significant. Our divestitures also include the assignment of contracts, such as leases, to the buyers; in many cases, we continue to be exposed to, and have in the past been responsible for, post‑transaction liabilities under such arrangements if the buyers do not timely pay the obligations.
Furthermore, our divestiture and other corporate development activities may present financial and operational risks, including (1) the diversion of management attention from existing core businesses, (2) adverse effects (including a deterioration in the related asset or business) from the announcement of the planned or potential transaction, and (3) the challenges associated with separating personnel and financial and other systems.
USPI and our hospital-related joint ventures depend on existing relationships with key health system partners. If we are unable to maintain synergistic relationships with these systems, or enter into new relationships, we may be unable to implement our business strategies successfully.
USPI and our hospital‑related joint ventures depend in part on the efforts, reputations and success of health system partners and the strength of our relationships with those systems. Our joint ventures could be adversely affected by any damage to those health systems’ reputations or to our relationships with them, including contractual disputes over the terms of the governing documents of such joint ventures. In addition, damage to our business reputation could negatively impact the willingness of health systems to enter into relationships with us or USPI. If we are unable to maintain existing arrangements on favorable terms or enter into relationships with additional health system partners, we may be unable to implement our business strategies for our joint ventures successfully.
Our joint venture arrangements are subject to operational risks that could have a material adverse effect on our business, results of operations and financial condition.
We have invested in a number of joint ventures with other entities when circumstances warranted the use of these structures, and we may form additional joint ventures in the future. These joint ventures may not be profitable or may not achieve the profitability that justifies the investments made. Furthermore, the nature of a joint venture requires us to consult with and share certain decision‑making powers with unaffiliated third parties, some of which may be not‑for‑profit health systems. If our joint venture partners do not fulfill their obligations, the affected joint venture may not be able to operate according to its business or strategic plans. In that case, our results of operations could be adversely affected, or we may be required to increase our level of financial commitment to the joint venture. Moreover, differences in economic or business interests or goals among joint venture participants could result in delayed decisions, failures to agree on major issues, which could lead to a dissolution of such arrangement, and even litigation, including claims for breach and attempts to terminate underlying contracts. If these differences cause the joint ventures to deviate from their business or strategic plans, or if our joint venture partners take actions contrary to our policies, objectives or the best interests of the joint venture, our results of operations could be adversely affected. In addition, our relationships with not‑for‑profit health systems and the joint venture agreements that govern these relationships are intended to be structured to comply with current revenue rulings published by the Internal Revenue Service, as well as case law relevant to joint ventures between for‑profit and not‑for‑profit healthcare entities. Material changes in these authorities could adversely affect our relationships with not‑for‑profit health systems and related joint venture arrangements.
Our participation in joint ventures is also subject to the risks that:
• We could experience an impasse on certain decisions because we do not have sole decision‑making authority, which could require us to expend additional resources on resolving such impasses or potential disputes.
• We may not be able to maintain good relationships with our joint venture partners (including health systems), which could limit our future growth potential and could have an adverse effect on our business strategies.
• Our joint venture partners could have investment or operational goals that are not consistent with our corporate‑wide objectives (including the timing, terms and strategies for investments or future growth opportunities) or their relevant contractual obligations.
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• Our joint venture partners might become bankrupt, fail to fund their share of required capital contributions or fail to fulfill their other obligations as joint venture partners, which may require us to infuse our own capital into any such venture on behalf of the related joint venture partner or partners despite other competing uses for such capital.
• Provisions in some of our existing joint venture arrangements requiring mandatory capital expenditures for the benefit of the applicable joint venture could limit our ability to expend funds on other corporate opportunities.
• Our joint venture partners may have competing interests in our markets that could create conflict of interest issues, which could impact the sustainability of our relationships.
• Any sale or other disposition of our interest in a joint venture or underlying assets of the joint venture may require consents from our joint venture partners, which we may not be able to obtain.
• Certain corporate‑wide or strategic transactions may also trigger other contractual rights held by a joint venture partner (including termination or liquidation rights) depending on how the transaction is structured, which could impact our ability to complete such transactions.
• Put/call arrangements and other joint venture rights could require us to utilize our cash flow or incur additional indebtedness to satisfy the payment obligations in respect of such arrangements.
• Our joint venture arrangements that involve financial and ownership relationships with physicians and others who either refer or influence the referral of patients to our hospitals or other healthcare facilities are subject to greater regulatory scrutiny from government enforcement agencies. While we endeavor to comply with the applicable safe harbors under the Anti‑kickback Statute, certain of our current arrangements, including joint venture arrangements, do not qualify for safe harbor protection.
Risks Related to Our Indebtedness
Our level of indebtedness could, among other things, adversely affect our ability to raise additional capital to fund our operations, limit our ability to react to changes in the economy or our industry, and prevent us from meeting our obligations under the agreements relating to our indebtedness.
At December 31, 2025, we had approximately $13.171 billion of total long‑term debt, as well as $104 million in standby letters of credit outstanding in the aggregate under our senior secured revolving credit facility (“Credit Agreement”) and our letter of credit facility agreement (as amended, “LC Facility”). During 2025, our interest expense was $821 million and represented 23% of our $3.508 billion of operating income. Our Credit Agreement is collateralized by eligible inventory and patient accounts receivable, including receivables for Medicaid supplemental payments, of substantially all of our wholly owned acute care and specialty hospitals, and obligations under our LC Facility are guaranteed and secured by a first‑priority pledge of the capital stock and other ownership interests of certain of our wholly owned domestic hospital subsidiaries on an equal‑ranking basis with our senior secured first lien notes. From time to time, we expect to engage in additional capital market, bank credit and other financing activities, depending on our needs and financing alternatives available at that time.
Our indebtedness could have important consequences, including the following:
• Our indebtedness may limit our ability to adjust to changing market conditions and place us at a competitive disadvantage compared to our competitors that have less debt.
• We may be more vulnerable in the event of a deterioration in our business, in the healthcare industry or in the economy generally, or if federal or state governments substantially limit or reduce reimbursement under the Medicare or Medicaid programs.
• Our debt service obligations reduce the amount of funds available for our operations, capital expenditures and corporate development activities, and may make it more difficult for us to satisfy our other financial obligations.
• Our operations are capital intensive and require significant investment to maintain buildings, equipment, software and other assets. Our indebtedness could limit our ability to obtain additional financing, if needed, to fund future capital expenditures, as well as working capital, acquisitions or other needs.
• Our indebtedness may result in the market value of our stock being more volatile, potentially resulting in larger investment gains or losses for our shareholders, than the market value of the common stock of other companies that have a relatively smaller amount of indebtedness.
• A significant portion of our outstanding debt is subject to early call price or make‑whole premiums; as a result, it may be costly to pursue debt repayment as a deleveraging strategy depending on when we decide to retire the debt.
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Furthermore, our Credit Agreement, our LC Facility and the indentures governing our outstanding notes contain, and any future debt obligations may contain, covenants that, among other things, restrict our ability to pay dividends, incur additional debt and sell assets.
We may not be able to generate sufficient cash to service all of our indebtedness, and we may not be able to refinance our indebtedness on favorable terms, if needed. If we are forced to take other actions to satisfy our obligations under our indebtedness, these actions may not be successful.
Our ability to make scheduled payments on or to refinance our indebtedness depends on our cash on hand and our financial and operating performance, which is subject to prevailing economic and competitive conditions and to financial, business and other factors that may be beyond our control. There can be no assurance that we will be able to maintain a level of cash flows from operating activities sufficient to permit us to pay the principal, premium, if any, and interest on our indebtedness.
In addition, our ability to meet our debt service obligations is primarily dependent upon the operating results of our subsidiaries and their ability to pay dividends or make other payments or advances to us. We hold most of our assets and conduct substantially all of our operations through direct and indirect subsidiaries. Moreover, we principally rely on dividends or other intercompany transfers of funds from our subsidiaries to meet our debt service and other obligations, including payment on our outstanding debt. The ability of our subsidiaries to pay dividends or make other payments or advances to us will depend on their operating results and will be subject to applicable laws and restrictions contained in agreements governing the debt of such subsidiaries. Subsidiaries that are not wholly owned may also be subject to restrictions on their ability to distribute cash to us in their financing or other agreements and, as a result, we may not be able to access their cash flows to service their respective debt obligations.
We periodically issue new notes to refinance our outstanding notes prior to their maturity. Any future increases in borrowing rates can be expected to increase our cost of capital as compared to prior periods should we seek additional funding. Moreover, global capital markets have experienced significant volatility and uncertainty in the past, and there can be no assurance that such financing alternatives will be available to us on favorable terms, or at all, should we determine it necessary or advisable to seek additional capital. In addition, our ability to incur secured indebtedness (which would generally enable us to achievebetter pricing than the incurrence of unsecured indebtedness) depends in part on the value of our assets, which depends, in turn, on the strength of our cash flows and results of operations, as well as on economic and market conditions and other factors.
If our cash flows and capital resources are insufficient to fund our debt service obligations and we are unable to refinance our indebtedness on acceptable terms, we may be forced to reduce or delay investments and capital expenditures, including those required for physical plant maintenance or operation of our existing facilities, for integrating our historical acquisitions or for future corporate development activities, and such reduction or delay could continue for years. We also may be forced to sell assets or operations, seek additional capital or restructure our indebtedness. There can be no assurance that we would be able to take any of these actions, that these actions would be successful and permit us to meet our scheduled debt service obligations, or that these actions would be permitted under the terms of our existing or future debt agreements, including our Credit Agreement, our LC Facility and the indentures governing our outstanding notes.
Despite current indebtedness levels, we have the ability and may decide to incur substantially more debt or otherwise increase our leverage. This could further intensify the risks described above.
We have the ability to incur additional indebtedness in the future, subject to the restrictions contained in our Credit Agreement, our LC Facility and the indentures governing our outstanding notes. We may decide to incur additional secured or unsecured debt in the future to finance our operations and any judgments or settlements or for other business purposes.
Our Credit Agreement provides for revolving loans in an aggregate principal amount of up to $1.900 billion (subject to a borrowing base calculation), with a $200 million subfacility for standby letters of credit. Our LC Facility provides for the issuance of standby and documentary letters of credit in an aggregate principal amount of up to $200 million. At December 31, 2025, we had no cash borrowings outstanding under the Credit Agreement, and we had $104 million of standby letters of credit outstanding in the aggregate under the Credit Agreement and the LC Facility. If new indebtedness is added or our leverage increases, the related risks could intensify.
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Restrictive covenants in the agreements governing our indebtedness may adversely affect us.
Our Credit Agreement, our LC Facility and the indentures governing our outstanding notes contain various covenants that, among other things, limit our ability and the ability of our subsidiaries to:
• incur, assume or guarantee additional indebtedness;
• incur liens;
• make certain investments;
• provide subsidiary guarantees;
• consummate asset sales;
• redeem debt that is subordinated in right of payment to outstanding indebtedness;
• enter into sale and lease‑back transactions;
• enter into transactions with affiliates; and
• consolidate, merge or sell all or substantially all of our assets.
These restrictions are subject to important exceptions and qualifications. In addition, under certain circumstances, the terms of our Credit Agreement require us to maintain a financial ratio relating to our ability to satisfy certain fixed expenses, including interest payments. Our ability to meet this financial ratio and the aforementioned restrictive covenants may be affected by events beyond our control, and there can be no assurance that we will meet those tests. These restrictions could limit our ability to obtain future financing, make acquisitions or needed capital expenditures, withstand economic downturns in our business or the economy in general, conduct operations or otherwise take advantage of business opportunities that may arise. In addition, a breach of any of these covenants could cause an event of default, which, if not cured or waived, could require us to repay the indebtedness immediately. Under these conditions, we are not certain whether we would have, or be able to obtain, sufficient funds to make accelerated payments.
urgent
Our Ambulatory Care segment, through USPI Holding Company, Inc. (together with its subsidiaries, “USPI”), held ownership interests in 533 ambulatory surgery centers (each, an “ASC”), 401 of which are consolidated, and 26 surgical hospitals, eight of which are consolidated, in 37 states at December 31, 2025. USPI’s facilities offer a range of procedures and service lines, including, among other specialties: orthopedics, total joint replacement, and spinal and other musculoskeletal procedures; gastroenterology; pain management; otolaryngology (ear, nose and throat); ophthalmology; and urology.
Unless otherwise indicated, all financial and statistical information included in MD&A relates to our continuing operations, with dollar amounts expressed in millions (except per adjusted admission and per adjusted patient day amounts). Continuing operations information includes the results of all facilities operated during any portion of the periods presented, and it reflects the performance of those facilities only for the time periods in which we operated them. Continuing operations information excludes the results of our hospitals and other businesses classified as discontinued operations for accounting purposes. We believe this presentation is useful to investors because continuing operations information reflects the impact of the addition or disposition of individual hospitals and other operations on our volumes, revenues and expenses.
In certain cases, information presented in MD&A for our Hospital Operations segment is described as presented on a same‑hospital basis, which includes facilities we operated for the entirety of the periods presented. For the years ended December 31, 2025 and 2024, information presented on a same-hospital basis includes the results of our same 47 hospitals and those outpatient centers we operated throughout both years, and excludes the results of: (1) three hospitals located in South Carolina and certain related operations (the “SC Hospitals”) we sold in January 2024; (2) four hospitals and certain related operations located in Orange County and Los Angeles County, California (the “OCLA CA Hospitals”) we sold in March 2024; (3) two hospitals and certain related operations located in San Luis Obispo County, California (the “Central CA Hospitals”), which we also sold in March 2024; (4) Westover Hills Baptist Hospital, the acute care hospital we opened in Texas in July 2024; (5) a rehabilitation hospital in El Paso, Texas, in which we acquired a majority ownership interest in September 2024; (6) five hospitals and certain related operations located in Alabama we divested in September 2024 (the “AL Hospitals” and, together with the SC Hospitals, OCLA CA Hospitals and Central CA Hospitals, the “Divested Hospitals”); (7) Florida Coast Medical Center, the acute care hospital we opened in Florida in September 2025; and (8) businesses classified as discontinued operations for accounting purposes during those periods, along with other ancillary facilities acquired or divested during the reporting periods that have a limited financial or operational impact. We present same‑hospital data because we believe it provides investors with useful information regarding the performance of our current portfolio of hospitals and other operations that are comparable for the periods presented. Furthermore, same‑hospital data may more clearly reflect recent
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trends we are experiencing with respect to volumes, revenues and expenses exclusive of variations caused by the addition or disposition of individual hospitals and other operations.
Our Ambulatory Care segment reports growth data on a same-facility systemwide basis, which includes both consolidated and unconsolidated facilities held at the end of the period, as well as facilities acquired during the period on a pro forma basis as if owned for the full period. Divested facilities are generally excluded; however, management may include facilities sold near the end of the period when, in its judgment, their inclusion provides financial statement users with a better understanding of the segment’s performance. This approach offers insights into the performance of our current portfolio by excluding variations from facility acquisitions or dispositions. Although we do not record the revenues of unconsolidated facilities, this information is important for understanding the financial performance of our Ambulatory Care segment, as these revenues form the basis for calculating management services revenues and equity in earnings of unconsolidated affiliates. Additionally, this presentation enhances comparability across periods.
We present certain operational metrics and statistics in order to provide additional insight into our operational performance efficiency and to help investors better understand management’s view and strategic focus. We define these operational metrics and statistics as follows:
Adjusted admissions— represents actual admissions in the period adjusted to include outpatient services provided by facilities in our Hospital Operations segment by multiplying actual admissions by the sum of gross inpatient revenues and outpatient revenues and dividing the result by gross inpatient revenues;
Adjusted patient days— represents actual patient days in the period adjusted to include outpatient services provided by facilities in our Hospital Operations segment by multiplying actual patient days by the sum of gross inpatient revenues and outpatient revenues and dividing the result by gross inpatient revenues;
Utilization of licensed bed s — represents patient days divided by the number of days in the period divided by average licensed beds; and
Accounts receivable days outstanding (“AR Days”)— calculated as our accounts receivable on the last date in the quarter divided by our net operating revenues for the quarter ended on that date divided by the number of days in the quarter. This calculation includes our Hospital Operations segment’s contract assets and excludes our California provider fee program revenues and activity related to our divested facilities.
We also present certain metrics as a percentage of net operating revenues because a significant portion of our operating expenses are variable, and we present certain metrics on a per adjusted admission and per adjusted patient day basis to show trends other than volume.
MANAGEMENT OVERVIEW
RECENT DEVELOPMENT
On January 27, 2026, we entered into an agreement with CommonSpirit Health (a successor to Catholic Health Initiatives) (“CHI”) relating to Conifer Health Solutions, LLC (“Conifer”). Subject to the terms of that agreement and other related contracts, the parties have agreed to, among other things: (1) terminate the amended and restated master services agreement pursuant to which Conifer provides end-to-end revenue cycle management services to certain CHI facilities effective as of December 31, 2026; (2) CHI’s payment to us of an aggregate amount equal to $1.900 billion in annual installments over the next three years; provided that, of such amount, $540 million was satisfied on January 27, 2026 by offsetting the $540 million due to CHI from Conifer as described in the next clause; (3) the reduction of our redeemable noncontrolling interest balance, and an increase in our additional paid-in capital balance associated with the redemption by Conifer of CHI’s minority equity interest in Conifer, in exchange for a payment by Conifer of $540 million, which redemption is effective as of January 1, 2026; and (4) the grant of mutual releases to each other in respect of potential disputes related to Conifer.
OPERATING ENVIRONMENT AND TRENDS
Industry Trends and Healthcare Policy Changes —We believe that several key trends are continuing to shape the demand for healthcare services: (1) consumers, employers and insurers are actively seeking lower‑cost solutions and better value with respect to healthcare spending; (2) patient volumes are shifting from inpatient to outpatient settings due to technological advances and demand for care that is more convenient, affordable and accessible; (3) the growing aging population requires greater chronic disease management and higher‑acuity treatment; and (4) consolidation continues across the entire healthcare sector.
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The healthcare industry remains subject to significant legislative and regulatory uncertainty. Changes in federal and state healthcare laws, regulations, funding policies or reimbursement practices – especially those involving reductions to government payment rates or access to insurance coverage – could have a material impact on our future revenues and expenses. As discussed in greater detail in the Government Programs section below, the One Big Beautiful Bill Act (“OBBBA”) enacted significant changes to, among other things, the federal tax code and U.S. healthcare policy, coverage and reimbursement systems. While the most consequential healthcare provisions are not scheduled to take effect until 2027 and thereafter, the OBBBA introduces new limitations and eligibility requirements that are expected to materially impact Medicaid funding (including supplemental payments) and enrollment, as well as the health insurance marketplace. The implementation of these requirements is subject to individual state interpretation, and we are unable to predict at this time how states will implement the various requirements of the law. In addition, the OBBBA contained significant changes to the U.S. federal tax code related to the deductibility of depreciation and business interest expense. However, these changes did not have a material impact on our tax expense for the year ended December 31, 2025.
Macroeconomic and Industry Context —The healthcare environment remains influenced by broader macroeconomic and operational factors. Our business has been impacted by inflation and its effects on salaries, wages and benefits, as well as other costs. While general inflation moderated somewhat during 2025, inflation specific to medical supply prices remained high due to current economic conditions and other factors. Furthermore, geopolitical dynamics, trade tensions, tariffs and export control rules may continue to influence pricing and availability within global supply chains. These challenges underscore the importance of operational discipline and adaptive cost management as we navigate the evolving healthcare landscape.
STRATEGIES
Expanding Our Ambulatory Care Segment —We continue to focus on opportunities to expand our Ambulatory Care segment through acquisitions, organic growth in our physician relationships and service lines, construction of new outpatient centers and strategic partnerships. We believe USPI’s ASCs and surgical hospitals offer many advantages to patients and physicians, including greater affordability, predictability, flexibility and convenience. Moreover, due in part to advancements in surgical techniques, medical technology and anesthesia, as well as the lower cost structure and greaterefficiencies that are attainable at a specialized outpatient site, we believe the volume and complexity of surgical cases performed in an outpatient setting will continue to increase over time. Historically, our outpatient services have generated significantly higher margins for us than inpatient services. During the year ended December 31, 2025, we acquired controlling ownership interests in 27 ASCs and one surgical hospital, and a noncontrolling ownership interest in one additional ASC; prior to these acquisitions, we did not hold an investment in any of these facilities. During the same period, we also increased our ownership interests in nine ASCs sufficient to consolidate them and opened six de novo ASCs.
Driving Growth in Our Hospital Operations Segment —We remain committed to better positioning our hospitals and competing more effectively in the ever‑evolving healthcare environment by focusing on driving performance through operational effectiveness, investing in our physician enterprise, particularly our specialist network, enhancing patient and physician satisfaction, growing our higher‑demand clinical service lines, expanding patient and physician access, and optimizing our portfolio of assets. We believe our efforts in these areas improve the quality of care we deliver and enhance growth.
In September 2025, we opened the newly constructed Florida Coast Medical Center in Port St. Lucie, Florida. This 54‑bed acute care hospital offers specialized services, including advanced cardiac care, diagnostic services, an emergency care department, general surgery, neurosciences, orthopedics, robotics and urology.
Improving the Customer Care Experience— As consumers continue to become more engaged in managing their health, we recognize that understanding what matters most to them and earning their loyalty is imperative to our success. As such, we have enhanced our focus on treating our patients as traditional customers by: (1) establishing networks of physicians and facilities that provide convenient access to services across the care continuum; (2) expanding service lines aligned with growing community demand, including a focus on aging and chronic disease patients; (3) offering greater affordability and predictability, including simplified registration and discharge procedures, particularly in our outpatient centers; (4) improving our culture of service; and (5) offering health programs and educational materials tailored to meet the needs of the communities we serve.
Recent advancements in technology and applications in healthcare have allowed us to accelerate the adoption of artificial intelligence (“AI”) and Generative AI‑enabled tools in areas such as clinical care coordination, medical documentation, revenue cycle management and administrative services. When used responsibly, we believe AI has the potential to enhance our business processes and support efficient delivery of high‑quality care.
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ImprovingProfitability— We continue to focus on growing patient volumes and effective cost management as a means to improveprofitability. We believe that emphasis on higher‑demand clinical service lines, focus on expanding our ambulatory care business, cultivation of our culture of service and utilizing contracting strategies that create shared value with payers should help us grow our patient volumes over time. We are also continuing to pursue new opportunities to enhanceefficiency, including further integration of enterprise‑wide centralized support functions, outsourcing additional functions unrelated to direct patient care, and reducing clinical contract variation.
Managing Our Capital Structure —In November 2025, we executed a new senior secured revolving credit facility (the “2025 Credit Agreement”) and concurrently terminated our then-existing senior secured revolving credit facility prior to its scheduled maturity date. Also in November, we finalized an amendment of our letter of credit facility. Through these transactions, we increased the borrowing capacity available to us and secured more favorable terms, pricing and reporting requirements.
During the three months ended December 31, 2025, we issued $1.500 billion aggregate principal amount of our 5.500% senior secured notes due on November 15, 2032 (the “2032 Senior Secured First Lien Notes”) and $750 million aggregate principal amount of our 6.000% senior notes due on November 15, 2033 (the “2033 Senior Unsecured Notes”). We used the net proceeds from these issuances, together with cash on hand, to redeem all $1.500 billion aggregate principal amount outstanding of our 6.250% senior secured second lien notes due February 2027 (the “February 2027 Senior Secured Second Lien Notes”) and redeem $750 million of the then $2.500 billion aggregate principal amount outstanding of our 6.125% senior notes due October 2028 (the “October 2028 Senior Unsecured Notes”) in advance of their respective maturity dates.
All of our long‑term debt has a fixed rate of interest, except for outstanding borrowings under our 2025 Credit Agreement, of which we had none at December 31, 2025. In addition, the maturity dates of our notes are staggered from 2027 through 2033. We believe that our capital structure helps to minimize the near‑term impact of increased interest rates, and the staggered maturities of our debt allow us to retire or refinance our debt over time.
In the year ended December 31, 2025, we repurchased $1.386 billion of our common stock pursuant to our share repurchase program. Our program has no expiration date, it does not obligate us to acquire any particular amount of common stock, and it may be suspended for periods or discontinued at any time. At December 31, 2025, there was $1.490 billion available under this program for future repurchases.
Our ability to execute on our strategies and respond to the aforementioned trends in the current operating environment is subject to numerous risks and uncertainties, all of which may cause actual results to be materially different from expectations. For information about risks and uncertainties that could affect our results of operations, see the Forward‑Looking Statements and Risk Factors sections in Part I of this report.
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RECENT RESULTS OF OPERATIONS
The following table presents selected operating statistics for our Hospital Operations and Ambulatory Care segments on a continuing operations basis:
Three Months Ended December 31,
Increase
(Decrease)
Hospital Operations – hospitals and related outpatient facilities:
Number of hospitals (at end of period)
Total admissions
Adjusted admissions
Paying admissions (excludes charity and uninsured)
Charity and uninsured admissions
Admissions through emergency department
Emergency department visits, outpatient
Total emergency department visits
Total surgeries
Patient days — total
Adjusted patient days
Average length of stay (days)
Average licensed beds
Utilization of licensed beds
Total visits
Paying visits (excludes charity and uninsured)
Charity and uninsured visits
Ambulatory Care:
Total consolidated facilities (at end of period)
Total consolidated cases
The change is the difference between the 2025 and 2024 amounts or percentages presented.
Total admissions increased by 488, or 0.4%, total surgeries increased by 610, or 0.9%, and total emergency department visits increased by 1,986, or 0.4%, in the three months ended December 31, 2025 compared to the three months ended December 31, 2024.
The 7.7% increase in our Ambulatory Care segment’s total consolidated cases during the three months ended December 31, 2025, as compared to the same period in 2024, was primarily attributable to incremental case volume from newly acquired and developed ASCs and same‑facility case volume growth, net of the impact of the sale or closure of certain facilities.
The following table presents net operating revenues by segment on a continuing operations basis:
Three Months Ended December 31,
Increase
(Decrease)
Hospital Operations
Ambulatory Care
Total
Consolidated net operating revenues increased by $454 million, or 8.9%, in the three months ended December 31, 2025 compared to the same period in 2024. The increase of $280 million, or 7.3%, in our Hospital Operations segment’s net operating revenues for the three‑month period in 2025 compared to the same period in 2024 was primarily due to the positive impact of a more favorable payer mix, increases in our same-hospital admissions, higher patient acuity, growth in Medicaid supplemental revenue and negotiated commercial rate increases in the 2025 period.
Net operating revenues in our Ambulatory Care segment increased by $174 million, or 13.8%, in the three months ended December 31, 2025 compared to the same period in 2024. This change was primarily driven by our newly acquired and developed ASCs, net of the impact of the sale or closure of certain facilities, negotiated commercial rate increases, higher patient acuity and increases in same-facility case volume in the 2025 period.
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The following table presents information about selected operating expenses by segment on a continuing operations basis:
Three Months Ended December 31,
Increase
(Decrease)
Hospital Operations:
Salaries, wages and benefits
Supplies
Other operating expenses
Total
Ambulatory Care:
Salaries, wages and benefits
Supplies
Other operating expenses
Total
Total:
Salaries, wages and benefits
Supplies
Other operating expenses
Total
Rent/lease expense (1) :
Hospital Operations
Ambulatory Care
Total
Included in other operating expenses.
The following table presents information about our Hospital Operations segment’s selected operating expenses per adjusted admission on a continuing operations basis:
Three Months Ended December 31,
Increase
(Decrease)
Salaries, wages and benefits per adjusted admission
Supplies per adjusted admission
Other operating expenses per adjusted admission
Total per adjusted admission
Salaries, wages and benefits expense for our Hospital Operations segment increased by $94 million, or 5.3%, in the three months ended December 31, 2025 compared to the same period in 2024. This increase was primarily attributable to higher incentive compensation expense, annual merit increases and an increase in employee benefit costs during the 2025 period. On a per adjusted admission basis, salaries, wages and benefits expense in our Hospital Operations segment increased by 4.3% in the three months ended December 31, 2025 compared to the three months ended December 31, 2024.
Supplies expense for our Hospital Operations segment increased by $22 million, or 3.7%, during the three months ended December 31, 2025 compared to the same period in 2024. This change was driven by an increase in same‑hospital admissions, as well as higher acuity, during the 2025 period. These increases were partially offset by our continued focus on cost‑efficiency measures, which include product standardization, contract management, improved utilization, bulk purchases, focused spending and operational improvements, among others. On a per adjusted admission basis, supplies expense increased by 2.7% in the three months ended December 31, 2025 compared to the three months ended December 31, 2024.
Other operating expenses for our Hospital Operations segment increased by $77 million, or 8.5%, in the three months ended December 31, 2025 compared to the same period in 2024. This increase was primarily attributable to higher professional and consulting fees, as well as an increase in malpractice expense, during the three-month period in 2025. On a per adjusted admission basis, other operating expenses during the three months ended December 31, 2025 increased by 7.1% compared to the same period in 2024.
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LIQUIDITY AND CAPITAL RESOURCES OVERVIEW
Cash and cash equivalents were $2.883 billion at December 31, 2025 compared to $2.975 billion at September 30, 2025.
Significant cash flow items in the three months ended December 31, 2025 included:
• Net cash provided by operating activities before interest, taxes, impairment and restructuring charges, and acquisition‑related costs, and litigation costs and settlements of $1.255 billion;
• Proceeds from the issuance of $2.250 billion aggregate principal amount of our 2032 Senior Secured First Lien Notes and 2033 Senior Unsecured Notes;
• Debt payments of $2.282 billion, including $2.250 billion to fully redeem our February 2027 Senior Secured Second Lien Notes and partially redeem our October 2028 Senior Unsecured Notes;
• Interest payments totaling $366 million;
• Capital expenditures of $364 million;
• $224 million of distributions paid to noncontrolling interests;
• $198 million of payments to purchase approximately 943 thousand shares of our common stock; and
• Income tax payments of $121 million.
Net cash provided by operating activities was $3.540 billion in the year ended December 31, 2025 compared to $2.047 billion in the year ended December 31, 2024. Key factors contributing to the change between 2025 and 2024 included the following:
• An increase in net income before interest, taxes, depreciation and amortization, impairment and restructuring charges, acquisition‑related costs, litigation costs and settlements, losses from the early extinguishment of debt, other non-operating income or expense, and net losses on sales, consolidation and deconsolidation of facilities of $571 million;
• Income tax payments that were $821 million lower in 2025 than in 2024; and
• The timing of working capital items.
SOURCES OF REVENUE FOR OUR HOSPITAL OPERATIONS SEGMENT
We earn revenues for patient services from a variety of sources, primarily managed care payers and the federal Medicare program, as well as state Medicaid programs, indemnity‑based health insurance companies and uninsured patients (that is, patients who do not have health insurance and are not covered by some other form of third‑party arrangement).
The following table presents the sources of net patient service revenues for our hospitals and related outpatient facilities, expressed as percentages of net patient service revenues from all sources on a continuing operations basis:
Years Ended December 31,
Medicare
Medicaid
Managed care (1)
Uninsured
Indemnity and other
Includes Medicare and Medicaid managed care programs.
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Our payer mix on an admissions basis for our hospitals, expressed as a percentage of total admissions from all sources on a continuing operations basis, is presented below:
Years Ended December 31,
Medicare
Medicaid
Managed care (1)
Charity and uninsured
Indemnity and other
Includes Medicare and Medicaid managed care programs.
Our hospitals and outpatient facilities are subject to various factors that affect our service mix, revenue mix and patient volumes and, thereby, impact our net patient service revenues and results of operations. These factors include, among others: changes in federal and state statutes, regulations and executive orders that effect the healthcare industry directly or indirectly, particularly those impacting government healthcare funding; changes in general economic conditions, including inflation, whether due to geopolitical dynamics, trade tensions, export control rules, tariffs or other factors; the number of uninsured and underinsured individuals in local communities treated at our facilities; cybersecurity incidents, including those targeting our vendors, and other unanticipated information technology outages; disease hotspots and seasonal cycles of illness; weather‑related conditions and natural disasters; physician recruitment, satisfaction, retention and attrition; advances in technology and treatments that reduce length of stay or permit procedures to be performed in an outpatient rather than inpatient setting; local healthcare competitors; utilization pressure by managed care organizations, as well as managed care contract negotiations or terminations; performance data on quality measures and patient satisfaction, as well as pricing for services; any unfavorable publicity about us, or our joint venture partners, that impacts our relationships with physicians and patients; and changing consumer behavior, including with respect to the timing of elective procedures.
GOVERNMENT PROGRAMS
The Centers for Medicare & Medicaid Services (“CMS”) is an agency of the U.S. Department of Health and Human Services (“HHS”) that administers a number of government programs authorized by federal law; it is the single largest payer of healthcare services in the United States. Medicare is a federally funded health insurance program primarily for individuals 65 years of age and older, as well as some younger people with certain disabilities and conditions, and is provided without regard to income or assets. Medicaid is co‑administered by the states and is jointly funded by the federal government and state governments. Medicaid is the nation’s main public health insurance program for people with low incomes and is the largest source of health coverage in the United States. The Children’s Health Insurance Program (“CHIP”), which is also co‑administered by the states and jointly funded, provides health coverage to children in families with incomes too high to qualify for Medicaid, but too low to afford private coverage. Unlike Medicaid, the CHIP is limited in duration and requires the enactment of reauthorizing legislation. Funding for the CHIP has been reauthorized through federal fiscal year (“FFY”) 2029.
Recent and Potential Future Changes to Healthcare Policy
The Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010 (the “Affordable Care Act”), extended health coverage to millions of uninsured legal U.S. residents through a combination of private sector health insurance reforms and public program expansion. The expansion of Medicaid in 40 states and the District of Columbia is currently financed through:
• negative “productivity adjustments” to the annual market basket updates, which began in 2011 and do not expire under current law; and
• reductions to Medicare and Medicaid disproportionate share hospital (“DSH”) payments, which began for Medicare payments in FFY 2014 and, under current law, are scheduled to commence for Medicaid payments on October 1, 2027.
Of the eight states in which we operate acute care and specialty hospitals, four have taken action in accordance with the Affordable Care Act to expand their Medicaid programs; however, over half of our licensed beds at December 31, 2025 were located in four states, namely Florida, South Carolina, Tennessee and Texas, that have not expanded Medicaid under the law.
The expansion of health insurance coverage under the Affordable Care Act resulted in an increase in the number of patients using our facilities with either private or public program coverage and a decrease in uninsured and charity care admissions. Although a substantial portion of our patient volumes and, as a result, our revenues have historically been derived
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from government healthcare programs, reductions to our reimbursement under the Medicare and Medicaid programs due to the Affordable Care Act have been partially offset by increased revenues from providing care to previously uninsured individuals.
Over the past several years, various laws and regulations lengthened the enrollment period, expanded income eligibility, and provided enhanced premium tax credits to eligible individuals purchasing Affordable Care Act coverage through state and federal health insurance marketplaces – all of which led to higher enrollment numbers, particularly in states that have not expanded Medicaid. Certain of these provisions expired at the end of 2025, resulting in significant increases in health insurance premiums. Such increases have led to decreases in enrollment and insurance coverage, and are expected to cause a corresponding rise in the uninsured or a shift of individuals from commercial coverage to government program coverage or other more limited coverage alternatives beginning in 2026. As such, we may experience decreased patient volumes, reduced revenues and an increase in uncompensated care, which would adversely affect our results of operations and cash flows.
The impact of the OBBBA is expected to be far‑reaching, with significant implications for states, their healthcare programs and consumers. Key provisions, the most consequential of which are set to take effect beginning in 2027, include new Medicaid work requirements, caps on state-directed payments, limits on provider taxes, stricter eligibility checks, financial incentives for accurate state administration and reforms to federal subsidies.
Once the OBBBA is implemented, the Congressional Budget Office anticipates that millions of individuals could lose health insurance between now and 2034. With respect to Medicaid, these coverage losses may primarily be attributable to policy changes, including the aforementioned work requirements, more frequent eligibility reviews and limits on eligibility. With respect to individuals who purchase Affordable Care Act coverage through state and federal marketplaces, these losses may primarily be attributable to changes in pre-verification requirements and limits to tax credit eligibility. States are awaiting additional guidance from federal agencies on several provisions and are likely to have variation in the details of how they will implement the provisions of the law.
Because most states must operate with balanced budgets, and the Medicaid program is generally a significant portion of a state’s budget, states can be expected to reevaluate their financial plans for 2026 and beyond. The OBBBA’s legislative and forthcoming regulatory changes may result in material reductions to Medicaid payments, changes and reductions to Medicaid supplemental payment programs, and payment delays. Federal government denials or delayed approvals of state waiver applications or extension requests could also materially impact Medicaid funding levels, most significantly in those states that have expanded Medicaid.
At this time, we cannot estimate the OBBBA’s impact, nor can we predict the timing of that impact, on our future business, financial condition or results of operations, however, we may experience decreased payments (including supplemental payments) from Medicare, Medicaid and other government programs, as well as delays in the timing of payments to our facilities.
We also cannot predict whether or how Congress may further extend or modify provisions of or relating to the Affordable Care Act, the OBBBA or other laws affecting the healthcare industry generally, nor can we predict how government agencies or the current administration might further influence, promulgate or implement rules, regulations or executive orders that affect the healthcare industry directly or indirectly.
If the rates paid by governmental payers are materially reduced, if the scope of services covered by governmental payers is significantly limited, if eligibility or enrollment is further restricted, if there are changes to align payment rates for certain procedures across various care settings in a site neutral manner, or if we or one or more of our hospitals are excluded from participation in the Medicare or Medicaid program or any other government healthcare program, there may be a material adverse effect on our business, financial condition, results of operations or cash flows. Future federal and state healthcare funding policy changes, along with other initiatives and requirements, may, among other things, adversely affect our patient volumes, case mix and revenue mix, increase our operating costs, materially reduce the reimbursement we receive for our services, diminish our competitive position or require us to expend resources to modify certain aspects of our operations.
M edicare
Medicare offers its beneficiaries different ways to obtain their medical benefits. One option, the Original Medicare Plan (which includes “Part A” and “Part B”), is a fee‑for‑service (“FFS”) payment system. The other option, called Medicare Advantage (sometimes called “Part C” or “MA Plans”), includes health maintenance organizations (“HMOs”), preferred provider organizations (“PPOs”), private FFS Medicare special needs plans and Medicare medical savings account plans. Our total net patient service revenues from operation of the hospitals and related outpatient facilities in our Hospital Operations
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segment for services provided to patients enrolled in the Original Medicare Plan were $2.119 billion, $2.132 billion and $2.383 billion for the years ended December 31, 2025, 2024 and 2023, respectively.
A general description of the types of payments we receive for services provided to patients enrolled in the Original Medicare Plan is provided below. Recent regulatory and legislative updates to the terms of these payment systems and their estimated effect on our revenues can be found under “Regulatory and Legislative Updates” below.
Acute Care Hospital Inpatient Prospective Payment System
Medicare Severity-Adjusted Diagnosis-Related Group Payments —Sections 1886(d) and 1886(g) of the Social Security Act set forth a system of payments for the operating and capital costs of inpatient acute care hospital admissions based on a prospective payment system (“PPS”). Under the inpatient prospective payment systems (“IPPS”), Medicare payments for hospital inpatient operating services are made at predetermined rates for each hospital discharge. Discharges are classified according to a system of Medicare severity‑adjusted diagnosis‑related groups (“MS‑DRGs”), which categorize patients with similar clinical characteristics that are expected to require similar amounts of hospital resources. CMS assigns to each MS‑DRG a relative weight that represents the average resources required to treat cases in that particular MS‑DRG, relative to the average resources used to treat cases in all MS‑DRGs.
The base payment amount for the operating component of the MS‑DRG payment is comprised of an average standardized amount that is divided into a labor‑related share and a nonlabor-related share. Both the labor‑related share of operating base payments and the base payment amount for capital costs are adjusted for geographic variations in labor and capital costs, respectively. Using diagnosis and procedure information submitted by the hospital, CMS assigns to each discharge an MS‑DRG, and the base payments are multiplied by the relative weight of the MS‑DRG assigned. The MS‑DRG operating and capital base rates, relative weights and geographic adjustment factors are updated annually, with consideration given to: the increased cost of goods and services purchased by hospitals; the relative costs associated with each MS‑DRG; changes in labor data by geographic area; and other policies. Although these payments are adjusted for area labor and capital cost differentials, the adjustments do not take into consideration an individual hospital’s operating and capital costs.
Outlier Payments —Outlier payments are additional payments made to hospitals on individual claims for treating Medicare patients whose medical conditions are more costly to treat than those of the average patient in the same MS‑DRG. To qualify for a cost outlier payment, a hospital’s billed charges, adjusted to cost, must exceed the payment rate for the MS‑DRG by a fixed threshold updated annually by CMS. A Medicare Administrative Contractor (“MAC”) calculates the cost of a claim by multiplying the billed charges by an average cost‑to‑charge ratio that is typically based on the hospital’s most recently filed cost report. Generally, if the computed cost exceeds the sum of the MS‑DRG payment plus the fixed threshold, the hospital receives 80% of the difference as an outlier payment.
Under the Social Security Act, CMS must project aggregate annual outlier payments to all PPS hospitals to be not less than 5% or more than 6% of total MS‑DRG payments (“Outlier Percentage”). The Outlier Percentage is determined by dividing total outlier payments by the sum of MS‑DRG and outlier payments. CMS annually adjusts the fixed threshold to bring projected outlier payments within the mandated limit. A change to the fixed threshold affects total outlier payments by changing: (1) the number of cases that qualify for outlier payments; and (2) the dollar amount hospitals receive for those cases that qualify for outlier payments. Under certain conditions, outlier payments are subject to reconciliation based on more recent data.
Disproportionate Share Hospital Payments —In addition to making payments for services provided directly to beneficiaries, Medicare makes additional payments to hospitals that treat a disproportionately high share of low‑income patients. Prior to October 1, 2013, DSH payments were based on each hospital’s low income utilization for each payment year (the “Pre‑ACA DSH Formula”). The Affordable Care Act revised the Medicare DSH adjustment effective for discharges occurring on or after October 1, 2013. Under the revised methodology, hospitals receive 25% of the amount they previously would have received under the Pre‑ACA DSH Formula. This amount is referred to as the “Empirically Justified Amount.”
Hospitals qualifying for the Empirically Justified Amount of DSH payments are also eligible to receive an additional payment for uncompensated care (the “UC‑DSH Amount”). The UC‑DSH Amount is a hospital’s share of a pool of funds that the CMS Office of the Actuary estimates would equal 75% of Medicare DSH that otherwise would have been paid under the Pre‑ACA DSH Formula, adjusted for changes in the percentage of individuals that are uninsured. Generally, the factors used to calculate and distribute UC‑DSH Amounts are set forth in the Affordable Care Act and are not subject to administrative or judicial review. The statute requires that each hospital’s cost of uncompensated care (i.e., charity and bad debt) as a percentage of the total uncompensated care cost of all DSH hospitals be used to allocate the pool. As of December 31, 2025, 39 of our hospitals qualified for Medicare DSH payments.
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The statutes and regulations that govern Medicare DSH payments have been the subject of various administrative appeals and lawsuits, and our hospitals have been participating in such appeals, including challenges to the inclusion of the Medicare Advantage (Part C) days used in the DSH calculation as set forth in the Changes to the Hospital Inpatient Prospective Payment Systems and Fiscal Year 2005 Rates. In June 2023, CMS issued a Final Action on the Treatment of Medicare Part C Days in the Calculation of a Hospital’s Medicare Disproportionate Patient Percentage (the “2023 Final Action”), which finalized CMS’ August 2020 proposed rule to include Medicare Advantage days in the Medicare fraction for all discharges prior to October 1, 2013. On September 30, 2025, the U.S. District Court for the District of Columbia (the “DC District Court”) issued a decision holding that the 2023 Final Action was impermissibly retroactive, arbitrary and capricious. Despite this finding, the DC District Court declined to vacate the 2023 Final Action and instead ordered the parties to file briefs to address whether vacatur is the appropriate remedy. We are not able to predict the remedy ultimately resulting from the DC District Court’s decision nor are we able to predict the outcome of new legal challenges, if any, or of pending appeals; however, a favorable outcome of our DSH appeals could have a material impact on our future revenues and cash flows.
Direct Graduate and Indirect Medical Education Payments —The Medicare program provides additional reimbursement to approved teaching hospitals for the increased expenses incurred by such institutions. This additional reimbursement, which is subject to certain limits, including intern and resident full-time equivalent limits, is made in the form of Direct Graduate Medical Education (“DGME”) and Indirect Medical Education (“IME”) payments. As of December 31, 2025, 29 of our hospitals were affiliated with academic institutions and were eligible to receive such payments.
IPPS Quality Adjustments —The Affordable Care Act also authorizes quality adjustments to Medicare IPPS payments under the following programs:
• Value‑Based Purchasing (“VBP”) Program – Under the VBP program, IPPS operating payments to hospitals are reduced by 2% to fund value‑based incentive payments to eligible hospitals based on their overall performance on a set of quality measures;
• Hospital Readmission Reduction Program – Under this program, IPPS operating payments to hospitals with excess readmissions are reduced up to a maximum of 3% of base MS‑DRG payments; and
• Hospital‑Acquired Conditions (“HAC”) Reduction Program – Under this program, overall inpatient payments are reduced by 1% for hospitals in the worst performing quartile of risk‑adjusted quality measures for reasonable preventable hospital‑acquired conditions.
These adjustments, which CMS updates annually and are generally based on a hospital’s performance from prior periods, can have an adverse impact on our IPPS operating payments.
Hospital Outpatient Prospective Payment System
Under the outpatient prospective payment system (“OPPS”), hospital outpatient services, except for certain services that are reimbursed on a separate fee schedule, are classified into groups called ambulatory payment classifications (“APCs”). Services in each APC are similar clinically and in terms of the resources they require, and a payment rate is established for each APC. Depending on the services provided, hospitals may be paid for more than one APC for an encounter. CMS annually updates the APCs and the rates paid for each APC.
Inpatient Psychiatric Facility Prospective Payment System
The inpatient psychiatric facility (“IPF”) prospective payment system (“IPF-PPS”) applies to psychiatric hospitals and psychiatric units located within acute care hospitals that have been designated as exempt from the hospital inpatient prospective payment system. The IPF-PPS is based on prospectively determined per‑diem rates and includes an outlier policy that authorizes additional payments for extraordinarily costly cases.
Inpatient Rehabilitation Prospective Payment System
Rehabilitation hospitals and rehabilitation units in acute care hospitals meeting certain criteria established by CMS are eligible to be paid as an inpatient rehabilitation facility (“IRF”) under the IRF prospective payment system (“IRF‑PPS”). Payments under the IRF‑PPS are made on a per-discharge basis. The IRF‑PPS uses federal prospective payment rates across distinct case‑mix groups established by a patient classification system.
Physician and Other Health Professional Services Payment System
Medicare uses a fee schedule to pay for physician and other health professional services based on a list of services and their payment rates referred to as the Medicare Physician Fee Schedule (“MPFS”). In determining payment rates for each service, CMS considers the amount of clinician work required to provide a service, expenses related to maintaining a practice
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and professional liability insurance costs. These three factors are adjusted for variation in the input prices in different markets, and the sum is multiplied by the fee schedule’s conversion factor (an average payment amount or a base rate that is used to convert relative units into payment rates) to produce a total payment amount. As required by statute, beginning in calendar year (“CY”) 2026, there will be two separate conversion factors: one factor for qualifying alternative payment model (“APM”) participants (“QPs”), and one factor for physicians and practitioners who are not QPs (“non-QP clinicians”).
Cost Reports
The final determination of certain Medicare payments to our hospitals, such as DSH, DGME, IME and bad debt expense, are retrospectively determined based on our hospitals’ cost reports. The final determination of these payments often takes many years to resolve because of audits by the MACs, providers’ rights of appeal, and the application of numerous technical reimbursement provisions. In addition, payments made under cost reports for recently divested hospitals are often made to the current operator of the facility even if we retained the right to such funds as part of the related divestiture, and we may incur fees and expenses collecting those funds from the current operator.
For filed cost reports, we adjust the accrual for estimated cost report settlements based on those cost reports and subsequent activity, and we consider the necessity of recording a valuation allowance based on historical settlement results. The accrual for estimated cost report settlements for periods for which a cost report is yet to be filed is recorded based on estimates of what we expect to report on the filed cost reports and a corresponding valuation allowance is recorded, if necessary, based on the method previously described. Cost reports must generally be filed within five months after the end of the annual cost report reporting period. After the cost report is filed, the accrual and corresponding valuation allowance may need to be adjusted.
Medicare Claims Reviews
HHS estimates that the overall 2025 Medicare FFS improper payment rate for the program is approximately 6.6%. The 2025 error rate for Hospital IPPS payments is approximately 3.2%. CMS has identified the FFS program as a program at risk for significant erroneous payments, and one of the agency’s stated key goals is to pay claims properly the first time. This means paying the right amount, to legitimate providers, for covered, reasonable and necessary services provided to eligible beneficiaries. According to CMS, paying correctly the first time saves resources required to recover improper payments and ensures the proper expenditure of Medicare Trust Fund dollars. CMS has established several initiatives to prevent or identify improper payments before a claim is paid, and to identify and recover improper payments after paying a claim. The overall goal is to reduce improper payments by identifying and addressing coverage and coding billing errors for all provider types. Under the authority of the Social Security Act, CMS employs a variety of contractors (e.g., MACs, Recovery Audit Contractors and Unified Program Integrity Contractors) to process and review claims according to Medicare rules and regulations.
Claims selected for prepayment review are not subject to the normal Medicare FFS payment timeframe. Furthermore, prepayment and post‑payment claimsdenials are subject to administrative and judicial review, and we pursue the reversal of adverse determinations where appropriate. We have established robust protocols to respond to claims reviews and payment denials. In addition to overpayments that are not reversed on appeal, we incur additional costs to respond to requests for records and pursue the reversal of payment denials. The degree to which our Medicare FFS claims are subjected to prepayment reviews, the extent to which payments are denied, and our success in overturningdenials could have an adverse effect on our cash flows and results of operations.
Meaningful Use of Health Information Technology
The Health Information Technology for Economic and Clinical Health (“HITECH”) Act, which is part of the American Recovery and Reinvestment Act of 2009, promotes the use of healthcare information technology by, among other things, providing financial incentives to hospitals and physicians to become “meaningful users” of electronic health record (“EHR”) systems and imposing penalties on those who do not. Under the HITECH Act and other laws and regulations, eligible hospitals that fail to demonstrate and maintain meaningful use of certified EHR technology and/or submit quality data every year (and have not applied and qualified for a hardship exception) are subject to a reduction of the Medicare market basket update. Eligible healthcare professionals are also subject to positive or negative payment adjustments based, in part, on their use of EHR technology. We continue to invest in the maintenance and utilization of certified EHR systems for our hospitals and employed physicians. Failure to do so could subject us to penalties that may have an adverse effect on our net revenues and results of operations.
Medicaid
Medicaid programs and the corresponding reimbursement methodologies vary from state‑to‑state and from year‑to‑year. In addition to traditional Medicaid programs, we also receive DSH and other supplemental revenues under various state Medicaid programs. All Medicaid patient service revenue is presented net of provider taxes or assessments paid by our
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hospitals. During the years ended December 31, 2025, 2024 and 2023, revenue from Medicaid programs included $1.338 billion, $1.161 billion and $929 million, respectively, of revenue attributable to DSH and other supplemental programs. Revenues from Medicaid programs constituted approximately 11%, 10% and 9% of the total net patient service revenues of our hospitals and related outpatient facilities for the years ended December 31, 2025, 2024 and 2023, respectively.
Several states in which we operate continue to face budgetary challenges that have resulted in reduced Medicaid funding levels to hospitals and other providers. Because most states must operate with balanced budgets, and the Medicaid program is generally a significant portion of a state’s budget, states can be expected to adopt or consider adopting future legislation designed to reduce or not increase their Medicaid expenditures. In addition, some states delay issuing Medicaid payments to providers to manage state expenditures. As an alternative means of funding provider payments, many of the states where we operate have adopted supplemental payment programs authorized under the Social Security Act. Continuing pressure on state budgets and other factors, including legislative and regulatory changes, could result in future reductions to Medicaid payments, payment delays, or changes and reductions to Medicaid supplemental payment programs. Federal government denials or delayed approvals of waiver applications or extension requests by the states where we operate could also materially impact our Medicaid funding levels.
Total Medicaid and Medicaid managed care net patient service revenues recognized by the hospitals and related outpatient facilities in our Hospital Operations segment for the years ended December 31, 2025, 2024 and 2023 were $2.822 billion, $2.845 billion and $2.776 billion, respectively. During the year ended December 31, 2025, Medicaid and Medicaid managed care revenues comprised 54% and 46%, respectively, of our Medicaid‑related net patient service revenues recognized by the hospitals and related outpatient facilities in our Hospital Operations segment. All Medicaid and Medicaid managed care patient service revenues are presented net of provider taxes or assessments paid by our hospitals.
Patient advocates from our Eligibility and Enrollment Services program (“EES”) screen patients in the hospital to determine whether those patients meet eligibility requirements for financial assistance programs. They also expedite the process of applying for these government programs. Receivables from patients who are potentially eligible for Medicaid are classified as Medicaid pending, under the EES, net of appropriate implicit price concessions. Based on recent trends, approximately 98% of all accounts in the EES are ultimately approved for benefits under a government program, such as Medicaid. There was $152 million and $210 million of accounts receivable in the EES still awaiting determination of eligibility under a government program at December 31, 2025 and 2024, respectively.
Because we cannot predict what actions the federal government or the states may take under existing or future legislation and/or regulatory changes to address budget gaps, deficits, Medicaid expansion, Medicaid eligibility redeterminations, provider fee programs, state‑directed payment programs or Medicaid Section 1115 waivers, we are unable to assess the effect that any such legislation or regulatory action might have on our business; however, the impact on our future financial position, results of operations or cash flows could be material.
Regulatory and Legislative Updates
Recent regulatory and legislative updates to the Medicare and Medicaid payment systems, as well as other government programs impacting our business, are provided below.
Payment and Policy Changes to the Medicare Inpatient Prospective Payment Systems —Section 1886(d) of the Social Security Act requires CMS to update Medicare inpatient FFS payment rates for hospitals reimbursed under the IPPS annually. The updates generally become effective October 1, the beginning of the FFY. In August 2025, CMS issued final changes to the Hospital Inpatient Prospective Payment Systems for Acute Care Hospitals and Fiscal Year 2026 Rates (“Final IPPS Rule”). According to CMS, the combined impact of the payment and policy changes in the Final IPPS Rule for operating costs will yield an average 4.4% increase in Medicare operating payments for proprietary hospitals in FFY 2026. The Final IPPS Rule includes the following payment and policy changes, among others:
• A market basket increase of 3.3% for MS‑DRG operating payments for hospitals reporting specified quality measure data and that are meaningful users of EHR technology; CMS also finalized a 0.7% multifactor productivity reduction required by the Affordable Care Act that results in a net operating payment update of 2.6% before budget neutrality adjustments;
• A decrease in the cost outlier threshold from $46,217 to $40,397;
• A 2.35% net increase in the capital federal MS‑DRG rate;
• Updates to the factors used to determine the amount and distribution of Medicare UC‑DSH Amounts; and
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• Updates to the implementation of the Transforming Episode Accountability Model (“TEAM”), which are in effect for certain episodic categories from January 1, 2026 through December 31, 2030. TEAM will be mandatory, with limited exceptions, for all hospitals located within the CMS‑selected Core-Based Statistical Areas (“CBSAs”). At December 31, 2025, nine hospitals in our Hospital Operations segment and one surgical hospital in our Ambulatory Care segment were located in CBSAs.
Payment and Policy Changes to the Medicare Outpatient Prospective Payment and Ambulatory Surgical Center Payment Systems —In November 2025, CMS released the final policy changes and payment rates for the Hospital Outpatient Prospective Payment System and Ambulatory Surgical Center Payment System for CY 2026 (“Final OPPS/ASC Rule”). The Final OPPS/ASC Rule includes the following payment and policy changes, among others:
• An estimated net increase of 2.6% for the OPPS rates based on a market basket increase of 3.3%, reduced by a multifactor productivity adjustment required by the Affordable Care Act of 0.7%;
• Adoption of a site neutrality payment policy for drug administration in off-campus outpatient departments; and
• A 2.6% increase to the ambulatory surgical center payment rates.
CMS projects that the combined impact of the payment and policy changes in the Final OPPS/ASC Rule will yield an average 3.3% increase in Medicare FFS OPPS payments for propriety hospitals.
Final Rule on the Remedy for the 340B-Acquired Drug Payment Policy for Calendar Years 2018-2022 —CMS’ 340B program allows certain hospitals (i.e., only nonprofit organizations with specific federal designations and/or funding) (“340B Hospitals”) to purchase drugs at discounted rates from drug manufacturers (“340B Drugs”). In the CY 2018 final rule regarding OPPS payment and policy changes, CMS reduced the payment for 340B Drugs from the average sales price (“ASP”) plus 6% to the ASP minus 22.5% and made a corresponding budget-neutral increase to payments to all hospitals for other drugs and services reimbursed under the OPPS (the “340B Payment Adjustment”). CMS retained the same 340B Payment Adjustment in the final rules regarding OPPS payment and policy changes for CYs 2019 through 2022. Certain hospital associations and hospitals commenced litigationchallenging CMS’ authority to impose the 340B Payment Adjustment for CYs 2018, 2019 and 2020. Following the initial court decisions and a series of appeals, the U.S. Supreme Court (the “Supreme Court”) unanimously ruled in June 2022 that the decision to impose the 340B Payment Adjustment in CYs 2018 and 2019 was unlawful, and the case was remanded to the lower courts to determine the appropriate remedy. In response to the Supreme Court’s decision, the final rules regarding OPPS payment and policy changes for CY 2023 affirmed that CMS was now applying the default rate, generally ASP plus 6%, to 340B Drugs and biologicals, and it had removed the 340B Payment Adjustment made in 2018. To address the remediation for the prior years’ underpayments, CMS released the Hospital Outpatient Prospective Payment System: Remedy for 340B-Acquired Drugs Payment Policy for Calendar Years 2018-2022 Final Rule in November 2023. The final rule provides for a one-time lump sum remedy payment to each 340B Hospital that received a cut in 340B Drug payments from 2018 through 2022 (to which CMS will not apply interest). Due to budget neutrality requirements, CMS also implemented a reduction to future non‑drug item and service payments through an adjustment to the OPPS conversion factor by minus 0.5% starting in CY 2026 until the full amount is offset. In the CY 2026 proposed rule, CMS proposed to increase the 340B remedy reduction from 0.5% to 2.0%, effectively accelerating the estimated recoupment timeline from 16 to six years. In the CY 2026 final rule, CMS did not finalize its proposal to increase the remedy reduction. Although CMS abandoned the accelerated recoupment timeline, the agency anticipates a larger, up to 2.0%, reduction in future rulemaking.
Payment and Policy Changes to the MPFS —In October 2025, CMS released the CY 2026 Medicare Physician Fee Schedule Final Rule (“MPFS Final Rule”). The MPFS Final Rule includes updates to payment policies, payment rates and other provisions for services reimbursed under the MPFS from January 1 through December 31, 2026. The MPFS Final Rule also includes a one-time temporary 2.5% MPFS conversion factor increase from the OBBBA. Under the MPFS Final Rule, the CY 2026 conversion factors will increase from $32.35 to $33.57 for qualifying APM QPs and to $33.40 for non-QP clinicians.
PRIVATE INSURANCE
Managed Care
We currently have thousands of managed care contracts with various HMOs and PPOs. HMOs generally maintain a full‑service healthcare delivery network comprised of physician, hospital, pharmacy and ancillary service providers that HMO members must access through an assigned “primary care” physician. The member’s care is then managed by his or her primary care physician and other network providers in accordance with the HMO’s quality assurance and utilization review guidelines so that appropriate healthcare can be efficiently delivered in the most cost‑effective manner. HMOs typically provide reduced benefits or reimbursement (or none at all) to their members who use non‑contracted healthcare providers for non‑emergency care.
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PPOs generally offer limited benefits to members who use non‑contracted healthcare providers. PPO members who use contracted healthcare providers receive a preferred benefit, typically in the form of lower co‑pays, co‑insurance or deductibles. As employers and employees have demanded more choice, managed care plans have developed hybrid products that combine elements of both HMO and PPO plans, including high‑deductible healthcare plans that may have limited benefits, but cost the employee less in premiums.
The amount of our managed care net patient service revenues, including Medicare and Medicaid managed care programs, from our hospitals and related outpatient facilities during the years ended December 31, 2025, 2024 and 2023 was $9.696 billion, $9.809 billion and $10.248 billion, respectively. Our top 10 managed care payers generated 69% of our managed care net patient service revenues for the year ended December 31, 2025. During the same period, national payers generated 48% of our managed care net patient service revenues; the remainder came from regional or local payers. At December 31, 2025 and 2024, 67% and 68%, respectively, of our Hospital Operations segment’s net accounts receivable were due from managed care payers.
Revenues under managed care plans are based primarily on payment terms involving predetermined rates per diagnosis, per‑diem rates, discounted FFS rates and/or other similar contractual arrangements. These revenues are also subject to review and possible audit by the payers, which can take several years before they are completely resolved. The payers are billed for patient services on an individual patient basis. An individual patient’s bill is subject to adjustment on a patient‑by‑patient basis in the ordinary course of business by the payers following their review and adjudication of each particular bill. We estimate the discounts for contractual allowances at the individual hospital level utilizing billing data on an individual patient basis. At the end of each month, on an individual hospital basis, we estimate our expected reimbursement for patients of managed care plans based on the applicable contract terms. We believe it is reasonably likely for there to be an approximately 3% increase or decrease in the estimated contractual allowances related to managed care plans. Based on reserves at December 31, 2025, a 3% increase or decrease in the estimated contractual allowance would impact the estimated reserves by approximately $42 million. Some of the factors that can contribute to changes in the contractual allowance estimates include: (1) changes in reimbursement levels for procedures, supplies and drugs when threshold levels are triggered; (2) changes in reimbursement levels when stop‑loss or outlier limits are reached; (3) changes in the admission status of a patient due to physician orders subsequent to initial diagnosis or testing; (4) final coding of in‑house and discharged‑not‑final‑billed patients that change reimbursement levels; (5) secondary benefits determined after primary insurance payments; and (6) reclassification of patients among insurance plans with different coverage and payment levels. Contractual allowance estimates are periodically reviewed for accuracy by taking into consideration known contract terms, as well as payment history. We believe our estimation and review process enables us to identify instances on a timely basis where such estimates need to be revised. We do not believe there were any adjustments to estimates of patient bills that were material to our revenues during the years ended December 31, 2025, 2024 or 2023. In addition, on a corporate‑wide basis, we do not record any general provision for adjustments to estimated contractual allowances for managed care plans. Managed care accounts, net of contractual allowances recorded, are further reduced to their net realizable value through implicit price concessions based on historical collection trends for these payers and other factors that affect the estimation process.
In recent years, managed care governmental admissions have increased as a percentage of total managed care admissions. However, in year ended December 31, 2025, admissions growth from commercial managed care plans was greater than the growth in admissions from Medicare and Medicaid managed care programs. Commercial managed care plans typically generate higher yields than managed care governmental insurance plans. We have continued to benefit from year‑over‑year aggregate managed care commercial pricing improvements.
Indemnity
An indemnity‑based agreement generally requires the insurer to reimburse an insured patient for healthcare expenses after those expenses have been incurred by the patient, subject to policy conditions and exclusions. Unlike an HMO member, a patient with indemnity insurance is free to control his or her utilization of healthcare and selection of healthcare providers.
UNINSURED PATIENTS
Uninsured patients are patients who do not qualify for government programs payments, such as Medicare and Medicaid, do not have some form of private insurance and, therefore, are responsible for their own medical bills. Self‑pay accounts receivable, which include amounts due from uninsured patients, as well as co‑pays, co‑insurance amounts and deductibles owed to us by patients with insurance, pose significant collectability problems. At December 31, 2025 and 2024, 7% and 5%, respectively, of our Hospital Operations segment’s accounts receivable was self‑pay. Further, a significant portion of our implicit price concessions relates to self‑pay amounts. The revenue cycle management services we provide are subject to various statutes and regulations regarding consumer protection in areas including finance, debt collection and credit reporting activities.
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We perform systematic analyses to focus our attention on the drivers of implicit price concessions for each hospital. While emergency department use is the primary contributor to our implicit price concessions in the aggregate, this is not the case at all hospitals. As a result, we have increased our focus on targeted initiatives that concentrate on non‑emergency department patients as well. These initiatives are intended to promote process efficiencies in collecting self‑pay accounts, as well as co‑pay, co‑insurance and deductible amounts owed to us by patients with insurance, that we deem highly collectible. We leverage a statistical‑based collections model that aligns our operational capacity to maximize our collections performance. We are dedicated to modifying and refining our processes as needed, enhancing our technology and improving staff training throughout the revenue cycle process in an effort to increase collections and reduce accounts receivable.
Over the longer term, several other initiatives we have previously announced should also help address the challenges associated with serving uninsured patients. For example, our Compact with Uninsured Patients (“ Compact ”) is designed to offer discounts to certain uninsured patients, which enables us to offer lower rates to those patients who historically had been charged standard gross charges. Under the Compact , the discount offered to uninsured patients is recognized as a contractual allowance, which reduces net operating revenues at the time the self‑pay accounts are recorded. The uninsured patient accounts, net of contractual allowances recorded, are further reduced to their net realizable value through implicit price concessions based on historical collection trends for self‑pay accounts and other factors that affect the estimation process.
We also provide financial assistance through our charity and uninsured discount programs to uninsured patients who are unable to pay for the healthcare services they receive. Our policy is not to pursue collection of amounts determined to qualify for financial assistance; therefore, we do not report these amounts in net operating revenues. Most states include an estimate of the cost of charity care in the determination of a hospital’s eligibility for Medicaid DSH payments. These payments are intended to mitigate our cost of uncompensated care. Some states have also developed provider fee or other supplemental payment programs to mitigate the shortfall of Medicaid reimbursement compared to the cost of caring for Medicaid patients.
The expansion of health insurance coverage under the Affordable Care Act resulted in an increase in the number of patients using our facilities with either private or public program coverage and a decrease in uninsured and charity care admissions, along with reductions in Medicare and Medicaid reimbursement to healthcare providers, including us. However, we continue to provide uninsured discounts and charity care due to the failure of certain states to expand Medicaid coverage and for persons living in the country who are not permitted to enroll in a health insurance exchange or government healthcare insurance program.
The following table presents our estimated costs (based on selected operating expenses, which include salaries, wages and benefits, supplies and other operating expenses) of caring for our uninsured and charity patients:
Years Ended December 31,
Estimated costs for:
Uninsured patients
Charity care patients
Total
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RESULTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2025 COMPARED TO THE YEAR ENDED DECEMBER 31, 2024
The following table presents our consolidated net operating revenues, operating expenses and operating income, both in dollar amounts and as percentages of net operating revenues, on a continuing operations basis:
Years Ended December 31,
Increase
(Decrease)
Net operating revenues:
Hospital Operations
Ambulatory Care
Net operating revenues
Equity in earnings of unconsolidated affiliates
Operating expenses:
Salaries, wages and benefits
Supplies
Other operating expenses, net
Depreciation and amortization
Impairment and restructuring charges, and acquisition-related costs
Litigation and investigation costs
Net losses (gains) on sales, consolidation and deconsolidation of facilities
Operating income
Net operating revenues
Equity in earnings of unconsolidated affiliates
Operating expenses:
Salaries, wages and benefits
Supplies
Other operating expenses, net
Depreciation and amortization
Impairment and restructuring charges, and acquisition-related costs
Litigation and investigation costs
Net losses (gains) on sales, consolidation and deconsolidation of facilities
Operating income
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The following table presents our net operating revenues, operating expenses and operating income, both in dollar amounts and as percentages of net operating revenues, by segment on a continuing operations basis:
Year Ended December 31, 2025
Year Ended December 31, 2024 (1)
Hospital Operations
Ambulatory Care
Hospital Operations
Ambulatory Care
Net operating revenues
Equity in earnings of unconsolidated affiliates
Operating expenses:
Salaries, wages and benefits
Supplies
Other operating expenses, net
Depreciation and amortization
Impairment and restructuring charges, and acquisition-related costs
Litigation and investigation costs
Net losses (gains) on sales, consolidation and deconsolidation of facilities
Operating income
Net operating revenues
Equity in earnings of unconsolidated affiliates
Operating expenses:
Salaries, wages and benefits
Supplies
Other operating expenses, net
Depreciation and amortization
Impairment and restructuring charges, and acquisition-related costs
Litigation and investigation costs
Net losses (gains) on sales, consolidation and deconsolidation of facilities
Operating income
Grant income is no longer significant enough to be presented separately and is now included in net operating revenues for the respective segment. Prior‑year ratios have been adjusted to reflect the resulting change in net operating revenues.
Consolidated net operating revenues increased by $635 million, or 3.1%, for the year ended December 31, 2025 compared to the year ended December 31, 2024. Our Hospital Operations segment’s net operating revenues decreased by $3 million during the year ended December 31, 2025 as compared to 2024. This decrease was primarily attributable to the impact of the sales of the Divested Hospitals in 2024, partially offset by a more favorable payer mix, increases in our same‑hospital admissions, higher patient acuity, growth in Medicaid supplemental revenue and negotiated commercial rate increases during 2025. During the year ended December 31, 2025, net operating revenues in our Ambulatory Care segment increased by $638 million, or 14.1%, as compared to 2024. This growth was primarily driven by our newly acquired and developed ASCs, net of the impact of the sale or closure of certain facilities, negotiated commercial rate increases, higher patient acuity and the addition of new service lines in 2025.
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RESULTS OF OPERATIONS BY SEGMENT
Hospital Operations Segment
The following tables present operating statistics, revenues and expenses of our hospitals and related outpatient facilities on a same‑hospital basis, unless otherwise indicated:
Same-Hospital
Years Ended December 31,
Increase
(Decrease)
Admissions, Patient Days and Surgeries
Number of hospitals
Total admissions
Adjusted admissions
Paying admissions (excludes charity and uninsured)
Charity and uninsured admissions
Admissions through emergency department
Paying admissions as a percentage of total admissions
Charity and uninsured admissions as a percentage of total admissions
Emergency department admissions as a percentage of total admissions
Surgeries — inpatient
Surgeries — outpatient
Total surgeries
Patient days — total
Adjusted patient days
Average length of stay (days)
Licensed beds (at end of period)
Average licensed beds
Utilization of licensed beds
The change is the difference between the 2025 and 2024 amounts or percentages presented.
Same-Hospital
Years Ended December 31,
Increase
(Decrease)
Outpatient Visits
Total visits
Paying visits (excludes charity and uninsured)
Charity and uninsured visits
Emergency department visits
Surgery visits
Paying visits as a percentage of total visits
Charity and uninsured visits as a percentage of total visits
The change is the difference between the 2025 and 2024 percentages presented.
Same-Hospital
Years Ended December 31,
Increase
(Decrease)
Revenues
Total segment net operating revenues
Selected revenue data – hospitals and related outpatient facilities:
Net patient service revenues
Net patient service revenue per adjusted admission
Net patient service revenue per adjusted patient day
Same-Hospital
Years Ended December 31,
Increase
(Decrease)
Selected Operating Expenses
Salaries, wages and benefits
Supplies
Other operating expenses
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Same-Hospital
Years Ended December 31,
Increase
(Decrease) (1)
Selected Operating Expenses as a Percentage of Net Operating Revenues
Salaries, wages and benefits
Supplies
Other operating expenses
The change is the difference between the 2025 and 2024 percentages presented.
Revenues
Same‑hospital net operating revenues increased by $973 million, or 6.5%, during the year ended December 31, 2025 compared to the previous year. This increase was attributable to the positive impact of a more favorable payer mix, higher patient admissions and acuity, growth in Medicaid supplemental revenue and negotiated commercial rate increases during 2025.
Salaries, Wages and Benefits
Same‑hospital salaries, wages and benefits expense increased by $247 million, or 3.5%, in the year ended December 31, 2025 compared to 2024. This change was primarily attributable to higher employee benefit costs, annual merit increases, and an increase in recruiting and retention costs. These factors were partially offset by a decrease in contract labor and premium pay costs during 2025. As a percentage of net operating revenues, same‑hospital salaries, wages and benefits expense decreased by 140 basis points to 46.3% in the year ended December 31, 2025 compared to the year ended December 31, 2024.
Supplies
Same‑hospital supplies expense increased by $121 million, or 5.3%, in the year ended December 31, 2025 compared to 2024. This increase was driven by higher patient admissions and acuity, partially offset by our cost‑efficiency measures. Same‑hospital supplies expense as a percentage of net operating revenues decreased by 10 basis points to 15.0% in the year ended December 31, 2025 compared to the year ended December 31, 2024.
Other Operating Expenses, Net
Same‑hospital other operating expenses increased by $210 million, or 6.1%, in the year ended December 31, 2025 compared to 2024. This change was primarily attributable to increases in medical fees, professional and consulting fees, and malpractice expense during 2025. Same‑hospital other operating expenses as a percentage of net operating revenues decreased by 10 basis points from 23.0% for the year ended December 31, 2024 to 22.9% for the year December 31, 2025.
Ambulatory Care Segment
Our Ambulatory Care segment is comprised of USPI’s ASCs and surgical hospitals. USPI operates its facilities in partnership with local physicians and, in many of these facilities, a health system partner. In most cases, we hold ownership interests in the facilities and operate them through separate legal entities. Our sources of earnings consist of:
• management and administrative services revenues from the facilities USPI operates through management services contracts, usually computed as a percentage of each facility’s net revenues; and
• our share of each facility’s net income (loss), which is computed by multiplying the facility’s net income (loss) times the percentage of each facility’s equity interests owned by USPI.
Our role as an owner and day‑to‑day manager provides us with significant influence over the operations of each facility. For many of the facilities in which our Ambulatory Care segment holds an ownership interest (150 of 559 facilities at December 31, 2025), this influence does not represent control of the facility, so we account for our investment in each of these facilities under the equity method for an unconsolidated affiliate. USPI controls 409 of the facilities our Ambulatory Care segment operates, and we account for these investments as consolidated subsidiaries. Our net earnings from a facility are the same whether it is consolidated or unconsolidated, but the classification of those earnings differs. For consolidated subsidiaries, our financial statements reflect 100% of the revenues and expenses of the subsidiaries. The net profit attributable to owners other than USPI is classified within net income available (loss attributable) to noncontrolling interests.
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For unconsolidated affiliates, our statements of operations reflect our earnings in two line items:
• equity in earnings of unconsolidated affiliates —our share of the net income (loss) of each facility, which is based on the facility’s net income (loss) and the percentage of the facility’s outstanding equity interests owned by USPI; and
• management and administrative services revenues, which is included in our net operating revenues —income we earn in exchange for managing the day‑to‑day operations of each facility, usually computed as a percentage of each facility’s net revenues.
The following table presents selected revenue and expense information for our Ambulatory Care segment:
Years Ended December 31,
Increase
(Decrease)
Net operating revenues
Equity in earnings of unconsolidated affiliates
Salaries, wages and benefits
Supplies
Other operating expenses, net
Revenues
Our Ambulatory Care segment’s net operating revenues increased by $638 million, or 14.1%, during the year ended December 31, 2025 compared to 2024. The change was driven by (1) a $300 million increase from 2024 and 2025 acquisitions, de novo development and purchases of controlling interests, partially offset by the impact of the sale or closure of certain facilities, and (2) a $338 million increase in same‑facility net operating revenues, which was primarily attributable to incremental revenue from negotiated commercial rate increases, higher patient acuity and the addition of new service lines during 2025.
Salaries, Wages and Benefits
Salaries, wages and benefits expense increased by $128 million, or 11.3%, during the year ended December 31, 2025 compared to 2024. This change was driven by an $87 million increase from 2024 and 2025 acquisitions, de novo development and purchases of controlling interests, partially offset by the impact of the sale or closure of certain facilities. A $41 million increase in same‑facility salaries, wages and benefits expense also contributed to the increase. Salaries, wages and benefits expense as a percentage of net operating revenues decreased by 60 basis points from 25.1% in the year ended December 31, 2024 to 24.5% in the year ended December 31, 2025.
Supplies
Supplies expense increased by $188 million, or 15.8%, during the year ended December 31, 2025 compared to 2024. The change was driven by a $91 million increase from 2024 and 2025 acquisitions, de novo development and purchases of controlling interests, partially offset by the impact of the sale or closure of certain facilities. An increase of $97 million in same‑facility supplies expense, due primarily to higher patient acuity and the addition of new service lines during 2025, also contributed to this change. Supplies expense as a percentage of net operating revenues increased by 40 basis points from 26.2% in the year ended December 31, 2024 to 26.6% in the year ended December 31, 2025.
Other Operating Expenses, Net
Other operating expenses increased by $114 million, or 17.5%, during the year ended December 31, 2025 compared to 2024. The change was primarily driven by (1) a $68 million increase from 2024 and 2025 acquisitions, de novo development and purchases of controlling interests, partially offset by the impact of the sale or closure of certain facilities, and (2) a $46 million increase in same-facility other operating costs during 2025. Other operating expenses as a percentage of net operating revenues increased from 14.3% for the year ended December 31, 2024 to 14.8% for 2025.
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Facility Growth
The following table presents the year-over-year changes in our revenue and cases on a same‑facility systemwide basis:
Year Ended December 31, 2025
Net revenues
Cases
Net revenue per case
Facility Acquisitions and Investment
The table below presents the aggregate cash activity related to our acquisition of various ownership interests in ambulatory care facilities:
Years Ended December 31,
Purchases of controlling interests
Acquisition-related cash adjustments
Purchases of noncontrolling interests
Equity investment in unconsolidated affiliates and consolidated facilities that did not result in a change of control
During the year ended December 31, 2025, we commenced operations at six de novo ASCs. In the same period, we paid an aggregate of $301 million to acquire controlling ownership interests in 27 ASCs and one surgical hospital in which we previously held no investment, as well as nine facilities that were previously unconsolidated. We also acquired a non‑controlling ownership interest in an ASC and ceased operations or disposed of 19 ASCs during the year ended December 31, 2025.
Consolidated
Impairment and Restructuring Charges, and Acquisition-Related Costs
The following table presents information about our impairment and restructuring charges, and acquisition‑related costs:
Years Ended December 31,
Consolidated:
Impairment charges
Restructuring charges
Acquisition-related costs
Total impairment and restructuring charges, and acquisition-related costs
By segment:
Hospital Operations
Ambulatory Care
Total impairment and restructuring charges, and acquisition-related costs
Restructuring charges during the year ended December 31, 2025 included $15 million of contract and lease termination fees, $13 million related to the transition of various administrative functions to our Global Business Center (“GBC”) in the Philippines, $8 million of employee severance costs and $8 million of other restructuring costs. Impairment charges for the year ended December 31, 2025 primarily related to the write-down of our investments in certain unconsolidated affiliates. During the year ended December 31, 2024, restructuring charges consisted of $17 million of legal costs related to the sale of certain businesses, $12 million of contract and lease termination fees, $11 million of employee severance costs, $9 million related to the transition of various administrative functions to our GBC and $7 million of other restructuring costs. Impairment charges for the year ended December 31, 2024 primarily related to the write-down of certain intangible assets held by our Ambulatory Care segment to their estimated fair value. Acquisition‑related costs during both 2025 and 2024 consisted entirely of transaction costs.
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Our impairment tests presume stable, improving or, in some cases, declining operating results in our facilities, which are based on programs and initiatives being implemented that are designed to achieve each facility’s most recent projections. If these projections are not met, or negative trends occur that impact our future outlook, future impairments of long-lived assets and goodwill may occur, and we may incur additional restructuring charges, which could be material.
Litigation and Investigation Costs
Litigation and investigation costs for the years ended December 31, 2025 and 2024 were $64 million and $35 million, respectively.
Gains and Losses on Sales, Consolidation and Deconsolidation of Facilities
We recorded net losses from the sale, consolidation and deconsolidation of facilities of $1 million during the year ended December 31, 2025. This activity included net losses related to the consolidation of certain facilities by our Ambulatory Care segment, partially offset by a gain related to post-closing adjustments from the divestiture of our AL Hospitals in 2024 and gains recognized in 2025 from the divestiture of certain facilities by our Hospital Operations and Ambulatory Care segments.
We recorded gains from the sale, consolidation and deconsolidation of facilities totaling $2.916 billion during the year ended December 31, 2024. Activity during 2024 primarily consisted of aggregate gains recognized from the sales of the Divested Hospitals, as well as facilities sold, consolidated and deconsolidated by our Ambulatory Care segment.
Interest Expense
Interest expense for the years ended December 31, 2025 and 2024 was $821 million and $826 million, respectively.
Losses from Early Extinguishment of Debt
During the year ended December 31, 2025, we recorded net losses of $4 million primarily related to the full redemption of our February 2027 Senior Secured Second Lien Notes and the partial redemption of our October 2028 Senior Unsecured Notes, in each case in advance of their maturity dates. These losses derived from the write-off of unamortized issuance costs associated with the respective notes.
During the year ended December 31, 2024, we recorded losses of $8 million related to the redemption of our 4.875% senior secured first lien notes due 2026 in advance of their maturity date. These losses derived from the write-off of unamortized issuance costs associated with the notes.
Income Tax Expense
During the year ended December 31, 2025, we recorded income tax expense of $433 million on pre‑tax income of $2.800 billion compared to income tax expense of $1.184 billion on pre‑tax income of $5.248 billion during the year ended December 31, 2024.
A reconciliation between the amount of reported income tax expense and the amount computed by multiplying income before income taxes by the statutory federal tax rate is presented below.
Years Ended December 31,
Amount
Percent
Amount
Percent
Tax expense at statutory federal rate
Domestic federal tax
Nontaxable or nondeductible items:
Tax benefit attributable to noncontrolling interests
Nondeductible goodwill
Other
Stock-based compensation tax benefit
Other
State and local income taxes, net of federal income tax effect
Changes in valuation allowances
Changes in prior year unrecognized tax benefits
Income tax expense
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During the year ended December 31, 2025, the valuation allowance increased by $2 million, including an increase of $11 million due to limitations on the tax deductibility of interest expense, and a decrease of $9 million due to changes in the expected realizability of deferred tax assets. The balance in the valuation allowance as of December 31, 2025 was $160 million. During the year ended December 31, 2024, the valuation allowance decreased by $90 million, including a decrease of $180 million primarily for utilization of interest expense carryforwards due to gains from sales of facilities, an increase of $92 million due to an acquisition, and a decrease of $2 million due to changes in the expected realizability of deferred tax assets. The balance in the valuation allowance as of December 31, 2024 was $158 million.
Net Income Available to Noncontrolling Interests
The table below presents net income available to noncontrolling interests by segment for the periods indicated:
Years Ended December 31,
Hospital Operations
Ambulatory Care
Total net income available to noncontrolling interests
RESULTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2024 COMPARED TO THE YEAR ENDED DECEMBER 31, 2023
A discussion of our results of operations for the year ended December 31, 2024 compared to the year ended December 31, 2023 can be found in our Annual Report on Form 10-K for the year ended December 31, 2024.
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LIQUIDITY AND CAPITAL RESOURCES
CASH REQUIREMENTS
Scheduled Contractual Obligations
Our obligations to make future cash payments under scheduled contractual obligations are summarized in the table below, all as of December 31, 2025. Other than with respect to the repayment of long-term debt, we expect to use net cash generated from operating activities or cash on hand to satisfy the below obligations. We also have the ability to use borrowings under our 2025 Credit Agreement. Long‑term debt maturities may be refinanced or repaid using net cash generated from operating activities or from the proceeds from sales of facilities.
Long-term Debt —During the year ended December 31, 2025, we executed our new 2025 Credit Agreement and concurrently terminated our then-existing senior secured revolving credit facility prior to its scheduled maturity date. Our 2025 Credit Agreement, which has a scheduled maturity date of November 4, 2030, provides for, subject to borrowing availability, revolving loans in an aggregate principal amount of up to $1.900 billion with a $200 million subfacility for standby letters of credit. Our borrowing availability is calculated by reference to a borrowing base that is determined by specified percentages of eligible accounts receivable, eligible inventory and Medicaid supplemental payments. At December 31, 2025, we had no cash borrowings outstanding under the 2025 Credit Agreement, and we had less than $1 million of standby letters of credit outstanding.
At December 31, 2025, we had senior unsecured notes and senior secured notes with aggregate principal amounts outstanding of $12.662 billion. A payment of the principal and any accrued but unpaid interest is due upon the maturity date of the respective notes, which dates are staggered from 2027 through 2033. We completed the following transactions during the year ended December 31, 2025, all of which occurred in November:
• We issued $1.500 billion aggregate principal amount of our 2032 Senior Secured First Lien Notes. We will pay interest on these notes on May 15 and November 15 of each year, which payments will commence on May 15, 2026.
• In addition, we issued $750 million aggregate principal amount of our 2033 Senior Unsecured Notes. We will pay interest on these notes on May 15 and November 15 of each year, which payments will commence on May 15, 2026.
• We used the net proceeds from the issuance of the 2032 Senior Secured First Lien Notes and 2033 Senior Unsecured Notes, together with cash on hand, to finance the redemption of all $1.500 billion aggregate principal amount outstanding of our February 2027 Senior Secured Second Lien Notes and the redemption of $750 million aggregate principal amount of the then $2.500 billion aggregate principal amount outstanding of our October 2028 Senior Unsecured Notes, in each case in advance of their maturity dates.
Interest payments, net of capitalized interest, were $865 million, $851 million and $882 million in the years ended December 31, 2025, 2024 and 2023, respectively. For the year ending December 31, 2026, we expect annual interest payments to be approximately $750 million to $760 million.
Future maturities of our long-term debt obligations are summarized in the table above. See Note 8 to the accompanying Consolidated Financial Statements for additional information about our long‑term debt obligations.
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Lease Obligations— We have operating lease agreements primarily for real estate, including off‑campus outpatient facilities, medical office buildings, and corporate and other administrative offices, as well as medical and office equipment. Our finance leases primarily relate to medical and office equipment and real estate. As of December 31, 2025, we had fixed payment obligations of $1.709 billion under non‑cancellable lease agreements. Future payments due in connection with our operating and finance leases, including imputed interest, are summarized in the table above. Additional information about our lease commitments is provided in Note 7 to the accompanying Consolidated Financial Statements.
Academic Teaching Services— We enter into contracts for academic teaching services with university and physician groups to support graduate medical education. These agreements contain various rights and termination provisions.
Defined Benefit Plan Obligations— We maintain three frozen, non‑qualified defined benefit plans that provide supplemental retirement benefits to certain of our current and former executives. These plans are unfunded, and plan obligations are paid from our working capital. We also maintain a frozen, qualified defined benefit plan for certain of our current and former employees in Detroit. See Note 10 to the accompanying Consolidated Financial Statements for additional information about our defined benefit plans.
Information Technology Services Contracts— We enter into various non‑cancellable contracts for information technology services and licenses as a normal part of our business. These contracts generally relate to information technology infrastructure support and services, software licenses for certain operational and administrative systems, and cybersecurity‑related software and services.
Purchase Orders— We had outstanding short‑term purchase commitments of $284 million at December 31, 2025, which we expect to pay within 12 months.
Other Contractual Obligations
Asset Retirement Obligations— Asset retirement obligations represent the estimated costs to perform environmental remediation work, which we are legally obligated to complete, at certain of our facilities upon their retirement. This work could include asbestos abatement, the removal of underground storage tanks and other similar activities. At December 31, 2025, the undiscounted aggregate future estimated payments related to these obligations was $206 million. We are unable to predict the timing of these payments due to the uncertainty and long timeframes inherent in these obligations.
Standby Letters of Credit— Standby letters of credit are required principally by our insurers and various states to collateralize our workers’ compensation programs pursuant to statutory requirements and as security to collateralize the deductible and self‑insured retentions under certain of our professional and general liability insurance programs. The amount of collateral required is primarily dependent upon the level of claims activity and our creditworthiness. The insurers require the collateral in case we are unable to meet our obligations to claimants within the deductible or self‑insured retention layers.
We have a letter of credit facility (as amended to date, the “LC Facility”) that provides for the issuance, from time to time, of standby and documentary letters of credit in an aggregate principal amount of up to $200 million. Drawings under any letter of credit issued under the LC Facility accrue interest if not reimbursed within three business days. At December 31, 2025, we had $104 million of standby letters of credit outstanding under the LC Facility. The timing of reimbursement payments is uncertain, as we cannot foresee when, or if, a standby letter of credit will be drawn upon.
Guarantees— Our guarantees include minimum revenue guarantees, primarily related to physicians under relocation agreements and physician groups that provide services at our hospitals, as well as operating lease guarantees. At December 31, 2025, the maximum potential amount of future payments under these guarantees was $219 million, of which $138 million were included in other current liabilities in the accompanying Consolidated Balance Sheet at December 31, 2025. The timing and amount of future payments under these guarantees is uncertain.
Professional and General Liability Obligations— At December 31, 2025, the current and long‑term professional and general liability reserves included in our Consolidated Balance Sheet were $276 million and $951 million, respectively, and the current and long‑term workers’ compensation reserves included in our Consolidated Balance Sheet were $36 million and $91 million, respectively. The timing of professional and general liability payments is uncertain as such payments depend on several factors, including the nature of claims and when they are received.
Other than the obligations described above, we had no off‑balance sheet arrangements that may have a current or future material effect on our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources at December 31, 2025.
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Other Cash Requirements
Capital Expenditures— Our capital expenditures primarily relate to the expansion and renovation of existing facilities (including amounts to comply with applicable laws and regulations); surgical hospital expansion focused on higher‑acuity services; equipment and information systems additions and replacements; introduction of new medical technologies (including robotics); design and construction of new facilities; and various other capital improvements. In September 2025, we opened the newly constructed, 54-bed Florida Coast Medical Center in Port St. Lucie, Florida. Capital expenditures were $1.010 billion, $931 million and $751 million in the years ended December 31, 2025, 2024 and 2023, respectively. We anticipate that our capital expenditures for the year ending December 31, 2026 will total approximately $700 million to $800 million, including $111 million that was accrued as a liability at December 31, 2025.
By the beginning of 2030, all hospitals in California providing acute care services must meet standards that are intended to ensure that they remain intact and capable of continued operation following an earthquake. We began analyzing the nonstructural performance category (“NPC”) seismic requirements for our hospitals in California in 2022 and completed the analysis in 2023. This analysis, which identified the NPC work required to be completed in future years to bring our hospitals in compliance with the building requirements by the 2030 deadline, was submitted to the State for review at the end of 2023. Since that time, we have sold six California hospitals.
We have initiated design work for the structural performance category (“SPC”) improvements required by the 2030 deadline. Designs are specific to each facility and involve the testing of construction materials. The completed engineering and architectural design documents will require regulatory review by the State before we can obtain construction permits. In addition to the previously identified NPC requirements, the final SPC scope of work will inform our budgeting and scheduling of the work. At this time, we are unable to estimate the cost of this work.
Income Taxes— Income tax payments, net of tax refunds, were $450 million and $1.271 billion in the years ended December 31, 2025 and 2024, respectively. Of the income tax payments made during the year ended December 31, 2024, $855 million was attributable to income tax obligations arising from our sales of the Divested Hospitals. At December 31, 2025, our carryforwards available to offset future taxable income consisted of (1) federal net operating loss (“NOL”) carryforwards of approximately $291 million pre‑tax, $140 million of which expires in 2026 to 2037 and $151 million of which has no expiration date, for which the associated deferred tax benefit net of valuation allowance is $2 million, (2) capital loss carryforwards of $100 million, for which the deferred tax benefit net of valuation allowance is $23 million, and (3) state NOL carryforwards of approximately $2.937 billion expiring in 2026 through 2045 for which the associated deferred tax benefit, net of valuation allowance and federal tax impact, is approximately $23 million.
Most of the federal net operating loss carryforwards and capital loss carryforwards are subject to separate return limitation year restrictions under the Internal Revenue Code and may be utilized only to offset taxable income of certain entities. Our ability to utilize NOL carryforwards to reduce future taxable income may be limited under Section 382 of the Internal Revenue Code if certain ownership changes in our company occur during a rolling three‑year period. These ownership changes include purchases of common stock under share repurchase programs, the offering of stock by us, the purchase or sale of our stock by 5% shareholders, as defined in the Treasury regulations, or the issuance or exercise of rights to acquire our stock. If such ownership changes by 5% shareholders result in aggregate increases that exceed 50 percentage points during the three‑year period, then Section 382 imposes an annual limitation on the amount of our taxable income that may be offset by the NOL carryforwards or tax credit carryforwards at the time of ownership change.
Periodic examinations of our tax returns by the IRS or other taxing authorities could result in the payment of additional taxes. The IRS has completed audits of our tax returns for all tax years ended on or before December 31, 2007. All disputed issues with respect to these audits have been resolved and all related tax assessments (including interest) have been paid. Our tax returns for years ended after December 31, 2007 and USPI’s tax returns for years ended after December 31, 2021 remain subject to audit by the IRS.
SOURCES AND USES OF CASH
Our liquidity for the year ended December 31, 2025 was primarily derived from net cash provided by operating activities and cash on hand. Our primary source of operating cash is the collection of accounts receivable. As such, our operating cash flow is impacted by levels of cash collections, as well as levels of implicit price concessions, due to shifts in payer mix and other factors. Our 2025 Credit Agreement provides additional liquidity to manage fluctuations in operating cash caused by these factors. We had $2.883 billion of cash and cash equivalents on hand at December 31, 2025 to fund our operations and capital expenditures, as well as funds available under our 2025 Credit Agreement.
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Cash Collections
The following table presents our consolidated net accounts receivable by payer:
December 31,
Medicare
Medicaid
Net cost report settlements receivable and valuation allowances
Managed care
Self-pay uninsured
Self-pay balance after insurance
Estimated future recoveries
Other payers
Total Hospital Operations
Ambulatory Care
Accounts receivable, net
The collection of accounts receivable is a key area of focus for our business. At December 31, 2025 and 2024, our Hospital Operations segment collection rate on self‑pay accounts was approximately 24% and 28%, respectively. Our self‑pay collection rate includes payments made by patients, including co‑pays, co‑insurance amounts and deductibles paid by patients with insurance. Based on our accounts receivable from uninsured patients and co‑pays, co‑insurance amounts and deductibles owed to us by patients with insurance at December 31, 2025, a 10% increase or decrease in our self‑pay collection rate, equivalent to a fluctuation of approximately two percentage points in the collection rate, which we believe could be a reasonably likely change, would result in a favorable or unfavorable adjustment to patient accounts receivable of approximately $14 million.
We also typically experience ongoing managed care payment delays, payer policy changes and disputes; however, we continue to work with these payers to obtain adequate and timely reimbursement for our services. Our estimated Hospital Operations segment collection rate from managed care payers was approximately 95% and 96% at December 31, 2025 and 2024, respectively.
Various factors can influence collection trends, including changes in the economy and inflation, which in turn impact unemployment rates and the number of uninsured and underinsured patients. Additional variables include the volume of patients through our emergency departments, the increased burden of co-pays and deductibles to be made by patients with insurance, successful cyber‑attacks against us or the third-party systems we interact with, and business practices related to collection efforts. These factors are dynamic and can affect collection trends and our estimation processes.
We manage our implicit price concessions using hospital‑specific goals and benchmarks such as (1) total cash collections, (2) point‑of‑service cash collections, (3) AR Days and (4) accounts receivable by aging category. The following tables present the approximate aging by payer of our net accounts receivable of our Hospital Operations segment of $2.015 billion and $2.045 billion at December 31, 2025 and 2024, respectively. Cost report settlements receivable, net of payables and related valuation allowances, of $1 million and $6 million at December 31, 2025 and 2024, respectively, are excluded from the tables.
Medicare
Medicaid
Managed
Care
Indemnity,
Self-Pay
and Other
Total
At December 31, 2025:
0-60 days
61-120 days
121-180 days
Over 180 days
Total
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Medicare
Medicaid
Managed
Care
Indemnity,
Self-Pay
and Other
Total
At December 31, 2024:
0-60 days
61-120 days
121-180 days
Over 180 days
Total
We continue to implement revenue cycle initiatives intended to improve our cash flow. These initiatives are focused on standardizing and improving pre‑service patient access processes, including pre‑registration, registration, verification of eligibility and benefits, liability identification and collections at point‑of‑service, and financial counseling. These initiatives are intended to reduce denials, improve service levels to patients and increase the quality of accounts that end up in accounts receivable. In our billing and accounts receivable operations, we continue to implement revenue cycle initiatives to accelerate liquidation and improve overall yield. Although we continue to focus on improving our methodology for evaluating the collectability of our accounts receivable, we may incur future charges if there are unfavorable changes in the trends affecting the net realizable value of our accounts receivable.
Uses of Cash
Net cash provided by operating activities was $3.540 billion in the year ended December 31, 2025 compared to $2.047 billion in the year ended December 31, 2024. Key factors contributing to the change between 2025 and 2024 included the following:
• An increase in net income before interest, taxes, depreciation and amortization, impairment and restructuring charges, acquisition‑related costs, litigation costs and settlements, losses from the early extinguishment of debt, other non-operating income or expense, and net losses on sales, consolidation and deconsolidation of facilities of $571 million;
• Income tax payments that were $821 million lower in 2025 than in 2024; and
• The timing of working capital items.
Net cash used in investing activities was $1.275 billion for the year ended December 31, 2025 as compared to net cash provided by investing activities of $3.429 billion for the year ended December 31, 2024. The primary factors contributing to the change between 2025 and 2024 were: (1) investing activities during 2024 included proceeds from the sales of facilities and other assets of $4.981 billion, primarily from the sales of the Divested Hospitals; (2) a $263 million decrease in purchases of businesses or joint venture interests during 2025; and (3) capital expenditures that were $79 million higher during 2025 compared to 2024.
Net cash used in financing activities was $2.401 billion and $3.685 billion in the years ended December 31, 2025 and 2024, respectively. The primary factors contributing to the change between 2025 and 2024 were: (1) financing activities during 2025 include proceeds from the issuance of $2.250 billion aggregate principal amount of our 2032 Senior Secured First Lien Notes and 2033 Senior Unsecured Notes; (2) we made payments totaling $1.386 billion to repurchase 8,771 thousand shares of our common stock under our share repurchase program during 2025, an increase of $714 million over 2024; (3) long‑term debt payments were $129 million higher during 2025; (4) distributions to noncontrolling interest holders increased by $128 million during 2025 as compared to 2024; and (5) purchases of noncontrolling ownership interests decreased by $108 million during 2025.
We record our equity securities and our debt securities classified as available‑for‑sale at fair market value. The majority of our investments are valued based on quoted market prices or other observable inputs. We have no investments that we expect will be negatively affected by the current economic conditions and materially impact our financial condition, results of operations or cash flows.
DEBT INSTRUMENTS, GUARANTEES AND RELATED COVENANTS
Credit Agreement— At December 31, 2025, our 2025 Credit Agreement provided for revolving loans in an aggregate principal amount of up to $1.900 billion with a $200 million subfacility for standby letters of credit. At December 31, 2025, we had no cash borrowings outstanding under the 2025 Credit Agreement, and we had less than $1 million of standby letters of credit outstanding. Based on our eligible accounts receivable, eligible inventory and Medicaid supplemental payments,
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$1.900 billion was available for borrowing under the 2025 Credit Agreement at December 31, 2025. We were in compliance with all covenants and conditions in our 2025 Credit Agreement at December 31, 2025.
Letter of Credit Facility— Our LC Facility provides for the issuance, from time to time, of standby and documentary letters of credit in an aggregate principal amount of up to $200 million. At December 31, 2025, we were in compliance with all covenants and conditions in the LC Facility, and we had $104 million of standby letters of credit outstanding thereunder.
Senior Unsecured Notes and Senior Secured Notes —A detailed discussion of our debt transactions during the year ended December 31, 2025 is provided under the Cash Requirements subsection above. In aggregate, we recognized net losses from the early extinguishment of debt of $4 million in the year ended December 31, 2025 primarily related to the full redemption of our February 2027 Senior Secured Second Lien Notes and the partial redemption of our October 2028 Senior Unsecured Notes, in each case in advance of the notes’ maturity dates. These losses resulted from the write-off of unamortized issuance costs associated with the notes.
LIQUIDITY
From time to time, we expect to engage in additional capital markets, bank credit and other financing activities depending on our needs and financing alternatives available at that time. We believe our existing debt agreements provide flexibility for future secured or unsecured borrowings.
Our cash on hand fluctuates day‑to‑day throughout the year based on the timing and levels of routine cash receipts and disbursements, including our book overdrafts, and required cash disbursements, such as interest payments and income tax payments. These fluctuations can result in material intra-quarter net operating and investing uses of cash that have caused, and in the future may cause, us to use our 2025 Credit Agreement as a source of liquidity. We believe that existing cash and cash equivalents on hand, borrowing availability under our 2025 Credit Agreement and anticipated future cash provided by our operating activities are adequate to meet our current cash needs. These sources of liquidity, in combination with any potential future debt incurrence, are adequate to finance planned capital expenditures, payments on the current portion of our long-term debt, payments to current and former joint venture partners, and other presently known operating needs.
Long-term liquidity for debt service and other purposes will be dependent on the amount of cash provided by operating activities and, subject to favorable market and other conditions, the successful completion of future borrowings and potential refinancings. However, our cash requirements could be materially affected by the use of cash in acquisitions of businesses, repurchases of securities, the exercise of put rights or other exit options by our joint venture partners, and contractual or regulatory commitments to fund capital expenditures in, or intercompany borrowings to, businesses we own. In addition, liquidity could be adversely affected should there be a deterioration in our results of operations, including our ability to generate sufficient cash from operations, as well as by the various risks and uncertainties discussed in this section and the Risk Factors section in Part I of this report, including changes in federal and state statutes, regulations and executive orders that effect the healthcare industry directly or indirectly, particularly those impacting government healthcare funding, and significant costs associated with legal proceedings and government investigations.
We have not relied on commercial paper or other short-term financing arrangements or entered into repurchase agreements or other short-term financing arrangements not otherwise reported in our balance sheet. In addition, we do not have significant exposure to floating interest rates given that all of our current long-term indebtedness has fixed rates of interest except for borrowings, if any, under our 2025 Credit Agreement.
RECENTLY ISSUED ACCOUNTING STANDARDS
See Note 24 to the accompanying Consolidated Financial Statements for a discussion of recently issued and recently adopted accounting standards.
CRITICAL ACCOUNTING ESTIMATES
In preparing our Consolidated Financial Statements in conformity with accounting principles generally accepted in the United States of America (GAAP), we must use estimates and assumptions that affect the amounts reported in our Consolidated Financial Statements and accompanying notes. We regularly evaluate the accounting policies and estimates we use. In general, we base the estimates on historical experience and on assumptions that we believe to be reasonable, given the particular circumstances in which we operate. Actual results may vary from those estimates.
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We consider our critical accounting estimates to be those that (1) involve significant judgments and uncertainties, (2) require estimates that are more difficult for management to determine, and (3) may produce materially different outcomes under different conditions or when using different assumptions. Our critical accounting estimates cover the following areas:
• Recognition of net operating revenues, including contractual allowances and implicit price concessions;
• Accruals for general and professional liability risks;
• Impairment of long‑lived assets;
• Impairment of goodwill; and
• Accounting for income taxes.
REVENUE RECOGNITION
We report net patient service revenues at the amounts that reflect the consideration we expect to be entitled to in exchange for providing patient care. These amounts are due from patients, third‑party payers (including managed care payers and government programs) and others, and they include variable consideration for retroactive revenue adjustments due to settlement of audits, reviews and investigations. Generally, we bill our patients and third‑party payers several days after the services are performed or shortly after discharge. Revenues are recognized as performance obligations are satisfied.
We determine performance obligations based on the nature of the services we provide. We recognize revenues for performance obligations satisfied over time based on actual charges incurred in relation to total expected charges. We believe that this method provides a faithful depiction of the transfer of services over the term of performance obligations based on the inputs needed to satisfy the obligations. Generally, performance obligations satisfied over time relate to patients in our hospitals receiving inpatient acute care services. We measure performance obligations from admission to the point when there are no further services required for the patient, which is generally the time of discharge. We recognize revenues for performance obligations satisfied at a point in time, which generally relate to patients receiving outpatient services, when (1) services are provided, and (2) we do not believe the patient requires additional services.
We determine the transaction price based on gross charges for services provided, reduced by contractual adjustments recognized for third‑party payers, discounts provided to uninsured patients in accordance with our Compact , and estimated implicit price concessions related primarily to uninsured patients. We determine our estimates of contractual adjustments and discounts based on contractual agreements, our discount policies and historical experience. We determine our estimate of implicit price concessions based on our historical collection experience using a portfolio approach as a practical expedient to account for patient contracts as collective groups rather than individually. The financial statement effects of using this practical expedient are not materially different from an individual contract approach.
The final determination of certain FFS Medicare and Medicaid program payments to our hospitals, such as DSH, DGME, IME and bad debt expense reimbursement, are retrospectively determined based on our hospitals’ cost reports. The final determination of these payments often takes many years to resolve because of audits by the program representatives, providers’ rights of appeal, and the application of numerous technical reimbursement provisions. We therefore record accruals to reflect the expected final settlements on our cost reports. For filed cost reports, we adjust the accrual for estimated cost report settlements based on those cost reports and subsequent activity, and we consider the necessity of recording a valuation allowance based on historical settlement results. The accrual for estimated cost report settlements for periods for which a cost report is yet to be filed is recorded based on estimates of what we expect to report on the filed cost reports, and a corresponding valuation allowance is recorded, if necessary, based on the method previously described. Cost reports must generally be filed within five months after the end of the annual cost report reporting period. After the cost report is filed, the accrual and corresponding valuation allowance may need to be adjusted. In addition, because the laws, regulations, instructions and rule interpretations governing Medicare and Medicaid reimbursement are complex and change frequently, the estimates we record could change by material amounts.
Revenues under managed care plans are based primarily on payment terms involving predetermined rates per diagnosis, per‑diem rates, discounted FFS rates and/or other similar contractual arrangements. These revenues are also subject to review and possible audit by the payers, which can take several years before they are completely resolved. The payers are billed for patient services on an individual patient basis. An individual patient’s bill is subject to adjustment on a patient‑by‑patient basis in the ordinary course of business by the payers following their review and adjudication of each particular bill. We estimate the discounts for contractual allowances at the individual hospital level utilizing billing data on an individual patient basis. At the end of each month, on an individual hospital basis, we estimate our expected reimbursement for patients of managed care plans based on the applicable contract terms. We believe it is reasonably likely for there to be an approximately 3% increase or decrease in the estimated contractual allowances related to managed care plans. Based on
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reserves at December 31, 2025, a 3% increase or decrease in the estimated contractual allowance would impact the estimated reserves by approximately $42 million. Some of the factors that can contribute to changes in the contractual allowance estimates include: (1) changes in reimbursement levels for procedures, supplies and drugs when threshold levels are triggered; (2) changes in reimbursement levels when stop‑loss or outlier limits are reached; (3) changes in the admission status of a patient due to physician orders subsequent to initial diagnosis or testing; (4) final coding of in‑house and discharged‑not‑final‑billed patients that change reimbursement levels; (5) secondary benefits determined after primary insurance payments; and (6) reclassification of patients among insurance plans with different coverage and payment levels. Contractual allowance estimates are periodically reviewed for accuracy by taking into consideration known contract terms, as well as payment history. We believe our estimation and review process enables us to identify instances on a timely basis where such estimates need to be revised. We do not believe there were any adjustments to estimates of patient bills that were material to our revenues during the year ended December 31, 2025. In addition, on a corporate‑wide basis, we do not record any general provision for adjustments to estimated contractual allowances for managed care plans. Managed care accounts, net of contractual allowances recorded, are further reduced to their net realizable value through implicit price concessions based on historical collection trends for these payers and other factors that affect the estimation process.
Generally, patients who are covered by third‑party payers are responsible for related co‑pays, co‑insurance and deductibles, which vary in amount. We also provide services to uninsured patients and offer uninsured patients a discount from standard charges. We estimate the transaction price for patients with co‑pays, co‑insurance and deductibles and for those who are uninsured based on historical collection experience and current market conditions. Under our Compact and other uninsured discount programs, the discount offered to certain uninsured patients is recognized as a contractual allowance, which reduces net operating revenues at the time the self‑pay accounts are recorded. The uninsured patient accounts, net of contractual allowances recorded, are further reduced to their net realizable value at the time they are recorded through implicit price concessions based on historical collection trends for self‑pay accounts and other factors that affect the estimation process.
We record implicit price concessions, primarily related to uninsured patients and patients with co‑pays, co‑insurance and deductibles. The implicit price concessions included in estimating the transaction price represent the difference between amounts billed to patients and the amounts we expect to collect based on our collection history with similar patients. Although outcomes vary, our policy is to attempt to collect amounts due from patients, including co‑pays, co‑insurance and deductibles due from patients with insurance, at the time of service while complying with all federal and state statutes and regulations, including, but not limited to, the Emergency Medical Treatment and Active Labor Act (“EMTALA”). Generally, as required by EMTALA, patients may not be denied emergency treatment due to inability to pay. Therefore, services, including the legally required medical screening examination and stabilization of the patient, are performed without delaying to obtain insurance information. In non‑emergency circumstances or for elective procedures and services, it is our policy to verify insurance prior to a patient being treated; however, there are various exceptions that can occur. Such exceptions can include, for example, instances where (1) we are unable to obtain verification because the patient’s insurance company was unable to be reached or contacted, (2) a determination is made that a patient may be eligible for benefits under various government programs, such as Medicaid or Victims of Crime, and it takes several days or weeks before qualification for such benefits is confirmed or denied, and (3) under physician orders we provide services to patients that require immediate treatment.
Based on our accounts receivable from uninsured patients and co-pays, co-insurance amounts and deductibles owed to us by patients with insurance at December 31, 2025, a 10% increase or decrease in our self‑pay collection rate, equivalent to a fluctuation of approximately two percentage points in the collection rate, which we believe could be a reasonably likely change, would result in a favorable or unfavorable adjustment to patient accounts receivable of approximately $14 million.
ACCRUALS FOR GENERAL AND PROFESSIONAL LIABILITY RISKS
We accrue for estimated professional and general liability claims, to the extent not covered by insurance, when they are probable and can be reasonably estimated. We maintain reserves, which are based on modeled estimates for the portion of our professional liability risks, including incurred but not reported claims, to the extent we do not have insurance coverage. Our liability consists of estimates established based upon calculations using several factors, including the number of expected claims, 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 the timing of historical payments. We consider the number of expected claims and average cost per claim to be the most significant assumptions in estimating accruals for general and professional liabilities. Our liabilities are adjusted for new claims information in the period such information becomes known. Malpractice expense is recorded within other operating expenses in our consolidated statements of operations.
Our estimated reserves for professional and general liability claims will change significantly if future trends differ from projected trends. We believe it is reasonably likely for there to be a 500‑basis point increase or decrease in our frequency or severity trend. Based on our reserves and other information at December 31, 2025, a 500‑basis point increase in our
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frequency trend would increase the estimated reserves by $63 million, and a 500‑basis point decrease in our frequency trend would decrease the estimated reserves by $47 million. A 500‑basis point increase in our severity trend would increase the estimated reserves by $256 million, and a 500‑basis point decrease in our severity trend would decrease the estimated reserves by $186 million. In addition, because of the complexity of the claims, the extended period of time to settle the claims and the wide range of potential outcomes, our ultimate liability for professional and general liability claims could change materially from our current estimates.
The table below shows the case reserves and incurred but not reported and loss development reserves:
December 31,
Case reserves
Incurred but not reported and loss development reserves
Total reserves
Several actuarial methods, including the incurred, paid loss development and Bornhuetter‑Ferguson methods, are applied to our historical loss data to produce estimates of ultimate expected losses and the resulting incurred but not reported and loss development reserves. These methods use our specific historical claims data related to paid losses and loss adjustment expenses, historical and current case reserves, reported and closed claim counts, and a variety of hospital census information. These analyses are considered in our determination of our estimate of the professional liability claims, including the incurred but not reported and loss development reserve estimates. The determination of our estimates involves subjective judgment and could result in material changes to our estimates in future periods if our actual experience is materially different than our assumptions.
Malpracticeclaims generally take up to five years to settle from the time of the initial reporting of the occurrence to the settlement payment. Accordingly, the percentage of reserves at both December 31, 2025 and 2024 representing unsettled claims was approximately 98%.
The following table presents the amount of our accruals for professional and general liability claims and the corresponding activity therein:
Years Ended December 31,
Accrual for professional and general liability claims, beginning of the year
Less losses recoverable from re-insurance and excess insurance carriers
Expense related to (1) :
Current year
Prior years
Total incurred loss and loss expense
Paid claims and expenses related to:
Current year
Prior years
Total paid claims and expenses
Plus losses recoverable from re-insurance and excess insurance carriers
Accrual for professional and general liability claims, end of year
(1) Total malpractice expense, including premiums for insured coverage and recoveries from third parties, was $341 million and $309 million in the years ended December 31, 2025 and 2024, respectively.
IMPAIRMENT OF LONG-LIVED ASSETS
We evaluate our long‑lived assets for possible impairment annually or whenever events or changes in circumstances indicate that the carrying amount of an asset group may not be recoverable from estimated future undiscounted cash flows (“UDCF”). If the estimated future UDCF are less than the carrying value of the asset group, we calculate the amount of an impairment charge only if the carrying value of the asset group exceeds the fair value. For purposes of impairment testing, all asset groups are evaluated at a level below that of the reporting unit, and their carrying values do not include any allocations of goodwill. The fair values of assets are estimated based on third‑party appraisals, established market values of comparable assets or internally developed estimates of future net cash flows expected to result from the use and ultimate disposition of those assets. The estimates of these future net cash flows are based on assumptions and projections we believe to be reasonable and
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supportable. Estimates require our subjective judgments and take into account assumptions about revenue and expense growth rates, operating margins and recoverable disposition values, based on industry and operating factors. These assumptions may vary by type of asset group and presume stable, improving or, in some cases, declining results, depending on their circumstances. If the presumed level of performance does not occur as expected, impairment may result.
We report long‑lived assets to be disposed of at the lower of their carrying amounts or fair values less costs to sell. In such circumstances, our estimates of fair value are based on third‑party appraisals, established market prices for comparable assets or internally developed estimates of future net cash flows.
Fair value estimates can change by material amounts in subsequent periods. Many factors and assumptions can impact the estimates, including the following risks:
• future financial results, which can be impacted by: volumes of insured patients and declines in commercial managed care patients; terms of managed care payer arrangements; healthcare policy changes; our ability to collect amounts due from uninsured and managed care payers; loss of volumes as a result of competition; physician recruitment and retention; and our ability to manage costs, such as labor costs, which can be adversely impacted by labor shortages, inflationary pressure on wages, minimum wage increases and labor union activity;
• changes in payments from governmental healthcare programs and in government regulations, such as reductions to Medicare and Medicaid payment rates resulting from government legislation or rule‑making or from budgetary challenges of states where we operate;
• how the facilities are operated in the future;
• the impact of future technological advancements on our business;
• the nature of the ultimate disposition of the assets; and
• macro-economic conditions, such as inflation and gross domestic product (GDP) growth.
During the years ended December 31, 2025, 2024 and 2023, we recorded impairment charges totaling $61 million, $7 million and $43 million, respectively. We recognized impairment charges related to our Hospital Operations segment of $13 million during the year ended December 31, 2025 and $1 million in each of the years ended December 31, 2024 and 2023. During the years ended December 31, 2025, 2024 and 2023, impairment charges totaling $48 million, $6 million and $42 million, respectively, related to our Ambulatory Care segment. Impairment charges recognized during the years ended December 31, 2025 and 2023 were primarily related to the write‑down of our investment in certain equity method investments held by our Ambulatory Care segment. During the year ended December 31, 2024, impairment charges were primarily related to the write-down of certain intangible assets held by our Ambulatory Care segment to their estimated fair value.
IMPAIRMENT OF GOODWILL
Goodwill represents the excess of purchase price over the net estimated fair value of identifiable assets acquired and liabilities assumed in a business combination. Goodwill is determined to have an indefinite useful life and is not amortized, but is instead subject to impairment tests performed at least annually, or when events occur that would more likely than not reduce the fair value of the reporting unit below its carrying amount. For goodwill, we assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. Further testing is required only if we determine, based on the qualitative assessment, that it is more likely than not that a reporting unit’s fair value is less than its carrying value. Otherwise, no further impairment testing is required. If we determine the carrying value of goodwill is impaired, or if the carrying value of a business that is to be sold or otherwise disposed of exceeds its fair value, we reduce the carrying value, including any allocated goodwill, to fair value, with any impairment not to exceed the carrying amount of goodwill. Any impairment would be recognized as a charge to income from operations and a reduction in the carrying value of goodwill.
At December 31, 2025, our business included two reportable segments – Hospital Operations and Ambulatory Care. Our reportable segments are reporting units used to perform our goodwill impairment analysis, and goodwill is accordingly assigned to these reporting segments. We completed our annual goodwill impairment analysis as of October 1, 2025.
At both December 31, 2025 and 2024, the allocated goodwill balances related to our Hospital Operations segment was $2.697 billion. Goodwill balances related to our Ambulatory Care segment were $8.501 billion and $7.994 billion at December 31, 2025 and 2024, respectively. We performed a separate qualitative analysis for our reporting units and, in each case, determined it was more likely than not that the fair value of each reporting unit exceeded its respective carrying value. We therefore concluded that the segments’ goodwill was not impaired at either December 31, 2025 or 2024. Factors considered in
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these analyses included recent and estimated future operating trends derived from macro‑economic conditions, industry conditions and other factors specific to each reporting segment.
ACCOUNTING FOR INCOME TAXES
We account for income taxes using the asset and liability method. This approach requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the carrying amounts and the tax bases of assets and liabilities. Income tax receivables and liabilities and deferred tax assets and liabilities are recognized based on the amounts that more likely than not will be sustained upon ultimate settlement with taxing authorities.
Developing our provision for income taxes and analysis of uncertain tax positions requires significant judgment and knowledge of federal and state income tax laws, regulations and strategies, including the determination of deferred tax assets and liabilities and, if necessary, any valuation allowances that may be required for deferred tax assets.
We assess the realization of our deferred tax assets to determine whether an income tax valuation allowance is required. Based on all available evidence, both positive and negative, and the weight of that evidence to the extent such evidence can be objectively verified, we determine whether it is more likely than not that all or a portion of the deferred tax assets will be realized. The main factors that we consider include:
• Cumulative profits/losses in recent years, adjusted for certain nonrecurring items;
• Income/losses expected in future years;
• Unsettled circumstances that, if unfavorably resolved, would adversely affect future operations and profit levels;
• The availability, or lack thereof, of taxable income in prior carryback periods that would limit realization of tax benefits; and
• The carryforward period associated with the deferred tax assets and liabilities.
During the year ended December 31, 2025, the valuation allowance increased by $2 million, including an increase of $11 million due to limitations on the tax deductibility of interest expense, and a decrease of $9 million due to changes in the expected realizability of deferred tax assets. The balance in the valuation allowance as of December 31, 2025 was $160 million. During the year ended December 31, 2024, the valuation allowance decreased by $90 million, including a decrease of $180 million primarily for utilization of interest expense carryforwards due to gains from sales of facilities, an increase of $92 million due to an acquisition, and a decrease of $2 million due to changes in the expected realizability of deferred tax assets. The balance in the valuation allowance as of December 31, 2024 was $158 million.
Deferred tax assets relating to interest expense limitations under Internal Revenue Code Section 163(j) have a full valuation allowance because the interest expense carryovers are not expected to be utilized in the foreseeable future.
We consider many factors when evaluating our uncertain tax positions, and such judgments are subject to periodic review. Tax benefits associated with uncertain tax positions are recognized in the period in which one of the following conditions is satisfied: (1) the more likely than not recognition threshold is satisfied; (2) the position is ultimately settled through negotiation or litigation; or (3) the statute of limitations for the taxing authority to examine and challenge the position has expired. Tax benefits associated with an uncertain tax position are derecognized in the period in which the more likely than not recognition threshold is no longer satisfied.
While we believe we have adequately provided for our income tax receivables or liabilities and our deferred tax assets or liabilities, adverse determinations by taxing authorities or changes in tax laws and regulations could have a material adverse effect on our consolidated financial position, results of operations or cash flows.
