F A C I L I T Y L O C A T I O N S
U N I T E D S T A T E S
Alabama | Alaska | Arizona
Arkansas | California
Colorado | Connecticut
U N I T E D K I N G D O M
England
Bristol | Cheshire
County Durham | Derbyshire
Delaware | District of Columbia
Dorset | Essex
Florida | Georgia | Idaho
Illinois | Indiana | Iowa
Kentucky | Louisiana
Massachusetts | Michigan
Minnesota | Mississippi
Missouri | Nevada
Gloucestershire | Hampshire
Hertfordshire | Kent
Lancashire | Leicestershire
Lincolnshire | London
Greater Manchester | North Yorkshire
Northumberland | Nottinghamshire
New Jersey | New Mexico
Somerset | South Yorkshire
North Carolina | North Dakota
Staffordshire | Suffolk | Surrey
Ohio | Oklahoma | Oregon
Teesside | West Midlands | West Yorkshire
Pennsylvania | South Carolina
Scotland
Tennessee | Texas
Utah | Virginia | Washington
West Virginia | Wisconsin
Wyoming
P U E R T O R I C O
Angus | Dumfries and Galloway
Stirling
Wales
Flintshire | Gwent
U N I V E R S A L H E A LT H S E R V I C E S , I N C .
Corporate Center
367 South Gulph Road
King of Prussia, PA 19406
uhs.com
Cygnet Health Care
Third Floor - 4 Millbank
SW1P 3JA London
United Kingdom
cygnethealth.co.uk
2022
ANNUAL REPORT AND ESG PROFILE
AN EXPANDING NETWORK OF CARE
U N I V E R S A L H E A LT H S E R V I C E S , I N C .
O U R I M PA C T
2022 BY THE NUMBERS
3.4 MILLION
PATIENTS SERVED
$13.4 BILLION
REVENUES
1,700+
PROVIDERS
OF PHYSICIAN
SERVICES
$734
MILLION
INVESTMENT IN
EQUIPMENT, FACILITY
EXPANSIONS AND
RENOVATIONS
94,000
EMPLOYEES, GLOBALLY
21,000
NURSES
ACUTE
CARE
BEHAVIORAL
HEALTH
312,000 inpatient
admissions
Over 730,000 total
patients served
1.6 million
patient days
6.2 million
patient days
1.1 million
outpatient visits
(excluding ER)
19 facilities
offering Patriot
Support Programs
33,750 deliveries
7 Accountable
Care Organizations
(ACOs)
391 inpatient beds
added in new and
existing facilities
in the U.S.
UHS is a registered trademark of UHS of Delaware, Inc., a subsidiary of Universal Health Services. Universal Health Services, Inc. is a holding company that operates through its subsidiaries.
All healthcare and management operations are conducted by subsidiaries of Universal Health Services, Inc. Any reference to “UHS” or “UHS facilities” including any statements, articles or other
publications contained herein which relates to healthcare or management operations is referring to Universal Health Services’ subsidiaries. Further, the terms “we,” “us,” “our” or “the company”
in such context similarly refer to the operations of the subsidiaries of Universal Health Services, Inc. Any reference to employment at UHS or employees of UHS refers to employment with one
of the subsidiaries of Universal Health Services, Inc.
2 U N I V E R S A L H E A LT H S E R V I C E S , I N C .
2 U N I V E R S A L H E A LT H S E R V I C E S , I N C .
CORPORATE INFORMATION
EXECUTIVE OFFICES
Universal Corporate Center
367 South Gulph Road
King of Prussia, PA 19406
(610) 768-3300
ANNUAL MEETING
May 17, 2023, 10:00 a.m.
COMPANY COUNSEL
Norton Rose Fulbright
New York, New York
AUDITORS
PricewaterhouseCoopers LLP
Philadelphia, Pennsylvania
TRANSFER AGENT AND REGISTRAR
First Class, Certified or Registered Mail:
Computershare Investor Services
P.O. Box 43078
Providence, RI 02940-3078
Overnight Mail:
Computershare Investor Services
150 Royall St., Suite 101
Canton, MA 02021
1-800-851-9677
Shareholder website:
www.computershare.com/investor
Shareholder online inquiries:
https://www-us.computershare.com/
investor/Contact
TDD: Hearing Impaired # 1-800-231-5469
Please contact Computershare for prompt
assistance on address changes, lost
certificates, consolidation of duplicate
accounts or related matters.
INTERNET ADDRESS
The Company can be accessed online
at uhs.com.
LISTING
Class B Common Stock: New York Stock
Exchange under the symbol UHS
PUBLICATIONS
For copies of the Company’s Annual Report,
Form 10-K, Form 10-Q, quarterly earnings
releases, and proxy statements, please call
1-800-874-5819, or write
Investor Relations
Universal Health Services, Inc.
Universal Corporate Center
367 South Gulph Road
King of Prussia, PA 19406
FINANCIAL COMMUNITY INQUIRIES
The Company welcomes inquiries from
members of the financial community seeking
information on the Company. These should be
directed to Steve Filton, Chief Financial Officer.
DISCLOSURE UNDER 303A.12(a)
In accordance with Section 303A.12(a) of The
New York Stock Exchange Listed Company
Manual, we submitted our CEO’s Certification
to the New York Stock Exchange in 2022.
Additionally, contained in Exhibits 31.1 and 31.2
of our Annual Report on Form 10-K filed with
the Securities and Exchange Commission on
February 27, 2023, are our CEO’s and CFO’s
Certifications regarding the quality of our public
disclosure under Section 302 of the Sarbanes-
Oxley Act of 2002.
O U R M I S S I O N
Established in 1979 by Alan B. Miller,
Founder and Executive Chairman
TO PROVIDE SUPERIOR QUALITY
HEALTHCARE SERVICES THAT:
PATIENTS recommend to family and friends,
PHYSICIANS prefer for their patients,
PURCHASERS select for their clients,
EMPLOYEES are proud of, and
INVESTORS seek for long-term returns.
Our Mission statement has been
repeatedly praised by industry experts
for being honest and authentic, and
for identifying value offered to all
key stakeholders from patients and
employees to our investors.
INDEX
Board of Directors/Corporate Officers
and Letter to Our Shareholders
4-5
Acute Care Division
8-17
Behavioral Health Division
18-26
Environmental, Social and Governance
27-62
Form 10K
10K: 1-128
Corporate Information
Inside Back Cover
2 0 2 2 A N N U A L R E P O R T 3
BOARD OF DIRECTORS
Left to Right (Standing): Eileen C. McDonnell1*,2*,3,7; Alan B. Miller3*,4*; Marc D. Miller3,4; Maria Singer1,4,5,6
(Seated): Warren J. Nimetz3,4; Elliot J. Sussman, MD1,2,5*,6*; Lawrence S. Gibbs1,2,5,6; Nina Chen6
Committees of the Board: 1Audit Committee, 2Compensation Committee, 3Executive Committee, 4Finance Committee, 5Nominating and Governance Committee,
6Quality and Compliance Committee, 7Lead Director, *Committee Chairperson
Learn more: uhs.com/about-uhs/leadership
CORPORATE OFFICERS
Alan B. Miller
Founder and Executive Chairman
of the Board
Marc D. Miller
President and Chief Executive Officer
Steve G. Filton
Executive Vice President
and Chief Financial Officer
Matthew J. Peterson
Executive Vice President
and President
Behavioral Health Division
Edward Sim
Executive Vice President
and President
Acute Care Division
Charles F. Boyle
Senior Vice President
and Controller
Jim Clark
Senior Vice President, Finance
Acute Care Division
Thomas Day
Senior Vice President, Finance
Behavioral Health Division
Geraldine Johnson Geckle
Senior Vice President
Human Resources
Matthew D. Klein
Senior Vice President
and General Counsel
Michael S. Nelson
Senior Vice President
Strategic Services
Victor J. Radina
Senior Vice President
Corporate Development
Cheryl K. Ramagano
Senior Vice President
and Treasurer
UHS of Delaware, Inc. is the administrative services company for, and a wholly owned subsidiary of, Universal Health Services, Inc.
All of our “Corporate Officers” listed above are employees of UHS of Delaware, Inc.
4 U N I V E R S A L H E A LT H S E R V I C E S , I N C .
LETTER TO OUR SHAREHOLDERS
Dear Shareholders,
Through our nearly 400 subsidiaries across the United States,
Puerto Rico and the United Kingdom, over 3.4 million patients were
served in 2022.
We are reminded daily of the very special role
We are proud of
that the healthcare industry plays and that frontline
the reputation we
providers fulfill. They do so with honor, respect and
have earned over
compassion – realizing our mission to deliver high-
the past 44 years as
quality care in our served communities, improving
a leader in the healthcare industry. For the 13th
and saving lives.
consecutive year, UHS was recognized among World’s
Most Admired Companies by Fortune magazine; this
2022 was another difficult year for the entire hospital
year #2 in the Healthcare: Medical Facilities category.
industry as we continued to manage the impacts
We have been ranked for 19 years on the Fortune 500
of the COVID-19 pandemic, a very challenging labor
list, currently at #297 – and UHS ranks #391 among
market and increasing inflation. During the year UHS
American companies on the Forbes Global 2000.
generated net revenues of $13.4 billion, an increase of
Our facilities continue to be honored by national,
6% over the prior year. However, a nationwide shortage
state and local organizations for delivering high-quality
of nurses and other clinical staff drove higher wage
care, for pioneering innovation, for their thought
costs and broader inflationary pressures, negatively
leadership and for their commitment to serving their
impacting our other expenses and profits. Nonetheless,
local communities.
we expect that our numerous recruitment and retention
initiatives will help to moderate the wage inflation in
As we plan for the future, our most important priorities
2023, and will start paving the path toward resumption
continue to be the delivery of compassionate patient
of pre-pandemic profitability levels.
care; profitable growth in attractive markets, business
segments and care delivery venues; and maintaining
Our capital growth and development through strategic
our reputation as an industry leader and preferred
partnerships, new facility construction, expansions
provider, employer and partner.
and renovations are proceeding. In 2022, we opened
the brand-new Northern Nevada Sierra Medical Center
On behalf of UHS leadership, we are grateful to
and three new freestanding emergency departments
patients for entrusting their care to UHS facilities;
within our Acute Care business, and added three new
to employees at those facilities for all their hard work;
facilities to the Behavioral Health portfolio. Further,
to our business partners for their collaboration; and
we continue to prioritize the integration of ambulatory
to our shareholders for their support and investment.
care access points along the care continuum in existing
markets. Our focus remains on positioning employees
Sincerely,
and facilities to provide the highest quality and most
efficient care to our millions of current and future patients.
Marc D. Miller
President and Chief Executive Officer
2 0 2 2 A N N U A L R E P O R T 5
FINANCIAL HIGHLIGHTS
Year Ended December 31
2022
2021
2020
Net revenues
$13,399,370,000
$12,642,117,000
$11,558,897,000
Adjusted net income
attributable to UHS (1)
Adjusted diluted earnings per share
attributable to UHS (1)
$730,244,000
$991,677,000
$954,709,000
$9.88
$11.82
$11.12
Year Ended December 31
Patient days
Admissions
Average number of licensed beds
2022
7,799,735
770,782
31,182
2021
7,731,419
762,302
30,698
2020
7,601,144
735,405
30,118
2022
2021
2020
2019
Amount
Per
Diluted Share
Amount
Per
Diluted Share
Amount
Per
Diluted Share
Amount
Per
Diluted Share
ID
(1) Calculation of Adjusted Net
Income Attributable to UHS
(in thousands except per share amounts)
Net income attributable to UHS
Other combined adjustments
Adjusted net income attributable to UHS
$730,244
$9.88
$675,609
54,635
$9.14
0.74
$991,590
87
$991,677
$11.82
–
$11.82
$943,953
10,756
$10.99
0.13
$814,854
76,966
$9.13
0.86
$954,709
$11.12
$891,820
$9.99
The “Other combined adjustments” neutralize the effect of items in each year that are nonrecurring or non-operational in nature including items such as: unrealized gains/losses resulting from changes
in the market value of shares of certain equity securities, reserves for various matters including settlements, legal judgments and lawsuits, costs related to extinguishment of debt, gains/losses on sales
of assets and businesses, impairment of long-lived and intangible assets and other amounts that may be reflected in the current or prior year financial statements that relate to prior periods. Since
“adjusted net income attributable to UHS” is not computed in accordance with generally accepted accounting principles (“GAAP”), investors are encouraged to use GAAP measures when evaluating our
financial performance. To obtain a complete understanding of our financial performance, the information provided above should be examined in connection with our consolidated financial statements
and notes thereto, as contained in this report.
AZ
NM
OK
AR
Net revenues
(in millions)
9
9
3
3
1
$
,
,
2
4
6
2
1
9 $
5
5
,
1
1
$
8
7
3
,
1
1
$
Adjusted net income per diluted
share attributable
to UHS (1)
Hospital patient days
(in thousands)
0
4
9
7
,
2
8
.
1
1
$
2
1
.
1
1
$
9
9
9
$
.
8
8
9
$
.
1
3
7
1 7
0
6
7
,
,
0
0
8
7
,
FL
PUERTO RICO
19
20
21
22
19
20
21
22
19
20
21
22
6 U N I V E R S A L H E A LT H S E R V I C E S , I N C .
AK
WA
OR
HI
MT
WY
NV
CA
UT
CO
UNITED
KINGDOM
ND
SD
NE
MN
IA
KS
MO
TX
LA
ME
VT
NH
WI
MI
NY
MA
CT
RI
IN
OH
IL
PA
MD
NJ
DE
DC
WV
VA
KY
TN
NC
SC
GA
MS
AL
Acute Care Hospitals
Ambulatory Surgery Centers
Behavioral Health Facilities
Freestanding Emergency Departments
Universal Health Services, Inc.
Corporate Headquarters
400 FACILITIES ACROSS
39 U.S. STATES, WASHINGTON, D.C.,
PUERTO RICO & UNITED KINGDOM
AK
WA
OR
ID
MT
WY
NV
CA
UT
CO
ND
SD
NE
MN
IA
KS
MO
AZ
NM
OK
AR
TX
LA
HI
UNITED
KINGDOM
ME
VT
NH
WI
MI
NY
MA
CT
RI
IN
OH
IL
PA
MD
WV
VA
NC
KY
TN
NJ
DE
DC
SC
GA
MS
AL
Acute Care Hospitals
Ambulatory Surgery Centers
Behavioral Health Facilities
Freestanding Emergency Departments
Universal Health Services, Inc.
Corporate Headquarters
FL
PUERTO RICO
Acute Care Hospitals
Ambulatory Surgery Centers
Behavioral Health Facilities
Freestanding Emergency Departments
Universal Health Services, Inc.
Corporate Headquarters
To explore our facilities using an interactive map, visit uhs.com/locations
2 0 2 2 A N N U A L R E P O R T 7
8 U N I V E R S A L H E A LT H S E R V I C E S , I N C .
UHS ACUTE CARE
DIVISION
We bring life-changing expertise, treatments and
technology to local communities through our Acute
Care hospitals and care access points.
The Acute Care Division operates 28 hospitals providing care to
millions annually. We are competitively positioned as the provider of
choice due in part to the favorable reputation that our hospitals have
earned and the high-quality care delivered. Our integrated delivery
networks provide patients with personalized care.
The Acute Care teams continued their intense focus on delivering
clinical excellence and quality to the communities we serve. This
commitment differentiates us in the market and has resulted in another
year of solid performance. While we are addressing the lingering issues
brought by the pandemic, many positive achievements were delivered
in 2022 and the teams continue to make a positive difference in the
lives of those we serve.
Healthcare is better where we are.
2 0 2 2 A N N U A L R E P O R T 9
U H S A C U T E C A R E D I V I S I O N
QUALITY & SAFETY
Our achievements in
quality demonstrate the
teams’ commitment to
the outstanding care and
services that we provide.
In 2022, seven Acute Care
hospitals earned an “A” grade
from The Leapfrog Group,
recognizing our efforts in
protecting patients from harm
and meeting the highest safety standards.
U.S. News & World Report published their Annual
Hospital Rankings in July. Of 24 UHS hospitals
evaluated, 83% earned at least one designation
as High Performing. Of note, South Texas Health
System Edinburg was named as the Best Regional
Hospital in the McAllen Metro area. It was one of only
493 hospitals recognized as Best Regional Hospitals
in their respective markets. In addition, the hospital
received High Performing ratings for its treatment of
heart attack, heart failure, stroke, COPD, diabetes,
kidney failure and pneumonia.
The George Washington University Hospital
earned High Performing designations for Neurology/
Neurosurgery and Urology. Several other UHS
hospitals earned High Performing for specific
conditions. One of the many distinctions bestowed
upon our hospitals includes: Lakewood Ranch
Medical Center was the first hospital in Florida to earn
The Joint Commission’s Gold Seal of Approval® for
Advanced Primary Heart Attack Center Certification.
The Gold Seal is a symbol of quality that reflects our
commitment to providing safe and quality care for
heart attack patients.
“ Healthcare today is challenging, but
I am optimistic and excited about the
future. Together, we have tremendous
opportunities to make a profound
impact in the communities
we serve.”
EDWARD SIM
EXECUTIVE VICE PRESIDENT AND
PRESIDENT, ACUTE CARE DIVISION
Award-winning care
UHS Hospitals Recognized with an “A” Safety Grade from The Leapfrog Group in 2022
Desert Springs Hospital
Medical Center
2nd “A” in a row
Henderson Hospital
9th “A” in a row
Northern Nevada
Medical Center
Palmdale Regional
Medical Center
St. Mary’s Regional
Medical Center
9th “A” in a row
Summerlin Hospital
Medical Center
Valley Hospital
Medical Center
1 0 U N I V E R S A L H E A LT H S E R V I C E S , I N C .
PROCESS IMPROVEMENT
Key Performance Metrics
We are committed to continuous improvement and
enhancing the patient experience while optimizing
performance, reducing costs and improving patient care.
• Capacity management software deployment continues
along with implementation of standard inpatient workflows.
• We drove a 64% reduction in contract labor spend; and a
12.3% reduction in RN turnover.
• We reduced Hospital Acquired Pressure Injuries by 18%;
and reduced falls with injury by 7%.
• Acute Inpatient Rehabilitation Units continued to be
successful in the Program Evaluation Model with 9 of 11
Rehab Units ranking above 90.
• Finally, all facilities earned certification from The Joint
Commission with accolades to host facilities; and two
facilities maintained certifications from The Commission
on Accreditation of Rehabilitation Facilities (CARF).
Overall, positive momentum is delivering results.
OVERALL LENGTH OF STAY
FOR LOW ACUITY ED PATIENTS
8.7%
REDUCTION
FROM 2021
PATIENT VOLUME
IN HOSPITAL-BASED EDs
9.4%
INCREASE
FROM 2021
ED LENGTH OF STAY FOR
PATIENTS ADMITTED
26%
REDUCTION
FROM 2021
PATIENT FEATURE
Joseph
The George Washington
University Hospital
Following successful rotator cuff
surgery at GW Hospital, Joseph
is back to throwing strikes at
his favorite bowling alley. “I had
surgery on my rotator cuff, which
was in bad shape. The advanced
pain management that I received
from GW Hospital made all the
difference. The reason I chose GW
Hospital for my surgery is that I have
been going there for at least 30
years for medical care. After a few
months following my rotator cuff
surgery, I am back to bowling again,
feeling great and I’d like to thank
everybody at GW Hospital.”
Learn more:
gwhospital.com
2 0 2 2 A N N U A L R E P O R T 1 1
U H S A C U T E C A R E D I V I S I O N
GROWTH & EXPANSION IN KEY REGIONS
Our expansion plans in key markets continued this year, enabling us to meet the growing healthcare needs of the
communities served. Our investment strategy for new builds remains robust and vigorous.
IN NEVADA, Northern Nevada
Sierra Medical Center opened in
April 2022 in Reno.
In the Las Vegas market, we acquired
a stake in the Las Vegas Institute for
Advanced Surgery. This care center has been
integrated into The Valley Health System. We
also celebrated the beam topping on construction
of the new West Henderson Hospital, scheduled
to open in 2024.
Also in Las Vegas, patients of The Valley
Health System have benefited from our Valley
Health at Home by BAYADA post-acute,
in-home care service
since its launch in
January 2022.
IN FLORIDA, progress continued in
Palm Beach Gardens, with City Council
providing support to proceed with next
steps for the new hospital to be built in
Alton, Florida.
We announced a $120 million planned expansion
of Lakewood Ranch Medical Center. Construction
will commence in early 2023. We launched Manatee
Health at Home by BAYADA, a new joint venture
partnership and our second in-market with BAYADA,
a leading Home Health Care Agency. BAYADA brings
more than 45 years of home health expertise to our
community, and enhances the quality services and
outcomes that patients have come to expect
from Manatee
Healthcare System.
Constructed to meet the expanding need for accessible, quality
healthcare in our ever-growing community, STHS Edinburg’s new
five-story, $100 million patient tower was designed to deliver an
improved patient experience.
Senior executives commemorate the
opening of the new patient tower.
1 2 U N I V E R S A L H E A LT H S E R V I C E S , I N C .
IN CALIFORNIA, our Acute Care assets
are now aligned under the System
brand, Southwest Healthcare. Significant
renovations, to be completed in phases over
the next four to five years, are in progress at
the Southwest Healthcare Rancho Springs Hospital and
Southwest Healthcare Inland Valley Hospital locations. We
announced in late 2021 a strategic alignment with Riverside
Medical Clinic (RMC), a premier multi-specialty physician
practice that employs over 180 physicians and advanced
practice providers at seven physician offices. We are
working to expand our care delivery continuum through
our relationship with RMC.
IN TEXAS, we opened the new $100 million
five-story patient tower at South Texas Health
System Edinburg. South Texas Health System
McAllen was designated a Level 1 Trauma
Center by the Texas Department of State Health
Services. At Texoma Medical Center, we completed
a Central Energy Plant and Dietary expansion and opened a
new ambulatory surgery center.
IN D.C., we unveiled the Cedar Hill Urgent
Care GW Health facility. This is the first-ever
urgent care center in Ward 8 in D.C. and
provides treatment for a variety of health
ailments including allergic reactions and
asthma, colds and flu, ear infections, minor
sprains and broken bones. In addition, radiology and
basic lab work services are offered. Opening Cedar Hill
Urgent Care GW Health is the next step in creating
a comprehensive, academic medical network which
will enhance health access, equity and outcomes and
elevate healthcare in our nation’s capital.
Mayor Muriel Bowser joined us as we broke
ground on Cedar Hill Regional Medical
Center GW Health. The more than $400
million project will include a 184-bed, full-
service hospital, trauma center, ambulatory
pavilion for physician offices, clinics and
community space, a 500-car garage, and a
helipad for emergency transports. Additionally,
the new hospital will provide maternity
services. When it opens its doors to patients
in early 2025, the new Cedar Hill Regional
Medical Center GW Health will be the first
inpatient facility to open in the District of
Columbia in more than 20 years.
PATIENT FEATURE
Joy
The George Washington
University Hospital
“I was diagnosed with stage 3 vocal
cord cancer. Having cancer can be
a scary experience, but I was never
afraid because I had confidence in
the GW team that I was working
with. They got me through one of
the most difficult periods in my life,
and thankfully they came through
for me. The care that I received
at GW was extraordinary. It was
impressive and it made me feel
special. Today, I am cancer free.”
Learn more:
gwhospital.com
2 0 2 2 A N N U A L R E P O R T 1 3
U H S A C U T E C A R E D I V I S I O N
Northern Nevada Sierra Medical Center
Reno, Nevada
• First seismic-built hospital
in the region
• 170 beds
• Exclusively private rooms
• 250+ employees
FEATURED SERVICES
24/7 ER, cardiology, labor and
delivery, pediatrics, oncology,
orthopedic and surgical services,
intensive care, advanced
cardiovascular services, inpatient
therapy and more.
Opened in April, Northern Nevada Sierra Medical Center
is the first full-service hospital to be built in the region in
nearly a century. Because of the rapid population growth
in the Reno and Sparks region, Sierra Medical Center
has expanded healthcare services so patients have
convenient access to quality healthcare.
Sierra Medical Center is part of Northern Nevada
Health System, a regional multi-facility system that
has excelled at offering quality care to residents of the
greater Truckee Meadows. The health system has many
locations across the region and in our rural communities.
This includes Northern Nevada Medical Center, a
124-bed acute care hospital in Sparks, and primary care
services and a wide range of specialty care through the
affiliated Northern Nevada Medical Group.
1 4 U N I V E R S A L H E A LT H S E R V I C E S , I N C .
1 4 U N I V E R S A L H E A LT H S E R V I C E S , I N C .
In December, Sierra Medical Center opened its level II
neonatal intensive care unit (NICU), providing care to infants
born at 32 weeks’ gestation or later who have needs
or conditions that require specialized medical attention.
The 12-bed NICU is equipped with advanced medical
technology including direct access to the labor and post-
partum maternity suites, where moms are cared for. Other
accommodations include private rooms with noise control
and isolation for the most sensitive patients. The staff who
support NICU patients include registered nurses, respiratory
therapists, physical therapists, social workers, case
managers and lactation consultants, all of whom receive
unique training to work with infants born prematurely.
Sierra Medical Center also opened its new pediatric
inpatient care unit, providing infants, children, adolescents
and teens with local comprehensive medical care. The
new unit is led by pediatric and NICU medical director
Jennifer Achilles, M.D. Local families can find comfort
knowing that they can access care a short drive from
home, with the area’s foremost experts. When a child is
hospitalized, their care team may include board-certified
emergency medicine providers, pediatric hospitalists,
pediatric nurses, respiratory therapists and other
specialists. The unit can treat common pediatric conditions
such as respiratory distress, dehydration, allergic
reactions, gastrointestinal concerns, infections, pain
and more.
PATIENT FEATURE
Baby Marigold
Northern Nevada Sierra
Medical Center
Soon after opening, Sierra Medical
Center’s level II NICU welcomed its
first baby, Marigold. “We are proud
to have earned certification as a
level II NICU and begin caring for
infants like Marigold that are born
prematurely,” said Laura Smith,
MSN, RN, RNC-NIC, NICU manager
at SMC. “The expanded services
provide families with reassurance
that our new hospital has the
advanced capabilities and highly
trained staff to support infant care.”
Learn more:
nnsierra.com
2 0 2 2 A N N U A L R E P O R T 1 5
U H S A C U T E C A R E D I V I S I O N
EXPANDING ACCESS TO CARE
Our Freestanding Emergency Departments
(FEDs) provide conveniently located access
points for individuals requiring immediate
medical attention. Since January 2022, we
opened four new FEDs. These are full-service
emergency departments that provide 24/7
care, stabilizing treatment for major conditions
including heart attack and stroke, and
treatment for minor conditions.
During the year, we handled over 322,000
ER visits and over 19,000 transfers to
UHS hospitals. We have acquired land to
construct additional FEDs and expect to have
approximately 30 FEDs operating by the end
of 2023.
ER at Sweetwater, an extension of Aiken
Regional Medical Centers
ER at Sun City Center, an extension of
Manatee Memorial Hospital
1 6 U N I V E R S A L H E A LT H S E R V I C E S , I N C .
ER at
Spanish Springs,
an extension of
Northern Nevada
Medical Center
(opened in
January 2023)
ER at Valley Vista, an extension of Centennial
Hills Hospital Medical Center
During the year, several FEDs received the
American College of Emergency Physicians
(ACEP) Bronze Level accreditation for
Geriatric Care. According to ACEP, populations
around the world are living longer now than
ever before and in the U.S., it is estimated
that 10,000 baby boomers turn 65 every day.
This demographic shift brings challenges
to healthcare systems as older adults visit
emergency departments at comparatively
higher rates than non-seniors, often present
with multiple chronic conditions, are at
increased risk of polypharmacy, and suffer from
complex social and physical challenges.
Seniors make contact with the healthcare
system at many points – perhaps none as
frequently or as importantly as the ED. The
concept of a geriatric ED has developed in the
past decade as hospitals recognize that one
size ED care does not fit all. Older individuals in
the ED have presentations, needs, dispositions
and outcomes that are quite specific to them.
Prominence Health Plan, our insurance offering, is driving
physician alignment through value-based care initiatives
via seven ACOs and Health Plan products in key markets.
Prominence currently serves 185,000 lives across its value-
based programs: 27,000 Medicare Advantage members,
37,000 Commercial lives, and 125,000 MSSP ACO lives
including ACO REACH in South Texas.
The ACOs saved Medicare $82 million in 2021. Since the
establishment of the first UHS ACO in 2014, the entities have
saved over $400 million and have achieved a 97% quality score.
Prominence’s health plan achieved 4 STAR ratings across all
markets for Medicare Advantage for 2023. Prominence Health
Plan and the ACOs are key strategic vehicles to partner with
Primary Care around population health initiatives.
Independence Physician Management (IPM), a subsidiary
of UHS, develops and manages multi-specialty physician
networks and urgent care clinics which align with our Acute
Care and Behavioral Health facilities in 13 markets across seven
states and the District of Columbia. With over 700 providers,
IPM treated patients in over 1.5 million encounters during 2022.
Northwest Emergency at Town Square, a Service of Northwest
Texas Healthcare System, was accredited for geriatric care.
PATIENT FEATURE
Leslie
Corona Regional Medical Center
In 2013, Leslie sustained a herniated
disc injury in a car accident. Her
injuries persisted over a few years,
and her doctors gave her some
grim news – she had spinal stenosis,
osteoarthritis and herniated discs.
“My doctor suggested spinal
fusion but would only do it if I lost
weight,” said Leslie. “The doctor
recommended weight-loss surgery.
At that time, I was 217 pounds and
he wanted me down to about 140
pounds.” Conyers chose to have
weight-loss surgery at Corona
Regional. By April 2021, she was down
to 200 pounds and ready for her
bariatric surgery. Leslie says she had
a great patient experience at Corona
Regional. She was able to lose enough
weight to have spinal fusion in 2021.
“I still have to do physical therapy,
but I can finally sleep at night. I am at
a healthy weight and the weight loss
made all the difference in my fusion
surgery recovery.”
Learn more:
coronaregional.com
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2 0 2 1 A N N U A L R E P O R T 1 7
1 8 U N I V E R S A L H E A LT H S E R V I C E S , I N C .
1 8 U N I V E R S A L H E A LT H S E R V I C E S , I N C .
UHS BEHAVIORAL
HEALTH DIVISION
The skilled teams provide compassionate care that
delivers hope, help and healing. Our facilities play a vital
role serving as trusted providers of behavioral healthcare
services in the communities we serve.
The Behavioral Health Division delivered another year of solid results
and strong patient outcomes. We cared for more than 730,000 individuals
across the full continuum of care including inpatient, outpatient, partial
hospitalization and telehealth settings.
We saw an increase in demand for behavioral healthcare services further
intensified by the pandemic. During the year, we continued to make
progress in quality-of-care achievements, promoting our culture of Service
Excellence and expanding our offerings.
Healthcare is our passion; saving and improving lives is our reward.
2 0 2 2 A N N U A L R E P O R T 1 9
U H S B E H A V I O R A L H E A LT H D I V I S I O N
1
DELIVERING TRUSTED CARE
WHAT IS A GOOD NPS SCORE?
-100
Needs Improvement
Good
Great
Excellent
100
2
0 - 30
30 - 70
-100 - 0
We consistently maintain our high standards across
our Behavioral Health Division. This is reflected in
feedback from industry regulators and patients.
In the CMS Inpatient Psychiatric Facility Quality
Reporting requirements, our Behavioral Health
facilities are compared to approximately 1,500
psychiatric providers across the country. UHS
results exceed the national averages in 9 out of 13
indicators. In 2022, patients rated their overall care
as 4.4 out of 5 in our patient satisfaction surveys.
More than 91% indicated they felt better following
care at one of our facilities.
What is a good NPS score?
NEEDS IMPROVEMENT
-100 - 0
30 - 70
GREAT
GOOD
0 - 30
-100
EXCELLENT
70 - 100
WHAT IS A GOOD NPS SCORE?
3
All UHS Behavioral Health facilities
are fully accredited by independent
organizations including The Joint
Commission (TJC) and/or Commission
NEEDS IMPROVEMENT
(-100 - 0)
on Accreditation of Rehabilitation
Facilities (CARF), whose rigorous
-100
clinical assessment protocols are
widely respected throughout the
healthcare industry.
GOOD
(0 - 30)
GREAT
(30 - 70)
EXCELLENT
(70 - 100)
Net Promoter
Score Index
EXCEPTIONAL
(70 to 100)
EXCELLENT
(50 to 69)
VERY GOOD/GREAT
(30 to 49)
GOOD
(0 to 29)
NEEDS
IMPROVEMENT
(-100 to -1)
GREAT
(30 - 70)
We incorporated the Net
5
Promoter Score (NPS) into
our surveys. NPS gauges
100
the loyalty of customers,
consumers and patients and
has been widely adopted
by more than two-thirds of
Fortune 1000 companies.
We measure loyalty using the
question, “How likely would
NEEDS
you be to recommend this
IMPROVEMENT
facility to a friend or family
(-100 - 0)
member?” In 2022, the
UHS Behavioral Health
Division NPS was 39.0,
which represents
-100
the percent of promoters minus the percent of
detractors. This score is considered very
good by industry standards.
2 0 U N I V E R S A L H E A LT H S E R V I C E S , I N C .
70 - 100
Best Addiction Treatment Centers
Drug and alcohol addiction contribute to a
substantial amount of suffering in the U.S. Newsweek
partnered with global market research firm Statista
Inc. to rank the best U.S. treatment facilities focused
on addiction. The rankings are based on a survey
of over 4,000 medical professionals and an analysis
of the treatment centers’ accreditation status. Four
of our facilities – The Pride Institute, Stonington
Institute, Talbott Recovery and The Ridge
Behavioral Health System – were ranked on the
Newsweek annual list.
100
Consumer Star Ratings
100
Our facilities are highly regarded, trusted providers
of behavioral healthcare in the communities we
serve. During the year, we managed and responded
to over 7,000 online reviews posted to Google
and Facebook, thanking patients for providing high
ratings, and providing effective service recovery
when concerns were shared. We view patient
feedback as a gift. Patients are telling us what they
like and where we can improve. It is our responsibility
to take action, respond and address concerns. We
share this positive feedback with staff.
EXCELLENT
(70 - 100)
“ We continue to be hyper-focused
GOOD
(0 - 30)
on delivering high-quality care to the
patients we are privileged to serve.
Our care delivery is our reputation,
and our purpose is the
opportunity to save and
improve lives. I know
this is a key motivator
for all of us.”
MATT PETERSON
EXECUTIVE VICE PRESIDENT AND
PRESIDENT, BEHAVIORAL HEALTH DIVISION
03070
ACCESS TO CARE
Our division made considerable strides in strengthening our
core in-person services, while making meaningful in-roads in
caring for patients wherever they are across the continuum,
including through expanded inpatient, outpatient programming
and telehealth offerings.
Our facilities provide patients with the help they need to put
them on a solid path to recovery. The care teams offer a full
continuum of care specifically tailored to address the unique
needs of each stage and age of life, serving children, adolescents,
adults and seniors. Levels of care include telehealth, partial
hospitalization, intensive outpatient care, acute inpatient
programs and residential treatment.
Working collaboratively with facility care teams, we determine
the best path to wellness and happiness for every patient. The
skilled, dedicated care teams are experienced in providing high-
quality mental healthcare that delivers strong patient outcomes.
Telehealth
The pandemic triggered an accelerated scaling of telehealth
offerings. The trajectory of this channel will continue, as many
patients find value in accessing care faster, tapping into a
larger network without geographic constraints and engaging
via the convenience of a mobile device. We believe telehealth
will ultimately reduce overall healthcare costs, support strong
patient outcomes and change the way certain assessments and
treatments are conducted.
Suicide Prevention
UHS partners with the National Action Alliance for Suicide
Prevention, helping individuals connect with support when they
find themselves in crisis. As a result of the pandemic, we know
that it is more important than ever to continue to focus on suicide
prevention as a national priority. Research indicates that more
than half of Americans are more open to talking about their own
mental health.
We supported the launch of the new 988 suicide and crisis lifeline
in July. 988 provides 24/7, no-cost and confidential support for
individuals in distress, including prevention and crisis resources.
Between its launch in Summer 2022 and
the end of the calendar year, there
were over 2 million calls, texts
and chat messages pouring in
to trained counselors who are
providing emotional support
and stabilization.
PATIENT FEATURE
Michael
Mesilla Valley Hospital
When he began the partial
hospitalization program at Mesilla
Valley Hospital, Michael was
addicted, homeless and ready to
give up on life. He found his way
to Mesilla Valley and decided it
was time to get help. “Through the
program at Mesilla Valley, I received
the tools I needed to overcome
addiction and learn coping skills to
help put me on the road to recovery.
I am grateful for Mesilla Valley
Hospital because I felt at home while
I was there, and the program gave
me hope to pursue my dreams.
This decision changed my life.”
Learn more:
mesillavalleyhospital.com
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U H S B E H A V I O R A L H E A LT H D I V I S I O N
Reaching More Communities
IN RESPONSE TO THE GROWING
DEMAND FOR BEHAVIORAL HEALTH
SERVICES IN THE U.S., we added
391 beds to new and existing facilities during
the year.
On the de novo front, we opened the new
Beaumont Behavioral Health in Dearborn,
Michigan; Via Linda Behavioral Health in
Scottsdale, Arizona; and Granite Hills Hospital
in West Allis, Wisconsin.
We are on track to open River Vista
Behavioral Health in Madera, California
in 2023. We have several integration
opportunities in the pipeline for the Division,
representing momentum on all fronts.
Division-wide referrals exceeded 1.5 million,
which represents growth of 15% over the
previous year. The demand for behavioral
health services among adults, teens and
children continues to climb and represents an
opportunity for our facilities to meet the need.
Beaumont
Behavioral Health
Dearborn, MI
River Vista
Behavioral Health
Madera, CA
Via Linda
Behavioral Health
Scottsdale, AZ
2 2 U N I V E R S A L H E A LT H S E R V I C E S , I N C .
We celebrated the 35th anniversary of First Hospital
Panamericano, located in Puerto Rico. “We marked
more than three decades of excellent patient outcomes
and top-quality services by the team, making us the
Provider of Choice on the island,” said Astro Muñoz,
CEO, First Hospital Panamericano.
Pictured (l to r): Jose Marrero, Caridad Pierluisi
(First Lady and Director of the Office of the Governor),
Eneris Roque (Admin Assistant PHP), Governor Pedro
Pierluisi, Astro Muñoz (CEO), Dolly Figueroa (Ward
Clerk), Ivette Rivera (UM Coordinator), Maria Landrau
(UM Coordinator).
PATIENT FEATURE
Emily
HRI Hospital
“I came to the HRI Hospital Women’s
Unit because my depression and
anxiety was worsening. It was time
to get more support. I was honestly
terrified about the whole experience
and that I would have to be away
from my family, but the staff was
so welcoming and supportive. Even
in my darkest moments, I felt like
this was a place where I would feel
better. I had a chance to participate
in art therapy, medication therapy
and group therapy. Staff was
compassionate – I always felt like
I could turn to staff for support.
Upon discharge, I was excited to go
home but knew that I would miss
the people with whom I had bonded
while at HRI. My advice for others is:
don’t be afraid to go for it. Coming
to HRI changed my life. It was the
best self-care decision I ever made.”
Learn more:
hrihospital.com
2 0 2 2 A N N U A L R E P O R T 2 3
“ I have personally
served with Major
General Fenwick
and can speak
to his relentless
commitment to
saving lives.”
Major General (Ret)
Jerry L. Fenwick
MATT PETERSON
EXECUTIVE VICE PRESIDENT AND
PRESIDENT, BEHAVIORAL HEALTH DIVISION
U H S B E H A V I O R A L H E A LT H D I V I S I O N
SPECIALTY CARE
OFFERINGS
Patriot Support Programs
We cared for over 17,000 military personnel, veterans
and their families during the year, providing tailored
programming and support for those coping with
the emotional and psychological effects of combat
and other behavioral health disorders.
Access to treatment is available to active-duty
military, veterans and their families across all
facilities. Additionally, 19 Behavioral Health facilities
across 13 states offer Patriot Support Programs
(PSP) with services specifically designed to address
the effects of combat stress, post-traumatic stress,
depression, substance use disorder and other
behavioral health issues.
In October, PSP welcomed its 7th Advisory Board
member, Major General (Ret) Jerry L. Fenwick, U.S.
Air Force & Air National Guard. With a focused and
dedicated Advisory Board, further expanded to
include the wisdom and talents of Major General
Fenwick, we will continue to enhance our offerings
to ensure military personnel receive the support
and care they need to succeed.
In July 2022, Brentwood Hospital’s
CEO and STAR Program for Uniformed
Services Liaison met with the Bayne-Jones
Army Community Hospital’s command
team, Chief of Behavioral Health and
Chief Nurse in charge of its emergency
department to discuss increasing access
to inpatient care for soldiers and
families at Fort Polk.
2 4 U N I V E R S A L H E A LT H S E R V I C E S , I N C .
Substance Use Disorder
A particular area of focus for the division continues to be
providing a broader array of substance use treatment
services, programs and care that results in longer, sustained
recovery. Treatment for substance use can take many forms
and incorporate several elements, including residential, partial
hospitalization, outpatient programs, drug or alcohol detox,
co-occurring treatment, step-down programs, sober living and
aftercare. Substance use treatment has come a long way, with
targeted research providing clear direction on which models
are the most effective for an individual’s specific needs and
pointing to new approaches that deliver better results.
Eating Disorders
Eating disorders manifest in different ways, but they are
all characterized by eating patterns that disrupt a person’s
mental, physical and emotional health. The skilled clinicians
are equipped and trained to address a wide range of eating
disorders from anorexia and bulimia to binge eating and
eating disorders in conjunction with other conditions.
Autism
People with autism spectrum disorder (ASD) often have
problems with social communication and interaction, and
restricted or repetitive behaviors or interests. Individuals
with ASD may also have different ways of learning, moving,
or paying attention. Several of our facilities have dedicated
programming to serve those diagnosed with ASD. We cared
for 770 individuals with ASD, tailoring each patient’s treatment
and interventions to precisely measure and track progress
toward improved health and quality of life. Plans integrate
behavioral functioning, social development, communication
abilities, academic/vocational achievement, family education
and support.
Educational Services for Students
The dedicated educators at our residential treatment facilities,
day schools and acute care programs provide programming
for adolescents, enabling them to continue their education
while in treatment. Congratulations to the class of 2022
including 158 students who completed high school or earned
their GED during the school year. By fully integrating education
into the clinical milieu, we create personalized education plans
to help each student experience academic success. These
graduates now have many opportunities available to them
and a much brighter future.
PATIENT FEATURE
Avlok
Skywood Recovery
“I am happy to be a part of the
Skywood Alumni program,” said
Avlok. “Skywood was my first
choice for recovery. Treatment at
Skywood was fantastic. They were
far and beyond my expectations.
The staff was warm and welcoming.
They made it really easy to focus
on recovery. The facility was super
clean and homey. During my stay,
my patient care coordinator helped
me make sure everything was set
with my job outside of the Skywood
program. When I was ready to
leave, I had all the appropriate
documentation to return to work
and my follow-up appointments
were all set. Since Skywood, I have
remained sober for over a year, and
I have been promoted at work. I
would highly recommend Skywood
for recovery.”
Learn more:
skywoodrecovery.com
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U H S B E H A V I O R A L H E A LT H D I V I S I O N
Cygnet Health Care
With almost 200 services, Cygnet Health Care
is proud to have become the leading
provider of behavioral health facilities
in the U.K., successfully helping
thousands of people each year.
During 2022, we navigated
the path out of COVID-19
with a focus on sustaining
quality services and we
experienced over 10%
growth in revenue.
The opportunities for
growth in the U.K. are
strong and demand for
our services is growing.
We are seeing more people
with new diagnoses, as well as
individuals who have pre-existing
conditions requiring a higher level
of support. Due to the growth of our
U.K. operations, we have separated Cygnet
into two divisions: Health Care and Social Care.
The dedicated Cygnet Health Care team at
Wast Hills
2 6 U N I V E R S A L H E A LT H S E R V I C E S , I N C .
Dedicated to Quality: the Cygnet team at Churchill
Our reputation for quality means the National
Health Service and local government organizations
are seeking our provision more than ever before.
We are looking forward to strengthening these
partnerships in the years ahead and extending
our services further.
Regulators also continue to recognize our quality
and we are proud that in 2022 we outperformed
the national average for services rated Good or
Outstanding. We will build on this quality and extend
our work into the communities we serve through
education, outreach and extending our social media
networks, where we grew our online following
by 24%.
None of these achievements and ambitions
would be possible without dedicated colleagues.
Caring is integral to our culture and values. In
our Health Care services we strive for our clinical
outcomes to exceed the expected standards,
supporting individuals with appropriate care along
the continuum. Our social care services provide
sanctuary for each individual entrusted to us and we
adhere to the concept: “Our residents don’t live in
our workplace, we work in their homes.”
Never has care been more important and despite
many challenges in 2022, we continued to push
forward with optimism and success. We will keep
supporting staff to be the best and resolve to
overcome the challenges we face globally, nationally
and economically with determination.
ENVIRONMENTAL,
SOCIAL AND
GOVERNANCE
Our commitment toward
improving society in a
meaningful way
2022
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2 0 2 2 A N N U A L R E P O R T 2 7
Since acquiring its first hospital in 1979, UHS has been strongly committed to treating
patients and staff members with utmost respect. We are proud of our reputation as a
trusted healthcare provider and a valued partner in each of our local communities.
In 2022, UHS enhanced transparency regarding our long-standing procedures and
processes that underscore our environmental, social and governance (ESG) commitments,
processes and best practices to address areas needing improvement, and increased our
focus on the development and execution of new initiatives supporting patients, employees
and communities.
We organized our ESG working group, including a multi-disciplinary team of senior
executives, named a Corporate ESG Director and identified key areas of focus for the
coming year. Historically, reporting, and consequently oversight, of certain ESG-related
efforts has been addressed independently across four Board Committees. As of 2021,
we have been reporting on our overall ESG initiative to the entire Board.
Learn more: uhs.com/ESG
CORPORATE RECOGNITION
UHS’ commitment to excellence is reflected in its long-
standing record of achievement including our multiple
appearances on Fortune 500, Fortune’s World’s
Most Admired Companies list, Philadelphia Business
Journal’s Largest Healthcare Systems and Hospitals in
the Philadelphia Region, and Largest Public Companies
in the Philadelphia Area lists.
In 2022, we were proud to announce UHS President
and CEO, Marc D. Miller, was recognized by Modern
Healthcare as one of the 100 Most Influential People in
Healthcare for his leadership and impact on the industry.
OUR PRINCIPLES
We stand for excellence, each and every day,
at each and every encounter. Our Principles
set a high bar and reflect our purpose.
We Provide Superior
Quality Patient Care
We Value Each Member of Our
Team and All Their Good Work
We Are Committed to Being a
Highly Ethical Healthcare Provider
We Are Devoted to Serving
Our Local Community
Learn more:
uhs.com/principles
2 8 U N I V E R S A L H E A LT H S E R V I C E S , I N C .
OUR INVESTMENT IN A
SUSTAINABLE ENVIRONMENT
UHS recognizes its responsibility to implement environmentally sustainable practices
and is committed to complying with applicable legal and regulatory environmental
standards to protect patients, visitors, staff and communities. Our environmental
stewardship includes, but is not limited to, following best practices when managing
our energy usage, construction and design of new build and/or major renovations
and disposing of waste.
Also in 2022, UHS spent an additional $680,000
toward Retro-Commission (RCx) and Monitoring-
Based Commission (MBCx) HVAC systems at select
Acute Care facilities. All told, between 2017-2022,
our RCx/MBCx initiative upgraded 14 facilities,
resulting in an overall savings of $2.14 million, 19.3
million kWh and nearly 970,000 therms.
During the year, UHS also committed more than
$572,000 to provide Automatic Fault Detection
and Diagnostics (AFDD) systems to Acute Care
facilities over a five-year span. By the end of the
year, the AFDD Platform was operational at 16
facilities; installation at an additional seven facilities
is expected to be completed in 2023. This upgrade
will not only proactively avoid mechanical failures
but also ensure optimal operation efficiencies of
the HVAC systems.
ENERGY EFFICIENCY PROGRESS
Our Centralized Utility Billing
Management System (UBM) monitors
energy usage across our U.S.
operations. By streamlining data
collection and reporting, we can
identify and act on inefficiencies faster and
more easily. The platform alerts us to any significant
deviation from average energy costs. Now with full-
year baseline data in place, we can monitor usage
year-to-year and investigate any discrepancies as well.
Our Acute Care facilities monitor the efficiencies of
their heating, ventilation and air conditioning (HVAC)
component operations through use of an automatic
fault detection and diagnostics platform. Reports,
generated either monthly or quarterly, flag deviations
from optimal operations, especially for those facilities
equipped with Retro-Commissioning and Monitoring-
Based Commissioning.
In 2022, UHS earmarked an additional $1.18 million
to retrofit California-area hospitals with higher-
efficiency, LED lighting certified by ENERGY STAR®
or DesignLights Consortium. While these upgrades
were not yet completed at year’s end, the project’s
projected annual savings amount to nearly $290,000
and 2.2 million kWh or 950 metric tons of carbon
dioxide (CO2) equivalent.
2 0 2 2 A N N U A L R E P O R T 2 9
Certifications and Registrations
UHS made significant progress
in its pursuit of U.S. Environmental
Protection Agency’s (EPA)
ENERGY STAR® certifications.
As of February 2023, 15 UHS
Acute Care facilities had earned
this designation, up from two in
2021. ENERGY STAR® certified buildings and plants
are verified to perform in the top 25% of buildings
nationwide, based on weather-normalized source
energy use that considers the occupancy, hours
of operation and other key metrics.
Newly certified facilities include Desert View
Hospital, Doctors Hospital of Laredo, Northern
Nevada Medical Center, Northwest Texas Healthcare
System, South Texas Health System McAllen,
St. Mary’s Regional Medical Center, Valley Health
Specialty Hospital, an extension of Spring Valley
Hospital as well as six others within The Valley
Health System.
“ Congratulations to our six Valley
Health System hospitals that earned
Six Valley Health System
the ENERGY STAR® certification for
hospitals earned the ENERGY
superior energy performance, earning
STAR® certification for superior
ratings between 92% and 100%,
energy performance, earning
outperforming similar U.S. buildings
ratings between 92% and 100%,
on energy efficiency. The hospitals
outperforming similar U.S. buildings
on energy efficiency. The hospitals
implemented a variety of energy-
implemented a variety of energy-
efficient measures over the past five
efficient measures over the past five
years, including the installation of
years including the installation of
LED lighting and recommissioning
LED lighting and recommissioning
HVAC systems to upgrade to current
HVAC systems to upgrade to
design standards, to earn this
current design standards, to earn
specialty certification.“
this specialty certification.
VAIBHAV GAGRANI, PE, CEM, LEED AP
DIRECTOR, ESG
15
2
2021
Feb. 2023
Number of
ENERGY STAR®
Certifications
3 0 U N I V E R S A L H E A LT H S E R V I C E S , I N C .
GREEN BUILDING CONSTRUCTION
HEALTHIER WORK ENVIRONMENTS
Coordinated efforts across
multiple departments, including
Environmental Services and
Supply Chain, ensure our work
environments, products and services
are safe and sustainable for staff, patients
and visitors. Despite post-pandemic disruptions
to manufacturing and transportation, the teams’
focus on providing healthier environments for all
stakeholders remained steadfast.
Investing in Clean Environments
We continue to use Green Seal and GREENGUARD
chemicals to maintain safe and clean environments
for employees and visitors. In 2022, we expanded
the use of Green Seal certified products to
include additional products, such as floor pads
and dusting sheets.
Manatee Memorial Hospital and Northwest Texas
Healthcare System earned the AORN GO Clear
Award – Gold.™ AORN recognizes operating
rooms that present a smoke-free
environment for staff and patient
safety. The goal is to have all UHS
Operating Rooms achieve this
award by the end of 2024.
Despite the challenges of pandemic-
related materials availability issues, UHS
continues to set high environmental
standards. Our construction and
design of new builds or major
renovations must comply with federal, state
and local energy efficiency standards and energy
codes. Additionally, we require that the project’s
ENERGY STAR® Score Rating meets or exceeds 90.
Lastly, any new construction or major renovation
project $20 million or higher will be assessed for
Green Building Initiatives’ Green Globes® or U.S.
Green Building Council’s LEED certification.
As of February 2023, six UHS Acute
Care facilities have Green Globes®
certifications, including Northern
Nevada Sierra Medical Center. Our West
Henderson Hospital (currently under
construction) is registered, requiring us
to file for certification within four years.
Spring Valley Hospital Medical Center in
Las Vegas became a member of Practice
Green Health.
Our Cedar Hill Regional Medical Center
GW Health (currently under construction)
in Washington, D.C. will have solar panels
on its garage that will provide energy
assistance to over 200 households in
the adjacent community.
2 0 2 2 A N N U A L R E P O R T 3 1
OUR CONTRACTORS ARE REQUIRED to track and report the percentage of
demolition and construction waste recycled. We are pleased to highlight summaries
of waste savings and/or diversions from a couple of our recent projects.
Whether it is a new build or major reconstruction or expansion, our projects are
designed to incorporate environmentally friendly materials and processes, from its
energy conscious design through demolition and waste removals.
South Texas Health System Edinburg
Edinburg, TX
(151,810 sq. ft. of new construction and
20,565 sq. ft. of renovation)
During 2022, South Texas Health System Edinburg completed
the construction of a new five-story patient tower, which doubled
the facility’s overall size. The first floor of the tower is now the
new and expanded Emergency Department.
During these projects:
• Three 94%-efficient heating water condensing boilers were
installed in the new tower to serve all of the hydronic heating
water for the heating and air system.
• Nearly 220 energy-efficient light fixtures replaced older fixtures.
• Higher efficiency refrigerators/freezers were installed in the
newly renovated Dietary section.
River Vista Behavioral Health
Madera, CA
(~80,000 sq. ft. of new construction)
This new facility is expected to open in
April 2023. Between February 2022 and
January 2023, the teams achieved high
diversion rates.
• Nearly 390 tons of materials were diverted,
for an overall diversion rate of 92.37%.
• Clean/unpainted drywall and metal combined
to account for 65% of materials diverted,
followed by clean wood (13%), mixed
recyclable (8%) and waste (trash) (8%).
3 2 U N I V E R S A L H E A LT H S E R V I C E S , I N C .
Also in 2022, new initiatives were launched,
including a food waste pilot study at The George
Washington University Hospital (GW Hospital). The
study evaluated the cause of waste, areas of where
waste was produced, the service period/area, food
type wasted and weight of what was wasted. Based
on this data, we were able to make meaningful
process changes. We will have the program
implemented in all Acute Care facilities by April 2023
with a Year One goal of waste accounting for 4%
or less of our total spend. By wasting less, we will
conserve valuable resources such as energy,
water and land.
Further, facilities conducted and documented weekly
inspections of Central Accumulation Areas where
waste covered under the Resource Conservation
and Recovery Act was stored for pickup from our
approved vendor. These inspections ensured proper
waste segregation, packaging and labeling, as well
as a safe and secure physical environment satisfying
requirements from the EPA and Department of Health.
Environmental Service operations also trained
staff on proper waste handling, which included
transportation of waste within the facility. This training
satisfies an annual Department of Transportation
requirement for
handling and
storing waste.
RESPONSIBLE WASTE AND
POLLUTION MANAGEMENT
While multiple initiatives have
long been in place to support the
responsible disposal of pollution and
waste, in 2022, we began framing a
comprehensive waste management
and recycling program. The program
will be based, in part, on waste management
studies recently conducted at Valley Health System
hospitals in Las Vegas. We expect to roll out this
comprehensive waste management program
across our U.S. operations in the near future.
In the meantime, our facilities continued to
participate in trainings and initiatives focused on the
proper disposal of waste that resulted in effective
reductions of CO2 emissions and/or increased in
recycled/reused materials. In 2022, these included:
• Facilities conducted annual waste training
to support our initiative for disposing waste
responsibly. Data on waste streams were collected
monthly and reported through the individual
hospital’s Environment of Care committees to
identify opportunities to reduce non-recycled
material and increase recycled material. In 2022,
this initiative documented 12.5 million pounds
of recycled material.
• Participation in our reusable sharps container
program mitigated more than 1.3 million pounds
of greenhouse gases (compared to single-use
containers). This is equivalent to CO2 emissions
from 69,307 gallons of gasoline consumed and
the preservation of 740 acres of forest.
2 0 2 2 A N N U A L R E P O R T 3 3
Staff was also supported by a new Hazardous
Materials and Waste Program playbook developed
by the Environmental Risk and Emergency
Management (EM) team to provide educational
and programmatic assistance for the Hazardous
Materials Management Program at the facility
level. This valuable resource educated Acute
Care and Behavioral Health staff on key topics,
such as labeling of receptacles and containers as
well as storage area and inspection requirements.
The playbook also shared tools, templates for
procedures/plans and best practices to ensure a
safe and compliant program.
The EM team also revised the facilities’ HazMat
Dashboard to ensure ongoing waste stream
segregation compliance. Training on the updated
dashboard was provided for both the Acute Care
and Behavioral Health Division staff.
REPROCESSING AND
WASTE DIVERSION
In 2022, 28 of our Acute Care facilities
and two Surgery Centers utilized
two FDA-approved third-party
manufacturers, Stryker Sustainability
and Innovative Health, for reprocessing
of their respective, approved medical
devices. Combined, these vendors helped our
UHS facilities divert nearly 37,000 pounds of
waste from landfills.
By purchasing reprocessed electrophysiology (EP)
devices from Innovative Health, five Acute Care
facilities mitigated 827 pounds of CO2 emissions
in 2022. Further, through participation in Stryker’s
Products for the Planet program, 513 trees were
planted in National Forests on behalf of UHS
reprocessing efforts.
In addition to reprocessing of medical devices,
UHS Acute Care facilities partnered with
manufacturers who collect their own manufactured
devices, disassemble them and then recycle the
individual components.
End-of-life computer equipment underwent
required security measures and then were recycled
exclusively through a vendor-managed program.
Conservation of Natural Resources
The System Water Management Team (WMT)
includes Facilities Operations, Infection Prevention,
Environmental Services and Risk Management and
oversees all aspects of potable and utility water
processes. Each hospital site, as well as the identified
outpatient clinics, have a site WMT that manages its
water systems and evaluates the necessary hazard
control and validation data to ensure the systems
are maintained at the highest degree of safety. We
maintain supporting documents that are compliant
with a HACCP-based Water Management Program
(WMP), which meets the requirements of ANSI/
ASHRAE Standard 188-2021 (Legionellosis: Risk
Management Practices for Building Water Systems).
As part of that same standard, UHS has designed and
implemented a WMP to manage the environmental
aspects of water streams (e.g., domestic/potable
water systems, cooling tower systems, outdoor
decorative water features) for the safety of patients,
visitors and employees.
Future short-term plans include developing a
corporate-wide water management program,
including the reduction of water consumption through
initiatives such as irrigation controls.
CULINARY AND NUTRITION
The Culinary and Nutrition Department
resides as part of our Corporate
Supply Chain structure and provides
oversight and direction for our
overall food program sourcing
and contracting. In 2022, we continued
our Food as Healing Fuel approach, despite
the challenges presented by an unstable and
inflationary marketplace.
Whenever possible, the team used Locked Order
Guides to secure products with the best availability
and value, but also those from sustainable sources
for practical reasons. First, and foremost, we needed
products to get to patients. We also needed to
minimize the effects of rampant food and disposable
cost inflation through Contract Compliance and
Purchasing Program Maximizations. Lastly, we
needed items that are sustainable for that day, as
well as in the future.
3 4 U N I V E R S A L H E A LT H S E R V I C E S , I N C .
Also, as post-pandemic census and visitor counts
rose, so did meal production and thus our potential
for recycling efforts. A survey of 68 of our Acute
Care and Behavioral Health facilities found eight
different categories of items are being recycled.
Used fryer oil was recycled most often (75% of
facilities surveyed), followed by cardboard (62%).
Our recycling initiatives in 2022 also included
promoting the use of reusable items such as
melamine plates, reusable but safe rubberized
plastic utensils and even reusable take-out
containers that can last over a year. In 2023, we
expect the Behavioral Health Division’s usage of
these reusable items to increase by 20%.
Notably, in 2022 our sustainable product usage
increased to account for more than $3.2 million
of products used by UHS kitchens. Our goal is to
increase this to $4 million in 2023 and $5 million
in 2024.
In the past year, the Support Services team worked
with hospitals to improve access to gluten-free menu
products for patients following gluten-free diets
at our Acute Care facilities. Since 2021, 12 of our
Acute Care facilities have attained Gluten Free Food
Service (GFFS) certification by the Gluten Intolerance
Group. This certification can only be obtained if
all menu items are produced in a food production
area free from cross-contact with menu items
containing gluten. Our organization demonstrates
its commitment to patient safety by investing time
and expertise needed to master trainings and
successfully pass the required audit for this initiative.
In 2022, UHS ramped up its plant-forward menuing
across Acute Care and Behavioral Health facilities.
The culinary and dietary experts created numerous
plant-centric recipes, such as General Tso’s Tofu,
and introduced new food choices, such as gluten-
free vegan menu items, to its patient and café
menus. Within the Behavioral Health Division
alone, the number of available plant-forward items
increased 18% since the previous year. We expect to
develop this initiative further to meet the increasing
demand for animal-based food alternatives, but
also help lower gas emissions and environmental
contamination and help patients and visitors
avoid high saturated fats.
Since May 2022, seven UHS Acute
Care hospitals earned Gluten
Intolerance Group’s certification or
re-certification as a Gluten-free Safe
Spot (see asterisks), bringing the total
number of certified UHS hospitals to 12.
Only two other non-UHS hospitals in
the U.S. have earned this accreditation.
Centennial Hills Hospital Medical Center
Desert Springs Hospital Medical Center
Doctors Hospital of Laredo*
Lakewood Ranch Medical Center*
Manatee Memorial Hospital*
Northwest Texas Healthcare System
South Texas Health System Edinburg/
South Texas Health System Children’s*
Summerlin Hospital Medical Center
Temecula Valley Hospital*
The George Washington
University Hospital*
Valley Hospital
Medical Center
Wellington Regional
Medical Center*
2 0 2 2 A N N U A L R E P O R T 3 5
Cygnet Health Care
Working Toward Targets
CYGNET HEALTH CARE OPERATES UHS’
BEHAVIORAL HEALTH FACILITIES IN THE UNITED
KINGDOM. It takes its environmental responsibilities seriously
and invested more than £2 million at sites to help tackle climate
change. Their ambitious Sustainability Strategy includes:
• Net zero carbon commitment for direct and indirect
emissions by 2035
• Net zero carbon emissions in supply chain by 2045
• Procuring 100% of electricity from renewable sources
since 2021
Recycling across Cygnet has increased from 16% in 2019 to 31% in
2022. This is due to initiatives such as the ‘right size right shape’
project, in partnership with Cygnet’s waste management provider,
which monitors the recycling habits across sites and supports
greater awareness.
In 2022, Cygnet Health Care completed the installation of solar
panels to five of its top 22 electricity usage sites, which now
accounts for approximately one-quarter of the electricity at each
site. In just one site, the CO2 emissions that are avoided equate
to 21,631 kg per year or 21.63 metric tons. This is equivalent to 865
trees (it takes 40-46 trees to compensate for 1 metric ton of C02).
Installation of solar panels at the remaining 17 sites is expected to
be completed by April 2023.
Cygnet has introduced new
technology across its vehicle
fleet to lower CO2 emissions,
save fuel, reduce accidents and
enhance the safe, comfortable
transfer of patients across its
U.K.-wide services.
The installation of a new
tracking and driver training
device in all company-owned
vehicles has seen a reduction
of CO2 emissions by 122 metric
tons, a cost savings of more than
£50k through improved fuel
economy, more environmentally
friendly driving styles, improved
safety and a reduction in
insurance claims.
Learn more: cygnethealth.co.uk/about/environmental-social-governance-esg/
3 6 U N I V E R S A L H E A LT H S E R V I C E S , I N C .
OUR COMMITMENT
TO SOCIAL CAUSES
Support of social causes has long been an integral part of our corporate
responsibility. We continually seek opportunities to provide high-quality care to
patients and their families, maintain a high level of support and respect for valued
employees and strive to make a positive impact on our local communities.
HIGH-QUALITY & EQUITABLE
HEALTHCARE SERVICES
Our facilities are designed to provide a safe
and welcoming environment, with caring experts
on hand to help each individual meet their
specific needs.
During 2022, UHS’ Acute Care and Behavioral
Health Divisions worked diligently preparing
necessary plans and processes to meet The Joint
Commission’s industrywide Health Equity Standards
that came into effect January 1, 2023. The Divisions’
respective Clinical Quality teams created guidelines
for their facilities and worked with dedicated
personnel to improve current patient intake forms to
better identify, and improve reporting of, inequities
among patients. The individual clinical teams are
developing resources, in coordination with those
available in our local communities, to support
equitable care for patients.
Our facilities are expected to follow the new
guidelines and starting in 2023, provide updates
to their respective Executive Committee and
Board of Directors.
Excellence in Quality and Safety
In 2022, the Acute Care Division clinical acuity was
recognized by industry groups. Most notably:
• 13 UHS Acute Care hospitals earned an “A” or “B”
safety grade from The Leapfrog Group, arguably
the industry’s highest safety standard.
• ER at Fruitville, an extension of Lakewood Ranch
Medical Center, was named a Press Ganey 2022
HX Guardian of Excellence Award® – Patient
Experience winner. This accolade recognizes
the facility as being in the top 5% of healthcare
providers evaluated in patient experience.
• St. Mary’s Regional Medical Center was one of
429 hospitals to earn The Centers for Medicare &
Medicaid Services (CMS) Five-Star Overall Rating
based on its performance across various measures
of quality including safety of care, readmission
rate, mortality, timely and effective care and
patient experience.
• St. Mary’s Regional Medical Center and
GW Hospital were recognized among America’s
Best Physical Rehabilitation Centers for 2022 by
Newsweek/Statista. Facilities were chosen based
on a rigorous methodology that includes data from
a survey of thousands of medical experts as well
as key performance indicators based on the U.S.
Centers for Medicare & Medicaid Services.
2 0 2 2 A N N U A L R E P O R T 3 7
In 2022, the Acute Care Division celebrated a
sharp decline in its maternal mortality rate and
for the first time, zero maternal deaths involving
hemorrhage. At 8.9 per 100,000 births, UHS’
maternal mortality rate was significantly lower than
the U.S. rate of 23.9 per 100,000 as reported by
the Centers for Disease Control and Prevention1.
Improvements can be attributed at least in part,
to the 2020 launch of UHS’ Quality in Obstetrics
Education Program. The program has offered UHS
OB Departments increased education and patient
safety programs aimed at the leading causes of
maternal deaths, obstetrical hemorrhage and
pregnancy-related hypertension, among others.
Within the Behavioral Health Division, the
Clinical Services Department continued to
collect, analyze and act on the Division’s clinical
and quality outcomes. Results in 2022 found:
• 80% of patients exhibited statistically meaningful
improvement on clinical outcome measures.
• 89% of patients agreed their treatment goals and
needs were met.
• 84% of professional referral sources surveyed
indicated a UHS facility was their “provider of
choice.”
In the U.K., 82% of Cygnet Health Care facilities
evaluated by regulators, including the Care
Quality Commission (CQC), earned a Good or
Outstanding rating.
Educational Services Exceed
National Averages
UHS’ dedicated teachers, principals and support
staff continued to help students excel and recover
educationally with individualized strategies including
tutoring, online remediation and extra mental
health supports in the classroom. We are proud
to report that in 2022:
• 90% of parents and guardians felt that the
academic staff truly cares about their child.
• 88% were satisfied with the facility’s
education program.
1CDC’s Maternal Mortality Rates in the United States, 2020
3 8 U N I V E R S A L H E A LT H S E R V I C E S , I N C .
Hill Crest Behavioral Health’s Higdon Hill School
was named a Cognia School of Distinction.
The school was recognized for earning this top
honor by Alabama Governor, Kay Ivey, State
Superintendent, Eric Mackey, and other state
and Cognia Dignitaries.
UHS earned high scores from the industry’s
reputable accreditation agency, Cognia. In 2022,
all six of our schools that underwent a Cognia
accreditation engagement review exceeded the
agency’s national education accreditation scores.
Investing to Meet High Standards
Acute Care and Behavioral Health Quality and
Clinical teams focus on staff training and incorporate
evidence-based clinical outcome assessment
metrics to effectively track and measure our
performance and optimize clinical services.
To that end, all patient care staff within the Acute
Care and Behavioral Health Divisions complete
numerous trainings each year, including those
related to our core tenets of quality care and safety.
In 2022, employees from both Divisions combined
completed nearly 3.1 million educational courses
online, including those related to patient safety,
skills training, regulatory and quality. Additionally,
employees completed numerous in-person trainings
throughout the year based on their role as well as
facility and regulatory requirements.
In addition, all Behavioral Health Division patient
care staff, regardless of status or role, and select
Acute Care Division patient care staff, were trained
and certified in various nationally accredited or
recognized behavior management techniques.
Certification is to be maintained according to the
standards and requirements set forth by these
certifying bodies. Many UHS facilities augmented
this training with their evidence-based verbal
de-escalation curriculum.
UHS invests in employee surveys with the aim
of improving clinical performance. Every other
year, both Divisions implement surveys aimed at
assessing the extent to which our facilities’ culture
support patient safety and safe practices. In March
2023, our Acute Care Division will participate in its
next Agency for Healthcare Research and Quality
(ARHQ) Patient Safety Culture Hospital Survey.
Meanwhile, in 2022, the Behavioral Health Division’s
Safety Culture survey was issued to 188 facilities;
42% of nearly 43,000 employees participated. As
with the ARHQ survey, our questionnaire gained
employee insight on key hospital measures such as
Organizational Learning-Continuous Improvement,
Reporting Patient Safety Events and Supervisor,
Manager or Clinical Leader Support for Patient Safety.
The Clinical Quality teams use the results of these
surveys to measure performance, identify areas for
improvement and benchmark our facilities against
industry averages.
The Hughes Center partnered with the Danville
Otterbots for creation of a sensory room at their
baseball stadium creating inclusivity for their fan base.
In Spring 2022, the Otterbots unveiled the new room
that includes cuddle swings, fidget boards, soft LED
lights, wall-to-wall padding, different textured rugs,
sound-deadening headphones, comfortable chairs,
sensory-friendly fidget toys and a blackout curtain.
“ This sensory room provides opportunities
for people with specialized, specific, sensory
needs to have a place to go when they feel
overwhelmed. During a game, it can be
very stimulating and overwhelming and this
presents a safe place for those people to go
when they just need time to reset.”
MARK HOWARD
CEO, THE HUGHES CENTER
UHS implements a corporation-
wide biannual Employee
Engagement Survey to provide
leadership valuable employee
insights, including perceived
expectations and level
of preparedness:
ACUTE CARE DIVISION = 20,379 RESPONDENTS
BEHAVIORAL HEALTH DIVISION = 19,605 RESPONDENTS
ENGAGING IN SAFE WORK
PRACTICES IS EXPECTED
OF ME IN MY JOB
I AM ADEQUATELY
TRAINED TO ENSURE
SAFETY AT WORK
4.31
4.27
ACUTE CARE
DIVISION
BEHAVIORAL
HEALTH DIVISION
4.20
4.08
ACUTE CARE
DIVISION
BEHAVIORAL
HEALTH DIVISION
*Ratings based on scale of 1 (strongly disagree) to 5 (strongly agree).
2 0 2 2 A N N U A L R E P O R T 3 9
CHARITABLE CARE
UHS continued to support our local communities
through charity care and uninsured discount
programs. Combined, our U.S. Acute Care facilities’
contributions for qualified patients neared $2.3 billion
in 2022.
COMMUNITY PARTNERS
UHS continued its long-standing partnership with
the National Action Alliance for Suicide Prevention,
helping individuals connect with support when they
find themselves in crisis. Our Behavioral Health
facilities champion the Action Alliance’s Zero Suicide
initiative, reminding local communities that they are
a resource for hope, resiliency, connectedness
and recovery.
With pandemic protocols lifted, UHS was able to
resume its long-standing alliance with the Philadelphia
Ronald McDonald House. Led by Assistant Director
of Culinary/Nutrition who designed the menu and
provided ingredients, select Corporate employees
prepared and served dinner to families whose
children are being treated at Children’s Hospital
of Philadelphia.
UHS regularly partners with several organizations
that support active-duty military personnel and
veterans. At this year’s annual Veteran’s Day event,
Corporate employees were introduced to Alpha
Bravo Canine, a local non-profit that raises, trains
and donates service dogs to disabled veterans.
Corporate employees participated in the annual
Wreaths Across America in which they placed over
225 wreaths at cemeteries in the Philadelphia area.
The Behavioral Health Division teamed up with
HMP Global’s Psychiatry & Behavioral Health
Learning Network to provide employees, referring
partners and other valued community partners
access to educational webinars on a variety of
healthcare topics. Webinars are held quarterly and
provide continuing education credits to those who
attend live. In 2022, the webinar series yielded over
4,700 registrations; approximately 45% of which
were live participants.
Facilities often joined forces with local chapters of
national organizations by sponsoring, hosting and/
or participating in their awareness- and fundraising
events – and leaders from across the corporation
continue to support some of our partners by serving
as Committee or Board members.
4 0 U N I V E R S A L H E A LT H S E R V I C E S , I N C .
UHS Corporate employees serve
as guest chefs at the Philadelphia
Ronald McDonald House.
Our facilities regularly
host free health screenings,
educational sessions and other
unique events throughout
the year. Here are some of
South Texas Health System’s
recent events:
The Think Pink Parade at South Texas
Health System McAllen drew hundreds of
community members, first responders and
STHS staff members to kick off Breast Cancer
Awareness Month.
South Texas Health System proudly partnered
with Pharr Emergency Medical Services to host
free #StopTheBleed courses for the community.
Participants learned lifesaving intervention
techniques.
As #AmericanHeartMonth came to an end,
South Texas Health System Heart’s Heroes
with Heart 5K was held to raise awareness for
heart disease while supporting this year’s heart
heroes — educators who have survived and
thrived in their battles with heart disease.
COMMUNITY OUTREACH
UHS is committed to being a valued partner with our
local communities, not only as a trusted healthcare
provider, but also by investing in community
development projects, hosting community involvement
activities and supporting local charities. Engagements
include volunteer opportunities and in-kind donations,
such as toy collections and food drives.
For the past two decades, UHS has contributed to
state-specific educational programs to help fund
student scholarships and/or provide supplemental
funding to our local communities’ school districts. In
2022, we contributed more than $6 million to seven
state programs.
UHS continued our work in raising awareness of
the opioid crisis and acquired the license to host
screenings of an 80-minute documentary, Tipping
the Pain Scale. UHS held a viewing for Corporate
employees and facilities hosted free screening
events for their local communities.
Throughout the year, both Acute Care and Behavioral
Health facilities hosted in-person and virtual events
encouraging healthy lifestyles as well as connecting
families and friends to important health and wellness
resources. Events included free health screenings,
blood drives, educational classes and informational
sessions on multiple physical and mental health
diseases and conditions.
2 0 2 2 A N N U A L R E P O R T 4 1
LEADERSHIP APPOINTMENTS
AND DISTINCTIONS
In 2022, many UHS leaders – including those
featured here – were recognized for their expertise,
thought leadership and/or contributions to the
industry or local communities.
Marc D. Miller, President and CEO,
was recognized in 2022 among Modern
Healthcare’s 100 Most Influential People
in Healthcare. He has been featured as
a thought leader on multiple prominent
venues including CEO Forum’s Transformative CEO
Summit, Behavioral Health Executive’s C-Suite Outlook
and Modern Healthcare’s Voices – The Check Up.
He serves on the Boards of Federation of American
Hospitals (FAH) and Premier Inc.
Matt Peterson, Executive Vice President
and President, Behavioral Health Division,
is Immediate Past Board Chair of the
National Association for Behavioral
Healthcare (NABH); a Fellow of the
American College of Healthcare Executives (FACHE);
and a Fellow of the Healthcare Financial Management
Association (FHFMA). In addition to his civilian career,
Matt serves in the U.S. military. In 2022, he was promoted
to Brigadier General, U.S. Air Force Air National Guard.
Karen E. Johnson, MSW, Senior Vice
President, Chief Clinical Officer, Behavioral
Health Division, continued to represent
UHS on The Joint Commission’s Health
Systems Corporate Liaison group and
the NABH’s Quality Committee. She continued to serve
on the Action Alliance’s Executive Committee as well as
on the National Response Strategy Steering Committee
formed during COVID. In 2022, Ms. Johnson served as
Chairperson for the FAH’s Quality Committee and as
Co-Chair for the Technical Expert Panel, developing quality
measures for CMS and psychiatric hospitals. She provided
lectures on behavioral health education and resources,
including the 2022 rollout of the National 988 Mental
Health Hotline in the U.S.
Roselle Charlier, VP, Chief Marketing and
Communications Officer, was inducted
into The Forum of Executive Women, a
network of over 500 women leaders in
the Greater Philadelphia Region.
Kevin DiLallo, Group Vice President,
Acute Care Division, was named to
Trustbridge Hospice Foundation Board
of Directors in West Palm Beach, Florida.
Karla Perez, Regional Vice President,
Acute Care Division, continued to serve
on the Board of Las Vegas Metro
Chamber of Commerce; Nevada Mutual
Insurance Company; the Nevada State
Bank and Nathan Adelson Hospice. She was honored
with the Girl Scouts of Southern Nevada’s Trailblazer
Award for her contributions to the healthcare profession
and community.
Mary Brandon, Infection Prevention
Coordinator, Poplar Springs, was
elected to serve as Regional President
of the Association of Occupational
Health Professionals.
Michelle Carson, Chief Litigation Counsel,
received the Women, Influence & Power
in Law Award for Best Mentor, a national
award that recognizes women who
make a remarkable difference in the
legal profession.
Andrew M. Eisen, MD, FAAP, Chief
Academic Officer and GME Designated
Institutional Official, The Valley Health
System GME Consortium, was elected
President of the Nevada State Medical
Association for a one-year term.
Kurt Hooks, Ph.D., MPH, LPC, CEO
of Virginia Beach Psychiatric Center,
serves as Chair of the Virginia Hospital &
Healthcare Association Behavioral Health
Committee. He served as Mental Health
Expert for Virginia Beach City Council’s 5/31 Shooting
Permanent Memorial Committee. Dr. Hooks frequently
provides interviews and lectures as a behavioral health
industry thought leader.
Amber Lopez, RN, Northwest Children’s
Hospital, part of the Northwest Texas
Healthcare System, was named March
of Dimes Nurse of the Year.
4 2 U N I V E R S A L H E A LT H S E R V I C E S , I N C .
Joyce Malaskovitz, Chief Nursing
Officer, Desert Springs Hospital,
was honored by Nevada Business
Magazine as Southern Nevada’s
Care Provider Hero.
Mary Frances Mullen, RN-BC, Assistant
Director of Nursing, Brooke Glen Behavioral
Hospital, earned the Distinguished
Healthcare Professional award from The
Ben Franklin Global Forum.
Astro Muñoz, CEO, First Hospital
Panamericano, worked to ensure
mental health is a main subject of the
Governor’s Public Policy Agenda to
improve the overall mental health of
residents in Puerto Rico.
Sally Perry, Regional Vice President,
Behavioral Health Division, was one
of 15 appointed by Governor Brian
Kemp to the newly created Healthcare
Workforce Commission created to tackle
the challenges in hiring and retention of healthcare
workers. She was also elected to the Georgia Hospital
Association’s Board of Trustees.
Jody Rain, Registered Nurse
Supervisor, Manatee Memorial
Hospital, was appointed by Florida
Governor Ron DeSantis to the Board
of Nursing.
Steven Reilly, Senior Director of
Sourcing and Contracts, was recognized
by The Journal of Healthcare Contracting
among Ten People to Watch for his
leadership in Supply Chain.
Rachel Sheehan, MSN, RN-BC,
C-ONQS, Corporate Director, Women’s
Services, Acute Care Division, was
presented with the March of Dimes
Excellence in Perinatal Leadership Award.
Greg Stewart, CEO, Wellstone Regional
Hospital, was appointed Board member
of Indiana Hospital Association (IHA),
placing the behavioral health sector in a
position for more visibility and advocacy.
He also was named Chairman of the IHA Council on
Behavioral Health.
Jennifer Taylor, Director of Contracts,
was named among ten Women Leaders
in Supply Chain by The Journal of
Healthcare Contracting.
Ryan Tatu, Ph.D., FACHE, CEO of
Lancaster Behavioral Health Hospital,
was elected to Board of Directors
of the Central PA American College
of Healthcare Executives for a three-
year term.
Pam Tahan, CEO, Wellington Regional
Medical Center, Executive Board
Member of Central Palm Beach County
Chamber of Commerce and Board
Member of Wellington Community
Foundation Inc., was sworn in as Chair, Central Palm
Beach Chamber of Commerce and as Chair, Hispanic
Chamber of Commerce of Palm Beach County. She also
was elected Chair of Healthcare Policy for the Economic
Council of Palm Beach County and elected to Palm
Beach County’s Emergency Services Council.
UHS was named to ECRI’s 11th annual Healthcare
Supply Chain Excellence Award, recognizing U.S.
healthcare organizations for achieving excellence
in spend management and adopting best practices/
solutions. Pictured center is Ray Davis, VP, Supply
Chain and the UHS Supply Chain team, along
with ECRI senior executives.
2 0 2 2 A N N U A L R E P O R T 4 3
2 0 2 2 A N N U A L R E P O R T 4 3
Workforce Demographics
UHS IS EXTREMELY PROUD OF THE TEAMS WHO
WORK TOGETHER to deliver high-quality services across
the United States and United Kingdom. It is their expertise, hard
work, dedication and collaboration that have allowed us to achieve a
great number of successes this past year and laid the groundwork for
many exciting opportunities in the future.
We are committed to the principle of Equal Employment Opportunity (EEO) for all
employees and applicants. As an EEO Employer, UHS supports and fully commits
to recruitment, selection, placement, promotion and compensation of all individuals
without regard to race, color, religion, age, sex (including pregnancy, gender identity,
and sexual orientation), genetic information, national origin, disability status, protected
veteran status or any other characteristic protected by federal, state or local laws.
2022 EMPLOYEE ENGAGEMENT
GLOBAL WORKFORCE
We value employees and are committed
to all being treated with dignity and respect.
These commitments are reflective in our policies
and procedures as well as the results of our
2022 Employee Engagement Survey.
Based on a rating of 1 (strongly disagree) and 5
(strongly agree), UHS earned favorable ratings
in the following metrics:
The person I report to treats
employees with respect.
My facility treats employees
fairly regardless of age, race, sex,
disability or sexual orientation.
The person I report to cares
about my well-being.
4.20
4.09
4.12
In 2022, the global workforce increased
5% to nearly 94,000 as U.S. and U.K.
workforces grew 4% and 10%, respectively.
78,900
82,300
10,500
11,500
2021
2022
2021
2022
U.S.
U.K.
NOTE: Approximate counts from 12/31/20 and 12/31/21.
4 4 U N I V E R S A L H E A LT H S E R V I C E S , I N C .
DIVERSITY ACROSS NEW HIRES IN U.S.
AND THOSE PROMOTED
In the United States, nearly 24,200 employees were hired during 2022. Further, more than
6,060 employees were promoted.
NEW HIRES
Female
77%
PROMOTED INDIVIDUALS
Female
74%
Male
23%
Male
26%
Ethnically
Diverse
60%
Ethnically
Diverse
47%
White
40%
White
53%
As a founding member company of Veteran Jobs Mission,
UHS is committed to reducing unemployment among U.S.
military veterans. We continue to honor this commitment
by increasing the number of military hires year over
year. In 2022, UHS hired 1,815 veterans, up 20%
over the previous year’s counts for the second year
in a row. Among the veterans hired during 2022,
46% were female
and 56% were
ethnically diverse.
2 0 2 2 A N N U A L R E P O R T 4 5
U.S. WORKFORCE
Female employees continue to make up the majority of the workforce at UHS and its facilities.
The average tenure of female employees in 2022 was in line with that of their male peers.
We appreciate diversity in the workforce, which reflects the diversity of the communities we
serve. Individuals who identify as white account for less than half of the workforce.
Female
75%
5.1
4.8
Male
Female
AVERAGE TENURE (years)
2021
47%
23%
16%
9%
5%
2022*
45%
24%
17%
9%
5%
Male
25%
2020
49%
23%
15%
9%
4%
WHITE
BLACK
HISPANIC
ASIAN
OTHER
*Note: 2022 data estimates; final data to be posted on uhs.com/esg after filing in 3Q23.
SOURCE: 2020 and 2021 EEO-1 reports.
U.K. WORKFORCE
Diversity is also shown in the makeup of the workforce in the U.K.:
Black
16%
White
39%
Asian
5%
Other
2%
Unknown
37%
Female
65.4%
Male
34.3%
Unknown
0.3%
4 6 U N I V E R S A L H E A LT H S E R V I C E S , I N C .
4 6 U N I V E R S A L H E A LT H S E R V I C E S , I N C .
DIVERSITY, EQUITY
AND INCLUSION
UHS’ commitment to diversity, equity and inclusion
(DEI) includes regularly monitoring employment
practices to ensure equity, regardless of an
employee’s gender, race or ethnicity and championing
for inclusive behaviors through leadership example,
policies and procedures, trainings and special events.
In 2022, UHS Corporate formed a DEI taskforce,
chaired by the SVP, Human Resources. Meanwhile,
there are facility-based committees designed to
recognize and highlight multicultural backgrounds and
other DEI-focused initiatives.
The George Washington University Hospital’s
Diversity and Inclusion Advisory Council (DIAC) is a
multidisciplinary cross section of diverse employees,
chaired by GW’s CEO. Its mission includes earning
the GW Community’s trust; creating a culture of
safety, celebration and acceptance where differences
are valued; driving awareness and education on
diversity, equity and inclusion; ensuring proportional
representation of communities served exists within
Hospital committees; and developing measurable
goals for the Hospital that are impactful with
sustainable change.
Within the Behavioral Health Division, St. Louis
Behavioral Medicine Institute (SLBMI) has a Diversity,
Equity, Inclusion & Belonging (DEIB) Committee,
whose mission is to “intentionally facilitate a culture
of diversity, equity, inclusion and belonging, and
to foster the process of continued growth through
learning, identifying blind spots and implementing
impactful change.” The Committee is open to all
SLBMI employees and regularly disseminates DEI
information to all staff. Its 2022 accomplishments
included working with the facility’s Gender Affirming
Program to create SLBMI’s Pronoun Policy and
Procedures, updating its patient registration forms and
incorporating issues of diversity in all clinical trainings.
During 2022, UHS continued to participate in the U.S.
Federal work opportunity program for employers who
invest in hiring individuals from certain targeted groups
who consistently faced barriers to employment. In YTD
September 2022, UHS screened more than 4,500
individuals for the program; all of whom were hired,
including the 30% who qualified for the program.
UHS also participates in the U.S. New Market Zone
and Qualified Opportunity Zone programs designed
to encourage private investment and/or hiring and
retention of individuals from areas identified as
being in distress or rural areas that are in need of
revitalization. Since January 2022, UHS completed
a few projects under this program, including the
construction of Granite Hills Hospital and Via Linda
Behavioral Health. These facilities, which are located
in these qualified locations, opened in 2022.
Cygnet Health
Care’s Multicultural
Network now has
105 ambassadors
across the U.K. who
help to promote
inclusion and raise
awareness of issues
affecting ethnic
minority staff and service users. In its
second full year, the Multi-Cultural
Network expanded its offering to include:
• A new mentorship program to support
ethnic minority staff with personal and
professional development.
• ID badges with the option of carrying the
phonetic pronunciation of names
if desired.
• Inclusive interviews - The Network
supports interviews across Cygnet to
ensure fairness and equality in
recruitment processes.
• A review of mandatory equality &
diversity training along with our
Unconscious Bias training to ensure both
are relevant to staff and services.
• A robust action plan which was
developed following Cygnet’s first
Race Equality Survey.
Looking ahead, we hope to coordinate
efforts and facilitate sharing of charters
and best practices.
2 0 2 2 A N N U A L R E P O R T 4 7
RECRUITMENT AND RETENTION
WORKFORCE POLICIES
During the year UHS made a positive impact on
employees’ intent to stay. Through internal
surveys, employees indicated that
they appreciate and value many of
the initiatives we recently added
to address the headwinds of
retention including: career
ladders and progression,
career development,
engagement during the work
day and ongoing recruitment
and retention strategies. By
year end, we recorded a 22%
decrease in Registered Nurse
openings and a 31% decrease
in Mental Health Technician
openings.
We also listened carefully to employee
feedback and took responsive action. We
strengthened our recruitment efforts, improved
the overall hiring and onboarding experience,
expanded the training resources employees need
to do their jobs effectively and safely, facilitated
more teamwork and collaboration, established new
Recharge Rooms at many of our Behavioral Health
facilities for staff rejuvenation, addressed burnout,
expanded mentorship, launched the new Employee
Assistance Program (EAP), and best of all, increased
employee engagement.
Surveys are issued to new hires after their first
seven and first 30 days to solicit feedback about
the hiring and onboarding process. In 2022,
our overall recruitment process earned a 90%
satisfaction rating. Meanwhile, 91% of individuals
who responded to our candidate hiring survey
(33% response rate) indicated they were satisfied
or highly satisfied with the process.
Similarly, in 2022, 85% of individuals who
responded to our onboarding survey (21%
response rate) indicated they were satisfied
or highly satisfied with the process.
UHS has a clear set of policies developed to reflect
our Corporate Mission and Purpose and the high
standards we have for employees. Employment
policies identify resources available to staff and/or
define the company’s internal process for various
events (e.g., scheduled leave, performance reviews,
grievance reporting). They are communicated and
enforced to ensure fair and equitable treatment for
all employees.
Our Background Screening Policy requires criminal,
sanction and drug screening as well as education,
license and employment verification prior to hire.
Onboarding employees are trained on policies
that reflect our corporate culture and values (e.g.,
Code of Conduct, Discrimination and Harassment
Prevention Policy, Employee Conduct and Work
Rules Policy, and Drug and Alcohol Policy).
Depending on their role, Division and employment
status, employees may be required to complete
training on key policies that fulfill regulatory
obligations and/or promote safe and healthy work
environments (e.g., HIPAA Privacy and Security
Rules, Workplace Violence Prevention Policy,
Grievance Reporting and Dispute Resolution Policy).
Employees have access to all policies either through
their local HR department and/or internal intranet.
OVERALL SATISFACTION WITH
RECRUITMENT PROCESS
90%
DECREASE IN REGISTERED
NURSE OPENINGS
22%
DECREASE IN MENTAL HEALTH
TECHNICIAN OPENINGS
31%
4 8 U N I V E R S A L H E A LT H S E R V I C E S , I N C .
EMPLOYEE DEVELOPMENT
AND TRAINING
In keeping with UHS’ culture of continuous
improvement, training opportunities are available
for all employees, regardless of level or status.
These include formal instructor-led, in-person or
virtual training, informal mentoring or networking
opportunities, or self-administered online courses.
Training programs are designed to assist
with personal and skill development, career
advancement and succession planning. In addition
to mandatory trainings that focus on keeping
employees mindful and informed of key policies
and skill sets, many are voluntary. All trainings
are tailored to include potential Americans with
Disabilities Act (ADA) accommodations.
During Orientation, new hires learn UHS’ Mission,
Vision, Principles and Values, key policies and
procedures as well as available benefits and
resources. The capstone course is a two-hour
overview of our founding principle, Service
Excellence. Time focused on its attributes –
continuous improvement, employee development,
ethical and fair treatment of all, teamwork,
compassion and innovation in service delivery
– provides new hires a deep understanding of
the company’s culture. The Service Excellence
Standards – treating everyone as a guest,
demonstrating professionalism and excellence and
practicing teamwork – are shared to help guide the
desired approach to day-to-day activities.
Service Excellence Facilitator Certification
Workshops are available for facility employees
identified by their leadership for consistently
upholding and demonstrating the UHS Service
Excellence Standards. The multi-session virtual
workshop develops facilitation skills, reviews best
practices for how to effectively manage a learning
environment and provides an in-depth explanation
of the Service Excellence presentation. Certified
Facilitators foster the Service Excellence culture and
deliver trainings at their own facilities.
TEAM C.A.R.E., the employee enrichment experience
at our UHS Corporate Offices, brings inspiring events,
content and programming for health/wellness, social/
community and career enrichment. This is designed
to expand our employees’ professional network, help
them meet new colleagues and offer opportunities
to engage in rewarding activities.
TEAM C.A.R.E. also offers Corporate employees
access to trainings or events that support
professional development (i.e., UHS Toastmasters
Club, Executive Speaker Series, Business Book
Clubs, The Power of Professional Women’s Career
Conversations and Diversity events).
In the U.K., in addition to the mandatory training
requirements, Cygnet Health Care training offerings
in 2022 included: Mental Health First Aid, Coaching
& Mentoring, Apprenticeship Programs and “A
Masterclass in Compassionate Leadership” led by
Professor Michael West.
During 2022, 130 employees
became certified as Service
Excellence Facilitators by
completing one of the 15 multi-
session virtual workshops led by
UHS Learning and Development
Facilitators Andrew Hallman
and Scott Doyel.
2 0 2 2 A N N U A L R E P O R T 4 9
Nurturing a talent pipeline
• Confidently engage in difficult workplace
The Learning and Development team began
branding their efforts under the “U Learn” brand in
2022. Within U Learn, there are three tracks: Invest
in U, Manage U and Develop U.
Invest in U is designed to refresh, remind, and
provide learning opportunities that help to enhance
one’s skills and knowledge for all staff. In 2022 the
courses covered topics such as business writing
fundamentals, e-mail etiquette, time management
and effective meeting guidelines.
The Manage U track provides leadership skills
designed for supervisors and managers. The programs
include Stepping Into Leadership, HR Essentials and
m3 Management Development Program.
We support new supervisors across all parts of the
organization through the training program “Stepping
Into Leadership.” Designed for first-time supervisors,
the program provides new supervisors with the
foundation to:
• Smoothly transition from an individual contributor
to an effective leadership role
• Apply strategies to build an engaged workforce
and high performing team
conversations
• Resolve and de-escalate workplace conflict
• Foster a culture of Service Excellence
In 2022, 40 Stepping Into Leadership Classes were
held for a combined 700 participants, to account for
over 1,000 hours of training for new supervisors.
Notably, the number of participants and training
hours for our m3 program, which is designed for
employees of all leadership levels, increased
substantially in the last year. In 2022, 152 m3 classes
were attended by 2,900 employees for a total of
more than 7,200 hours of training.
The Develop U track contains specialty programs
focused on employee and team development.
Courses in this track include Take Charge of your
Professional Development, Train to Retain: A Hiring
Manager’s Toolkit for Successful On-boarding,
and Everything DiSC Workplace. The Learning
and Development team delivered the Acute Care
Division’s Resourcing for High Quality and Safe
Care, and the Behavioral Health Division’s
Trauma-Informed Care programs.
152
2,900*
7,200
144
2,000+
5,400+
2021
2022
2021
2022
2021
2022
Number of m3
programs conducted
Number of employees
attending m3 programs
Number of hours of
m3 training delivered
*Note: Employees may have attended more than one session.
5 0 U N I V E R S A L H E A LT H S E R V I C E S , I N C .
Aiken Regional Medical Centers welcomed
it first class of residents to its three-year
accredited Family Medicine Residency
Program in July 2022. This program is
dedicated to the achievement of equity
for medical trainees from all racial
backgrounds, ethnicities, socioeconomic
levels, religions, gender identities, sexual
orientations and abilities. It is committed
to equity in recruitment, education,
mentorship and professional advancement
for all trainees. The program will develop
objective, unbiased standards for evaluating
applicants during recruitment and selection,
and conduct faculty development training
on implicit bias.
GRADUATE MEDICAL
EDUCATIONAL PROGRAMS
We have been steadily growing the UHS
Graduate Medical Education (GME) Program since
2018. Its goals include developing excellence in
graduate medical education and creating a reliable
pipeline of newly trained doctors and pharmacists
to join our network of healthcare professionals
and ultimately improving access to healthcare
in our valued communities.
UHS Sponsored GME Programs
In 2022, 18 UHS Sponsored Programs operated
out of the following UHS Acute Care hospitals/
health systems: Aiken Regional Medical Centers,
Manatee Memorial Hospital, Southwest Healthcare
(Temecula Valley Hospital, Rancho Springs Hospital,
Inland Valley Hospital and Corona Regional Medical
Center), Texoma Medical Center, The Valley Health
System (Centennial Hills Hospital, Desert Springs
Hospital, Henderson Hospital, Spring Valley Hospital
and Summerlin Hospital Medical Center) and
Wellington Regional Medical Center.
Of our 18 UHS Sponsored Programs, 17 are
accredited by the Accreditation Council of Graduate
Medical Education (ACGME). Further, both of our
Pharmacy Residency Programs are accredited by
the American Society of Health System Pharmacists
(ASHP).
In 2022, UHS Sponsored Programs continued
to offer specialties/sub-specialties in Emergency
Medicine, Family Medicine, General Surgery, Internal
Medicine, Pharmacy and Transitional Year programs,
while adding Cardiology, OB/GYN, Pulmonary and
Sports Medicine.
“ We are very excited about the growth of our UHS GME programs across the system.
Our residency and fellowship programs allow us to address significant physician
shortages in the regions that UHS serves. The quality improvement and scholarly
work that GME trainees and faculty perform also complement our clinical
Centers of Excellence in our facilities and promote the provision of top
quality and cutting-edge healthcare. We will continue building new
GME programs across the country and optimizing our existing
programs to provide the highest level of training possible to
the next generation of physicians.”
MICHAEL NDUATI, MD, MBA, MPH, FAAFP
CHIEF ACADEMIC OFFICER, ACUTE CARE DIVISION
2 0 2 2 A N N U A L R E P O R T 5 1
Congratulations to the 2022 recipients of
Lakewood Ranch Medical Center (LWRMC)
Foundation’s Nursing Scholarship program.
Since it was created in 2018, the Foundation
has awarded 27 scholarships to those studying
for associate’s, bachelor’s or master’s degrees.
Eligible candidates include nursing students
who reside in Manatee or Sarasota County
and who are currently participating in a
clinical affiliation at LWRMC, or a nurse
employed by a hospital and enrolled in a
graduate program leading to a Master
of Science degree in nursing.
In July 2022, a total of 316 residents – representing
an increase of 20% over the previous year –
participated in UHS Sponsored Programs.
By July 2023, the number of UHS Sponsored
Programs and residents is expected to increase
by 33% and 26%, respectively. This growth will be
driven, at least in part, by a new program being
developed by our South Texas Health System.
Academic Partnership GME Programs
In 2022, The George Washington University
Hospital, Northwest Texas Healthcare System and
Valley Hospital Medical Center collectively offered
50 Academic Partnership Programs. More than 590
residents and fellows participated.
Learn more: uhs.com/careers/graduate-
medical-education
OTHER PROFESSIONAL
DEVELOPMENT PROGRAMS
Across the company we offer educational and work
opportunities, including internships, externships,
and clinical field placement opportunities. We
also continued efforts to expand the Strategic
Partnerships with Nursing program with other
medical technology schools.
UHS also supports employees’ professional
development through financial assistance programs.
UHS annually earmarks approximately $1 million
for its Tuition Reimbursement Program to support
employees participating in degree or certification
programs. Our facilities also offer student loan
repayment to engage recent graduates in the
workforce, as well as support the pursuit of
continuing education.
For our 2022 Summer Internship Program, UHS
successfully recruited and onboarded 44 interns,
a 43% increase over the previous year. Interns
attended two Orientation sessions, up to 13
leadership “Lunch & Learn” sessions, professional
development workshops and networking events.
The interns worked across five departments at our
Corporate Offices: Information Services (32 interns),
Supply Chain (8), Revenue Cycle (2), Design and
Construction (1) and Legal (1). Of the 32 Information
Services (IS) interns, 43% identified as diverse.
The program was a success. On a scale of 1-10 (10
being highest), 71% of interns rated their overall
experience a score of 9 or 10, and all reported they
would recommend UHS to other students for an
internship. Further, of the 35 IS or Supply Chain
interns expecting to graduate college between
August 2022 and May 2023, we extended 16 offers,
15 of which were accepted.
5 2 U N I V E R S A L H E A LT H S E R V I C E S , I N C .
EMPLOYEE BENEFITS
UHS Foundation for Employees
UHS’ non-pay benefit program seeks to attract
top talent, yet also serves to retain and support
current staff. Its well-rounded “Benefits for Living
Better” program addresses employees’ physical,
mental, financial and professional needs.
Learn more: jobs.uhs.com/careers
The program is constantly being evaluated and
adjusted to not only be competitive in our markets,
but responsive to employee needs. Key highlights
of the 2022 program included:
• A new, more robust line of EAP Services, including
Work/Life services, Legal/Financial consultations,
Child and Elder Care services and Concierge
assistants
• Flexible work arrangements including compressed
work week, hybrid work-from-home schedule and
remote work
• A variety of employment status options, especially
among clinical staff, including part-time, per diems,
on call, temporary and job sharing
Employees have access to enhanced benefits
through various free events and programs, such
as Mindset Spark Sessions which included two
free events designed to help drive positive and
intentional thinking for the benefit of mental and
physical well-being, and the Fertility and Family
Planning Education and Support program through
Fertility IQ to help navigate family planning.
The UHS Foundation is a 501(c)(3)
nonprofit entity that supports UHS
employees who have been affected
by hardship due to either qualified
natural disasters (e.g., hurricanes,
fires) or a national public health
emergency (e.g., the COVID-19 pandemic). Since it
was established in 2005, the UHS Foundation has
raised more than $2.9 million in support of impacted
employees and their families.
“ Thank you so much to the Foundation
and all involved in the process. You
have no idea how much these funds
will assist us in the rebuilding process.”
SHAWN K. IMHOOF, DIRECTOR OF DIAGNOSTIC
IMAGING, LAKEWOOD RANCH MEDICAL CENTER,
IN THE AFTERMATH OF HURRICANE IAN
EMPLOYEE ENGAGEMENT
On alternating years, through use of a third-party
independent vendor, UHS’ Corporate Human
Resources deploys either a comprehensive 50+
question Employment Engagement Survey or a brief
20-question Pulse Survey. Based on this employee
feedback, UHS is able to measure performance as
well as to identify and act on areas for improvement.
To protect employees’ privacy, responses are kept
confidential and results are shared as aggregate totals
by department. Management is encouraged to share
results with their staff, develop action plans for any low-
performing metrics, address any concerns and solicit
suggestions in the spirit of continuous improvement.
Our 2022 Employee Engagement Survey found
that employees scored UHS Overall (Corporate,
Acute Care, Behavioral Health and IPM collectively)
highest in the categories of Job Fit, Teamwork, Safety,
Management and Resiliency.
2022
EMPLOYEE
ENGAGEMENT
SURVEY –
UHS OVERALL
Highest scoring items.
Ratings based on scale
of 1 (strongly disagree)
to 5 (strongly agree).
Notably, 75% of survey
respondents were engaged
with the company and
reportedly intend to
be working here in 3 years.
JOB FIT
I like the work I do.
4.34
TEAMWORK
I enjoy working with my coworkers. 4.33
SAFETY
Engaging in safe work practices is
expected of me in my job.
MANAGEMENT
I respect the abilities of the person
to whom I report.
4.29
4.26
RESILIENCY
At work, I feel I am highly capable.
4.25
2 0 2 2 A N N U A L R E P O R T 5 3
TEAM C.A.R.E. events are initiated
based on suggestions from employees
and aim to support causes and/or
organizations that are aligned with
UHS’ Mission and Principles.
Since 2018, TEAM C.A.R.E. has sponsored
an annual golf tournament to benefit
the UHS Foundation. In September 2022,
the 4th Annual UHS Golf Tournament
raised more than $110,000, which was
matched by UHS, and donated to the
UHS Foundation.
“ The UHS Golf Tournament is the largest event
that TEAM C.A.R.E. sponsors and has the most
diverse participation, including individuals who
are here to volunteer, golf and connect with their
colleagues. Most importantly, all of the proceeds
go to the UHS Foundation.”
GERRY GECKLE
SENIOR VICE PRESIDENT,
HUMAN RESOURCES
Food drive to benefit Upper Merion Food Pantry
5 4 U N I V E R S A L H E A LT H S E R V I C E S , I N C .
Phillies Fan Day at UHS’ Corporate Office
Suicide Prevention Awareness Summit
EMPLOYEE RECOGNITION
AND AWARDS
Corporate and facility leadership in the U.S. and U.K.
regularly recognize employees for their dedication
to the organization, and exceptional care bestowed
to patients and their families through formal annual
events as well as throughout the year.
The Service Excellence Award is UHS’ annual top
honor bestowed to three Corporate Home Office
employees for their professional, effective and
efficient service to all stakeholders. This prestigious
award is also given annually at the facility-level, to
a deserving Acute Care facility, a Behavioral Health
facility and a Behavioral Health Residential
Treatment Center in the U.S.
Quality Awards are annual rewards for earning
exceptional industry and patient quality and
safety ratings. Typically, the award is presented to
one facility in each category: Acute Care facility,
Behavioral Health facility and Behavioral Health
Residential Treatment Center.
The annual Chairman’s Council Award is presented
to facility CEOs who meet or exceed quality goals
and financial goals, earn exceptional patient
satisfaction scores, and demonstrate community
involvement and overall leadership. Three-time
recipients of the Chairman’s Council Award are
presented the Eagle Award.
Service Anniversary certificates and gifts are
presented upon Corporate employees’ milestone
work anniversaries. At the Corporate Office,
employees are recognized for every five years
of service.
Employee recognition awards are regularly
presented at the facility level for those nominated by
leadership or peers for exemplary performance.
To facilitate peer-to-peer recognition, Cygnet hosts
a monthly Characters of Care Award while the UHS
Corporate Office has a ‘Cheers for Peers’ program.
Introduced in March 2022, this program enables
employees to post a note or an image on our
Corporate network to acknowledge colleagues
who go “above and beyond.”
Each Division has a Great (Good) Catch program to
recognize staff who by early intervention, prevented
either an actual or possible negative outcome. Each
Behavioral Health facility contributes four Good
Catches a month. They are trended and used to
develop education work product for the Division.
In the Acute Care Division, Great Catches are
promoted at the facility level and presented at the
monthly Corporate Patient Safety Council, so these
learnings can be shared across the entire Division.
Our Recharge Room program is proving to be a
meaningful way for Behavioral Health facilities to
engage with, and show their appreciation for their
staff. The number of facilities with these dedicated
spaces designed to offer employees solace during
their busy day, increased from 6 in 2021 to more
than 50 by the end of 2022.
Employees were invited to participate in the
selection of their room’s name, design and features
(e.g., massage chairs, aroma stations, décor, etc.).
Facilities are using surveys (via online or QR code) to
measure employees’ use and reaction to room visits,
including any impact on their stress levels.
In March, Laurel Ridge Treatment Center celebrated
the opening of their new Employee Recharge Zone
by bringing food trucks on-site and handing out
appreciation gifts.
“ We take pride in how hard employees
work to help patients. This space allows
the team to step away to relax and recharge
in order to take better care of patients
and themselves.”
DR. JACOB CUELLAR
CEO, LAUREL RIDGE TREATMENT CENTER
2 0 2 2 A N N U A L R E P O R T 5 5
Suicide Prevention Awareness Summit
PRIVACY AND DATA SECURITY
UHS’ Privacy and Data Security team is led by the
Chief Compliance and Privacy Officer and the Chief
Information Security Officer, along with designated
hospital-based facility Privacy and Security Officers.
The team’s mission is to preserve the confidentiality,
integrity and availability of information assets in
accordance with Information Security Policies for
employees and patients.
To this end, the focus remains on appropriately
identifying, selecting, deploying, maintaining and
improving information security controls based on
the National Institute of Standards and Technologies
(NIST) Cybersecurity Framework (CSF).
We comply with privacy and security policies, as well
as several related federal and state laws, including
the Health Insurance Portability and Accountability
Act of 1996 (HIPAA) Security Rule and the Payment
Card Industry (PCI) requirements that govern
compliant technology and processing of consumer
credit card information. Our compliance with these
requirements is reviewed by external parties. For
example, each year a third-party firm certifies our PCI
environment with attestation to our acquiring banks.
We have approximately 48 privacy and security-
related policies maintained at the Corporate level
and locally by U.S. facilities. Additionally, we deploy
numerous technologies and engage third parties
to provide intelligence services to UHS.
The UHS Information Services (IS) team evaluates
information security controls on a regular basis through
penetration testing, assessment and evaluations to
review system effectiveness. Third-party cybersecurity
firms also provide monitoring and investigation
services, including regular security penetration tests
and audits.
In addition to these measures, UHS invests time and
resources toward training all employees. As frontline
defenders in our efforts to ensure privacy and security
of our information, employees participate in trainings
and phishing exercises to learn how to identify
possible threats. Collectively, more than 45,000
hours of employee training are conducted each
year, including mandatory annual data privacy and
cybersecurity training for all employees.
Beyond the people, processes and technologies,
UHS also understand the Cybersecurity risks that exist
amongst our Supply Chain vendors. To address this,
UHS has a process to assess risk, evaluate and even
require third-party verification of our vendors and
suppliers as they engage in our contracting process.
Ultimately, issues and events can arise. However, when
they do, UHS has an Incident Response Plan and if
needed, Disaster Recovery processes that are engaged
to minimize impact on availability of services.
Finally, UHS also has multiple governance processes
to review the health and maturity of our Cybersecurity
program through regular review of key performance
indicators, metrics and roadmaps to promote the use
of recent technologies and manage risks.
“ Information Security plays a
critical role across industries, but
in particular in healthcare. In
today’s dynamic environment, we
are vigilant in establishing a future-
oriented operational
approach, maintaining
compliance and
managing risk in a
pragmatic and cost-
effective manner.”
KIM SASSAMAN
CHIEF INFORMATION SECURITY OFFICER,
INFORMATION SERVICES
5 6 U N I V E R S A L H E A LT H S E R V I C E S , I N C .
OUR GOVERNANCE
STRUCTURE
As reflected in the Board of Directors’ Corporate Governance Guidelines,
UHS has a deep-rooted commitment to a system of governance that enhances
corporate responsibility and accountability. From its start in 1979 as an organization
of 6 employees to a nearly 94,000 employee-strong, dual-continent enterprise,
this commitment remains intact today.
BOARD OF DIRECTORS
The Company’s business is conducted by its
employees, managers and officers under the
oversight of the Board of Directors. The Board
is elected by the Company’s stockholders in
accordance with the Company’s Articles of
Incorporation, to oversee management and
to assure that the long-term interests of the
stockholders are served.
UHS’ Board of Directors is chaired by Founder
and Executive Chairman Alan B. Miller. There
are currently six committees: Audit Committee,
Compensation Committee, Executive
Committee, Finance Committee, Nominating
and Governance Committee, and Quality
and Compliance Committee.
Nina Chen was elected to the Board of Directors
in September 2022 and appointed to UHS’ Quality
and Compliance Committee, effective January 1,
2023. With the appointment of Ms. Chen, the Board
now has eight members; five (63%) of whom are
independent, and three (38%) are female.
Ms. Chen had a 13+ year tenure at Mercer,
including her last role as Partner, gaining significant
leadership experience in talent management,
performance management, business development
and benefits. She currently serves as the
Special Projects Consultant for
The Welcoming Center,
a 501(c)(3) non-profit
organization that promotes
inclusive economic
growth through
immigrant integration.
IN THE U.S., OVERSIGHT OF COMPLIANCE, OPPORTUNITIES AND RISK OF
KEY ESG-RELATED ISSUES IS PROVIDED ACROSS OUR BOARD COMMITTEES.
AUDIT
COMMITTEE
Business Ethics
Charity Care
Privacy &
Data Security
Accounting and
Financial Reporting
Responsibilities
COMPENSATION
COMMITTEE
Employee
Development/
Training
Employee Benefits
Employee
Engagement
EXECUTIVE
COMMITTEE
FINANCE
COMMITTEE
NOMINATING
& GOVERNANCE
COMMITTEE
Ownership & Control
QUALITY &
COMPLIANCE
COMMITTEE
Quality of Care
Employee/Patient Safety
Equity of Care
2 0 2 2 A N N U A L R E P O R T 5 7
In the U.K., a 12-member Executive Management
Board provides governance to our Cygnet Health
Care facilities through its Board sub-committees,
which meet quarterly and have overall responsibility
for the quality of care delivered across all services
that Cygnet provides. They are supported by
an Advisory Board; all three of its members are
independent and hold non-executive positions.
Twenty-five percent of the Executive Management
Board and 33% of the Advisory Board are women.
Management Evaluation and Succession
The Nominating & Governance Committees of UHS
and Cygnet Health Care, respectively, evaluate
the performance of the Company’s management
annually and discuss this evaluation with the entire
Board following the end of each fiscal year.
The Board, or a committee of the Board, oversees
the Company’s management succession planning,
including its policies and principles regarding the
selection of and succession to the Chief Executive
Officer of the Company in the event of emergency,
retirement or other circumstance.
LOCAL GOVERNANCE
In the U.S., the Board of Directors at each of the
Acute Care and Behavioral Health facilities have
decision-making authority over financial and
non-clinical operations issues. Meanwhile, Executive
Leadership teams, organized Medical Staff and
local governing bodies jointly oversee the
day-to-day operations of these facilities, as well
as our ambulatory surgery centers. Facilities’
local governing bodies also have Medical
Staff oversight.
Within the Acute Care Division, the facilities’ local
governing bodies are typically comprised of a team
of local community members, medical staff and
hospital or regional leadership. Within the Behavioral
Health Division, the local governing bodies
are typically represented by local and Division
leadership and may include current or retired
medical staff.
As with all healthcare providers, UHS facilities
are subject to regular visits and inspections by
federal and state regulatory agencies. All our U.S.
facilities are fully accredited by widely respected,
independent organizations including The Joint
Commission (TJC) and the Commission on
Accreditation of Rehabilitation Facilities (CARF).
In the U.K., our Cygnet facilities are subject to
regulatory review by the CQC, among others.
Some of our Acute Care facilities have also earned
accreditations by specialized benchmarking entities
(e.g., American College of Radiology, American
College of Surgeons, College of American
Pathologists and American College of Cardiology).
Within the UHS organization, our Acute Care and
Behavioral Health Divisions each have a Division
Compliance Officer as well as designated Facility
Compliance Officers who oversee their respective
facilities’ local compliance programs and obligations.
Similarly, the Acute Care and Behavioral Health
Divisions each have Chief Medical Officers (CMOs)
and quality designees at the divisional and regional
levels, as well as at select individual facilities. CMOs
determine medical strategy and provide oversight
of medical staff and utilization management,
while quality teams manage and oversee clinical
and regulatory programs. Leadership analyzes
performance metrics monthly, and shares best
practices across facilities to promote quality and
safety, including outcomes measurement as primary
initiatives in each organization.
The Behavioral Health Division’s Admissions, Risk
Management and Corporate Clinical teams’ focus is
on the quality of patient care at our locations to work
towards meeting, if not exceeding, the expectations.
5 8 U N I V E R S A L H E A LT H S E R V I C E S , I N C .
RISK MANAGEMENT MEASURES
Each Acute Care and Behavioral Health Division’s
Risk Management program is led by a Division Risk
Management Director, who is supported by Senior
and/or Regional Risk Managers and Facility Risk
Managers. In addition, the Acute Care Division has a
Medication Safety Risk Manager who focuses their
efforts on safe medication use including analysis and
oversight of the medication administration system.
This comprehensive risk management program
is also comprised of a dedicated Corporate Loss
Control (Employee Injury) staff, Claims Management
professionals, as well as an Environmental Risk and
Emergency Management (EM) team.
UHS utilizes an Enterprise Risk Management (ERM)
approach to mitigate loss and promote employee
and patient safety. This approach comprises the
traditional risk management model components
of Risk Identification, Risk Analysis, Risk Control
and Risk Financing as well as utilization of the ERM
domains (i.e., Operational, Human Capital, Strategic,
Clinical/Patient Safety, Financial, Legal/Regulatory,
Technology and Hazard).
Each of these core components is supported by
dedicated teams that utilize time-tested processes,
procedures and/or tools, such as risk assessments,
dashboards and data analytics to meet their core
objectives. This may include the collecting, reporting
and analysis of data against internal or nationally
available benchmarks.
While prevention of patient safety events is core
to our mission of providing safe, high-quality care,
adverse events do occur. Risk identification tools
include TJC’s Sentinel Events Alerts, Root Cause
Analysis and Failure Mode and Effects Analysis, as
well as internal safety tools, such as patient safety
event reports on adverse outcomes, adverse drug
reactions, medication errors and patient concerns.
Executive and Unit Safety rounding and patient
safety surveys are also instruments used for early
detection of potential adverse or unexpected
patient outcomes and hazards.
To meet the Patient Safety Risk objectives, loss
prevention and control methods are in place to
assess high-risk clinical areas, such as new service
lines. Patient Safety Newsletters, Safety Watches
and Clinical Risk Alerts, as well as evaluation of the
facility risk management programs, are conducted
regularly with processes and procedures adapted
as needed.
Our Claims process offers a systematic approach
to reducing financial loss and negative community
image in cases where preventative measures may
have failed and an injury or other negative outcome
occurs.
Decisions that affect the financial sustainability
of the organization, access to capital or external
financial ratings through business relationships or
the timing and recognition of revenue and expenses
comprise the financial focus for risk management.
To ensure financial stability and solvency, risk
transferring techniques are analyzed, evaluated and
implemented.
During 2022, the Incident Command team responded
to several emergencies due to extreme weather. In late
September, when Hurricane Ian, a destructive Category
4 Atlantic hurricane was approaching, the team was
activated, and our emergency preparedness protocols and
processes were put into place. In the end, patients and staff
of just one facility needed to be evacuated to other UHS
facilities, while the remaining 26 facilities in the affected
area were returned to regular operation within 24-48 hours.
2 0 2 2 A N N U A L R E P O R T 5 9
“ UHS hospitals have protocols and
procedures in place to best manage
emergencies and security-related
events. Using the most current
industry best practices and partnering
with local first responders, our
facilities conduct drills and test
our emergency and safety protocols
to ensure teams are as prepared
as possible.”
JOAN F. HESS, CHEP
CORPORATE DIRECTOR
ENVIRONMENTAL RISK
AND EMERGENCY
MANAGEMENT
Patient Safety Organizations
The Acute Care and Behavioral Health Divisions
each have their own Patient Safety Organization
(PSO) to govern their respective risk management
process. These PSOs, which are registered with
the federal government under the Agency for
Healthcare Research and Quality, voluntarily
report and analyze data to help facilities identify
opportunities to mitigate risk, reduce patient
harm and improve quality of care.
The Acute Care Division’s Corporate Patient Safety
Council identifies its patient safety priorities for the
year. At the local level, each facility has a Patient
Safety Council that meets monthly to analyze patient
safety data to ensure the appropriate processes are
in place to prevent patient, employee and visitor
harm and monitor the effectiveness of the process
improvements put in place.
The Behavioral Health Division also has a
Corporate Patient Safety Council that is chaired
by the Division’s Chief Clinical Officer and is a
multidisciplinary Committee comprised of key leaders
and representatives from Plant Operations, Nursing,
Medical, Loss Control and Risk Management. This
Committee performs a robust analysis conducted on
all relevant data for trends and follow-up action.
Updates on PSO initiatives from both Divisions are
reported to the Board of Director’s Quality and
Compliance Committee every quarter.
Employee Safety Program
Support Measures
During 2022, the Environmental Risk and Emergency
Management (EM) Team continued to diligently
identify, analyze and implement risk avoidance
measures to ensure a safe and secure working
environment for staff, including increasing the
number of trainings, consultations and resources
provided since the previous year.
In 2022, 43 Behavioral Health facilities, 17 Acute
Care hospitals and two physician practice locations
received specific training on various EM programs,
based on their individual interest or need.
Additionally, employees from our 14 facilities in
Pa., N.J. and Del. as well as our Corporate Office
attended a one-day Behavioral Health Cluster
Training session to discuss key EM programs, such
as Sprinkler Discharge and Water Management,
as well as Hazard Vulnerability Assessment and
Response Plans.
The EM team has virtual trainings, playbooks and
toolkits readily available at a secure, online location
for all facilities to access at any time.
Employee Safety Council Initiatives
The UHS Employee Safety Council, chaired by
the Corporate Director of Environmental Risk and
Emergency Management, is committed to workplace
safety and remains keenly focused on developing
training programs.
During 2022, the Council’s Staff Safety
subcommittee, which is comprised of Clinical
Services, Loss Control, Risk Management, Human
Resources and Legal, implemented Staff Safety
Initiatives that were focused on reducing clinical
injury rates in our Behavioral Health facilities.
In one six-month safety initiative, members from
Clinical Services and Loss Control met regularly with
the senior management teams of eight Behavioral
Health facilities to share core strategies and tools
that addressed patient aggression.
6 0 U N I V E R S A L H E A LT H S E R V I C E S , I N C .
Also, during 2022, the EM team held an Armed
Intruder/Active Assailant Education training for the
Acute Care Division’s senior leaders as well as Risk
and Quality and Emergency Management Planners.
In addition to this training, the team also developed
a toolkit to provide facilities with best practices for
preventing these types of incidents and for how to
react should such an unfortunate event occur at
their location. The toolkit houses resource materials
related to this subject, such as videos, assessment
tools and a playbook.
Similarly, the Acute Care Division has an ongoing
focus on reducing employee injuries. During 2022,
a work group met monthly with senior leadership
teams from 51 UHS facilities, including Acute Care
hospitals, freestanding emergency departments and
physician practice locations. The group reviewed
injuries (and their causes) and offered strategies
that could be put in place to avoid recurrence. A
measurement of the overall aggregate injury rate
from these participating facilities shows that their low
injury rate in January 2022 dropped even further by
year-end 2022.
Workplace Violence Training
Workplace violence continues to be a heightened
safety/security concern across all sectors of
society, including the healthcare industry. As a
company, one of our top priorities is to maintain
a safe and secure working environment for
employees. During 2022, a work group comprised
of our Employee Safety Council, Legal, Loss Control,
Risk Management, Human Resources and other
subject matter experts reviewed existing Workplace
Violence Prevention Plans to ensure facility plans
meet new specific state and regulatory standards.
As a best practice, the team
continues to provide monthly
“Spotlight on Safety” posters
to Acute Care and Behavioral
Health facilities throughout the
year. Topics included Environment
of Care and Environmental
Awareness, Employee Safety,
Needlestick Prevention, Aggression
Prevention/Consistent Milieus
and Workplace Violence.
2 0 2 2 A N N U A L R E P O R T 6 1
OUR EMPHASIS ON
ETHICAL CONDUCT
The Board of Directors and senior management
of UHS are committed to healthcare operations that
are ethical and in compliance with all applicable
laws and regulations.
UHS’ Chief Compliance and Privacy Officer oversees
the UHS Compliance Program and regularly reports
on the Company’s compliance program operations
to the Quality and Compliance Committee of the
Board of Directors and to the UHS Compliance
Committee. The committees review reports and
recommendations of the UHS Chief Compliance and
Privacy Officer based upon data generated through
the UHS Compliance Program operations.
UHS maintains a compliance program that includes
appropriate policies and procedures consistent
with legal and regulatory requirements, compliance
education (including enterprise-wide compliance
training of all new employees as part of the
onboarding process), and its audit and monitoring
and disclosure programs.
We are committed to fostering a culture of
accountability at all levels and encourage employees
to report anything they believe could be noncompliant
with our values. We prohibit retaliation for the good
faith reporting of compliance concerns and offer the
ability for individuals to anonymously elevate any
concerns. Our commitment to fairness and integrity
extends to everyone with whom we interact and
do business.
Our Code of Conduct provides guidance on
expectations for acceptable behavior for those who
work on behalf of UHS. It is intended to promote
honest and ethical conduct, deter wrongdoing,
promote compliance with all applicable governmental
laws, rules and regulations, and prompt internal
reporting of violations and compliance concerns.
Our Compliance Manual serves as a resource
of basic healthcare compliance standards and
overview of the UHS Compliance Program. Further,
our Code of Conduct outlines what is expected
of employees in the workplace and references
key policies and procedures. This set of values,
rules, standards and principles serves as a guide
defining how people should appropriately interact as
ambassadors of our organization.
“ Our UHS Code of Conduct outlines
our expectations of those who work
on behalf of UHS and supports a
work environment that puts patient
care first.”
JIM PASSEY
VICE PRESIDENT,
CHIEF COMPLIANCE
AND PRIVACY OFFICER
UHS operates a Compliance
Hotline as part of our Code of
Conduct. To report an ethical dilemma
or potentially inappropriate or illegal
conduct, individuals may call the
Compliance Hotline (toll free at
1-800-852-3449) or use Internet-based
reporting at www.uhs.alertline.com
Learn more: uhs.com/compliance
6 2 U N I V E R S A L H E A LT H S E R V I C E S , I N C .
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(MARK ONE)
☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2022
OR
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File No. 1-10765
UNIVERSAL HEALTH SERVICES, INC.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of
incorporation or organization)
UNIVERSAL CORPORATE CENTER
367 South Gulph Road
P.O. Box 61558
King of Prussia, Pennsylvania
(Address of principal executive offices)
23-2077891
(I.R.S. Employer
Identification Number)
19406-0958
(Zip Code)
Registrant’s telephone number, including area code: (610) 768-3300
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Class B Common Stock, $0.01 par value
UHS
New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
Class D Common Stock, $.01 par value
(Title of each Class)
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☒ No ☐
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes ☐ No ☒
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90
days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T
during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging
growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the
Exchange Act.
Large accelerated filer
Non-accelerated filer
☒
☐
Accelerated filer
Smaller reporting company
Emerging growth company
☐
☐
☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial
accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial
reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction
of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the
registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
The aggregate market value of voting stock held by non-affiliates at June 30, 2022 was $6.4 billion. (For the purpose of this calculation, it was assumed that Class A, Class C, and
Class D Common Stock, which are not traded but are convertible share-for-share into Class B Common Stock, have the same market value as Class B Common Stock. Also, for
purposes of this calculation only, all directors are deemed to be affiliates.)
The number of shares of the registrant’s Class A Common Stock, $.01 par value, Class B Common Stock, $.01 par value, Class C Common Stock, $.01 par value, and Class D
Common Stock, $.01 par value, outstanding as of January 31, 2023, were 6,577,100; 63,417,294; 661,688 and 14,170, respectively.
DOCUMENTS INCORPORATED BY REFERENCE:
Portions of the registrant’s definitive proxy statement for our 2022 Annual Meeting of Stockholders, which will be filed with the Securities and Exchange Commission
within 120 days after December 31, 2022 (incorporated by reference under Part III).
Business
Item 1
Item 1A Risk Factors
Item 1B Unresolved Staff Comments
Item 2
Item 3
Item 4
Properties
Legal Proceedings
Mine Safety Disclosure
UNIVERSAL HEALTH SERVICES, INC.
2022 FORM 10-K ANNUAL REPORT
TABLE OF CONTENTS
PART I
PART II
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
[RESERVED]
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 5
Item 6
Item 7
Item 7A Quantitative and Qualitative Disclosures About Market Risk
Item 8
Item 9
Item 9A Controls and Procedures
Item 9B Other Information
Item 9C Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
Financial Statements and Supplementary Data
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
PART III
Item 10 Directors, Executive Officers and Corporate Governance
Item 11 Executive Compensation
Item 12 Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Item 13 Certain Relationships and Related Transactions, and Director Independence
Item 14 Principal Accountant Fees and Services
Item 15 Exhibits and Financial Statement Schedules
Item 16 Form 10-K Summary
PART IV
SIGNATURES
1
12
26
26
35
35
36
37
38
75
76
76
76
77
77
78
78
78
78
78
79
86
87
This Annual Report on Form 10-K is for the year ended December 31, 2022. This Annual Report modifies and supersedes
documents filed prior to this Annual Report. Information that we file with the Securities and Exchange Commission (the “SEC”) in
the future will automatically update and supersede information contained in this Annual Report.
In this Annual Report, “we,” “us,” “our” “UHS” and the “Company” refer to Universal Health Services, Inc. and its
subsidiaries. UHS is a registered trademark of UHS of Delaware, Inc., the management company for, and a wholly-owned subsidiary
of Universal Health Services, Inc. Universal Health Services, Inc. is a holding company and operates through its subsidiaries including
its management company, UHS of Delaware, Inc. All healthcare and management operations are conducted by subsidiaries of
Universal Health Services, Inc. To the extent any reference to “UHS” or “UHS facilities” in this report including letters, narratives or
other forms contained herein relates to our healthcare or management operations it is referring to Universal Health Services, Inc.’s
subsidiaries including UHS of Delaware, Inc. Further, the terms “we,” “us,” “our” or the “Company” in such context similarly refer to
the operations of Universal Health Services Inc.’s subsidiaries including UHS of Delaware, Inc. Any reference to employees or
employment contained herein refers to employment with or employees of the subsidiaries of Universal Health Services, Inc. including
UHS of Delaware, Inc.
PART I
ITEM 1. Business
Our principal business is owning and operating, through our subsidiaries, acute care hospitals and outpatient facilities and
behavioral health care facilities.
As of February 27, 2023, we owned and/or operated 359 inpatient facilities and 39 outpatient and other facilities including the
following located in 39 states, Washington, D.C., the United Kingdom and Puerto Rico:
Acute care facilities located in the U.S.:
28 inpatient acute care hospitals;
21 free-standing emergency departments, and;
7 outpatient centers & 1 surgical hospital.
Behavioral health care facilities (331 inpatient facilities and 10 outpatient facilities):
Located in the U.S.:
185 inpatient behavioral health care facilities, and;
8 outpatient behavioral health care facilities.
Located in the U.K.:
143 inpatient behavioral health care facilities, and;
2 outpatient behavioral health care facilities.
Located in Puerto Rico:
3 inpatient behavioral health care facilities.
Net revenues from our acute care hospitals, outpatient facilities and commercial health insurer accounted for 57% of our
consolidated net revenues during 2022 and 56% during 2021. Net revenues from our behavioral health care facilities and commercial
health insurer accounted for 43% of our consolidated net revenues during 2022 and 44% during 2021.
Our behavioral health care facilities located in the U.K. generated net revenues of approximately $685 million in 2022 and $688
million in 2021. Total assets at our U.K. behavioral health care facilities were approximately $1.235 billion as of December 31, 2022
and $1.351 billion as of December 31, 2021.
Services provided by our hospitals include general and specialty surgery, internal medicine, obstetrics, emergency room care,
radiology, oncology, diagnostic care, coronary care, pediatric services, pharmacy services and/or behavioral health services. We
provide capital resources as well as a variety of management services to our facilities, including central purchasing, information
services, finance and control systems, facilities planning, physician recruitment services, administrative personnel management,
marketing and public relations.
Available Information
We are a Delaware corporation that was organized in 1979. Our principal executive offices are located at Universal Corporate
Center, 367 South Gulph Road, P.O. Box 61558, King of Prussia, PA 19406. Our telephone number is (610) 768-3300.
Our website is located at www.uhs.com. Copies of our annual, quarterly and current reports that we file with the SEC, and any
amendments to those reports, are available free of charge on our website. Our filings are also available to the public at the website
maintained by the SEC, www.sec.gov. The information posted on our website is not incorporated into this Annual Report. Our Board
of Directors’ committee charters (Audit Committee, Compensation Committee, Nominating & Governance Committee and Quality
and Compliance Committee), Code of Business Conduct and Corporate Standards applicable to all employees, Code of Ethics for
Senior Financial Officers, Corporate Governance Guidelines and our Code of Conduct, Corporate Compliance Manual and
Compliance Policies and Procedures are available free of charge on our website. Copies of such reports and charters are available in
print to any stockholder who makes a request. Such requests should be made to our Secretary at our King of Prussia, PA corporate
headquarters. We intend to satisfy the disclosure requirement under Item 5.05 of Form 8-K relating to amendments to or waivers of
any provision of our Code of Ethics for Senior Financial Officers by promptly posting this information on our website.
In accordance with Section 303A.12(a) of the New York Stock Exchange Listed Company Manual, we submitted our CEO’s
certification to the New York Stock Exchange in 2022. Additionally, contained in Exhibits 31.1 and 31.2 of this Annual Report on
Form 10-K, are our CEO’s and CFO’s certifications regarding the quality of our public disclosures under Section 302 of the Sarbanes-
Oxley Act of 2002.
1
Our Mission
Our company mission is:
To provide superior quality healthcare services that
PATIENTS recommend to families and friends,
PHYSICIANS prefer for their patients,
PURCHASERS select for their clients,
EMPLOYEES are proud of, and
INVESTORS seek for long-term returns.
To achieve this, we have a commitment to:
service excellence
continuous improvement in measurable ways
employee development
ethical and fair treatment of all
teamwork
compassion
innovation in service delivery
Business Strategy
We believe community-based hospitals will remain the focal point of the healthcare delivery network and we are committed to a
philosophy of self-determination for both the company and our hospitals.
Acquisition of Additional Hospitals. We selectively seek opportunities to expand our base of operations by acquiring,
constructing or leasing additional hospital facilities. We are committed to a program of rational growth around our core businesses,
while retaining the missions of the hospitals we manage and the communities we serve. Such expansion may provide us with access to
new markets and new healthcare delivery capabilities. We also continue to examine our facilities and consider divestiture of those
facilities that we believe do not have the potential to contribute to our growth or operating strategy. In recent years our behavioral
health services segment has been focused on efforts to partner with non-UHS acute care hospitals to help operate their behavioral
health services. These arrangements include hospital purchases, leased beds and joint venture operating agreements.
Improvement of Operations of Existing Hospitals and Services. We also seek to increase the operating revenues and
profitability of owned hospitals by the introduction of new services, improvement of existing services, physician recruitment and the
application of financial and operational controls.
We are involved in continual development activities for the benefit of our existing facilities. From time-to-time applications are
filed with state health planning agencies to add new services in existing hospitals in states which require certificates of need, or CONs.
Although we expect that some of these applications will result in the addition of new facilities or services to our operations, no
assurances can be made for ultimate success by us in these efforts.
Quality and Efficiency of Services. Pressures to contain healthcare costs and technological developments allowing more
procedures to be performed on an outpatient basis have led payers to demand a shift to ambulatory or outpatient care wherever
possible. We are responding to this trend by emphasizing the expansion of outpatient services. In addition, in response to cost
containment pressures, we continue to implement programs at our facilities designed to improve financial performance and efficiency
while continuing to provide quality care, including more efficient use of professional and paraprofessional staff, monitoring and
adjusting staffing levels and equipment usage, improving patient management and reporting procedures and implementing more
efficient billing and collection procedures. In addition, we will continue to emphasize innovation in our response to the rapid changes
in regulatory trends and market conditions while fulfilling our commitment to patients, physicians, employees, communities and our
stockholders.
In addition, our aggressive recruiting of highly qualified physicians and developing provider networks help to establish our
facilities as an important source of quality healthcare in their respective communities.
Hospital Utilization
We believe that the most important factors relating to the overall utilization of a hospital include the quality and market position
of the hospital and the number, quality and specialties of physicians providing patient care within the facility. Generally, we believe
that the ability of a hospital to meet the health care needs of its community is determined by its breadth of services, level of
technology, emphasis on quality of care and convenience for patients and physicians. Other factors that affect utilization include
general and local economic conditions, market penetration of managed care programs, the degree of outpatient use, the availability of
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reimbursement programs such as Medicare and Medicaid, and demographic changes such as the growth in local populations.
Utilization across the industry also is being affected by improvements in clinical practice, medical technology and pharmacology.
Current industry trends in utilization and occupancy have been significantly affected by changes in reimbursement policies of third
party payers. We are also unable to predict the extent to which these industry trends will continue or accelerate. In addition, our acute
care services business is typically subject to certain seasonal fluctuations, such as higher patient volumes and net patient service
revenues in the first and fourth quarters of the year.
Sources of Revenue
We receive payments for services rendered from private insurers, including managed care plans, the federal government under
the Medicare program, state governments under their respective Medicaid programs and directly from patients. See Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations—Sources of Revenue for additional
disclosure. Other information related to our revenues, income and other operating information for each reporting segment of our
business is provided in Note 12 to our Consolidated Financial Statements, Segment Reporting.
Regulation and Other Factors
Overview: The healthcare industry is subject to numerous laws, regulations and rules including, among others, those related to
government healthcare participation requirements, various licensure and accreditations, reimbursement for patient services, health
information privacy and security rules, and Medicare and Medicaid fraud and abuse provisions (including, but not limited to, federal
statutes and regulations prohibiting kickbacks and other illegal inducements to potential referral sources, false claims submitted to
federal or state health care programs and self-referrals by physicians). Providers that are found to have violated any of these laws and
regulations may be excluded from participating in government healthcare programs, subjected to significant fines or penalties and/or
required to repay amounts received from the government for previously billed patient services. Although we believe our policies,
procedures and practices comply with governmental regulations, no assurance can be given that we will not be subjected to additional
governmental inquiries or actions, or that we would not be faced with sanctions, fines or penalties if so subjected. Even if we were to
ultimately prevail, a significant governmental inquiry or action under one of the above laws, regulations or rules could have a material
adverse impact on us.
Licensing, Certification and Accreditation: All of our U.S. hospitals are subject to compliance with various federal, state and
local statutes and regulations in the U.S. and receive periodic inspection by state licensing agencies to review standards of medical
care, equipment and cleanliness. Our hospitals must also comply with the conditions of participation and licensing requirements of
federal, state and local health agencies, as well as the requirements of municipal building codes, health codes and local fire
departments. Various other licenses and permits are also required in order to dispense narcotics, operate pharmacies, handle
radioactive materials and operate certain equipment. Our facilities in the United Kingdom are also subject to various laws and
regulations.
All of our eligible hospitals have been accredited by The Joint Commission. All of our acute care hospitals and most of our
behavioral health centers in the U.S. are certified as providers of Medicare and Medicaid services by the appropriate governmental
authorities.
If any of our facilities were to lose its Joint Commission accreditation or otherwise lose its certification under the Medicare and
Medicaid programs, the facility may be unable to receive reimbursement from the Medicare and Medicaid programs and other payers.
We believe our facilities are in substantial compliance with current applicable federal, state, local and independent review body
regulations and standards. The requirements for licensure, certification and accreditation are subject to change and, in order to remain
qualified, it may become necessary for us to make changes in our facilities, equipment, personnel and services in the future, which
could have a material adverse impact on operations.
Certificates of Need: Many of the states in which we operate hospitals have enacted certificates of need (“CON”) laws as a
condition prior to hospital capital expenditures, construction, expansion, modernization or initiation of major new services. Failure to
obtain necessary state approval can result in our inability to complete an acquisition, expansion or replacement, the imposition of civil
or, in some cases, criminal sanctions, the inability to receive Medicare or Medicaid reimbursement or the revocation of a facility’s
license, which could harm our business. In addition, significant CON reforms have been proposed in a number of states that would
increase the capital spending thresholds and provide exemptions of various services from review requirements. In the past, we have
not experienced any material adverse effects from those requirements, but we cannot predict the impact of these changes upon our
operations.
Conversion Legislation: Many states have enacted or are considering enacting laws affecting the conversion or sale of not-for-
profit hospitals to for-profit entities. These laws generally require prior approval from the attorney general, advance notification and
community involvement. In addition, attorneys general in states without specific conversion legislation may exercise discretionary
authority over these transactions. Although the level of government involvement varies from state to state, the trend is to provide for
increased governmental review and, in some cases, approval of a transaction in which a not-for-profit entity sells a health care facility
to a for-profit entity. The adoption of new or expanded conversion legislation and the increased review of not-for-profit hospital
conversions may limit our ability to grow through acquisitions of not-for-profit hospitals.
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Utilization Review: Federal regulations require that admissions and utilization of facilities by Medicare and Medicaid patients
must be reviewed in order to ensure efficient utilization of facilities and services. The law and regulations require Peer Review
Organizations (“PROs”) to review the appropriateness of Medicare and Medicaid patient admissions and discharges, the quality of
care provided, the validity of diagnosis related group (“DRG”) classifications and the appropriateness of cases of extraordinary length
of stay. PROs may deny payment for services provided, assess fines and also have the authority to recommend to the Department of
Health and Human Services (“HHS”) that a provider that is in substantial non-compliance with the standards of the PRO be excluded
from participating in the Medicare program. We have contracted with PROs in each state where we do business to perform the
required reviews.
Audits: Most hospitals are subject to federal audits to validate the accuracy of Medicare and Medicaid program submitted
claims. If these audits identify overpayments, we could be required to pay a substantial rebate of prior years’ payments subject to
various administrative appeal rights. The federal government contracts with third-party “recovery audit contractors” (“RACs”) and
“Medicaid integrity contractors” (“MICs”), on a contingent fee basis, to audit the propriety of payments to Medicare and Medicaid
providers. Similarly, Medicare zone program integrity contractors (“ZPICs”) target claims for potential fraud and abuse. Additionally,
Medicare administrative contractors (“MACs”) must ensure they pay the right amount for covered and correctly coded services
rendered to eligible beneficiaries by legitimate providers. The Centers for Medicare and Medicaid Services (“CMS”) consolidated
many of these Medicare and Medicaid program integrity functions into new unified program integrity contractors (“UPICs”), though it
remains unclear what effect, if any, this consolidation may have. We have undergone claims audits related to our receipt of federal
healthcare payments during the last three years, the results of which have not required material adjustments to our consolidated results
of operations. However, potential liability from future federal or state audits could ultimately exceed established reserves, and any
excess could potentially be substantial. Further, Medicare and Medicaid regulations also provide for withholding Medicare and
Medicaid overpayments in certain circumstances, which could adversely affect our cash flow.
Self-Referral and Anti-Kickback Legislation
The Stark Law: The Social Security Act includes a provision commonly known as the “Stark Law.” This law prohibits
physicians from referring Medicare and Medicaid patients to entities with which they or any of their immediate family members have
a financial relationship, unless an exception is met. These types of referrals are known as “self-referrals.” Sanctions for violating the
Stark Law include civil penalties up to $27,750 for each violation, and up to $185,009 for sham arrangements. There are a number of
exceptions to the self-referral prohibition, including an exception for a physician’s ownership interest in an entire hospital as opposed
to an ownership interest in a hospital department unit, service or subpart. However, federal laws and regulations now limit the ability
of hospitals relying on this exception to expand aggregate physician ownership interest or to expand certain hospital facilities. This
regulation also places a number of compliance requirements on physician-owned hospitals related to reporting of ownership interest.
There are also exceptions for many of the customary financial arrangements between physicians and providers, including employment
contracts, leases and recruitment agreements that adhere to certain enumerated requirements. CMS issued a final rule in 2020 that
created a new Stark exception for value-based models. Although the final regulations provide exceptions to the Stark Law, there may
remain regulatory risks for participating hospitals, as well as financial and operational risks.
We monitor all aspects of our business and have developed a comprehensive ethics and compliance program that is designed to
meet or exceed applicable federal guidelines and industry standards. Nonetheless, because the law in this area is complex and
constantly evolving, there can be no assurance that federal regulatory authorities will not determine that any of our arrangements with
physicians violate the Stark Law.
Anti-kickback Statute: A provision of the Social Security Act known as the “anti-kickback statute” prohibits healthcare
providers and others from directly or indirectly soliciting, receiving, offering or paying money or other remuneration to other
individuals and entities in return for using, referring, ordering, recommending or arranging for such referrals or orders of services or
other items covered by a federal or state health care program. However, changes to the anti-kickback statute have reduced the intent
required for violation; one is no longer required to have actual knowledge or specific intent to commit a violation of the anti-kickback
statute in order to be found in violation of such law.
The anti-kickback statute contains certain exceptions, and the Office of the Inspector General of the Department of Health and
Human Services (“OIG”) has issued regulations that provide for “safe harbors,” from the federal anti-kickback statute for various
activities. These activities, which must meet certain requirements, include (but are not limited to) the following: investment interests,
space rental, equipment rental, practitioner recruitment, personnel services and management contracts, sale of practice, referral
services, warranties, discounts, employees, group purchasing organizations, waiver of beneficiary coinsurance and deductible
amounts, managed care arrangements, obstetrical malpractice insurance subsidies, investments in group practices, freestanding
surgery centers, donation of technology for electronic health records and referral agreements for specialty services. In 2020, the OIG
issued a final rule that established an anti-kickback statute safe harbor for value based models. Although the final regulations provide
safe harbors, there may remain regulatory risks for participating hospitals, as well as financial and operational risks. The fact that
conduct or a business arrangement does not fall within a safe harbor or exception does not automatically render the conduct or
business arrangement illegal under the anti-kickback statute. However, such conduct and business arrangements may lead to increased
scrutiny by government enforcement authorities.
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Although we believe that our arrangements with physicians and other referral sources have been structured to comply with
current law and available interpretations, there can be no assurance that all arrangements comply with an available safe harbor or that
regulatory authorities enforcing these laws will determine these financial arrangements do not violate the anti-kickback statute or other
applicable laws. Violations of the anti-kickback statute may be punished by a criminal fine of up to $100,000 for each violation or
imprisonment, however, under 18 U.S.C. Section 3571, this fine may be increased to $250,000 for individuals and $500,000 for
organizations. Civil money penalties may include fines of up to $112,131 per violation and damages of up to three times the total
amount of the remuneration and/or exclusion from participation in Medicare and Medicaid.
Similar State Laws: Many of the states in which we operate have adopted laws that prohibit payments to physicians in
exchange for referrals similar to the anti-kickback statute and the Stark Law, some of which apply regardless of the source of payment
for care. These statutes typically provide criminal and civil penalties as well as loss of licensure. In many instances, the state statutes
provide that any arrangement falling in a federal safe harbor will be immune from scrutiny under the state statutes. However, in most
cases, little precedent exists for the interpretation or enforcement of these state laws.
These laws and regulations are extremely complex and, in many cases, we don’t have the benefit of regulatory or judicial
interpretation. It is possible that different interpretations or enforcement of these laws and regulations could subject our current or past
practices to allegations of impropriety or illegality or could require us to make changes in our facilities, equipment, personnel,
services, capital expenditure programs and operating expenses. A determination that we have violated one or more of these laws, or
the public announcement that we are being investigated for possible violations of one or more of these laws (see Item 3. Legal
Proceedings), could have a material adverse effect on our business, financial condition or results of operations and our business
reputation could suffer significantly. In addition, we cannot predict whether other legislation or regulations at the federal or state level
will be adopted, what form such legislation or regulations may take or what their impact on us may be.
If we are deemed to have failed to comply with the anti-kickback statute, the Stark Law or other applicable laws and regulations,
we could be subjected to liabilities, including criminal penalties, civil penalties (including the loss of our licenses to operate one or
more facilities), and exclusion of one or more facilities from participation in the Medicare, Medicaid and other federal and state health
care programs. The imposition of such penalties could have a material adverse effect on our business, financial condition or results of
operations.
Federal False Claims Act and Similar State Regulations: A current trend affecting the health care industry is the increased
use of the federal False Claims Act, and, in particular, actions being brought by individuals on the government’s behalf under the
False Claims Act’s qui tam, or whistleblower, provisions. Whistleblower provisions allow private individuals to bring actions on
behalf of the government by alleging that the defendant has defrauded the Federal government.
When a defendant is determined by a court of law to have violated the False Claims Act, the defendant may be liable for up to
three times the actual damages sustained by the government, plus mandatory civil penalties of between $13,508 to $27,018 for each
separate false claim. There are many potential bases for liability under the False Claims Act. Liability often arises when an entity
knowingly submits a false claim for reimbursement to the federal government. The Fraud Enforcement and Recovery Act of 2009
(“FERA”) amended and expanded the number of actions for which liability may attach under the False Claims Act, eliminating
requirements that false claims be presented to federal officials or directly involve federal funds. FERA also clarifies that a false claim
violation occurs upon the knowing retention, as well as the receipt, of overpayments. In addition, recent changes to the anti-kickback
statute have made violations of that law punishable under the civil False Claims Act. Further, a number of states have adopted their
own false claims provisions as well as their own whistleblower provisions whereby a private party may file a civil lawsuit on behalf of
the state in state court. The False Claims Act require that federal healthcare program overpayments be returned within 60 days from
the date the overpayment was identified, or by the date any corresponding cost report was due, whichever is later. Failure to return an
overpayment within this period may result in additional civil False Claims Act liability.
Other Fraud and Abuse Provisions: The Social Security Act also imposes criminal and civil penalties for submitting false
claims to Medicare and Medicaid. False claims include, but are not limited to, billing for services not rendered, billing for services
without prescribed documentation, misrepresenting actual services rendered in order to obtain higher reimbursement and cost report
fraud. Like the anti-kickback statute, these provisions are very broad.
Further, the Health Insurance Portability and Accountability Act of 1996 (“HIPAA”) broadened the scope of the fraud and abuse
laws by adding several criminal provisions for health care fraud offenses that apply to all health benefit programs, whether or not
payments under such programs are paid pursuant to federal programs. HIPAA also introduced enforcement mechanisms to prevent
fraud and abuse in Medicare. There are civil penalties for prohibited conduct, including, but not limited to billing for medically
unnecessary products or services.
HIPAA Administrative Simplification and Privacy Requirements: The administrative simplification provisions of HIPAA,
as amended by the Health Information Technology for Economic and Clinical Health Act (“HITECH”), require the use of uniform
electronic data transmission standards for health care claims and payment transactions submitted or received electronically. These
provisions are intended to encourage electronic commerce in the health care industry. HIPAA also established federal rules protecting
the privacy and security of personal health information. The privacy and security regulations address the use and disclosure of
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individual health care information and the rights of patients to understand and control how such information is used and disclosed.
Violations of HIPAA can result in both criminal and civil fines and penalties.
We believe that we are in material compliance with the privacy regulations of HIPAA, as we continue to develop training and
revise procedures to address ongoing compliance. The HIPAA security regulations require health care providers to implement
administrative, physical and technical safeguards to protect the confidentiality, integrity and availability of patient information.
HITECH has since strengthened certain HIPAA rules regarding the use and disclosure of protected health information, extended
certain HIPAA provisions to business associates, and created new security breach notification requirements. HITECH has also
extended the ability to impose civil money penalties on providers not knowing that a HIPAA violation has occurred. We believe that
we have been in substantial compliance with HIPAA and HITECH requirements to date. Recent changes to the HIPAA regulations
may result in greater compliance requirements for healthcare providers, including expanded obligations to report breaches of
unsecured patient data, as well as create new liabilities for the actions of parties acting as business associates on our behalf.
Red Flags Rule: In addition, the Federal Trade Commission (“FTC”) Red Flags Rule requires financial institutions and
businesses maintaining accounts to address the risk of identity theft. The Red Flag Program Clarification Act of 2010, signed on
December 18, 2010, appears to exclude certain healthcare providers from the Red Flags Rule, but permits the FTC or relevant
agencies to designate additional creditors subject to the Red Flags Rule through future rulemaking if the agencies determine that the
person in question maintains accounts subject to foreseeable risk of identity theft. Compliance with any such future rulemaking may
require additional expenditures in the future.
Patient Safety and Quality Improvement Act of 2005: On July 29, 2005, the Patient Safety and Quality Improvement Act of
2005 was enacted, which has the goal of reducing medical errors and increasing patient safety. This legislation establishes a
confidential reporting structure in which providers can voluntarily report “Patient Safety Work Product” (“PSWP”) to “Patient Safety
Organizations” (“PSOs”). Under the system, PSWP is made privileged, confidential and legally protected from disclosure. PSWP does
not include medical, discharge or billing records or any other original patient or provider records but does include information
gathered specifically in connection with the reporting of medical errors and improving patient safety. This legislation does not
preempt state or federal mandatory disclosure laws concerning information that does not constitute PSWP. PSOs are certified by the
Secretary of the HHS for three-year periods and analyze PSWP, provide feedback to providers and may report non-identifiable PSWP
to a database. In addition, PSOs are expected to generate patient safety improvement strategies.
Environmental Regulations: Our healthcare operations generate medical waste that must be disposed of in compliance with
federal, state and local environmental laws, rules and regulations. Infectious waste generators, including hospitals, face substantial
penalties for improper disposal of medical waste, including civil penalties of up to $25,000 per day of noncompliance, criminal
penalties of up to $50,000 per day, imprisonment, and remedial costs. In addition, our operations, as well as our purchases and sales of
facilities are subject to various other environmental laws, rules and regulations. We believe that our disposal of such wastes is in
material compliance with all state and federal laws.
Corporate Practice of Medicine: Several states, including Florida, Nevada, California and Texas, have laws and/or regulations
that prohibit corporations and other entities from employing physicians and practicing medicine for a profit or that prohibit certain
direct and indirect payments or fee-splitting arrangements between health care providers that are designed to induce or encourage the
referral of patients to, or the recommendation of, particular providers for medical products and services. Possible sanctions for
violation of these restrictions include loss of license and civil and criminal penalties. In addition, agreements between the corporation
and the physician may be considered void and unenforceable. These statutes and/or regulations vary from state to state, are often
vague and have seldom been interpreted by the courts or regulatory agencies. We do not expect these state corporate practice of
medicine proscriptions to significantly affect our operations. Many states have laws and regulations which prohibit payments for
referral of patients and fee-splitting with physicians. We do not make any such payments or have any such arrangements.
EMTALA: All of our hospitals are subject to the Emergency Medical Treatment and Active Labor Act (“EMTALA”). This
federal law generally requires hospitals with an emergency department that are certified providers under Medicare to conduct a
medical screening examination of every person who visits the hospital’s emergency room for treatment and, if the patient is suffering
from a medical emergency, to either stabilize the patient’s condition or transfer the patient to a facility that can better handle the
condition. Our obligation to screen and stabilize emergency medical conditions exists regardless of a patient’s ability to pay for
treatment. There are severe penalties under EMTALA if a hospital fails to screen or appropriately stabilize or transfer a patient or if
the hospital delays appropriate treatment in order to first inquire about the patient’s ability to pay. Penalties for violations of
EMTALA include civil monetary penalties and exclusion from participation in the Medicare program. In addition to any liabilities that
a hospital may incur under EMTALA, an injured patient, the patient’s family or a medical facility that suffers a financial loss as a
direct result of another hospital’s violation of the law can bring a civil suit against the hospital unrelated to the rights granted under
that statute.
The federal government broadly interprets EMTALA to cover situations in which patients do not actually present to a hospital’s
emergency room, but present for emergency examination or treatment to the hospital’s campus, generally, or to a hospital-based clinic
that treats emergency medical conditions or are transported in a hospital-owned ambulance, subject to certain exceptions. EMTALA
does not generally apply to patients admitted for inpatient services; however, CMS has sought industry comments on the potential
applicability of EMTALA to hospital inpatients and the responsibilities of hospitals with specialized capabilities, respectively. CMS
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has not yet issued regulations or guidance in response to that request for comments. The government also has expressed its intent to
investigate and enforce EMTALA violations actively in the future. We believe that we operate in substantial compliance with
EMTALA.
Health Care Industry Investigations: We are subject to claims and suits in the ordinary course of business, including those
arising from care and treatment afforded by our hospitals and are party to various government investigations and litigation. Please see
Item 3. Legal Proceedings included herein for additional disclosure. In addition, currently, and from time to time, some of our
facilities are subjected to inquiries and/or actions and receive notices of potential non-compliance of laws and regulations from various
federal and state agencies. Providers that are found to have violated these laws and regulations may be excluded from participating in
government healthcare programs, subjected to potential licensure, certification, and/or accreditation revocation, subjected to fines or
penalties or required to repay amounts received from the government for previously billed patient services.
We monitor all aspects of our business and have developed a comprehensive ethics and compliance program that is designed to
meet or exceed applicable federal guidelines and industry standards. Because the law in this area is complex and constantly evolving,
governmental investigation or litigation may result in interpretations that are inconsistent with industry practices, including ours.
Although we believe our policies, procedures and practices comply with governmental regulations, no assurance can be given that we
will not be subjected to inquiries or actions, or that we will not be faced with sanctions, fines or penalties in connection with the
investigations. Even if we were to ultimately prevail, the government’s inquiry and/or action in connection with these matters could
have a material adverse effect on our future operating results.
Our substantial Medicare, Medicaid and other governmental billings may result in heightened scrutiny of our operations. It is
possible that governmental entities could initiate additional investigations or litigation in the future and that such matters could result
in significant penalties as well as adverse publicity. It is also possible that our executives and/or managers could be included as targets
or witnesses in governmental investigations or litigation and/or named as defendants in private litigation.
Revenue Rulings 98-15 and 2004-51: In March 1998 and May 2004, the IRS issued guidance regarding the tax consequences
of joint ventures between for-profit and not-for-profit hospitals. As a result of the tax rulings, the IRS has proposed, and may in the
future propose, to revoke the tax-exempt or public charity status of certain not-for-profit entities which participate in such joint
ventures or to treat joint venture income as unrelated business taxable income to them. The tax rulings have limited development of
joint ventures and any adverse determination by the IRS or the courts regarding the tax-exempt or public charity status of a not-for-
profit partner or the characterization of joint venture income as unrelated business taxable income could further limit joint venture
development with not-for-profit hospitals, and/or require the restructuring of certain existing joint ventures with not-for-profits.
State Rate Review: Some states where we operate hospitals have adopted legislation mandating rate or budget review for
hospitals or have adopted taxes on hospital revenues, assessments or licensure fees to fund indigent health care within the state. In the
aggregate, state rate reviews and indigent tax provisions have not materially, adversely affected our results of operations.
Medical Malpractice Tort Law Reform: Medical malpractice tort law has historically been maintained at the state level. All
states have laws governing medical liability lawsuits. Over half of the states have limits on damages awards. Almost all states have
eliminated joint and several liability in malpractice lawsuits, and many states have established limits on attorney fees. Many states had
bills introduced in their legislative sessions to address medical malpractice tort reform. Proposed solutions include enacting limits on
non-economic damages, malpractice insurance reform, and gathering lawsuit claims data from malpractice insurance companies and
the courts for the purpose of assessing the connection between malpractice settlements and premium rates. Reform legislation has also
been proposed, but not adopted, at the federal level that could preempt additional state legislation in this area.
Compliance Program: Our company-wide compliance program has been in place since 1998. Currently, the program’s
elements include a Code of Conduct, risk area specific policies and procedures, employee education and training, an internal system
for reporting concerns, auditing and monitoring programs, and a means for enforcing the program’s policies.
Since its initial adoption, the compliance program continues to be expanded and developed to meet the industry’s expectations
and our needs. Specific written policies, procedures, training and educational materials and programs, as well as auditing and
monitoring activities have been prepared and implemented to address the functional and operational aspects of our business. Specific
areas identified through regulatory interpretation and enforcement activities have also been addressed in our program. Claims
preparation and submission, including coding, billing, and cost reports, comprise the bulk of these areas. Financial arrangements with
physicians and other referral sources, including compliance with anti-kickback and Stark laws and emergency department treatment
and transfer requirements are also the focus of policy and training, standardized documentation requirements, and review and audit.
United Kingdom Regulation: Our operations in the United Kingdom are also subject to a high level of regulation relating to
registration and licensing requirements, employee regulation, clinical standards, environmental rules as well as other areas. We are
also subject to a highly regulated business environment, and failure to comply with the various laws and regulations applicable to us
could lead to substantial penalties and other adverse effects on our business.
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Human Capital Management
Employees and Medical Staff
As of December 31, 2022, we had approximately 93,800 total employees consisting of: (i) approximately 82,300 employees
located in the U.S., of which approximately 59,700 were employed full-time, and; (ii) approximately 11,500 employees located in the
U.K. Our hospitals are staffed by licensed physicians who have been admitted to the medical staff of individual hospitals. In a number
of our markets, physicians may have admitting privileges at other hospitals in addition to ours. Within our acute care division,
approximately 370 physicians are employed by physician practice management subsidiaries of ours either directly or through contracts
with affiliated group practices structured as 501A corporations. Members of the medical staffs of our hospitals also serve on the
medical staffs of hospitals not owned by us and may terminate their affiliation with our hospitals at any time. In addition, within our
behavioral health division, approximately 490 psychiatrists are employed by subsidiaries of ours either directly or through contracts
with affiliated group practices structured as 501A corporations. Each of our hospitals is managed on a day-to-day basis by a managing
director employed by a subsidiary of ours. In addition, a Board of Governors, including members of the hospital’s medical staff,
governs the medical, professional and ethical practices at each hospital. We believe that our relations with our employees are
satisfactory.
Labor Relations
Approximately 825 of our employees at four of our hospitals are unionized. At Valley Hospital Medical Center, housekeeping
and dietary employees are represented by the Culinary Workers Union, Local 226, and engineers are represented by the International
Union of Operating Engineers. At Desert Springs Hospital, which is scheduled to discontinue all inpatient operations by March of
2023, engineers are represented by the International Union of Operating Engineers and registered nurses are represented by the
Service Employees International Union (“SEIU”). At HRI Hospital in Boston, registered nurses, licensed practical nurses, certain
technicians and some clerical employees are represented by the SEIU. At Brooke Glen Behavioral Hospital, unionized employees are
represented by the Teamsters, and registered nurses are represented by the Northwestern Nurses Association/Pennsylvania Association
of Staff Nurses and Allied Professionals.
Culture and Work Environment
During orientation, newly hired employees learn our mission, vision, principles and values, key policies and procedures, a
summary of the various benefits and resources available, and perhaps most notably, an overview of our founding principle, Service
Excellence. Learning key attributes of our Service Excellence standards, which include continuous improvement, employee
development, ethical and fair treatment of all, teamwork, compassion and innovation in service delivery, provides newly hired
employees a thorough understanding of our company culture. Other components of our Service Excellence standards, which include
treating everyone as a guest, demonstrating professionalism and excellence and practicing teamwork, are shared to help guide the
desired approach to day-to-day activities.
Service Excellence Facilitator Certification Workshops are available for facility employees identified by their leadership for
consistently upholding and demonstrating our Service Excellence standards. Certified facilitators foster the Service Excellence culture
and deliver training at their facilities.
During 2022, we strengthened our recruitment efforts, improved the overall hiring and onboarding experience, expanded the
training resources employees need to do their jobs effectively and safely, facilitated more teamwork and collaboration, addressed
burnout, expanded mentorship and increased employee engagement.
Ethical Standards
Each member of our Board of Directors and senior management is committed to healthcare operations that are ethical and in
compliance with all applicable laws and regulations.
We are committed to fostering a culture of accountability at all levels and encourage our employees to report anything they
believe could be noncompliant with our values. We prohibit retaliation for the good faith reporting of compliance concerns and offer
the ability for individuals to anonymously elevate any concerns. Our commitment to fairness and integrity extends to everyone with
whom we interact and do business.
Health and Safety
Policies and training programs to encourage work safety are a major focus in our organization. Leading into 2022, we launched
a new employee assistance program which has provided a superior level of service to all our employees and members of their
households. They also provided support on site at any of our hospitals. We have continuous training on workplace safety and launched
a “We Care” program guide to ensure our hospitals support employees in a detailed way in the event of an employee injury.
Employee Development
In keeping with our culture of continuous improvement, training opportunities are available for all employees, regardless of
level or status. These include formal instructor-led, in-person or virtual training, informal mentoring or networking opportunities or
self-administered online courses.
8
Training programs are designed to assist with personal and skill development, career advancement and succession planning. In
addition to mandatory training that focus on keeping employees mindful and informed of key policies and skill sets, many are
voluntary. All training is tailored to include potential Americans with Disabilities Act accommodations.
Across the company, we offer educational and work opportunities, including internships, externships and clinical field placement
opportunities.
We also offer financial assistance programs, such as tuition reimbursement, to support employees participating in degree or
certification programs.
Equal Employment Opportunity
We are committed to the principle of Equal Employment Opportunity ("EEO") for all employees and applicants. As an EEO
Employer, we support and are fully committed to recruitment, selection, placement, promotion and compensation of all individuals
without regard to race, color, religion, age, sex (including pregnancy, gender identity, and sexual orientation), genetic information,
national origin, disability status, protected veteran status or any other characteristic protected by federal, state or local laws.
Diversity and Inclusion
We value each member of our team and are committed to treating everyone with dignity and respect. Our commitment to
diversity, equality and inclusion includes regularly monitoring employment practices to ensure equity, regardless of an employee’s
gender, race or ethnicity and championing for inclusive behaviors through leadership example, policies and procedures, training and
special events.
Employee Assistance
We continue to support the overall health and financial well-being of our employees across the extensive programs and benefit
plans that we offer. In 2022, we continued to expand the UHS Resource Guide which provides details on access to the benefits,
resources and support tools available to employees throughout our organization.
In 2022, the UHS Foundation continued to support employees and their families who suffered losses due to natural disasters
across the country, including fires in Boulder, Colorado, Hurricane Ida, Hurricane Ian, and the storms that impacted Kentucky.
Competition
The health care industry is highly competitive. In recent years, competition among healthcare providers for patients has
intensified in the United States due to, among other things, regulatory and technological changes, increasing use of managed care
payment systems, cost containment pressures and a shift toward outpatient treatment. In all of the geographical areas in which we
operate, there are other facilities that provide services comparable to those offered by our facilities. In addition, some of our
competitors include hospitals that are owned by tax-supported governmental agencies or by nonprofit corporations and may be
supported by endowments and charitable contributions and exempt from property, sale and income taxes. Such exemptions and
support are not available to us.
In some markets, certain of our competitors may have greater financial resources, be better equipped and offer a broader range
of services than us. Certain hospitals that are located in the areas served by our facilities are specialty or large hospitals that provide
medical, surgical and behavioral health services, facilities and equipment that are not available at our hospitals. The increase in
outpatient treatment and diagnostic facilities, outpatient surgical centers and freestanding ambulatory surgical also increases
competition for us. In addition, some of our hospitals face competition from hospitals or surgery centers that are physician owned.
The number and quality of the physicians on a hospital’s staff are important factors in determining a hospital’s success and
competitive advantage. Typically, physicians are responsible for making hospital admissions decisions and for directing the course of
patient treatment. We believe that physicians refer patients to a hospital primarily on the basis of the patient’s needs, the quality of
other physicians on the medical staff, the location of the hospital and the breadth and scope of services offered at the hospital’s
facilities. We strive to retain and attract qualified doctors by maintaining high ethical and professional standards and providing
adequate support personnel, technologically advanced equipment and facilities that meet the needs of those physicians.
In addition, we depend on the efforts, abilities, and experience of our medical support personnel, including our nurses,
pharmacists and lab technicians and other health care professionals. We compete with other health care providers in recruiting and
retaining qualified hospital management, nurses and other medical personnel. Our acute care and behavioral health care facilities are
experiencing the effects of a nationwide staffing shortage, which has caused and may continue to cause an increase in salaries, wages
and benefits expense in excess of the inflation rate. In addition, in some markets like California, there are requirements to maintain
specified nurse-staffing levels. To the extent we cannot meet those levels, we may be required to limit the healthcare services provided
in these markets which would have a corresponding adverse effect on our net operating revenues.
Many states in which we operate hospitals have CON laws. The application process for approval of additional covered services,
new facilities, changes in operations and capital expenditures is, therefore, highly competitive in these states. In those states that do
not have CON laws or which set relatively high levels of expenditures before they become reviewable by state authorities, competition
in the form of new services, facilities and capital spending is more prevalent. See “Regulation and Other Factors.”
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Our ability to negotiate favorable service contracts with purchasers of group health care services also affects our competitive
position and significantly affects the revenues and operating results of our hospitals. Managed care plans attempt to direct and control
the use of hospital services and to demand that we accept lower rates of payment. In addition, employers and traditional health
insurers are increasingly interested in containing costs through negotiations with hospitals for managed care programs and discounts
from established charges. In return, hospitals secure commitments for a larger number of potential patients. Generally, hospitals
compete for service contracts with group health care service purchasers on the basis of price, market reputation, geographic location,
quality and range of services, quality of the medical staff and convenience. The importance of obtaining contracts with managed care
organizations varies from market to market depending on the market strength of such organizations.
A key element of our growth strategy is expansion through the acquisition of additional hospitals in select markets. The
competition to acquire hospitals is significant. We compete for acquisitions with other for-profit health care companies, private equity
and venture capital firms, as well as not-for-profit entities. Some of our competitors have greater resources than we do. We intend to
selectively seek opportunities to expand our base of operations by adhering to our disciplined program of rational growth, but may not
be successful in accomplishing acquisitions on favorable terms.
Relationship with Universal Health Realty Income Trust
At December 31, 2022, we held approximately 5.7% of the outstanding shares of Universal Health Realty Income Trust (the
“Trust”). We serve as Advisor to the Trust under an annually renewable advisory agreement, which is scheduled to expire on
December 31st of each year, pursuant to the terms of which we conduct the Trust’s day-to-day affairs, provide administrative services
and present investment opportunities. The advisory agreement was renewed by the Trust for 2023 at the same rate in place for 2022,
2021 and 2020, providing for an advisory computation at 0.70% of the Trust’s average invested real estate assets. We earned an
advisory fee from the Trust, which is included in net revenues in the accompanying consolidated statements of income, of
approximately $5.1 million during 2022, $4.4 million during 2021 and $4.1 million during 2020.
In addition, certain of our officers and directors are also officers and/or directors of the Trust. Management believes that it has
the ability to exercise significant influence over the Trust, therefore we account for our investment in the Trust using the equity
method of accounting.
Our pre-tax share of income from the Trust was $1.2 million during 2022, $6.2 million during 2021 and $1.1 million during
2020 , which are included in other income, net, on the accompanying consolidated statements of income for each year. We received
dividends from the Trust amounting to $2.2 million during each of 2022, 2021 and 2020. Included in our share of the Trust’s income
during 2021 was approximately $5.0 million related to our share of gains on various transactions recorded by the Trust, including an
asset purchase and sale transaction between the Trust and UHS, as discussed below.
The carrying value of our investment in the Trust was $8.4 million and $9.4 million at December 31, 2022 and 2021,
respectively, and is included in other assets in the accompanying consolidated balance sheets. The market value of our investment in
the Trust was $37.6 million at December 31, 2022 and $46.8 million at December 31, 2021, based on the closing price of the Trust’s
stock on the respective dates.
The Trust commenced operations in 1986 by purchasing certain hospital properties from us and immediately leasing the
properties back to our respective subsidiaries. The base rents are paid monthly and the bonus rents, which as of January 1, 2022 are
applicable only to McAllen Medical Center, are computed and paid on a quarterly basis, based upon a computation that compares
current quarter revenue to a corresponding quarter in the base year. The leases with those subsidiaries are unconditionally guaranteed
by us and are cross-defaulted with one another.
On December 31, 2021, we entered into an asset purchase and sale agreement with the Trust, which was amended during the
first quarter of 2022, pursuant to the terms of which:
a wholly-owned subsidiary of ours purchased from the Trust, the real estate assets of the Inland Valley Campus of Southwest
Healthcare System located in Wildomar, California, at its fair market value of $79.6 million.
two wholly-owned subsidiaries of ours transferred to the Trust, the real estate assets of the following properties:
o Aiken Regional Medical Center (“Aiken”), located in Aiken, South Carolina (which includes a 211-bed acute care
hospital and a 62-bed behavioral health facility), at its fair-market value of approximately $57.7 million, and;
o Canyon Creek Behavioral Health (“Canyon Creek”), located in Temple, Texas, at its fair-market value of
approximately $26.0 million.
in connection with this transaction, since the fair-market value of Aiken and Canyon Creek, which totaled approximately
$83.7 million in the aggregate, exceeded the $79.6 million fair-market value of the Inland Valley Campus of Southwest
Healthcare System, we received approximately $4.1 million in cash from the Trust. This transaction generated a gain of
approximately $68.4 million for the Trust, our share of which (approximately $4.0 million) is included in our consolidated
statement of income for the year ended December 31, 2021.
Also on December 31, 2021, Aiken and Canyon Creek (as lessees), entered into a master lease and individual property leases
(with the Trust as lessor), as amended, for initial lease terms on each property of approximately twelve years, ending on December 31,
2033. Subject to the terms of the master lease, Aiken and Canyon Creek have the right to renew their leases, at the then current fair
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market rent (as defined in the master lease), for seven, five-year optional renewal terms. The aggregate annual rental during 2022
pursuant to the leases for these two facilities, amounted to approximately $5.7 million ($3.9 million related to Aiken and $1.8 million
related to Canyon Creek). There is no bonus rental component applicable to either of these leases. On each January 1st through 2033,
the annual rental will increase by 2.25% on a cumulative and compounded basis.
As a result of the purchase options within the lease agreements for Aiken and Canyon Creek, the asset purchase and sale
transaction is accounted for as a failed sale leaseback in accordance with U.S. GAAP. We have accounted for the asset exchange and
substitution transaction with the Trust as a financing arrangement and, since we did not derecognize the real property related to Aiken
and Canyon Creek, we will continue to depreciate the assets. Our Consolidated Balance Sheet as of December 31, 2022 and 2021
reflects a financial liability of $80.9 million and $82.4 million, respectively, which is included in debt, for the fair value of real estate
assets that we exchanged as part of the transaction. Our monthly lease payments payable to the Trust will be recorded to interest
expense and as a reduction to the outstanding financial liability. The amount allocated to interest expense is determined using our
incremental borrowing rate and is based on the outstanding financial liability.
The total aggregate rental for leases on the four wholly-owned hospital facilities with the Trust (excluding Clive Behavioral
Health Hospital which is discussed below) was approximately $20.2 million during 2022. Total aggregate rent expense under the
operating leases on three hospital facilities with the Trust (McAllen Medical Center, Wellington Regional Medical Center and Inland
Valley Campus of Southwest Healthcare System) was $17.7 million and $17.1 million during 2021 and 2020, respectively.
Pursuant to the Master Leases by certain subsidiaries of ours and the Trust as described in the table below, dated 1986 and 2021
(“the Master Leases”) which govern the leases of McAllen Medical Center and Wellington Regional Medical Center (each of which is
governed by the Master Lease dated 1986), and Aiken Regional Medical Center and Canyon Creek Behavioral Health (each of which
is governed by the Master Lease dated 2021), we have the option to renew the leases at the lease terms described above and below by
providing notice to the Trust at least 90 days prior to the termination of the then current term. We also have the right to purchase the
respective leased hospitals at their appraised fair market value upon any of the following: (i) at the end of the lease terms or any
renewal terms; (ii) upon one month’s notice should a change of control of the Trust occur, or; (iii) within the time period as specified
in the lease in the event that we provide notice to the Trust of our intent to offer a substitution property/properties in exchange for one
(or more) of the hospital properties leased from the Trust should we be unable to reach an agreement with the Trust on the properties
to be substituted. In addition, we have rights of first refusal to: (i) purchase the respective leased facilities during and for 180 days
after the lease terms at the same price, terms and conditions of any third-party offer, or; (ii) renew the lease on the respective leased
facility at the end of, and for 180 days after, the lease term at the same terms and conditions pursuant to any third-party offer.
In addition, we are the managing, majority member in a joint venture with an unrelated third-party that operates Clive
Behavioral Health, a 100-bed behavioral health care facility located in Clive, Iowa. The real property of this facility, which was
completed and opened in late, 2020, is also leased from the Trust (annual rental of approximately $2.6 million and $2.5 million during
2022 and 2021, respectively) pursuant to the lease terms as provided in the table below. In connection with the lease on this facility,
the joint venture has the right to purchase the leased facility from the Trust at its appraised fair market value upon either of the
following: (i) by providing notice at least 270 days prior to the end of the lease terms or any renewal terms, or; (ii) upon 30 days'
notice anytime within 12 months of a change of control of the Trust (UHS also has this right should the joint venture decline to
exercise its purchase right). Additionally, the joint venture has rights of first offer to purchase the facility prior to any third-party sale.
The table below provides certain details for each of the hospitals leased from the Trust as of January 1, 2023:
Hospital Name
McAllen Medical Center
Wellington Regional Medical Center
Aiken Regional Medical Center/Aurora Pavilion Behavioral
Health Services
Canyon Creek Behavioral Health
Clive Behavioral Health Hospital
Annual
Minimum
Rent
$ 5,485,000
$ 6,477,000
End of Lease Term
December, 2026
December, 2026
Renewal
Term
(years)
$ 3,982,000 December, 2033
$ 1,800,000 December, 2033
December, 2040
$ 2,701,000
5 (a)
5 (b)
35 (c)
35 (c)
50 (d)
(a) We have one 5-year renewal option at existing lease rates (through 2031).
(b) We have one 5-year renewal option at fair market value lease rates (through 2031). Upon the December 31, 2021 expiration of
the lease on Wellington Regional Medical Center, a wholly-owned subsidiary of ours exercised its fair market value renewal
option and renewed the lease for a 5-year term scheduled to expire on December 31, 2026. Effective January 1, 2022, the
annual fair market value lease rate for this hospital is $6.3 million (there is no longer a bonus rental component of the lease
payment). On each January 1st through 2026, the annual rent will increase by 2.50% on a cumulative and compounded basis.
(c) We have seven 5-year renewal options at fair market value lease rates (2034 through 2068). On each January 1st through 2033,
the annual rent will increase by 2.25% on a cumulative and compounded basis.
(d) This facility is operated by a joint venture in which we are the managing, majority member and an unrelated third-party holds a
minority ownership interest. The joint venture has three, 10-year renewal options at computed lease rates as stipulated in the
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lease (2041 through 2070) and two additional, 10-year renewal options at fair market values lease rates (2071 through 2090). In
each January through 2040 (and potentially through 2070 if three, 10-year renewal options are exercised), the annual rental will
increase by 2.75% on a cumulative and compounded basis.
In addition, certain of our subsidiaries are tenants in several medical office buildings (“MOBs”) and two free-standing
emergency departments owned by the Trust or by limited liability companies in which the Trust holds 95% to 100% of the ownership
interest.
In January, 2022, the Trust commenced construction on a new 86,000 rentable square feet multi-tenant MOB that is located on
the campus of Northern Nevada Sierra Medical Center in Reno, Nevada. Northern Nevada Sierra Medical Center, a 158-bed newly
constructed acute care hospital owned and operated by a wholly-owned subsidiary of ours, was completed and opened in the April,
2022. In connection with this MOB, which is expected to be completed and opened during the first quarter of 2023, a ground lease and
a master flex lease was executed between a wholly-owned subsidiary of ours and the Trust, pursuant to the terms of which our
subsidiary will master lease approximately 68% of the rentable square feet of the MOB at an initial minimum rent of $1.3 million
annually. The master flex lease could be reduced during the term if certain conditions are met.
Executive Officers of the Registrant
The executive officers, whose terms will expire at such time as their successors are elected, are as follows:
Name and Age
Marc D. Miller (52)
Alan B. Miller (85)
Steve G. Filton (65)
Matthew J. Peterson (53)
Edward H. Sim (51)
Present Position with the Company
Chief Executive Officer, President and Director
Executive Chairman of the Board
Executive Vice President, Chief Financial Officer and Secretary
Executive Vice President, President of Behavioral Health Division
Executive Vice President, President of Acute Care Division
Mr. Marc D. Miller was appointed Chief Executive Officer and President effective January 1, 2021. He has served as President
since May, 2009 and prior thereto served as Senior Vice President and co-head of our Acute Care Hospitals since 2007. He was
elected a Director in May, 2006 and Vice President in 2005. He has served in various capacities related to our acute care division since
2000. He was elected to the Board of Trustees of Universal Health Realty Income Trust in December, 2008. In August, 2015, he was
appointed to the Board of Directors of Premier, Inc., a publicly traded healthcare performance improvement alliance. See Note 9 to
the Consolidated Financial Statements-Relationship with Universal Health Realty Income Trust and Other Related Party Transactions
for additional disclosure regarding the Company’s group purchasing organization agreement with Premier, Inc. Marc D. Miller is the
son of Alan B. Miller, our Executive Chairman of the Board.
Mr. Alan B. Miller was appointed Executive Chairman of the Board effective January 1, 2021. He had been Chairman of the
Board and Chief Executive Officer since the Company’s inception and also served as President from inception until May, 2009. Prior
thereto, he was President, Chairman of the Board and Chief Executive Officer of American Medicorp, Inc. He currently serves as
Chairman of the Board, Chief Executive Officer and President of Universal Health Realty Income Trust. He is the father of Marc D.
Miller, our Chief Executive Officer, President and Director.
Mr. Filton was elected Executive Vice President in 2017 and continues to serve as Chief Financial Officer since his appointment
in 2003. He has also served as Secretary since 1999. He had served as Senior Vice President since 2003, as Vice President and
Controller since 1991, and as Director of Corporate Accounting since 1985.
Mr. Peterson’s employment with us commenced in September, 2019 as Executive Vice President and President of our
Behavioral Health Division. He was formerly employed at UnitedHealth Group for 11 years serving in various capacities including
Chief Operating Officer for OptumGovernment, a health services and technology company, as well as various other Senior Vice
President/Vice President roles. In addition to his civilian business career, Mr. Peterson also serves in the Air National Guard
("ANG"), U.S. Airforce, and was recently promoted to Brigadier General. He has also served for over 25 years with the ANG as a
Healthcare Executive/Medical Service Corps Officer and has held numerous leadership roles.
Mr. Sim's employment with us commenced in December, 2022 as Executive Vice President and President of our Acute Care
Division. He was formerly employed as Chief Operating Officer at Centura Health, since 2017. Prior to joining Centura Health, Mr.
Sim served in senior leadership roles of increasing responsibility for 11 years at Baptist Health.
ITEM 1A. Risk Factors
We are subject to numerous known and unknown risks, many of which are described below and elsewhere in this Annual
Report. Any of the events described below could have a material adverse effect on our business, financial condition and results of
operations. Additional risks and uncertainties that we are not aware of, or that we currently deem to be immaterial, could also impact
our business and results of operations.
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Risks Related to Business Operations
A significant portion of our revenue is produced by facilities located in Texas, Nevada and California.
Texas: We own 7 inpatient acute care hospitals, 12 free-standing emergency departments and 21 inpatient behavioral healthcare
facilities as listed in Item 2. Properties. On a combined basis, these facilities contributed 17% and 16% of our consolidated net
revenues during 2022 and 2021, respectively. On a combined basis, after deducting an allocation for corporate overhead expense,
these facilities generated 27% in 2022 and 13% in 2021, of our income from operations after net income attributable to noncontrolling
interest.
Nevada: We own 10 inpatient acute care hospitals, 5 free-standing emergency departments, 1 acute outpatient center and 3
inpatient behavioral healthcare facilities as listed in Item 2. Properties. On a combined basis, these facilities contributed 17% and 18%
of our consolidated net revenues during 2022 and 2021, respectively. On a combined basis, after deducting an allocation for corporate
overhead expense, these facilities generated 14% in 2022 and 24% in 2021, of our income from operations after net income
attributable to noncontrolling interest. Excluding the impact of the $57.6 million provision for asset impairment recorded during 2022,
as discussed in Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations - Provision for Asset
Impairments, after deducting an allocation for corporate overhead expense, these facilities generated 18% of our income from
operations after net income attributable to noncontrolling interest during 2022.
California: We own 5 inpatient acute care hospitals, 2 acute outpatient centers, 8 inpatient behavioral healthcare facilities and 3
behavioral healthcare outpatient facilities as listed in Item 2. Properties. On a combined basis, these facilities contributed 11% of our
consolidated net revenues during each of 2022 and 2021. On a combined basis, after deducting an allocation for corporate overhead
expense, these facilities generated 15% in 2022 and 14% in 2021, of our income from operations after net income attributable to
noncontrolling interest.
Our revenues and results of operations are significantly affected by payments received from the government and other third party
payers.
We derive a significant portion of our revenue from third-party payers, including the Medicare and Medicaid programs.
Changes in these government programs in recent years have resulted in limitations on reimbursement and, in some cases, reduced
levels of reimbursement for healthcare services. Payments from federal and state government programs are subject to statutory and
regulatory changes, administrative rulings, interpretations and determinations, requirements for utilization review, and federal and
state funding restrictions, all of which could materially increase or decrease program payments, as well as affect the cost of providing
service to patients and the timing of payments to facilities. We are unable to predict the effect of recent and future policy changes on
our operations. In addition, the uncertainty and fiscal pressures placed upon federal and state governments as a result of, among other
things, deterioration in general economic conditions and the funding requirements from the federal healthcare reform legislation, may
affect the availability of taxpayer funds for Medicare and Medicaid programs. In addition, the vast majority of the net revenues
generated at our behavioral health facilities located in the United Kingdom are derived from governmental payers. If the rates paid or
the scope of services covered by governmental payers in the United States or United Kingdom are reduced, there could be a material
adverse effect on our business, financial position and results of operations.
We receive annual Medicaid revenues of approximately $100 million, or greater, from each of Texas, California, Nevada,
Illinois, Pennsylvania, Washington, D.C., Florida, Kentucky and Massachusetts. We also receive Medicaid disproportionate share
hospital payments from certain states including, most significantly, Texas. We are therefore particularly sensitive to potential
reductions in Medicaid and other state-based revenue programs as well as regulatory, economic, environmental and competitive
changes in those states.
In addition to changes in government reimbursement programs, our ability to negotiate favorable contracts with private payers,
including managed care organizations, significantly affects the revenues and operating results of our hospitals. Private payers,
including managed care organizations, increasingly are demanding that we accept lower rates of payment.
We expect continued third-party efforts to aggressively manage reimbursement levels and cost controls. Reductions in
reimbursement amounts received from third-party payers could have a material adverse effect on our financial position and our results
of operations.
If we are not able to provide high quality medical care at a reasonable price, patients may choose to receive their health care from
our competitors.
In recent years, the number of quality measures that hospitals are required to report publicly has increased. Centers for Medicare
and Medicaid Services (“CMS”) publishes performance data related to quality measures and data on patient satisfaction surveys that
hospitals submit in connection with the Medicare program. Federal law provides for the future expansion of the number of quality
measures that must be reported. Additionally, the Patient Protection and Affordable Care Act (the “Legislation”) requires all hospitals
to annually establish, update and make public a list of their standard charges for products and services. Also, the No Surprises Act,
adopted as part of the Consolidated Appropriations Act, 2021 (“CAA”), creates additional price transparency requirements beginning
January 1, 2022, including requiring providers to send health plans of insured patients and uninsured patients a good faith estimate of
the expected charges and diagnostic codes prior to the scheduled date of the service or item. If any of our hospitals achieve poor
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results on the quality measures or patient satisfaction surveys (or results that are lower than our competitors) or if our standard charges
are higher than our competitors, our patient volume could decline because patients may elect to use competing hospitals or other
health care providers that have better metrics and pricing. This circumstance could harm our business and results of operations.
An increase in uninsured and underinsured patients in our acute care facilities or the deterioration in the collectability of the
accounts of such patients could harm our results of operations.
Collection of receivables from third-party payers and patients is our primary source of cash and is critical to our operating
performance. Our primary collection risks relate to uninsured patients and the portion of the bill that is the patient’s responsibility,
which primarily includes co-payments and deductibles. However, we also have substantial receivables due to us from certain state-
based funding programs. We estimate our provisions for doubtful accounts based on general factors such as payer mix, the agings of
the receivables, historical collection experience and assessment of probability of future collections. We routinely review accounts
receivable balances in conjunction with these factors and other economic conditions that might ultimately affect the collectability of
the patient accounts and make adjustments to our allowances as warranted. Significant changes in business office operations, payer
mix, economic conditions or trends in federal and state governmental health coverage could affect our collection of accounts
receivable, cash flow and results of operations. If we experience unexpected increases in the growth of uninsured and underinsured
patients or in bad debt expenses, our results of operations will be harmed.
Our hospitals face competition for patients from other hospitals and health care providers.
The healthcare industry is highly competitive, and competition among hospitals, and other healthcare providers for patients and
physicians has intensified in recent years. In all of the geographical areas in which we operate, there are other facilities that provide
services comparable to those offered by our facilities. Some of our competitors include hospitals that are owned by tax-supported
governmental agencies or by nonprofit corporations and may be supported by endowments and charitable contributions and exempt
from property, sales and income taxes. Such exemptions and support are not available to us.
In some markets, certain of our competitors may have greater financial resources, be better equipped and offer a broader range
of services than we offer. The number of inpatient facilities, as well as outpatient surgical and diagnostic centers, many of which are
fully or partially owned by physicians, in the geographic areas in which we operate has increased significantly. As a result, most of
our hospitals operate in an increasingly competitive environment.
We also operate health care facilities in the United Kingdom where the National Health Service (the “NHS”) is the principal
provider of healthcare services. In addition to the NHS, we face competition in the United Kingdom from independent sector
providers and other publicly funded entities for patients.
If our competitors are better able to attract patients, recruit physicians and other healthcare professionals, expand services or
obtain favorable managed care contracts at their facilities, we may experience a decline in patient volume and our business may be
harmed.
Our performance depends on our ability to recruit and retain quality physicians.
Typically, physicians are responsible for making hospital admissions decisions and for directing the course of patient treatment.
As a result, the success and competitive advantage of our hospitals depends, in part, on the number and quality of the physicians on
the medical staffs of our hospitals, the admitting practices of those physicians and our maintenance of good relations with those
physicians. Physicians generally are not employees of our hospitals, and, in a number of our markets, physicians have admitting
privileges at other hospitals in addition to our hospitals. They may terminate their affiliation with us at any time. If we are unable to
maintain high ethical and professional standards, adequate support personnel and technologically advanced equipment and facilities
that meet the needs of those physicians, they may be discouraged from referring patients to our facilities and our results of operations
may decline.
It may become difficult for us to attract and retain an adequate number of physicians to practice in certain of the non-urban
communities in which our hospitals are located. Our failure to recruit physicians to these communities or the loss of physicians in
these communities could make it more difficult to attract patients to our hospitals and thereby may have a material adverse effect on
our business, financial condition and results of operations.
Generally, the top ten attending physicians within each of our facilities represent a large share of our inpatient revenues and
admissions. The loss of one or more of these physicians, even if temporary, could cause a material reduction in our revenues, which
could take significant time to replace given the difficulty and cost associated with recruiting and retaining physicians.
If we do not continually enhance our hospitals with the most recent technological advances in diagnostic and surgical equipment,
our ability to maintain and expand our markets will be adversely affected.
The technology used in medical equipment and related devices is constantly evolving and, as a result, manufacturers and
distributors continue to offer new and upgraded products to health care providers. To compete effectively, we must continually assess
our equipment needs and upgrade when significant technological advances occur. If our facilities do not stay current with
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technological advances in the health care industry, patients may seek treatment from other providers and/or physicians may refer their
patients to alternate sources, which could adversely affect our results of operations and harm our business.
Our performance depends on our ability to attract and retain qualified nurses and medical support staff and we face competition
for staffing that may increase our labor costs and harm our results of operations.
We depend on the efforts, abilities, and experience of our medical support personnel, including our nurses, pharmacists and lab
technicians and other healthcare professionals. We compete with other healthcare providers in recruiting and retaining qualified
hospital management, nurses and other medical personnel.
The nationwide shortage of nurses and other clinical staff and support personnel has been a significant operating issue facing us
and other healthcare providers. In particular, like others in the healthcare industry, we continue to experience a shortage of nurses and
other clinical staff and support personnel at our acute care and behavioral health care hospitals in many geographic areas, which
shortage has been exacerbated by the COVID-19 pandemic. We are treating patients with COVID-19 in our facilities and, in some
areas, the increased demand for care is putting a strain on our resources and staff, which has required us to utilize higher-cost
temporary labor and pay premiums above standard compensation for essential workers. The length and extent of the disruptions
caused by the COVID-19 pandemic are currently unknown; however, we expect such disruptions to continue for the foreseeable
future. This staffing shortage may require us to further enhance wages and benefits to recruit and retain nurses and other clinical staff
and support personnel or require us to hire expensive temporary personnel. To the extent we cannot maintain sufficient staffing levels
at our hospitals, we may be required to limit the acute and behavioral health care services provided at certain of our hospitals which
would have a corresponding adverse effect on our net revenues. In addition, in some markets like California, there are requirements to
maintain specified nurse-staffing levels which could adversely affect our net revenues to the extent we cannot meet those levels. If
these states increase mandatory nurse-staffing ratios or additional states in which we operate adopt mandatory nurse-staffing ratios,
such changes could significantly affect labor costs and have an adverse impact on revenues if we are required to limit admissions in
order to meet the required ratios.
We cannot predict the degree to which we will be affected by the future availability or cost of attracting and retaining talented
medical support staff. If our general labor and related expenses increase, we may not be able to raise our rates correspondingly. Our
failure to either recruit and retain qualified hospital management, nurses and other medical support personnel or control our labor costs
could harm our results of operations.
Increased labor union activity is another factor that could adversely affect our labor costs. Union organizing activities and
certain potential changes in federal labor laws and regulations could increase the likelihood of employee unionization in the future, to
the extent a greater portion of our employee base unionized, it is possible our labor costs could increase materially.
The failure of certain employers, or the closure of certain facilities, could have a disproportionate impact on our hospitals.
The economies in the communities in which our hospitals operate are often dependent on a small number of large employers.
Those employers often provide income and health insurance for a disproportionately large number of community residents who may
depend on our hospitals and other health care facilities for their care. The failure of one or more large employer or the closure or
substantial reduction in the number of individuals employed at facilities located in or near the communities where our hospitals
operate, could cause affected employees to move elsewhere to seek employment or lose insurance coverage that was otherwise
available to them. The occurrence of these events could adversely affect our revenue and results of operations, thereby harming our
business.
The trend toward value-based purchasing may negatively impact our revenues.
We believe that value-based purchasing initiatives of both governmental and private payers tying financial incentives to quality
and efficiency of care will increasingly 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. The Legislation contains a number of provisions
intended to promote value-based purchasing in federal healthcare programs. Medicare now requires providers to report certain quality
measures in order to receive full reimbursement increases for inpatient and outpatient procedures that were previously awarded
automatically. In addition, 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 unless the conditions
were present at admission. Beginning in federal fiscal year 2015, hospitals that rank in the worst 25% of all hospitals nationally for
hospital acquired conditions in the previous year were subject to reduced Medicare reimbursements. The Legislation also prohibits the
use of federal funds under the Medicaid program to reimburse providers for treating certain provider-preventable conditions.
There is a trend among private payers toward value-based purchasing of healthcare services, as well. Many large commercial
payers require hospitals to report quality data, and several of these payers will not reimburse hospitals for certain preventable adverse
events. We expect value-based purchasing programs, including programs that condition reimbursement on patient outcome measures,
to become more common and to involve a higher percentage of reimbursement amounts. We are unable at this time to predict how this
trend will affect our results of operations, but it could negatively impact our revenues if we are unable to meet quality standards
established by both governmental and private payers.
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Controls designed to reduce inpatient services and increasing rates of “denials” may reduce our revenues.
Controls imposed by third-party payers designed to reduce admissions and lengths of stay, commonly referred to as “utilization
review,” have affected and are expected to continue to affect our facilities. Utilization review entails the review of the admission and
course of treatment of a patient by managed care plans. Inpatient utilization, average lengths of stay and occupancy rates continue to
be negatively affected by payer-required preadmission authorization and utilization review and by payer pressure to maximize
outpatient and alternative healthcare delivery services for less acutely ill patients. Efforts to impose more stringent cost controls are
expected to continue. In addition, we have been experiencing increasing rates of denied claims (“denials”) from managed care payers
which have reduced our net revenues and increased our operating costs as we devote additional resources to enhanced documentation
and collection efforts. Although we cannot predict the effect these factors will have on our operations, significant limits on the scope
of services reimbursed, and reimbursements withheld due to denials, could have a material adverse effect on our business, financial
position and results of operations.
We depend heavily on key management personnel and the departure of one or more of our key executives or a significant portion
of our local hospital management personnel could harm our business.
The expertise and efforts of our senior executives and key members of our local hospital management personnel are critical to
the success of our business. The loss of the services of one or more of our senior executives or of a significant portion of our local
hospital management personnel could significantly undermine our management expertise and our ability to provide efficient, quality
healthcare services at our facilities, which could harm our business. Effective January 1, 2021, Mr. Alan B. Miller, our Founder,
Chairman and Chief Executive Officer stepped down as Chief Executive Officer and Mr. Marc D. Miller, our former President, was
appointed and has been serving as our Chief Executive Officer. Mr. Alan B. Miller continues to serve in his current role as Executive
Chairman of our Board of Directors in addition to retaining certain other management responsibilities within our Company.
Risks Related to the COVID-19 Pandemic
COVID-19 and other pandemics, epidemics, or public health threats may adversely affect our business, results of operations and
financial condition.
The impact of the COVID-19 pandemic, which began during the second half of March, 2020, has had a material effect on our
operations and financial results since that time. The length and extent of the disruptions caused by the COVID-19 pandemic are
currently unknown; however, we expect such disruptions to continue into the future. Since the future volumes and severity of COVID-
19 patients remain highly uncertain and subject to change, including potential increases in future COVID-19 patient volumes caused
by new variants of the virus, as well as related pressures on staffing and wage rates, we are not able to fully quantify the impact that
these factors will have on our future financial results. However, developments related to the COVID-19 pandemic could continue to
materially affect our financial performance.
The healthcare industry is labor intensive and salaries, wages and benefits are subject to inflationary pressures, as are supplies
expense and other operating expenses. Our ability to pass on increased costs associated with providing healthcare to Medicare and
Medicaid patients is limited due to various federal, state and local laws which, in certain circumstances, limit our ability to increase
prices.
In addition, the nationwide shortage of nurses and other clinical staff and support personnel has been a significant operating
issue facing us and other healthcare providers. Like others in the healthcare industry, we continue to experience a shortage of nurses
and other clinical staff and support personnel at our acute care and behavioral health care hospitals in many geographic areas. In some
areas, the labor scarcity is putting a strain on our resources and staff, which has required us to utilize higher-cost temporary labor and
pay premiums above standard compensation for essential workers. This staffing shortage has required us to hire expensive temporary
personnel and/or enhance wages and benefits to recruit and retain nurses and other clinical staff and support personnel. At certain
facilities, particularly within our behavioral health care segment, we have been unable to fill all vacant positions and, consequently,
have been required to limit patient volumes. These factors, which had a material unfavorable impact on our results of operations
during 2022, have been moderating to a certain degree but are expected to continue to have an unfavorable material impact on our
results of operations for the foreseeable future.
The COVID-19 pandemic has led to a constrained supply environment which could result in higher cost to procure, and
potential unavailability of, critical personal protection equipment, pharmaceuticals and medical supplies. Should a supply disruption
result in the inability to obtain especially high margin drugs and compound components necessary for patient care, our consolidated
financial statements could be negatively impacted.
In addition, CMS issued an Interim Final Rule (“IFR”) effective November 5, 2021 mandating COVID-19 vaccinations for all
applicable staff at all Medicare and Medicaid certified facilities. Under the IFR, facilities covered by this regulation must establish a
policy ensuring all eligible staff have received the first dose of a two-dose COVID-19 vaccine or a one-dose COVID-19 vaccine prior
to providing any care, treatment, or other services by December 5, 2021. All eligible staff must have received the necessary shots to be
fully vaccinated – either two doses of Pfizer or Moderna or one dose of Johnson & Johnson – by January 4, 2022. The regulation also
provides for exemptions based on recognized medical conditions or religious beliefs, observances, or practices. Under the IFR,
facilities must develop a similar process or plan for permitting exemptions in alignment with federal law. If facilities fail to comply
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with the IFR by the deadlines established, they are subject to potential termination from the Medicare and Medicaid program for non-
compliance. In addition, the Occupational Safety and Health Administration also issued an Emergency Temporary Standard (“ETS”)
requiring all businesses with 100 or more employees to be vaccinated by January 4, 2022. Pursuant to the ETS, those employees not
vaccinated by that date will need to show a negative COVID-19 test weekly and wear a face mask in the workplace. Legal challenges
to these rules ensued, and the U.S. Supreme Court upheld a stay of the ETS requirements but permitted the IFR vaccination
requirements to go into effect pending additional litigation. CMS has indicated that hospitals in states not involved in the Supreme
Court litigation are expected to be in compliance with IFR vaccination requirements consistent with the dates referenced above.
Hospitals in states that were involved in the Supreme Court litigation were required to come into compliance with first dose
requirements by February 13, 2022 and second dose requirements by March 15, 2022. Hospitals in Texas were required to come into
compliance with the first dose requirements by February 19, 2022 and the second dose requirements by March 21, 2022. We cannot
predict at this time the potential viability or impact of any such additional litigation. Implementation of these rules could have an
impact on staffing at our facilities for those employees that are not vaccinated in accordance with IFR and ETS requirements, and
associated loss of revenues and increased costs resulting from staffing issues could have a material adverse effect on our financial
results.
The extent to which the COVID-19 pandemic and measures taken in response thereto impact our business, results of operations
and financial condition will depend on numerous factors and future developments, most of which are beyond our control or ability to
predict. The ultimate impact of the COVID-19 pandemic, including the future volumes and severity of COVID-19 patients caused by
new variants of the virus, as well as related pressures on staffing and wage rates and the strained supply environment, is highly
uncertain and subject to change. We are not able to fully quantify the impact that these factors will have on our future financial results,
but expect developments related to the COVID-19 pandemic to materially affect our financial performance for the foreseeable future.
Even after the COVID-19 pandemic has subsided, we may continue to experience materially adverse impacts on our financial
condition and our results of operations as a result of its macroeconomic impact, including any recession that has occurred or may
occur in the future. If general economic conditions, including inflation, deteriorate or remain volatile or uncertain for an extended
period of time, our liquidity and ability to repay our outstanding debt may be harmed and the trading price of our common stock could
decline. These factors may affect the availability, terms or timing on which we may obtain any additional funding. There can be no
assurance that we will be able to raise additional funds on terms acceptable to us, if at all.
Despite these measures, there have been waves of escalated COVID-19 cases at various times, including the third and fourth
quarters of 2021 and continuing into the first quarter of 2022, in many states in the U.S., including many states in which we operate
hospitals. Recently, COVID-19 vaccinations have begun to be administered and while we expect the administration of vaccines will
assist in easing the number of COVID-19 patients, the pace at which this is likely to occur is very difficult to predict. The extent to
which the COVID-19 pandemic and measures taken in response thereto impact our business, results of operations and financial
condition will depend on numerous factors and future developments, most of which are beyond our control or ability to predict. The
ultimate impact of the COVID-19 pandemic is highly uncertain and subject to change. We are not able to fully quantify the impact
that these factors will have on our future financial results, but expect developments related to the COVID-19 pandemic to materially
affect our financial performance for the foreseeable future. Even after the COVID-19 pandemic has subsided, we may continue to
experience materially adverse impacts on our financial condition and our results of operations as a result of its macroeconomic impact,
including any recession that has occurred or may occur in the future.
There is a high degree of uncertainty regarding the implementation and impact of the Coronavirus Aid, Relief, and Economic
Security Act (the “CARES Act”) and the Paycheck Protection Program and Health Care Enhancement Act (“PPPHCE Act”).
The Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), a stimulus package signed into law on March 27,
2020, authorizes $100 billion in grant funding to hospitals and other healthcare providers to be distributed through the Public Health
and Social Services Emergency Fund (the “PHSSEF”). These funds are not required to be repaid provided the recipients attest to and
comply with certain terms and conditions, including limitations on balance billing and not using PHSSEF funds to reimburse expenses
or losses that other sources are obligated to reimburse. However, since the expenses and losses will be ultimately measured over the
life of the COVID-19 pandemic, potential retrospective unfavorable adjustments in future periods, of funds recorded as revenues in
prior periods, could occur. The U.S. Department of Health and Human Services (“HHS”) initially distributed $30 billion of this
funding based on each provider’s share of total Medicare fee-for-service reimbursement in 2019. Subsequently, HHS distributed $50
billion in CARES Act funding (including the $30 billion already distributed) proportional to providers’ share of 2018 net patient
revenue. We have received payments from these initial distributions of the PHSSEF as disclosed herein. HHS has indicated that
distributions of the remaining $50 billion will be targeted primarily to hospitals in COVID-19 high impact areas, to rural providers,
safety net hospitals and certain Medicaid providers and to reimburse providers for COVID-19-related treatment of uninsured patients.
We have received payments from these targeted distributions of the PHSSEF, as disclosed herein. The CARES Act also makes other
forms of financial assistance available to healthcare providers, including through Medicare and Medicaid payment adjustments and an
expansion of the Medicare Accelerated and Advance Payment Program, which makes available accelerated payments of Medicare
funds in order to increase cash flow to providers. On April 26, 2020, CMS announced it was reevaluating and temporarily suspending
the Accelerated and Advance Payment Program in light of the availability of the PHSSEF and the significant funds available through
other programs. We have received accelerated payments under this program as disclosed herein.
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The Paycheck Protection Program and Health Care Enhancement Act (the “PPPHCE Act”), a stimulus package signed into law
on April 24, 2020, includes additional emergency appropriations for COVID-19 response, including $75 billion to be distributed to
eligible providers through the PHSSEF. Recipients will not be required to repay the government for funds received, provided they
comply with HHS-defined terms and conditions. A third phase of PHSSEF allocations was recently announced, under which $24.5
billion was made available for providers who previously received, rejected or accepted PHSSEF payments. Applicants that have not
yet received PHSSEF payments of 2 percent of patient revenue will receive a payment that, when combined with prior payments (if
any), equals 2 percent of patient care revenue. Providers that have already received payments of approximately 2 percent of annual
revenue from patient care can submit more information and may be eligible for an additional payment. On December 27, 2020, the
Consolidated Appropriations Act, 2021 (“CAA”) was signed into law. The CAA appropriated an additional $3 billion to the PHSSEF,
codified flexibility for providers to calculate lost revenues and permitted parent organizations to allocate PHSSEF targeted
distributions to subsidiary organizations. The CAA also provides that not less than 85 percent of the unobligated PHSSEF amounts
and any future funds recovered from health care providers should be used for additional distributions that consider financial losses and
changes in operating expenses in the third or fourth quarters of 2020 and the first quarter of 2021 that are attributable to the
coronavirus. The CAA provided additional funding for testing, contact tracing and vaccine administration. Providers receiving
payments were required to sign terms and conditions regarding utilization of the payments. Any provider receiving funds in excess of
$10,000 in the aggregate will be required to report data elements to HHS detailing utilization of the payments. Providers will report
healthcare related expenses attributable to COVID-19 that have not been reimbursed by another source, which may include general
and administrative or healthcare related operating expenses. Funds may also be applied to lost revenues, represented as a negative
change in year-over-year net patient care operating income. All such fund payments must be expended by June 30, 2021.
HHS had adopted certain reimbursement policies and regulatory flexibilities favorable to providers during the Public Health
Emergency (“PHE”) declared in response to the COVID-19 pandemic. HHS has published guidance indicating its intent for the PHE
to expire on May 11, 2023. The end of the PHE status will result in the conclusion of those policies over various designated
timeframes. We cannot predict whether the loss of any such favorable conditions available to providers during the declared PHE will
ultimately have a negative financial impact on us.
There is a high degree of uncertainty surrounding the implementation of the CARES Act and the PPPHCE Act, and the federal
government may consider additional stimulus and relief efforts, but we are unable to predict whether additional stimulus measures will
be enacted or their impact. There can be no assurance as to the total amount of financial and other types of assistance we will receive
under the CARES Act and the PPPHCE Act, and it is difficult to predict the impact of such legislation on our operations or how they
will affect operations of our competitors. Moreover, we are unable to assess the extent to which anticipated negative impacts on us
arising from the COVID-19 pandemic will be offset by amounts or benefits received or to be received under the CARES Act and the
PPPHCE Act.
Risks Related to the Regulatory Environment
Reductions or changes in Medicare and Medicaid funding could have a material adverse effect on our future results of operations.
The Budget Control Act of 2011 (the “Budget Control Act”) mandated significant reductions in federal spending for fiscal years
2012-2021, including a reduction of 2% on all Medicare payments during this period. Subsequent legislation enacted by Congress
eliminated the 2% reduction through 2021 but extended these reductions through 2030 in exchange. The payment reduction
suspension was extended through March 31, 2022, with a 1% payment reduction from then until June 30, 2022 and the full 2%
payment reduction thereafter. The most recent legislation extended these reductions through 2032. Please see Item 7. Management’s
Discussion and Analysis of Financial Condition and Results of Operations, Sources of Revenue-Medicare, for additional disclosure.
Beginning in 2024 and continuing through 2027, the Medicaid disproportionate share hospital (“DSH”) allotment to the states
from federal funds will be reduced. Such reductions have been delayed several times, most recently under the CAA, which further
delays the DSH reductions through 2024. During the reduction period, state Medicaid DSH allotments from federal funds will be
reduced by $8 billion annually. Reductions are imposed on states based on percentage of uninsured individuals, Medicaid utilization
and uncompensated care.
We are subject to uncertainties regarding health care reform.
On March 23, 2010, President Obama signed into law the Legislation. Two primary goals of the Legislation are to provide for
increased access to coverage for healthcare and to reduce healthcare-related expenses.
Although it was expected that as a result of the Legislation there would be a reduction in uninsured patients, which would
reduce our expense from uncollectible accounts receivable, the Legislation makes a number of other changes to Medicare and
Medicaid which we believe may have an adverse impact on us. It has been projected that the Legislation will result in a net reduction
in Medicare and Medicaid payments to hospitals totaling $155 billion over 10 years. The Legislation revises reimbursement under the
Medicare and Medicaid programs to emphasize the efficient delivery of high quality care and contains a number of incentives and
penalties under these programs to achieve these goals. The Legislation implements a value-based purchasing program, which will
reward the delivery of efficient care. Conversely, certain facilities will receive reduced reimbursement for failing to meet quality
parameters; such hospitals will include those with excessive readmission or hospital-acquired condition rates. It remains unclear what
portions of that legislation may remain, or what any replacement or alternative programs may be created by future legislation.
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A 2012 U.S. Supreme Court ruling limited the federal government’s ability to expand health insurance coverage by holding
unconstitutional sections of the Legislation that sought to withdraw federal funding for state noncompliance with certain Medicaid
coverage requirements. Pursuant to that decision, the federal government may not penalize states that choose not to participate in the
Medicaid expansion program by reducing their existing Medicaid funding. Therefore, states can choose to accept or not to participate
without risking the loss of federal Medicaid funding. As a result, many states, including Texas, have not expanded their Medicaid
programs without the threat of loss of federal funding. CMS had granted section 1115 demonstration waivers providing for work and
community engagement requirements for certain Medicaid eligible individuals. However, most recently, the Biden Administration
has expressed disfavor with Medicaid program work requirements, with the understanding that such requirements pose a substantial
risk that many potential demonstration beneficiaries would be prevented from initially enrolling in coverage or that the requirements
would lead to a sizable number of eligibility suspensions and eventual disenrollments among beneficiaries who are initially able to
enroll. Accordingly, CMS has recently revoked certain State Medicaid program approvals including work requirements.
The various provisions in the Legislation that directly or indirectly affect Medicare and Medicaid reimbursement are scheduled
to take effect over a number of years. The impact of the Legislation on healthcare providers will be subject to implementing
regulations, interpretive guidance and possible future legislation or legal challenges. Certain Legislation provisions, such as that
creating the Medicare Shared Savings Program, create uncertainty in how healthcare may be reimbursed by federal programs in the
future. Thus, we cannot predict the impact of the Legislation on our future reimbursement at this time and we can provide no
assurance that the Legislation will not have a material adverse effect on our future results of operations.
The Legislation also contained provisions aimed at reducing fraud and abuse in healthcare. The Legislation amended several
existing laws, including the federal Anti-Kickback Statute and the False Claims Act, making it easier for government agencies and
private plaintiffs to prevail in lawsuits brought against healthcare providers. While Congress had previously revised the intent
requirement of the Anti-Kickback Statute to provide that a person is not required to “have actual knowledge or specific intent to
commit a violation of” the Anti-Kickback Statute in order to be found in violation of such law, the Legislation also provides that any
claims for items or services that violate the Anti-Kickback Statute are also considered false claims for purposes of the federal civil
False Claims Act. The Legislation provides that a healthcare provider that retains an overpayment in excess of 60 days is subject to the
federal civil False Claims Act, although certain final regulations implementing this statutory requirement remain pending. The
Legislation also expands the Recovery Audit Contractor program to Medicaid. These amendments also make it easier for severe fines
and penalties to be imposed on healthcare providers that violate applicable laws and regulations.
We have partnered with local physicians in the ownership of certain of our facilities. These investments have been permitted
under an exception to the physician self-referral law. The Legislation permits existing physician investments in a hospital to continue
under a “grandfather” clause if the arrangement satisfies certain requirements and restrictions, but physicians are prohibited from
increasing the aggregate percentage of their ownership in the hospital. The Legislation also imposes certain compliance and disclosure
requirements upon existing physician-owned hospitals and restricts the ability of physician-owned hospitals to expand the capacity of
their facilities. As discussed below, should the Legislation be repealed in its entirety, this aspect of the Legislation would also be
repealed restoring physician ownership of hospitals and expansion right to its position and practice as it existed prior to the
Legislation.
The impact of the Legislation on each of our hospitals may vary. Because Legislation provisions are effective at various times
over the next several years, we anticipate that many of the provisions in the Legislation may be subject to further revision. Initiatives
to repeal the Legislation, in whole or in part, to delay elements of implementation or funding, and to offer amendments or supplements
to modify its provisions have been persistent. The ultimate outcomes of legislative attempts to repeal or amend the Legislation and
legal challenges to the Legislation are unknown. Legislation has already been enacted that has eliminated the penalty for failing to
maintain health coverage that was part of the original Legislation. In addition, Congress has considered legislation that would, if
enacted, in material part: (i) eliminate the large employer mandate to obtain or provide health insurance coverage, respectively; (ii)
permit insurers to impose a surcharge up to 30 percent on individuals who go uninsured for more than two months and then purchase
coverage; (iii) provide tax credits towards the purchase of health insurance, with a phase-out of tax credits accordingly to income
level; (iv) expand health savings accounts; (v) impose a per capita cap on federal funding of state Medicaid programs, or, if elected by
a state, transition federal funding to block grants, and; (vi) permit states to seek a waiver of certain federal requirements that would
allow such state to define essential health benefits differently from federal standards and that would allow certain commercial health
plans to take health status, including pre-existing conditions, into account in setting premiums.
It remains unclear what portions of the Legislation may remain, or whether any replacement or alternative programs may be
created by any future legislation. Any such future repeal or replacement may have significant impact on the reimbursement for
healthcare services generally, and may create reimbursement for services competing with the services offered by our hospitals.
Accordingly, there can be no assurance that the adoption of any future federal or state healthcare reform legislation will not have a
negative financial impact on our hospitals, including their ability to compete with alternative healthcare services funded by such
potential legislation, or for our hospitals to receive payment for services.
While attempts to repeal the entirety of the Legislation have not been successful to date, a key provision of the Legislation was
repealed as part of the Tax Cuts and Jobs Act and on December 14, 2018, a Texas Federal District Court Judge declared the
Legislation unconstitutional, reasoning that the individual mandate tax penalty was essential to and not severable from the remainder
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of the Legislation. The case was appealed to the U.S. Supreme Court which ultimately held in California v. Texas that the plaintiffs
lacked standing to challenge the Legislation’s requirement to obtain minimum essential health insurance coverage, or the individual
mandate. The Court dismissed the case without specifically ruling on the constitutionality of the Legislation. On September 7, 2022,
the same Texas Federal District Court judge, in the case of Braidwood Management v. Becerra, ruled that the requirement that certain
health plans cover services with an “A” or “B” recommendation from the U.S. Preventive Services Task Force without cost sharing
violates the Appointments Clause of the U.S. Constitution and that the coverage of certain HIV prevention medication violates the
Religious Freedom Restoration Act. We are unable to predict the outcome of this litigation or its potential impact at this time. While
the results of the 2020 elections potentially reduce the risk of the Legislation being eliminated in whole or in part, the continued
uncertainties regarding implementation of the Legislation create unpredictability for the strategic and business planning efforts of
health care providers, which in itself constitutes a risk.
On March 11, 2021, President Biden signed the American Rescue Plan (“ARP”) into law. The ARP extends eligibility for
Legislation health insurance subsidies to people buying their own health coverage on the Marketplace who have household incomes
above 400% of the federal poverty level. ARP also increased the amount of financial assistance for people at lower incomes who were
already eligible under the Legislation. The Inflation Reduction Act of 2022 (“IRA”) was passed on August 16, 2022, which among
other things, allows for CMS to negotiate prices for certain single-source drugs and biologics reimbursed under Medicare Part B and
Part D, beginning with 10 high-cost drugs paid for by Medicare Part D starting in 2026, followed by 15 Part D drugs in 2027, 15 Part
B or Part D drugs in 2028, and 20 Part B or Part D drugs in 2029 and beyond. The IRA also continued the expanded subsidies for
individuals to obtain private health insurance under the Legislation through 2025. The effect of IRA on hospitals and the healthcare
industry in general is not yet known.
Under the Legislation, hospitals are required to make public a list of their standard charges, and effective January 1, 2019, CMS
has required that this disclosure be in machine-readable format and include charges for all hospital items and services and average
charges for diagnosis-related groups. On November 27, 2019, CMS published a final rule on “Price Transparency Requirements for
Hospitals to Make Standard Charges Public.” This rule took effect on January 1, 2021 and requires all hospitals to also make public
their payer-specific negotiated rates, minimum negotiated rates, maximum negotiated rates and cash for all items and services,
including individual items and services and service packages, that could be provided by a hospital to a patient. Failure to comply with
these requirements may result in daily monetary penalties.
As part of the CAA, Congress passed legislation aimed at preventing or limiting patient balance billing in certain circumstances.
The CAA addresses surprise medical bills stemming from emergency services, out-of-network ancillary providers at in-network
facilities, and air ambulance carriers. The legislation prohibits surprise billing when out-of-network emergency services or out-of-
network services at an in-network facility are provided, unless informed consent is received. In these circumstances providers are
prohibited from billing the patient for any amounts that exceed in-network cost-sharing requirements. On July 13, 2021, HHS, the
Department of Labor and the Department of the Treasury issued an interim final rule, which begins to implement this legislation. The
rule would limit our ability to receive payment for services at usually higher out-of-network rates in certain circumstances and prohibit
out-of-network payments in other circumstances.
We are required to treat patients with emergency medical conditions regardless of ability to pay.
In accordance with our internal policies and procedures, as well as the Emergency Medical Treatment and Active Labor Act, or
EMTALA, we provide a medical screening examination to any individual who comes to one of our hospitals while in active labor
and/or seeking medical treatment (whether or not such individual is eligible for insurance benefits and regardless of ability to pay) to
determine if such individual has an emergency medical condition. If it is determined that such person has an emergency medical
condition, we provide such further medical examination and treatment as is required to stabilize the patient’s medical condition, within
the facility’s capability, or arrange for transfer of such individual to another medical facility in accordance with applicable law and the
treating hospital’s written procedures. Our obligations under EMTALA may increase substantially going forward; CMS has sought
stakeholder comments concerning the potential applicability of EMTALA to hospital inpatients and the responsibilities of hospitals
with specialized capabilities, respectively, but has yet to issue further guidance in response to that request. If the number of indigent
and charity care patients with emergency medical conditions we treat increases significantly, or if regulations expanding our
obligations to inpatients under EMTALA is proposed and adopted, our results of operations will be harmed.
If we fail to continue to meet the promoting interoperability criteria related to electronic health record systems (“EHR”), our
operations could be harmed.
Pursuant to Health Information Technology for Economic and Clinical Health (“HITECH”) regulations, hospitals that did not
qualify as a meaningful user of EHR by 2015 were subject to a reduced market basket update to the inpatient prospective payment
system (“IPPS”) standardized amount in 2015 and each subsequent fiscal year. In the 2019 IPPS final rule, CMS re-named the
meaningful use program to “promoting interoperability”. We believe that all of our acute care hospitals have met the applicable
promoting interoperability criteria and therefore are not subject to a reduced market basked update to the IPPS standardized amount.
However, under the HITECH Act, hospitals must continue to meet the applicable criteria in each fiscal year or they will be subject to a
market basket update reduction in a subsequent fiscal year. Failure of our acute care hospitals to continue to meet the applicable
meaningful use criteria would have an adverse effect on our future net revenues and results of operations.
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If we fail to comply with extensive laws and government regulations, we could suffer civil or criminal penalties or be required to
make significant changes to our operations that could reduce our revenue and profitability.
The healthcare industry is required to comply with extensive and complex laws and regulations at the federal, state and local
government levels relating to, among other things: hospital billing practices and prices for services; relationships with physicians and
other referral sources; adequacy of medical care and quality of medical equipment and services; ownership of facilities; qualifications
of medical and support personnel; confidentiality, maintenance, privacy and security issues associated with health-related information
and patient medical records; the screening, stabilization and transfer of patients who have emergency medical conditions; certification,
licensure and accreditation of our facilities; operating policies and procedures, and; construction or expansion of facilities and
services.
Among these laws are the federal False Claims Act, the Health Insurance Portability and Accountability Act of 1996,
(“HIPAA”), the federal anti-kickback statute and the provision of the Social Security Act commonly known as the “Stark Law.” These
laws, and particularly the anti-kickback statute and the Stark Law, impact the relationships that we may have with physicians and
other referral sources. We have a variety of financial relationships with physicians who refer patients to our facilities, including
employment contracts, leases and professional service agreements. We also provide financial incentives, including minimum revenue
guarantees, to recruit physicians into communities served by our hospitals. The Office of the Inspector General of the Department of
Health and Human Services, or OIG, has enacted safe harbor regulations that outline practices that are deemed protected from
prosecution under the anti-kickback statute. A number of our current arrangements, including financial relationships with physicians
and other referral sources, may not qualify for safe harbor protection under the anti-kickback statute. Failure to meet a safe harbor
does not mean that the arrangement necessarily violates the anti-kickback statute, but may subject the arrangement to greater scrutiny.
We cannot assure that practices that are outside of a safe harbor will not be found to violate the anti-kickback statute. CMS published
a Medicare self-referral disclosure protocol, which is intended to allow providers to self-disclose actual or potential violations of the
Stark law. Because there are only a few judicial decisions interpreting the Stark law, there can be no assurance that our hospitals will
not be found in violation of the Stark Law or that self-disclosure of a potential violation would result in reduced penalties.
Federal regulations issued under HIPAA contain provisions that require us to implement and, in the future, may require us to
implement additional costly electronic media security systems and to adopt new business practices designed to protect the privacy and
security of each of our patient’s health and related financial information. Such privacy and security regulations impose extensive
administrative, physical and technical requirements on us, restrict our use and disclosure of certain patient health and financial
information, provide patients with rights with respect to their health information and require us to enter into contracts extending many
of the privacy and security regulatory requirements to third parties that perform duties on our behalf. Additionally, recent changes to
HIPAA regulations may result in greater compliance requirements, including obligations to report breaches of unsecured patient data,
as well as create new liabilities for the actions of parties acting as business associates on our behalf.
These laws and regulations are extremely complex, and, in many cases, we do not have the benefit of regulatory or judicial
interpretation. In the future, it is possible that different interpretations or enforcement of these laws and regulations could subject our
current or past practices to allegations of impropriety or illegality or could require us to make changes in our facilities, equipment,
personnel, services, capital expenditure programs and operating expenses. A determination that we have violated one or more of these
laws (see Note 8 to the Consolidated Financial Statements - Commitments and Contingencies, as included this Form 10-K), or the
public announcement that we are being investigated for possible violations of one or more of these laws, could have a material adverse
effect on our business, financial condition or results of operations and our business reputation could suffer significantly. In addition,
we cannot predict whether other legislation or regulations at the federal or state level will be adopted, what form such legislation or
regulations may take or what their impact on us may be. See Item 1 Business—Self-Referral and Anti-Kickback Legislation.
If we are deemed to have failed to comply with the anti-kickback statute, the Stark Law or other applicable laws and regulations,
we could be subjected to liabilities, including criminal penalties, civil penalties (including the loss of our licenses to operate one or
more facilities), and exclusion of one or more facilities from participation in the Medicare, Medicaid and other federal and state
healthcare programs. The imposition of such penalties could have a material adverse effect on our business, financial condition or
results of operations.
We also operate health care facilities in the United Kingdom and have operations and commercial relationships with companies
in other foreign jurisdictions and, as a result, are subject to certain U.S. and foreign laws applicable to businesses generally, including
anti-corruption laws. The Foreign Corrupt Practices Act regulates U.S. companies in their dealings with foreign officials, prohibiting
bribes and similar practices, and requires that they maintain records that fairly and accurately reflect transactions and appropriate
internal accounting controls. In addition, the United Kingdom Bribery Act has wide jurisdiction over certain activities that affect the
United Kingdom.
21
Our operations in the United Kingdom are also subject to a high level of regulation relating to registration and licensing
requirements employee regulation, clinical standards, environmental rules as well as other areas. We are also subject to a highly
regulated business environment, and failure to comply with the various laws and regulations, applicable to us could lead to substantial
penalties, and other adverse effects on our business.
We are subject to occupational health, safety and other similar regulations and failure to comply with such regulations could harm
our business and results of operations.
We are subject to a wide variety of federal, state and local occupational health and safety laws and regulations. Regulatory
requirements affecting us include, but are not limited to, those covering: (i) air and water quality control; (ii) occupational health and
safety (e.g., standards regarding blood-borne pathogens and ergonomics, etc.); (iii) waste management; (iv) the handling of asbestos,
polychlorinated biphenyls and radioactive substances; and (v) other hazardous materials. If we fail to comply with those standards, we
may be subject to sanctions and penalties that could harm our business and results of operations.
We are subject to pending legal actions, purported stockholder class actions, governmental investigations and regulatory actions.
We and our subsidiaries are subject to pending legal actions, governmental investigations and regulatory actions (see Note 8 to
the Consolidated Financial Statements - Commitments and Contingencies, as included this Form 10-K). We may become subject to
additional medical malpractice lawsuits, product liability lawsuits, class action lawsuits and other legal actions in the ordinary course
of business.
Defending ourselves against the allegations in the lawsuits and governmental investigations, or similar matters and any related
publicity, could potentially entail significant costs and could require significant attention from our management and our reputation
could suffer significantly. We are unable to predict the outcome of these matters or to reasonably estimate the amount or range of any
such loss; however, these lawsuits and the related publicity and news articles that have been published concerning these matters could
have a material adverse effect on our business, financial condition, results of operations and/or cash flows which in turn could cause a
decline in our stock price. In an effort to resolve one or more of these matters, we may choose to negotiate a settlement. Amounts we
pay to settle any of these matters may be material. All professional and general liability insurance we purchase is subject to policy
limitations. We believe that, based on our past experience and actuarial estimates, our insurance coverage is adequate considering the
claims arising from the operations of our hospitals. While we continuously monitor our coverage, our ultimate liability for
professional and general liability claims could change materially from our current estimates. If such policy limitations should be
partially or fully exhausted in the future, or payments of claims exceed our estimates or are not covered by our insurance, it could have
a material adverse effect on our operations.
We are and may become subject to other loss contingencies, both known and unknown, which may relate to past, present and
future facts, events, circumstances and occurrences. Should an unfavorable outcome occur in some or all of our legal proceedings or
other loss contingencies, or if successful claims and other actions are brought against us in the future, there could be a material adverse
impact on our financial position, results of operations and liquidity.
In particular, government investigations, as well as qui tam and stockholder lawsuits, may lead to material fines, penalties,
damages payments or other sanctions, including exclusion from government healthcare programs. The federal False Claims Act
permits private parties to bring qui tam, or whistleblower, lawsuits on behalf of the government against companies alleging that the
defendant has defrauded the federal government. These private parties are entitled to share in any amounts recovered by the
government, and, as a result, the number of whistleblower lawsuits that have been filed against providers has increased significantly in
recent years. Because qui tam lawsuits are filed under seal, we could be named in one or more such lawsuits of which we are not
aware. Settlements of lawsuits involving Medicare and Medicaid issues routinely require both monetary payments and corporate
integrity agreements, each of which could have a material adverse effect on our business, financial condition, results of operations
and/or cash flows.
The failure of certain employers, or the closure of certain facilities, could have a disproportionate impact on our hospitals.
The economies in the communities in which our hospitals operate are often dependent on a small number of large employers.
Those employers often provide income and health insurance for a disproportionately large number of community residents who may
depend on our hospitals and other health care facilities for their care. The failure of one or more large employer or the closure or
substantial reduction in the number of individuals employed at facilities located in or near the communities where our hospitals
operate, could cause affected employees to move elsewhere to seek employment or lose insurance coverage that was otherwise
available to them. The occurrence of these events could adversely affect our revenue and results of operations, thereby harming our
business.
If any of our existing health care facilities lose their accreditation or any of our new facilities fail to receive accreditation, such
facilities could become ineligible to receive reimbursement under Medicare or Medicaid.
The construction and operation of healthcare facilities are subject to extensive federal, state and local regulation relating to,
among other things, the adequacy of medical care, equipment, personnel, operating policies and procedures, fire prevention, rate-
setting and compliance with building codes and environmental protection. Additionally, such facilities are subject to periodic
inspection by government authorities to assure their continued compliance with these various standards.
22
All of our hospitals are deemed certified, meaning that they are accredited, properly licensed under the relevant state laws and
regulations and certified under the Medicare program. The effect of maintaining certified facilities is to allow such facilities to
participate in the Medicare and Medicaid programs. We believe that all of our healthcare facilities are in material compliance with
applicable federal, state, local and other relevant regulations and standards. However, should any of our healthcare facilities lose their
deemed certified status and thereby lose certification under the Medicare or Medicaid programs, such facilities would be unable to
receive reimbursement from either of those programs and our business could be materially adversely effected.
State efforts to regulate the construction or expansion of health care facilities could impair our ability to expand.
Many of the states in which we operate hospitals have enacted Certificates of Need, or (“CON”), laws as a condition prior to
hospital capital expenditures, construction, expansion, modernization or initiation of major new services. Our failure to obtain
necessary state approval could result in our inability to complete a particular hospital acquisition, expansion or replacement, make a
facility ineligible to receive reimbursement under the Medicare or Medicaid programs, result in the revocation of a facility’s license or
impose civil or criminal penalties on us, any of which could harm our business.
In addition, significant CON reforms have been proposed in a number of states that would increase the capital spending
thresholds and provide exemptions of various services from review requirements. In the past, we have not experienced any material
adverse effects from those requirements, but we cannot predict the impact of these changes upon our operations.
Risks Related to Information Technology
A cyber security incident could cause a violation of HIPAA, breach of member privacy, or other negative impacts.
We rely extensively on our information technology (“IT”) systems to manage clinical and financial data, communicate with our
patients, payers, vendors and other third parties and summarize and analyze operating results. In addition, we have made significant
investments in technology to adopt and utilize electronic health records and to become meaningful users of health information
technology pursuant to the American Recovery and Reinvestment Act of 2009. Our IT systems are subject to damage or interruption
from power outages, facility damage, computer and telecommunications failures, computer viruses, security breaches including credit
card or personally identifiable information breaches, vandalism, theft, natural disasters, catastrophic events, human error and potential
cyber threats, including malicious codes, worms, phishing attacks, denial of service attacks, ransomware and other sophisticated
cyber-attacks, and our disaster recovery planning cannot account for all eventualities. As cyber criminals continue to become more
sophisticated through evolution of their tactics, techniques and procedures, we have taken, and will continue to take, additional
preventive measures to strengthen the cyber defenses of our networks and data. However, if any of our systems are damaged, fail to
function properly or otherwise become unavailable, we may incur substantial costs to repair or replace them, and may experience loss
or corruption of critical data such as protected health information or other data subject to privacy laws and proprietary business
information and interruptions or disruptions and delays in our ability to perform critical functions, which could materially and
adversely affect our businesses and results of operations and could result in significant penalties or fines, litigation, loss of customers,
significant damage to our reputation and business, and other losses. In addition, our future results of operations, as well as our
reputation, could be adversely impacted by theft, destruction, loss, or misappropriation of public health information, other confidential
data or proprietary business information.
In September, 2020, we had experienced an information technology security incident which led us to suspend user access to our
information technology applications related to operations located in the United States. While our information technology applications
were offline, patient care was delivered safely and effectively at our facilities across the country utilizing established back-up
processes, including offline documentation methods. We have investigated the nature and potential impact of the security incident and
engaged third-party information technology and forensic vendors to assist. No evidence of unauthorized access, copying or misuse of
any patient or employee data has been identified to date. Promptly after the incident, our information technology applications were
restored at our acute care and behavioral health hospitals, as well as at the corporate level, thereby re-establishing connections to all
major systems and applications, including electronic medical records, laboratory and pharmacy systems and our hospitals resumed
normal operations.
Risks Related to the Market Conditions and Liquidity
Our revenues and volume trends may be adversely affected by certain factors over which we have no control.
Our revenues and volume trends are dependent on many factors, including physicians’ clinical decisions and availability, payer
programs shifting to a more outpatient-based environment, whether or not certain services are offered, seasonal and severe weather
conditions, including the effects of extreme low temperatures, hurricanes and tornadoes, earthquakes, climate change, current local
economic and demographic changes. We have a high concentration of facilities in various geographic areas, including states that have
a potentially higher risk of experiencing events such as severe weather conditions and earthquakes. Given the location of our facilities,
we are particularly susceptible to revenue loss, cost increase, or damage caused by severe weather conditions or natural disasters such
as hurricanes, wildfires, earthquakes, or tornadoes. Any significant loss due to a natural disaster may not be covered by insurance and
may lead to an increase in the cost of insurance or unavailability on acceptable terms. Climate change may also have effects on our
business by increasing the cost of property insurance or making coverage unavailable on acceptable terms. To the extent that
significant changes in the climate occur in areas where our facilities are located, we may experience increased frequency of severe
23
weather conditions or natural disasters or other changes to weather patterns, all of which may result in physical damage to or a
decrease in demand for properties affected by these conditions. Should the impact of climate change be material in nature or occur for
lengthy periods of time, our financial condition, revenues, results of operations, or cash flow may be adversely affected. In addition,
government regulation intended to mitigate the impact of climate change, severe weather patterns, or natural disasters could result in
additional required capital expenditures to comply with such regulation without a corresponding increase in our revenues. In addition,
technological developments and pharmaceutical improvements may reduce the demand for healthcare services or the profitability of
the services we offer. Further, the Medicare program’s three-year phase out and eventual elimination of the Inpatient Only List, a list
of surgeries and procedures that are only covered by Medicare when provided in an inpatient setting, may reduce inpatient volumes.
A worsening of economic and employment conditions in the United States could materially affect our business and future results
of operations.
Our patient volumes, revenues and financial results depend significantly on the universe of patients with health insurance, which
to a large extent is dependent on the employment status of individuals in our markets. Worsening of economic conditions, including
inflation and rising interest rates, may result in a higher unemployment rate which may increase the number of individuals without
health insurance. As a result, our facilities may experience a decrease in patient volumes, particularly in less intense, more elective
service lines, or an increase in services provided to uninsured patients. These factors could have a material unfavorable impact on our
future patient volumes, revenues and operating results.
In addition, as of December 31, 2022, we had approximately $3.9 billion of goodwill recorded on our consolidated balance
sheet. Should the revenues and financial results of our acute care and/or behavioral health care facilities be materially, unfavorably
impacted due to, among other things, a worsening of the economic and employment conditions in the United States that could
negatively impact our patient volumes and reimbursement rates, a continued rise in the unemployment rate and increases in the
number of uninsured patients treated at our facilities, we may incur future charges to recognize impairment in the carrying value of our
goodwill and other intangible assets, which could have a material adverse effect on our financial results.
Legal uncertainty or a worsening of the economic conditions in the United Kingdom could materially affect our business and
future results of operations.
On June 23, 2016, the United Kingdom affirmatively voted in a non-binding referendum in favor of the exit of the United
Kingdom from the European Union (“Brexit”) and it was approved by vote of the British legislature. On March 29, 2017, the United
Kingdom triggered Article 50 of the Lisbon Treaty, formally starting negotiations regarding its exit from the European Union. On
January 31, 2020, the United Kingdom formally exited the European Union. On December 24, 2020, the United Kingdom and the
European Union reached a post-Brexit trade and cooperation agreement that created new business and security requirements and
preserved the United Kingdom’s tariff- and quota-free access to the European Union member states. The trade and cooperation
agreement was provisionally applied as of January 1, 2021 and entered into force on May 1, 2021, following ratification by the
European Union.
Changes to the trading relationship between the United Kingdom and the European Union may result in increased cost of goods
imported into the United Kingdom. Additional currency volatility could result in a weaker British pound, which may decrease the
profitability of our operations in the United Kingdom. A weaker British pound versus the U.S. Dollar also causes local currency
results of our United Kingdom operations to be translated into fewer U.S. Dollars during a reporting period. While we may elect to
enter into hedging arrangements to protect our business against certain currency fluctuations, these hedging arrangements do not
provide comprehensive protection, and our results of operations could be adversely affected by foreign exchange fluctuations.
Brexit could lead to legal and regulatory uncertainty as the United Kingdom determines which European Union laws to replace
or replicate. Brexit could also lead to increased legal and regulatory complexity as national laws and regulations in the United
Kingdom start to diverge from European Union laws and regulations. For instance, rules for data transfers outside of the United
Kingdom and European Economic Area have changed significantly with Brexit and a recent Court of European Justice decision, and
are subject to further revision and updated regulatory guidance, making necessary compliance measures challenging to ascertain and
implement with respect to our United Kingdom operations. The exit of the United Kingdom from the European Union could also
create future economic uncertainty, both in the United Kingdom and globally, and could cause disruptions to and create uncertainty
surrounding our business. Any of these effects of Brexit, and others we cannot anticipate, could harm our business, financial condition
or results of operations.
We continue to see rising costs in construction materials and labor. Such increased costs could have an adverse effect on the cash
flow return on investment relating to our capital projects.
The cost of construction materials and labor has significantly increased. As we continue to invest in modern technologies,
emergency rooms and operating room expansions, the construction of medical office buildings for physician expansion and
reconfiguring the flow of patient care, we spend large amounts of money generated from our operating cash flow or borrowed funds.
Although we evaluate the financial feasibility of such projects by determining whether the projected cash flow return on investment
exceeds our cost of capital, such returns may not be achieved if the cost of construction continues to rise significantly or the expected
patient volumes are not attained.
24
The deterioration of credit and capital markets may adversely affect our access to sources of funding and we cannot be certain of
the availability and terms of capital to fund the growth of our business when needed.
We require substantial capital resources to fund our acquisition growth strategy and our ongoing capital expenditure programs
for renovation, expansion, construction and addition of medical equipment and technology. We believe that our capital expenditure
program is adequate to expand, improve and equip our existing hospitals. We cannot predict, however, whether financing for our
growth plans and capital expenditure programs will be available to us on satisfactory terms when needed, which could harm our
business.
To fund all or a portion of our future financing needs, we rely on borrowings from various sources including fixed rate, long-
term debt as well as borrowings pursuant to our revolving credit facility and accounts receivable securitization program. If any of the
lenders were unable to fulfill their future commitments, our liquidity could be impacted, which could have a material unfavorable
impact our results of operations and financial condition. The increase in interest rates has substantially increased our borrowing costs
and reduced our ability to access the capital markets on favorable terms. Additional increases in interest rates and the effect on capital
markets could adversely affect our ability to carry out our strategy.
Risks Related to Our Common Stock
The number of outstanding shares of our Class B Common Stock is subject to potential increases or decreases.
At December 31, 2022, 23.6 million shares of Class B Common Stock were reserved for issuance upon conversion of shares of
Class A, C and D Common Stock outstanding, for issuance upon exercise of options to purchase Class B Common Stock and for
issuance of stock under other incentive plans. Class A, C and D Common Stock are convertible on a share for share basis into Class B
Common Stock. To the extent that these shares were converted into or exercised for shares of Class B Common Stock, the number of
shares of Class B Common Stock available for trading in the public market place would increase substantially and the current holders
of Class B Common Stock would own a smaller percentage of that class.
In addition, from time-to-time, our Board of Directors approve stock repurchase programs authorizing us to purchase shares of
our Class B Common Stock on the open market at prevailing market prices or in negotiated transactions off the market. Such
repurchases decrease the number of outstanding shares of our Class B Common Stock. During 2022, in conjunction with our stock
repurchase program, we repurchased approximately 6.7 million shares at an aggregate cost of approximately $811 million. As of
December 31, 2022, we had an aggregate available repurchase authorization of approximately $947 million pursuant to this program,
including a $1.4 billion increase authorized by our Board of Directors in February, 2022. Pursuant to our stock repurchase program,
shares of our Class B Common Stock may be repurchased, from time to time as conditions allow, on the open market or in negotiated
private transactions. There is no expiration date for our stock repurchase programs.
Our ability to repurchase shares will depend upon, among other factors, our cash flows from operations, our available capital
and potential future capital requirements for strategic transactions, including acquisitions, debt service requirements, and investing in
our existing markets as well as our results of operations, financial condition, interest rates, our access to the capital markets and other
factors beyond our control that our Board of Directors may deem relevant. A suspension or elimination of our share repurchase could
have a negative effect on our stock price.
Conversely, as a potential means of generating additional funds to operate and expand our business, we may from time-to-time
issue equity through the sale of stock which would increase the number of outstanding shares of our Class B Common Stock. Based
upon factors such as, but not limited to, the market price of our stock, interest rate on borrowings and uses or potential uses for cash,
repurchase or issuance of our stock could have a dilutive effect on our future basic and diluted earnings per share.
The right to elect the majority of our Board of Directors and the majority of the general shareholder voting power resides with the
holders of Class A and C Common Stock, the majority of which is owned by Alan B. Miller, Executive Chairman of our Board of
Directors.
Our Restated Certificate of Incorporation provides that, with respect to the election of directors, holders of Class A Common
Stock vote as a class with the holders of Class C Common Stock, and holders of Class B Common Stock vote as a class with holders
of Class D Common Stock, with holders of all classes of our Common Stock entitled to one vote per share.
As of March 24, 2022, the shares of Class A and Class C Common Stock constituted 9.7% of the aggregate outstanding shares
of our Common Stock, had the right to elect five members of the Board of Directors and constituted 89.5% of our general voting
power as of that date. As of March 24, 2022, the shares of Class B and Class D Common Stock (excluding shares issuable upon
exercise of options) constituted 90.3% of the outstanding shares of our Common Stock, had the right to elect two members of the
Board of Directors and constituted 10.5% of our general voting power as of that date.
As to matters other than the election of directors, our Restated Certificate of Incorporation provides that holders of Class A,
Class B, Class C and Class D Common Stock all vote together as a single class, except as otherwise provided by law.
Each share of Class A Common Stock entitles the holder thereof to one vote; each share of Class B Common Stock entitles the
holder thereof to one-tenth of a vote; each share of Class C Common Stock entitles the holder thereof to 100 votes (provided the
holder of Class C Common Stock holds a number of shares of Class A Common Stock equal to ten times the number of shares of
25
Class C Common Stock that holder holds); and each share of Class D Common Stock entitles the holder thereof to ten votes (provided
the holder of Class D Common Stock holds a number of shares of Class B Common Stock equal to ten times the number of shares of
Class D Common Stock that holder holds).
In the event a holder of Class C or Class D Common Stock holds a number of shares of Class A or Class B Common Stock,
respectively, less than ten times the number of shares of Class C or Class D Common Stock that holder holds, then that holder will be
entitled to only one vote for every share of Class C Common Stock, or one-tenth of a vote for every share of Class D Common Stock,
which that holder holds in excess of one-tenth the number of shares of Class A or Class B Common Stock, respectively, held by that
holder. The Board of Directors, in its discretion, may require beneficial owners to provide satisfactory evidence that such owner holds
ten times as many shares of Class A or Class B Common Stock as Class C or Class D Common Stock, respectively, if such facts are
not apparent from our stock records.
Since a substantial majority of the Class A shares and Class C shares are controlled by Mr. Alan B. Miller and members of his
family, one of whom is Marc D. Miller, our Chief Executive Officer, President and a director, and they can elect a majority of our
company’s directors and effect or reject most actions requiring approval by stockholders without the vote of any other stockholders,
there are potential conflicts of interest in overseeing the management of our company.
In addition, because this concentrated control could discourage others from initiating any potential merger, takeover or other
change of control transaction that may otherwise be beneficial to our businesses, our business and prospects and the trading price of
our securities could be adversely affected.
ITEM 1B. Unresolved Staff Comments
None.
ITEM 2.
Properties
Executive and Administrative Offices and Commercial Health Insurer
We own various office buildings in King of Prussia and Wayne, Pennsylvania, Brentwood, Tennessee, Denton, Texas and Reno,
Nevada.
Facilities
The following tables set forth the name, location, type of facility and, for acute care hospitals and behavioral health care
facilities, the number of licensed beds:
Acute Care Hospitals
Name of Facility
Location
Aiken Regional Medical Centers (1) ....................................................... Aiken, South Carolina
Aurora Pavilion Behavioral Health Services (1) ........................... Aiken, South Carolina
ER at Sweetwater ........................................................................... North Augusta, South Carolina
Centennial Hills Hospital Medical Center ............................................... Las Vegas, Nevada
ER at Valley Vista .......................................................................... North Las Vegas, Nevada
Corona Regional Medical Center ............................................................. Corona, California
Desert Springs Hospital Medical Center .................................................. Las Vegas, Nevada
Desert View Hospital ............................................................................... Pahrump, Nevada
Doctors Hospital of Laredo (6) ................................................................ Laredo, Texas
Doctors Hospital Emergency Room Saunders ............................... Laredo, Texas
Doctors Hospital Emergency Room South..................................... Laredo, Texas
Fort Duncan Regional Medical Center .................................................... Eagle Pass, Texas
The George Washington University Hospital (19) .................................. Washington, D.C.
Henderson Hospital ................................................................................. Henderson, Nevada
ER at Green Valley Ranch ............................................................. Henderson, Nevada
Lakewood Ranch Medical Center ............................................................ Lakewood Ranch, Florida
ER at Fruitville ............................................................................... Sarasota, Florida
Manatee Memorial Hospital .................................................................... Bradenton, Florida
ER at Sun City ................................................................................ Wimauma, Florida
Northern Nevada Medical Center ............................................................ Sparks, Nevada
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Real
Property
Ownership
Interest
Number of
Beds
211
62
—
339
—
238
282
25
183
—
—
101
395
303
—
120
—
295
−−
219
Leased
Leased
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Leased
Owned
Leased
Owned
Owned
Owned
Owned
Owned
Owned
Name of Facility
Location
ER at McCarran NW ...................................................................... Reno, Nevada
Northern Nevada Sierra Medical Center .................................................. Reno, Nevada
Northwest Texas Healthcare System ....................................................... Amarillo, Texas
Northwest Texas Healthcare System Behavioral Health................ Amarillo, Texas
Northwest Emergency at Town Square .......................................... Amarillo, Texas
Northwest Emergency on Georgia ................................................. Amarillo, Texas
Palmdale Regional Medical Center .......................................................... Palmdale, California
South Texas Health System (2) ................................................................
Edinburg Regional Medical Center/Children’s Hospital (2) .......... Edinburg, Texas
South Texas Health System Behavioral (2).................................... McAllen, Texas
South Texas Health System Heart (2) ............................................ McAllen, Texas
South Texas Health System McAllen (1) (2) ................................. McAllen, Texas
South Texas Health System ER Alamo (2) .................................... Alamo, Texas
South Texas Health System ER McColl (2) ................................... Edinburg, Texas
South Texas Health System ER Mission (1) (2) ............................ Mission, Texas
South Texas Health System ER Monte Cristo (2).......................... Edinburg, Texas
South Texas Health System ER Ware Road (2)............................. McAllen, Texas
South Texas Health System ER Weslaco (1) (2)............................ Weslaco, Texas
Southwest Healthcare System ..................................................................
Inland Valley Medical Center Campus ......................................... Wildomar, California
Rancho Springs Medical Center Campus ....................................... Murrieta, California
Spring Valley Hospital Medical Center ................................................... Las Vegas, Nevada
ER at Blue Diamond ...................................................................... Las Vegas, Nevada
Valley Health Specialty Hospital ................................................... Las Vegas, Nevada
St. Mary’s Regional Medical Center ........................................................ Enid, Oklahoma
Summerlin Hospital Medical Center ........................................................ Las Vegas, Nevada
Temecula Valley Hospital ........................................................................ Temecula, California
Texoma Medical Center ........................................................................... Denison, Texas
TMC Behavioral Health Center ..................................................... Denison, Texas
ER at Anna ..................................................................................... Anna, Texas
ER at Sherman ............................................................................... Sherman, Texas
Valley Hospital Medical Center ............................................................... Las Vegas, Nevada
Elite Medical Center (ER) .............................................................. Las Vegas, Nevada
Wellington Regional Medical Center (1) ................................................. Wellington, Florida
ER at Westlake ............................................................................... Westlake, Florida
Inpatient Behavioral Health Care Facilities
United States:
Name of Facility
Location
Alabama Clinical Schools .......................................................................... Birmingham, Alabama
Alliance Health Center ............................................................................... Meridian, Mississippi
Anchor Hospital ......................................................................................... Atlanta, Georgia
Arbour Hospital ......................................................................................... Jamaica Plain, Massachusetts
Arrowhead Behavioral Health (16) ........................................................... Maumee, Ohio
Austin Oaks Hospitals................................................................................ Austin, Texas
Beaumont Behavioral Health (18) ............................................................ Dearborn, Michigan
Behavioral Hospital of Bellaire .................................................................. Houston, Texas
Belmont Pines Hospital.............................................................................. Youngstown, Ohio
Benchmark Behavioral Health Systems ..................................................... Woods Cross, Utah
BHC Alhambra Hospital ............................................................................ Rosemead, California
Black Bear Lodge ...................................................................................... Sautee Nacoochee, Georgia
Bloomington Meadows Hospital ............................................................... Bloomington, Indiana
27
Real
Property
Ownership
Interest
Number of
Beds
—
158
405
90
—
—
184
251
134
60
431
—
—
—
—
—
—
120
120
364
—
66
229
485
140
354
60
—
—
328
—
235
—
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Leased
Owned
Owned
Leased
Owned
Owned
Leased
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Leased
Leased
Real
Property
Ownership
Interest
Number of
Beds
80
214
122
136
48
80
87
124
121
94
115
115
78
Owned
Owned
Owned
Owned
Owned
Owned
Leased
Leased
Owned
Owned
Owned
Owned
Owned
United States:
Name of Facility
Location
Real
Property
Ownership
Interest
Number of
Beds
Brentwood Behavioral Healthcare ............................................................. Flowood, Mississippi
Brentwood Hospital ................................................................................... Shreveport, Louisiana
The Bridgeway ........................................................................................... North Little Rock, Arkansas
The Brook Hospital—Dupont .................................................................... Louisville, Kentucky
The Brook Hospital—KMI ........................................................................ Louisville, Kentucky
Brooke Glen Behavioral Hospital .............................................................. Fort Washington, Pennsylvania
Brynn Marr Hospital .................................................................................. Jacksonville, North Carolina
Calvary Center ........................................................................................... Phoenix, Arizona
Canyon Creek Behavioral Health .............................................................. Temple, Texas
Canyon Ridge Hospital .............................................................................. Chino, California
The Carolina Center for Behavioral Health ............................................... Greer, South Carolina
Cedar Creek Hospital ................................................................................. St. Johns, Michigan
Cedar Grove Residential Treatment Center ............................................... Murfreesboro, Tennessee
Cedar Hills Hospital (7) ............................................................................. Portland, Oregon
Cedar Ridge Behavioral Hospital .............................................................. Oklahoma City, Oklahoma
Cedar Ridge Residential Treatment Center ................................................ Oklahoma City, Oklahoma
Cedar Ridge Bethany ................................................................................. Bethany, Oklahoma
Cedar Springs Hospital .............................................................................. Colorado Springs, Colorado
Centennial Peaks Hospital ......................................................................... Louisville, Colorado
Center for Change ...................................................................................... Orem, Utah
Central Florida Behavioral Hospital .......................................................... Orlando, Florida
Chris Kyle Patriots Hospital ...................................................................... Anchorage, Alaska
Clarion Psychiatric Center ......................................................................... Clarion, Pennsylvania
Clive Behavioral Health (11) ..................................................................... Clive, Iowa
Coastal Behavioral Health ......................................................................... Savannah, Georgia
Coastal Harbor Treatment Center .............................................................. Savannah, Georgia
Columbus Behavioral Center for Children and Adolescents ..................... Columbus, Indiana
Compass Intervention Center ..................................................................... Memphis, Tennessee
Copper Hills Youth Center ........................................................................ West Jordan, Utah
Coral Shores Behavioral Health ................................................................. Stuart, Florida
Cumberland Hall Hospital ......................................................................... Hopkinsville, Kentucky
Cumberland Hospital for Children and Adolescents .................................. New Kent, Virginia
Cypress Creek Hospital .............................................................................. Houston, Texas
DeBarr Residential Treatment Center ........................................................ Anchorage, Alaska
Del Amo Behavioral Health System .......................................................... Torrance, California
Diamond Grove Center .............................................................................. Louisville, Mississippi
Dover Behavioral Health System ............................................................... Dover, Delaware
El Paso Behavioral Health System ............................................................. El Paso, Texas
Emerald Coast Behavioral Hospital ........................................................... Panama City, Florida
Fairmount Behavioral Health System ........................................................ Philadelphia, Pennsylvania
Fairfax ........................................................................................................
Fairfax Behavioral Health ................................................................ Kirkland, Washington
Fairfax Behavioral Health—Everett ................................................. Everett, Washington
Fairfax Behavioral Health—Monroe ................................................ Monroe, Washington
Forest View Hospital ................................................................................. Grand Rapids, Michigan
Fort Lauderdale Behavioral Health Center ................................................ Fort Lauderdale, Florida
Foundations Behavioral Health .................................................................. Doylestown, Pennsylvania
Foundations for Living .............................................................................. Mansfield, Ohio
Fox Run Center .......................................................................................... St. Clairsville, Ohio
Fremont Hospital ....................................................................................... Fremont, California
Friends Hospital (15) ................................................................................. Philadelphia, Pennsylvania
Fuller Hospital ........................................................................................... Attleboro, Massachusetts
Garfield Park Behavioral Hospital ............................................................. Chicago, Illinois
Glen Oaks Hospital .................................................................................... Greenville, Texas
Granite Hills Hospital ................................................................................ West Allis, Wisconsin
Gulf Coast Treatment Center ..................................................................... Fort Walton Beach, Florida
28
121
260
127
88
110
146
102
68
102
157
156
54
45
98
60
56
56
110
104
58
174
36
112
100
50
141
57
108
197
80
97
108
128
30
166
55
104
166
86
239
157
30
34
108
182
122
84
100
148
219
109
88
54
120
28
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Leased
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Leased
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Leased
Leased
Owned
Owned
Leased
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Leased
Owned
United States:
Name of Facility
Location
Real
Property
Ownership
Interest
Number of
Beds
Gulfport Behavioral Health System ........................................................... Gulfport, Mississippi
Hampton Behavioral Health Center ........................................................... Westhampton, New Jersey
Harbour Point Behavioral Health Center ................................................... Portsmouth, Virginia
Hartgrove Behavioral Health System ........................................................ Chicago, Illinois
Havenwyck Hospital .................................................................................. Auburn Hills, Michigan
Heartland Behavioral Health Services ....................................................... Nevada, Missouri
Hermitage Hall ........................................................................................... Nashville, Tennessee
Heritage Oaks Hospital .............................................................................. Sacramento, California
Heritage Oaks Patient Enrichment Center ................................................. Sacramento, California
Hickory Trail Hospital ............................................................................... DeSoto, Texas
Highlands Behavioral Health System ........................................................ Highlands Ranch, Colorado
Hill Crest Behavioral Health Services ....................................................... Birmingham, Alabama
Holly Hill Hospital ..................................................................................... Raleigh, North Carolina
The Horsham Clinic ................................................................................... Ambler, Pennsylvania
HRI Hospital .............................................................................................. Brookline, Massachusetts
The Hughes Center .................................................................................... Danville, Virginia
Inland Northwest Behavioral Health (9) .................................................... Spokane, Washington
Intermountain Hospital .............................................................................. Boise, Idaho
Kempsville Center of Behavioral Health ................................................... Norfolk, Virginia
KeyStone Center ........................................................................................ Wallingford, Pennsylvania
Kingwood Pines Hospital .......................................................................... Kingwood, Texas
La Amistad Behavioral Health Services .................................................... Maitland, Florida
Lakeside Behavioral Health System .......................................................... Memphis, Tennessee
Lancaster Behavioral Health Hospital (8) .................................................. Lancaster, Pennsylvania
Laurel Heights Hospital ............................................................................. Atlanta, Georgia
Laurel Oaks Behavioral Health Center ...................................................... Dothan, Alabama
Laurel Ridge Treatment Center .................................................................. San Antonio, Texas
Liberty Point Behavioral Healthcare .......................................................... Stauton, Virginia
Lighthouse Behavioral Health Hospital ..................................................... Conway, South Carolina
Lighthouse Care Center of Augusta ........................................................... Augusta, Georgia
Lincoln Prairie Behavioral Health Center .................................................. Springfield, Illinois
Lincoln Trail Behavioral Health System .................................................... Radcliff, Kentucky
Mayhill Hospital ........................................................................................ Denton, Texas
McDowell Center for Children .................................................................. Dyersburg, Tennessee
The Meadows Psychiatric Center .............................................................. Centre Hall, Pennsylvania
Meridell Achievement Center .................................................................... Austin, Texas
Mesilla Valley Hospital ............................................................................. Las Cruces, New Mexico
Michael’s House ........................................................................................ Palm Springs, California
Michiana Behavioral Health ...................................................................... Plymouth, Indiana
Midwest Center for Youth and Families .................................................... Kouts, Indiana
Millwood Hospital ..................................................................................... Arlington, Texas
Mountain Youth Academy ......................................................................... Mountain City, Tennessee
Natchez Trace Youth Academy ................................................................. Waverly, Tennessee
Newport News Behavioral Health Center .................................................. Newport News, Virginia
North Spring Behavioral Healthcare .......................................................... Leesburg, Virginia
North Star Hospital .................................................................................... Anchorage, Alaska
North Star Bragaw ..................................................................................... Anchorage, Alaska
Oak Plains Academy .................................................................................. Ashland City, Tennessee
Okaloosa Youth Academy ......................................................................... Crestview, Florida
Old Vineyard Behavioral Health Services ................................................. Winston-Salem, North Carolina
Palmer Residential Treatment Center ........................................................ Palmer, Alaska
Palmetto Lowcountry Behavioral Health ................................................... North Charleston, South Carolina
Palmetto Summerville Behavioral Health .................................................. Summerville, South Carolina
Palm Point Behavioral Health .................................................................... Titusville, FL
Palm Shores Behavioral Health Center ...................................................... Bradenton, Florida
Palo Verde Behavioral Health.................................................................... Tucson, Arizona
29
109
120
186
160
243
151
111
125
16
86
86
221
296
206
62
64
100
155
106
153
116
85
373
126
124
118
330
58
105
82
97
140
59
32
119
134
120
110
83
74
134
90
115
132
127
74
30
98
75
164
30
108
64
74
65
84
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Leased
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Leased
Owned
Owned
Owned
Leased
Owned
Owned
Owned
Leased
Owned
Owned
Owned
Leased
Owned
Owned
Leased
United States:
Name of Facility
Location
Real
Property
Ownership
Interest
Number of
Beds
Parkwood Behavioral Health System ........................................................ Olive Branch, Mississippi
The Pavilion Behavioral Health System .................................................... Champaign, Illinois
Peachford Hospital ..................................................................................... Atlanta, Georgia
Pembroke Hospital ..................................................................................... Pembroke, Massachusetts
Pinnacle Pointe Behavioral Healthcare System ......................................... Little Rock, Arkansas
Poplar Springs Hospital ............................................................................. Petersburg, Virginia
Prairie St John’s ......................................................................................... Fargo, North Dakota
PRIDE Institute .......................................................................................... Eden Prairie, Minnesota
Provo Canyon Behavioral Hospital ............................................................ Orem, Utah
Provo Canyon School ................................................................................ Provo, Utah
Psychiatric Institute of Washington ........................................................... Washington, D.C.
Quail Run Behavioral Health ..................................................................... Phoenix, Arizona
The Recovery Center ................................................................................. Wichita Falls, Texas
The Ridge Behavioral Health System ........................................................ Lexington, Kentucky
Rivendell Behavioral Health Hospital ....................................................... Bowling Green, Kentucky
Rivendell Behavioral Health Services of Arkansas ................................... Benton, Arkansas
River Crest Hospital ................................................................................... San Angelo, Texas
Riveredge Hospital .................................................................................... Forest Park, Illinois
River Oaks Hospital ................................................................................... Harahan , Louisiana
River Park Hospital .................................................................................... Huntington, West Virginia
River Point Behavioral Health ................................................................... Jacksonville, Florida
Rockford Center ......................................................................................... Newark, Delaware
Rolling Hills Hospital ................................................................................ Franklin, Tennessee
Roxbury Treatment Center ........................................................................ Shippensburg, Pennsylvania
Salt Lake Behavioral Health ...................................................................... Salt Lake City, Utah
San Marcos Treatment Center .................................................................... San Marcos, Texas
SandyPines Residential Treatment Center ................................................ Jupiter , Florida
Sierra Vista Hospital .................................................................................. Sacramento, California
Saint Simons by the Sea ............................................................................. Saint Simons Island , Georgia
Skywood Recovery .................................................................................... Augusta, Michigan
Southeast Behavioral Health (17) .............................................................. Cape Girardeau, Missouri
Spring Mountain Sahara ............................................................................ Las Vegas, Nevada
Spring Mountain Treatment Center ........................................................... Las Vegas, Nevada
Springwoods Behavioral Health ................................................................ Fayetteville, Arkansas
Stonington Institute .................................................................................... North Stonington, Connecticut
Streamwood Behavioral Healthcare System .............................................. Streamwood, Illinois
Summit Oaks Hospital ............................................................................... Summit, New Jersey
SummitRidge Hospital ............................................................................... Lawrenceville, Georgia
Suncoast Behavioral Health Center ........................................................... Bradenton, Florida
Texas NeuroRehab Center ......................................................................... Austin, Texas
Three Rivers Behavioral Health ................................................................. West Columbia, South Carolina
Three Rivers Midlands ............................................................................... West Columbia, South Carolina
Turning Point Care Center ......................................................................... Moultrie, Georgia
University Behavioral Center .................................................................... Orlando, Florida
University Behavioral Health of Denton .................................................... Denton, Texas
Valle Vista Health System ......................................................................... Greenwood, Indiana
Valley Hospital .......................................................................................... Phoenix, Arizona
Via Linda BHS (14) ................................................................................... Scottsdale, Arizona
The Vines Hospital .................................................................................... Ocala, Florida
Virginia Beach Psychiatric Center ............................................................. Virginia Beach, Virginia
Wekiva Springs Center .............................................................................. Jacksonville, Florida
Wellstone Regional Hospital ..................................................................... Jeffersonville, Indiana
West Oaks Hospital ................................................................................... Houston, Texas
Willow Springs Center ............................................................................... Reno, Nevada
Windmoor Healthcare of Clearwater ......................................................... Clearwater, Florida
Windsor Laurelwood Center for Behavioral Medicine.............................. Willoughby, Ohio
30
148
122
246
120
127
208
158
42
80
274
130
116
34
110
125
80
80
210
126
187
84
148
130
112
118
265
149
171
101
100
102
30
110
80
64
178
126
96
60
137
129
64
79
112
104
140
122
120
98
100
120
100
176
116
144
160
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Leased
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Leased
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Leased
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Leased
United States:
Name of Facility
Location
Real
Property
Ownership
Interest
Number of
Beds
Wyoming Behavioral Institute ................................................................... Casper, Wyoming
129
Owned
United Kingdom:
Name of Facility
Location
Acer Clinic ..................................................................................................Chesterfield, UK
Acer Clinic 2 ................................................................................................Chesterfield, UK
Adele Cottage ..............................................................................................Rainworth, UK
Albert Ward ................................................................................................Darlington, UK
Amberwood Lodge .....................................................................................Dorset, UK
Ashbrook ......................................................................................................Birmingham, UK
Ashfield House ...........................................................................................Huddersfield, UK
Beacon Lower .............................................................................................Bradford, UK
Beacon Upper .............................................................................................Bradford, UK
Beckly .........................................................................................................Halifax, UK
Beeches ........................................................................................................Retford, UK
Birches .........................................................................................................Newark, UK
Broughton House .........................................................................................Lincolnshire, UK
Broughton Lodge .........................................................................................Macclesfield, UK
CAS Brunel ..................................................................................................Bristol, UK
Chaseways ...................................................................................................Sawbridgeworth, UK
Cherry Tree House .......................................................................................Mansfield Woodhouse, UK
Conifers ........................................................................................................Derby, UK
Cygnet Alders Clinic ...................................................................................Gloucester, UK
Cygnet Appletree ........................................................................................Meadowfield, UK
Cygnet Aspen House ..................................................................................Doncaster, UK
Cygnet Aspen Lodge ...................................................................................Doncaster, UK
Cygnet Bostall House .................................................................................Abbey Wood, UK
Cygnet Cedars ..............................................................................................Birmingham, UK
Cygnet Cedar Vale .......................................................................................East Bridgeford, UK
Cygnet Churchill ..........................................................................................London, UK
Cygnet Delfryn House .................................................................................Flintshire, UK
Cygnet Delfryn Lodge .................................................................................Flintshire, UK
Cygnet Elms .................................................................................................Birmingham, UK
Cygnet Fountains .........................................................................................Blackburn, UK
Cygnet Grange .............................................................................................Sutton-in-Ashfield, UK
Cygnet Heathers ...........................................................................................West Bromwich, UK
Cygnet Hospital—Beckton ..........................................................................London, UK
Cygnet Hospital—Bierley ............................................................................Bradford, UK
Cygnet Hospital—Blackheath......................................................................London, UK
Cygnet Hospital Bury ..................................................................................Bury, UK
Cygnet Hospital Clifton ...............................................................................Nottingham, UK
Cygnet Hospital—Derby .............................................................................Derby, UK
Cygnet Hospital—Ealing .............................................................................Ealing, UK
Cygnet Hospital—Godden Green ................................................................Sevenoaks, UK
Cygnet Hospital—Harrogate .......................................................................Middlesex, UK
Cygnet Hospital—Harrow ...........................................................................Harrow, UK
Cygnet Hospital Hexham .............................................................................Northumberland, UK
Cygnet Hospital—Kewstoke .......................................................................Weston-super-Mare, UK
Cygnet Hospital Sheffield ............................................................................Sheffield, UK
Cygnet Hospital—Stevenage .......................................................................Stevenage, UK
Cygnet Hospital—Taunton ..........................................................................Taunton, UK
Cygnet Hospital Woking ..............................................................................Woking, UK
31
Real
Property
Ownership
Interest
Number of
Beds
14
14
2
26
9
16
6
8
8
12
12
6
34
20
32
6
6
7
20
26
20
16
6
24
14
57
28
24
10
32
8
20
62
63
32
167
25
50
26
39
36
61
27
72
57
88
57
60
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Leased
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
United Kingdom:
Name of Facility
Location
Cygnet Hospital—Wyke ..............................................................................Bradford, UK
Cygnet Joyce Parker Hospital ......................................................................Coventry, UK
Cygnet Lodge ...............................................................................................Sutton-in-Ashfield, UK
Cygnet Lodge—Brighouse ..........................................................................Brighouse, UK
Cygnet Lodge – Kenton ...............................................................................Middlesex, UK
Cygnet Lodge—Lewisham ..........................................................................London, UK
Cygnet Lodge – Salford ...............................................................................Manchester, UK
Cygnet Lodge – Woking ..............................................................................Woking, UK
Cygnet Manor ..............................................................................................Shirebrook, UK
Cygnet Newham House ...............................................................................Middlesbrough, UK
Cygnet Nield House .....................................................................................Crewe, UK
Cygnet Oaks .................................................................................................Barnsley, UK
Cygnet Pindar House ...................................................................................Barnsley, UK
Cygnet Raglan House ..................................................................................West Midlands, UK
Cygnet Sedgley House .................................................................................Wolverhampton, UK
Cygnet Sedgley Lodge .................................................................................Wolverhampton, UK
Cygnet Sherwood House ..............................................................................Mansfield, UK
Cygnet Sherwood Lodge ..............................................................................Mansfield, UK
Cygnet St. Augustine’s ................................................................................Stoke on Trent, UK
Cygnet St. Teilo House ................................................................................Gwent, UK
Cygnet St. Williams .....................................................................................Darlington, UK
Cygnet Storthfield House .............................................................................Derbyshire, UK
Cygnet Victoria House .................................................................................Darlington, UK
Cygnet Views ...............................................................................................Matlock, UK
Cygnet Wallace Hospital .............................................................................Dundee, UK
Cygnet Wast Hills ........................................................................................Birmingham, UK
Cygnet Woodside .........................................................................................Bradford, UK
Dene Brook ..................................................................................................Rotherham, UK
Devon Lodge................................................................................................Southampton, UK
Dove Valley Mews ......................................................................................Barnsley, UK
Ducks Halt ...................................................................................................Essex, UK
Eleni House ..................................................................................................Essex, UK
Ellen Mhor ...................................................................................................Dundee, UK
Elston House ................................................................................................Newark, UK
Fairways .......................................................................................................Ipswich, UK
Farm Lodge ..................................................................................................Rainham, UK
The Fields ....................................................................................................Sheffield, UK
Highwoods ...................................................................................................Colchester, UK
Gables ..........................................................................................................Essex, UK
Gledcliffe Road ............................................................................................Huddersfield, UK
Gledholt .......................................................................................................Huddersfield, UK
Gledholt Mews .............................................................................................Huddersfield, UK
Glyn House ..................................................................................................Stoke on Trent, UK
Hawkstone ...................................................................................................Keighley, UK
Hollyhurst ....................................................................................................Darlington, UK
Hope House..................................................................................................Hartlepool, UK
Kirkside House ............................................................................................Leeds, UK
Kirkside Lodge ............................................................................................Leeds, UK
Langdale Coach House ................................................................................Huddersfield, UK
Langdale House ...........................................................................................Huddersfield, UK
Larch Court ..................................................................................................Essex, UK
Limes Houses ...............................................................................................Mansfield, UK
Lindsay House ............................................................................................Dundee, UK
Longfield House ..........................................................................................Bradford, UK
Lowry House................................................................................................Hyde, UK
Maidstone ....................................................................................................Maidstone, UK
32
Real
Property
Ownership
Interest
Number of
Beds
52
56
8
25
15
17
24
31
20
20
30
35
22
25
20
14
30
17
32
23
12
22
6
10
10
26
9
13
12
10
5
8
12
8
8
5
54
20
7
6
9
21
5
10
19
11
7
8
3
8
4
6
2
9
12
65
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
United Kingdom:
Name of Facility
Location
Marion House ..............................................................................................Derby, UK
Meadows Mews ...........................................................................................Tipton, UK
Morgan House ..............................................................................................Stoke on Trent, UK
Newbus Grange ............................................................................................Neasham, UK
Nightingale ..................................................................................................Dorset, UK
Norcott House ..............................................................................................Liversedge, UK
Norcott Lodge ..............................................................................................Liversedge, UK
Oak Court .....................................................................................................Essex, UK
Oakhurst Lodge ............................................................................................Hampshire, UK
Oaklands ......................................................................................................Northumberland, UK
Old Leigh House ..........................................................................................Essex, UK
The Orchards................................................................................................Essex, UK
Outwood ......................................................................................................Leeds, UK
Oxley Lodge ................................................................................................Huddersfield, UK
Oxley Woodhouse ........................................................................................Huddersfield, UK
Pines .............................................................................................................Mansfield Woodhouse, UK
Ramsey ........................................................................................................Colchester, UK
Ranaich House .............................................................................................Dunblane, UK
Redlands ......................................................................................................Darlington, UK
Rhyd Alyn ....................................................................................................Flintshire, UK
Shear Meadow .............................................................................................Hemel Hempstead, UK
Sherwood Lodge Step Down .......................................................................Mansfield, UK
The Squirrels ................................................................................................Hampshire, UK
4, 5, 7 The Sycamores ..................................................................................South Normanton, UK
15 The Sycamores ........................................................................................South Normanton, UK
Tabley House Nursing Home .......................................................................Knutsford, UK
Thistle House ...............................................................................................Dundee, UK
Thornfield Grange ........................................................................................Bishop Auckland, UK
Thornfield House .........................................................................................Bradford, UK
Thors Park ....................................................................................................Essex, UK
Toller Road ..................................................................................................Leicestershire, UK
Trinity House ...............................................................................................Galloway, UK
Tupwood Gate Nursing Home .....................................................................Caterham, UK
1Vincent Court .............................................................................................Lancashire, UK
Walkern Lodge ............................................................................................Stevenage, UK
Willow House ..............................................................................................Birmingham, UK
12 Woodcross Street ....................................................................................Wolverhampton, UK
Woodrow House ..........................................................................................Stockport, UK
Yew Trees ....................................................................................................Essex, UK
Puerto Rico:
Name of Facility
First Hospital Panamericano—Cidra ....................................................... Cidra, Puerto Rico
First Hospital Panamericano—San Juan .................................................. San Juan, Puerto Rico
First Hospital Panamericano—Ponce ...................................................... Ponce, Puerto Rico
Location
Real
Property
Ownership
Interest
Number of
Beds
5
10
5
17
10
11
9
12
8
19
7
5
10
4
13
7
21
14
5
6
4
9
9
6
4
51
10
9
7
14
8
13
33
5
4
8
8
9
10
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Leased
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Leased
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Number
of
Beds
165
45
30
Real
Property
Ownership
Interest
Owned
Leased
Leased
33
Outpatient Behavioral Health Care Facilities
United States:
Name of Facility
Arbour Counseling Services ............................................................................................. Rockland, Massachusetts
The Canyon at Santa Monica ............................................................................................ Santa Monica, California
Foundations San Francisco ............................................................................................... San Francisco, California
Michael’s House Outpatient ............................................................................................. Palm Springs, California
The Pointe Outpatient Behavioral Health Services ........................................................... Little Rock, Arkansas
Saint Louis Behavioral Medicine Institute ........................................................................ St. Louis, Missouri
Skywood Outpatient ......................................................................................................... Royal Oak, Michigan
Talbott Recovery ............................................................................................................... Atlanta, Georgia
Location
United Kingdom:
Name of Facility
Location
Long Eaton Day Services .................................................................................................. Nottingham, UK
Sheffield Day Services ...................................................................................................... Sheffield, UK
Outpatient Centers and Surgical Hospital
Name of Facility
Location
Aiken Surgery Center ....................................................................................................... Aiken, South Carolina
Cancer Care Institute of Carolina ...................................................................................... Aiken, South Carolina
Cornerstone Regional Hospital (3) ................................................................................... Edinburg, Texas
Manatee Diagnostic Center ............................................................................................... Bradenton, Florida
Palms Westside Clinic ASC (5) ........................................................................................ Royal Palm Beach, Florida
Quail Surgical and Pain Management Center (10) ............................................................ Reno, Nevada
Riverside Medical Clinic Surgery Center ......................................................................... Riverside, California
Temecula Valley Day Surgery (4) .................................................................................... Murrieta, California
Real
Property
Ownership
Interest
Owned
Leased
Leased
Leased
Leased
Owned
Leased
Owned
Real
Property
Ownership
Interest
Owned
Owned
Real
Property
Ownership
Interest
Owned
Owned
Leased
Leased
Leased
Leased
Leased
Leased
(1) Real property leased from Universal Health Realty Income Trust.
(2) These entities are consolidated under one license operating as the South Texas Health System.
(3) We manage and own a noncontrolling interest of approximately 50% in the entity that operates this facility.
(4) We manage and own a majority interest in an LLC that owns and operates this center.
(5) We own a noncontrolling ownership interest of approximately 50% in the entity that operates this facility that is managed by a
third-party.
(6) We hold an 93% ownership interest in this facility through both general and limited partnership interests. The remaining 7%
ownership interest is held by unaffiliated third parties.
(7) Land of this facility is leased.
(8) We manage and own a noncontrolling interest of 50% in this facility. The remaining 50% ownership interest is held by an
unaffiliated third party. Land of this facility is leased from the unaffiliated third party member.
(9) We manage and hold an 80% ownership interest in this facility. The remaining 20% ownership interest is held by an unaffiliated
third party.
(10) We hold a 51% ownership interest in this facility. The remaining 49% ownership interest is held by unaffiliated third parties.
(11) We manage and hold a 52% ownership interest in this facility. The remaining 48% ownership interest is held by an unaffiliated
third party.
34
(12) We manage and hold a 74.1% ownership interest in this facility. The remaining 25.9% ownership interest is held by an
unaffiliated third party.
(13) We manage and hold a 75% ownership interest in this facility. The remaining 25% ownership interest is held by an unaffiliated
third party.
(14) We manage and hold a 51% ownership interest in this facility. The remaining 49% ownership interest is held by an unaffiliated
third party.
(15) We manage and hold a 80% ownership interest in this facility. The remaining 20% ownership interest is held by an unaffiliated
third party.
(16) We manage and hold a 70% ownership interest in this facility. The remaining 30% ownership interest is held by an unaffiliated
third party.
(17) We manage and hold a 75% ownership interest in this facility. The remaining 25% ownership interest is held by an unaffiliated
third party.
(18) We manage and hold a 74% ownership interest in this facility. The remaining 26% ownership interest is held by an unaffiliated
third party.
(19) The land of this facility is leased pursuant to the terms of a lease that is scheduled to expire in August, 2082. The lease contains
one, twenty-five year renewal option.
We own or lease medical office buildings adjoining some of our hospitals. We believe that the leases on the facilities, medical
office buildings and other real estate leased or owned by us do not impose any material limitation on our operations. The aggregate
lease payments on facilities leased by us were $104 million in 2022, $93 million in 2021 and $82 million in 2020.
ITEM 3.
Legal Proceedings
The information regarding our legal proceedings is contained in Note 8 to the Consolidated Financial Statements -
Commitments and Contingencies, as included this Form 10-K, is incorporated herein by reference.
ITEM 4. Mine Safety Disclosures
Not applicable.
35
ITEM 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Our Class B Common Stock is traded on the New York Stock Exchange under the symbol UHS. Shares of our Class A, Class C
and Class D Common Stock are not traded in any public market, but are each convertible into shares of our Class B Common Stock on
a share-for-share basis.
PART II
The number of stockholders of record as of January 31, 2023, were as follows:
Class A Common
Class B Common
Class C Common
Class D Common
17
729
1
85
Stock Repurchase Programs
As of December 31, 2021, we had an aggregate available purchase authorization of $358.2 million. In February, 2022, our
Board of Directors authorized a $1.4 billion increase to the program. As of December 31, 2022, we had an aggregate available
repurchase authorization of $947.37 million. Pursuant to this program, shares of our Class B Common Stock may be repurchased,
from time to time as conditions allow, on the open market or in negotiated private transactions. There is no expiration date for our
stock repurchase programs.
As reflected below, during the fourth quarter of 2022, we have repurchased approximately 812,141 shares at an aggregate cost
of approximately $107.23 million (approximately $132.03 per share) pursuant to the terms of our stock repurchase program. In
addition, during the three-month period ended December 31, 2022, 17,727 shares were repurchased in connection with income tax
withholding obligations resulting from stock-based compensation programs. For the year ended December 31, 2022, we have
repurchased approximately 6.67 million shares at an aggregate cost of approximately $810.86 million (approximately $121.63 per
share). In addition, for the year ended December 31, 2022, 153,305 shares were repurchased in connection with income tax
withholding obligations resulting from stock-based compensation programs.
During the period of October 1, 2022 through December 31, 2022, we repurchased the following shares:
Additional
Dollars
Authorized
For
Repurchase
(in
thousands)
October, 2022
November, 2022
December, 2022
Total October through
December
$
—
—
—
-
Total
number of
shares
purchased (1)
1,730
191,955
637,764
Total
number of
shares
cancelled
745
286
550
831,449
1,581
$
$
$
$
Average
price paid
per share
for forfeited
restricted
shares
0.01
0.01
0.01
0.01
Total
Number
of shares
purchased
as part of
publicly
announced
programs (2)
Average
price paid
per share
for shares
purchased
as part of
publicly
announced
program
Aggregate
purchase
price paid
(in thousands)
Maximum
number of
dollars that
may yet be
purchased
under the
program
(in
thousands)
— $
$
$
182,141
630,000
— $
129.64 $
132.73 $
— $
$
$
23,612
83,617
1,054,597
1,030,985
947,368
812,141
$
132.03 $
107,229
(1)
(2)
Includes shares that were repurchased in connection with income tax withholding obligations resulting from the exercise
of stock options and the vesting of restricted stock grants. Also includes 745, 286 and 550 restricted shares that were
forfeited and canceled by former employees pursuant to the terms of our restricted stock purchase plan during October,
November and December, 2022, respectively.
The only publicly announced program pursuant to which the shares were repurchased was the share repurchase program
described above. There is no other plan or program that has expired during this time period. Also, there is no other plan
or program that we have determined to terminate prior to expiration, or under which we do not intend to make further
purchases.
Dividends
During the year ended December 31, 2022 we paid dividends of $0.80 per share. Dividend equivalents are accrued on unvested
restricted stock units and are paid upon vesting of the restricted stock unit.
Our Credit Agreement contains covenants that include limitations on, among other things, dividends and stock repurchases (see
below in Capital Resources-Credit Facilities and Outstanding Debt Securities).
36
Equity Compensation
Refer to Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters, of this
report for information regarding securities authorized for issuance under our equity compensation plans.
Stock Price Performance Graph
The following graph compares the cumulative total stockholder return on our common stock with the cumulative total return on
the stock included in the Standard & Poor’s 500 Index and a Peer Group Index during the five-year period ended December 31, 2022.
The graph assumes an investment of $100 made in our common stock and each Index as of January 1, 2018 and has been weighted
based on market capitalization. Note that our common stock price performance shown below should not be viewed as being indicative
of future performance.
Companies in the peer group, which consist of companies in the S&P 500 Index or S&P MidCap 400 Index are as follows:
Acadia Healthcare Company, Inc., Community Health Systems, Inc., HCA Healthcare, Inc., LifePoint Health, Inc. (included until
November, 2018, when it was acquired by Apollo Management) and Tenet Healthcare Corporation.
Company Name / Index
Universal Health Services, Inc.
S&P 500 Index
Peer Group
ITEM 6.
[RESERVED]
2017 Base
100.00
$
100.00
$
100.00
$
$
$
$
2018
103.16
95.62
135.63
2019
127.53
125.72
168.65
$
$
$
2021
2020
122.42 $ 116.10
148.85 $ 191.58
192.34 $ 304.63
$
$
$
2022
126.98
156.88
281.64
$
$
$
37
ITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is intended
to promote an understanding of our operating results and financial condition. The MD&A is provided as a supplement to, and should
be read in conjunction with, our consolidated financial statements and the accompanying notes to the Consolidated Financial
Statements, as included in this Annual Report on Form 10-K. The MD&A contains forward-looking statements that involve risks,
uncertainties, and assumptions. Actual results may differ materially from those anticipated in these forward-looking statements as a
result of various factors, including, but not limited to, those presented under Item 1A. Risk Factors, and below in Forward-Looking
Statements and Risk Factors and as included elsewhere in this Annual Report on Form 10-K. This section generally discusses our
results of operations for the year ended December 31, 2022, as compared to the year ended December 31, 2021. For discussion of our
result of operations and changes in our financial condition for the year ended December 31, 2021 as compared to the year ended
December 31, 2020, please refer to Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of
Operations in our Annual Report on Form 10-K for the year ended December 31, 2021, as filed with the Securities and Exchange
Commission on February 24, 2022.
Overview
Our principal business is owning and operating, through our subsidiaries, acute care hospitals and outpatient facilities and
behavioral health care facilities.
As of February 27, 2023, we owned and/or operated 359 inpatient facilities and 39 outpatient and other facilities including the
following located in 39 states, Washington, D.C., the United Kingdom and Puerto Rico:
Acute care facilities located in the U.S.:
28 inpatient acute care hospitals;
21 free-standing emergency departments, and;
7 outpatient centers & 1 surgical hospital.
Behavioral health care facilities (331 inpatient facilities and 10 outpatient facilities):
Located in the U.S.:
185 inpatient behavioral health care facilities, and;
8 outpatient behavioral health care facilities.
Located in the U.K.:
143 inpatient behavioral health care facilities, and;
2 outpatient behavioral health care facilities.
Located in Puerto Rico:
3 inpatient behavioral health care facilities.
Net revenues from our acute care hospitals, outpatient facilities and commercial health insurer accounted for 57% of our
consolidated net revenues during 2022 and 56% during 2021. Net revenues from our behavioral health care facilities and commercial
health insurer accounted for 43% of our consolidated net revenues during 2022 and 44% during 2021.
Our behavioral health care facilities located in the U.K. generated net revenues of approximately $685 million in 2022 and $688
million in 2021. Total assets at our U.K. behavioral health care facilities were approximately $1.235 billion as of December 31, 2022
and $1.351 billion as of December 31, 2021.
Services provided by our hospitals include general and specialty surgery, internal medicine, obstetrics, emergency room care,
radiology, oncology, diagnostic care, coronary care, pediatric services, pharmacy services and/or behavioral health services. We
provide capital resources as well as a variety of management services to our facilities, including central purchasing, information
services, finance and control systems, facilities planning, physician recruitment services, administrative personnel management,
marketing and public relations.
Forward-Looking Statements and Risk Factors
You should carefully review the information contained in this Annual Report, and should particularly consider any risk factors
that we set forth in this Annual Report on Form 10-K for the year ended December 31, 2022, and in other reports or documents that
we file from time to time with the Securities and Exchange Commission (the “SEC”). In this Annual Report, we state our beliefs of
future events and of our future financial performance. This Annual Report contains “forward-looking statements” that reflect our
current estimates, expectations and projections about our future results, performance, prospects and opportunities. Forward-looking
statements include, among other things, the information concerning our possible future results of operations, business and growth
38
strategies, financing plans, expectations that regulatory developments or other matters will or will not have a material adverse effect
on our business or financial condition, our competitive position and the effects of competition, the projected growth of the industry in
which we operate, and the benefits and synergies to be obtained from our completed and any future acquisitions, and statements of our
goals and objectives, and other similar expressions concerning matters that are not historical facts. Words such as “may,” “will,”
“should,” “could,” “would,” “predicts,” “potential,” “continue,” “expects,” “anticipates,” “future,” “intends,” “plans,” “believes,”
“estimates,” “appears,” “projects” and similar expressions, or the negative of those words and expressions, as well as statements in
future tense, identify forward-looking statements. In evaluating those statements, you should specifically consider various factors,
including the risks related to healthcare industry trends and those set forth herein in Item 1A. Risk Factors. Those factors may cause
our actual results to differ materially from any of our forward-looking statements.
Forward-looking statements should not be read as a guarantee of future performance or results, and will not necessarily be
accurate indications of the times at, or by which, such performance or results will be achieved. Forward-looking information is based
on information available at the time and/or our good faith belief with respect to future events, and is subject to risks and uncertainties
that are difficult to predict and many of which are outside of our control. Many factors, including those set forth herein in Item 1A.
Risk Factors, and other important factors disclosed in this report, and from time to time in our other filings with the SEC, could cause
actual performance or results to differ materially from those expressed in the statements. Such factors include, among other things, the
following:
we are subject to risks associated with public health threats and epidemics, including the health concerns relating to the
COVID-19 pandemic. In January 2020, the Centers for Disease Control and Prevention (“CDC”) confirmed the spread of
the disease to the United States. In March 2020, the World Health Organization declared the COVID-19 outbreak a
pandemic. The federal government has declared COVID-19 a national emergency, as many federal and state authorities
have implemented aggressive measures to “flatten the curve” of confirmed individuals diagnosed with COVID-19 in an
attempt to curtail the spread of the virus and to avoid overwhelming the health care system;
the impact of the COVID-19 pandemic, which began during the second half of March, 2020, has had a material effect on
our operations and financial results since that time. The length and extent of the disruptions caused by the COVID-19
pandemic are currently unknown; however, we expect such disruptions to continue into the future. Since the future
volumes and severity of COVID-19 patients remain highly uncertain and subject to change, including potential increases
in future COVID-19 patient volumes caused by new variants of the virus, as well as related pressures on staffing and wage
rates, we are not able to fully quantify the impact that these factors will have on our future financial results. However,
developments related to the COVID-19 pandemic could continue to materially affect our financial performance. Even
after the COVID-19 pandemic has subsided, we may continue to experience materially adverse impacts on our financial
condition and our results of operations as a result of its macroeconomic impact, including the risks of a global recession or
a recession in one or more of our key markets, the impact they may have on us and our customers and our assessment of
that impact, and any disruptions and inefficiencies in the supply chain, and many of our known risks described in the Risk
Factors section of our Annual Report on Form 10-K for the year ended December 31, 2022;
the nationwide shortage of nurses and other clinical staff and support personnel has been a significant operating issue
facing us and other healthcare providers. Like others in the healthcare industry, we continue to experience a shortage of
nurses and other clinical staff and support personnel at our acute care and behavioral health care hospitals in many
geographic areas. In some areas, the labor scarcity is putting a strain on our resources and staff, which has required us to
utilize higher-cost temporary labor and pay premiums above standard compensation for essential workers. This staffing
shortage has required us to hire expensive temporary personnel and/or enhance wages and benefits to recruit and retain
nurses and other clinical staff and support personnel. At certain facilities, particularly within our behavioral health care
segment, we have been unable to fill all vacant positions and, consequently, have been required to limit patient volumes.
These factors, which had a material unfavorable impact on our results of operations during 2022, are expected to continue
to have an unfavorable material impact on our results of operations for the foreseeable future;
the Centers for Medicare and Medicaid Services (“CMS”) issued an Interim Final Rule (“IFR”) effective November 5,
2021 mandating COVID-19 vaccinations for all applicable staff at all Medicare and Medicaid certified facilities. Under
the IFR, facilities covered by this regulation must establish a policy ensuring all eligible staff have received the COVID-
19 vaccine prior to providing any care, treatment, or other services. All eligible staff must have received the necessary
shots to be fully vaccinated. The regulation also provides for exemptions based on recognized medical conditions or
religious beliefs, observances, or practices. Under the IFR, facilities must develop a similar process or plan for permitting
exemptions in alignment with federal law. If facilities fail to comply with the IFR by the deadlines established, they are
subject to potential termination from the Medicare and Medicaid program for non-compliance. We cannot predict at this
time the potential viability or impact of any additional vaccination requirements. Implementation of these rules could have
an impact on staffing at our facilities for those employees that are not vaccinated in accordance with IFR requirements,
and associated loss of revenues and increased costs resulting from staffing issues could have a material adverse effect on
our financial results;
39
the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), a stimulus package signed into law on
March 27, 2020, authorizes $100 billion in grant funding to hospitals and other healthcare providers to be distributed
through the Public Health and Social Services Emergency Fund (the “PHSSEF”). These funds are not required to be
repaid provided the recipients attest to and comply with certain terms and conditions, including limitations on balance
billing and not using PHSSEF funds to reimburse expenses or losses that other sources are obligated to reimburse.
However, since the expenses and losses will be ultimately measured over the life of the COVID-19 pandemic, potential
retrospective unfavorable adjustments in future periods, of funds recorded as revenues in prior periods, could occur. The
U.S. Department of Health and Human Services (“HHS”) initially distributed $30 billion of this funding based on each
provider’s share of total Medicare fee-for-service reimbursement in 2019. Subsequently, HHS determined that CARES
Act funding (including the $30 billion already distributed) would be allocated proportional to providers’ share of 2018 net
patient revenue. We have received payments from these initial distributions of the PHSSEF as disclosed herein. HHS has
indicated that distributions of the remaining $50 billion will be targeted primarily to hospitals in COVID-19 high impact
areas, to rural providers, safety net hospitals and certain Medicaid providers and to reimburse providers for COVID-19
related treatment of uninsured patients. We have received payments from these targeted distributions of the PHSSEF, as
disclosed herein. The CARES Act also makes other forms of financial assistance available to healthcare providers,
including through Medicare and Medicaid payment adjustments and an expansion of the Medicare Accelerated and
Advance Payment Program, which made available accelerated payments of Medicare funds in order to increase cash flow
to providers. On April 26, 2020, CMS announced it was reevaluating and temporarily suspending the Medicare
Accelerated and Advance Payment Program in light of the availability of the PHSSEF and the significant funds available
through other programs. We have received accelerated payments under this program during 2020, and returned early all
of those funds during the first quarter of 2021, as disclosed herein. The Paycheck Protection Program and Health Care
Enhancement Act (the “PPPHCE Act”), a stimulus package signed into law on April 24, 2020, includes additional
emergency appropriations for COVID-19 response, including $75 billion to be distributed to eligible providers through the
PHSSEF. A third phase of PHSSEF allocations made $24.5 billion available for providers who previously received,
rejected or accepted PHSSEF payments. Applicants that had not yet received PHSSEF payments of 2 percent of patient
revenue were to receive a payment that, when combined with prior payments (if any), equals 2 percent of patient care
revenue. Providers that have already received payments of approximately 2 percent of annual revenue from patient care
were potentially eligible for an additional payment. Recipients will not be required to repay the government for PHSSEF
funds received, provided they comply with HHS defined terms and conditions. On December 27, 2020, the Consolidated
Appropriations Act, 2021 (“CAA”) was signed into law. The CAA appropriated an additional $3 billion to the PHSSEF,
codified flexibility for providers to calculate lost revenues, and permitted parent organizations to allocate PHSSEF
targeted distributions to subsidiary organizations. The CAA also provides that not less than 85 percent of the unobligated
PHSSEF amounts and any future funds recovered from health care providers should be used for additional distributions
that consider financial losses and changes in operating expenses in the third or fourth quarters of 2020 and the first quarter
of 2021 that are attributable to the coronavirus. The CAA provided additional funding for testing, contact tracing and
vaccine administration. Providers receiving payments were required to sign terms and conditions regarding utilization of
the payments. Any provider receiving funds in excess of $10,000 in the aggregate will be required to report data elements
to HHS detailing utilization of the payments, and we will be required to file such reports. We, and other providers, will
report healthcare related expenses attributable to COVID-19 that have not been reimbursed by another source, which may
include general and administrative or healthcare related operating expenses. Funds may also be applied to lost revenues,
represented as a negative change in year-over-year net patient care operating income. The deadline for using all Provider
Relief Fund payments depends on the date of the payment received period; payments received in the first period of April
10, 2020 to June 30, 2020 were to have been expended by June 30, 2021 and payments received in the fourth period of
July 1, 2021 to December 31, 2021 were to have been expended by December 31, 2022. The American Rescue Plan Act
of 2021 (“ARPA”), enacted on March 11, 2021, included funding directed at detecting, diagnosing, tracing, and
monitoring COVID-19 infections; establishing community vaccination centers and mobile vaccine units; promoting,
distributing, and tracking COVID-19 vaccines; and reimbursing rural hospitals and facilities for healthcare-related
expenses and lost revenues attributable to COVID-19. ARPA increased the eligibility for, and amount of, premium tax
credits to purchase health coverage through Patient Protection and Affordable Care Act, as amended by the Health and
Education Reconciliation Act (collectively, the “Legislation”). Further, ARPA set the Medicaid program’s federal medical
assistance percentage (“FMAP”) at 100 percent for amounts expended for COVID-19 vaccines and vaccine
administration. ARPA also increases the FMAP by 5 percent for eight calendar quarters to incentivize states to expand
their Medicaid programs. Finally, ARPA provides subsidies to cover 100 percent of health insurance premiums under the
Consolidated Omnibus Budget Reconciliation Act through September 30, 2021. There is a high degree of uncertainty
surrounding the implementation of the CARES Act, the PPPHCE Act, the CAA and ARPA, and the federal government
may consider additional stimulus and relief efforts, but we are unable to predict whether additional stimulus measures will
be enacted or their impact. On December 29, 2022, the Consolidated Appropriations Act, 2023, was signed into law and
phases out the enhanced FMAP rate and fully eliminates the increase on December 31, 2023. States are also permitted to
begin Medicaid eligibility redeterminations on March 31, 2023, which is anticipated to result in a large decrease in
Medicaid enrollment. There can be no assurance as to the total amount of financial and other types of assistance we will
40
receive under the CARES Act, the PPPHCE Act, the CAA and the ARPA, and it is difficult to predict the impact of such
legislation on our operations or how they will affect operations of our competitors. Moreover, we are unable to assess the
extent to which anticipated negative impacts on us arising from the COVID-19 pandemic will be offset by amounts or
benefits received or to be received under the CARES Act, the PPPHCE Act, the CAA and the ARPA;
HHS had adopted certain reimbursement policies and regulatory flexibilities favorable to providers during the Public
Health Emergency (“PHE”) declared in response to the COVID-19 pandemic. HHS has published guidance indicating its
intent for the PHE to expire on May 11, 2023. The end of the PHE status will result in the conclusion of those policies
over various designated timeframes. We cannot predict whether the loss of any such favorable conditions available to
providers during the declared PHE will ultimately have a negative financial impact on us;
our ability to comply with the existing laws and government regulations, and/or changes in laws and government
regulations;
an increasing number of legislative initiatives have been passed into law that may result in major changes in the health
care delivery system on a national or state level. For example, Congress has reduced to $0 the penalty for failing to
maintain health coverage that was part of the original Legislation as part of the Tax Cuts and Jobs Act. President Biden
has undertaken and is expected to undertake additional executive actions that will strengthen the Legislation and reverse
the policies of the prior administration. To date, the Biden administration has issued executive orders implementing a
special enrollment period permitting individuals to enroll in health plans outside of the annual open enrollment period and
reexamining policies that may undermine the Legislation or the Medicaid program. The Inflation Reduction Act of 2022
(“IRA”) was passed on August 16, 2022, which among other things, allows for CMS to negotiate prices for certain single-
source drugs reimbursed under Medicare Part B and Part D. The ARPA’s expansion of subsidies to purchase coverage
through a Legislation exchange, which the IRA continued through 2025, is anticipated to increase exchange enrollment.
The Trump Administration had directed the issuance of final rules (i) enabling the formation of association health plans
that would be exempt from certain Legislation requirements such as the provision of essential health benefits, (ii)
expanding the availability of short-term, limited duration health insurance, (iii) eliminating cost-sharing reduction
payments to insurers that would otherwise offset deductibles and other out-of-pocket expenses for health plan enrollees at
or below 250 percent of the federal poverty level, (iv) relaxing requirements for state innovation waivers that could reduce
enrollment in the individual and small group markets and lead to additional enrollment in short-term, limited duration
insurance and association health plans and (v) incentivizing the use of health reimbursement arrangements by employers
to permit employees to purchase health insurance in the individual market. The uncertainty resulting from these Executive
Branch policies may have led to reduced Exchange enrollment in 2018, 2019 and 2020. It is also anticipated that these
policies, to the extent that they remain as implemented, may create additional cost and reimbursement pressures on
hospitals, including ours. In addition, there have been numerous political and legal efforts to expand, repeal, replace or
modify the Legislation since its enactment, some of which have been successful, in part, in modifying the Legislation, as
well as court challenges to the constitutionality of the Legislation. The U.S. Supreme Court rejected the latest such case on
June 17, 2021, when the Court held in California v. Texas that the plaintiffs lacked standing to challenge the Legislation’s
requirement to obtain minimum essential health insurance coverage, or the individual mandate. The Court dismissed the
case without specifically ruling on the constitutionality of the Legislation. As a result, the Legislation will continue to
remain law, in its entirety, likely for the foreseeable future. On September 7, 2022, the Legislation faced its most recent
challenge when a Texas Federal District Court judge, in the case of Braidwood Management v. Becerra, ruled that a
requirement that certain health plans cover services without cost sharing violates the Appointments Clause of the U.S.
Constitution and that the coverage of certain HIV prevention medication violates the Religious Freedom Restoration Act.
Any future efforts to challenge, replace or replace the Legislation or expand or substantially amend its provision is
unknown. See below in Sources of Revenue and Health Care Reform for additional disclosure;
under the Legislation, hospitals are required to make public a list of their standard charges, and effective January 1, 2019,
CMS has required that this disclosure be in machine-readable format and include charges for all hospital items and
services and average charges for diagnosis-related groups. On November 27, 2019, CMS published a final rule on “Price
Transparency Requirements for Hospitals to Make Standard Charges Public.” This rule took effect on January 1, 2021 and
requires all hospitals to also make public their payer-specific negotiated rates, minimum negotiated rates, maximum
negotiated rates, and discounted cash rates, for all items and services, including individual items and services and service
packages, that could be provided by a hospital to a patient. Failure to comply with these requirements may result in daily
monetary penalties. On November 2, 2021, CMS released a final rule amending several hospital price transparency
policies and increasing the amount of penalties for noncompliance through the use of a scaling factor based on hospital
bed count;
as part of the CAA, Congress passed legislation aimed at preventing or limiting patient balance billing in certain
circumstances. The CAA addresses surprise medical bills stemming from emergency services, out-of-network ancillary
providers at in-network facilities, and air ambulance carriers. The legislation prohibits surprise billing when out-of-
network emergency services or out-of-network services at an in-network facility are provided, unless informed consent is
41
received. In these circumstances providers are prohibited from billing the patient for any amounts that exceed in-network
cost-sharing requirements. HHS, the Department of Labor and the Department of the Treasury have issued interim final
rules, which begin to implement the legislation. The rules are expected to limit our ability to receive payment for services
at usually higher out-of-network rates in certain circumstances and prohibit out-of-network payments in other
circumstances. On February 28, 2022, a district judge in the Eastern District of Texas invalidated portions of the rule
governing aspects of the Independent Dispute Resolution (“IDR”) process. In light of this decision, the government issued
a final rule on August 19, 2022 eliminating the rebuttable presumption in favor of the qualifying payment amount
(“QPA”) by the IDR entity and providing additional factors the IDR entity should consider when choosing between two
competing offers. On September 22, 2022, the Texas Medical Association filed a lawsuit challenging the IDR process
provided in the updated final rule and alleging that the final rule unlawfully elevates the QPA above other factors the IDR
entity must consider. The American Hospital Association and American Medical Association have announced their intent
to join this case as amici supporting the Texas Medical Association;
possible unfavorable changes in the levels and terms of reimbursement for our charges by third party payers or
government based payers, including Medicare or Medicaid in the United States, and government based payers in the
United Kingdom;
our ability to enter into managed care provider agreements on acceptable terms and the ability of our competitors to do the
same;
the outcome of known and unknown litigation, government investigations, false claims act allegations, and liabilities and
other claims asserted against us and other matters as disclosed in Note 8 to the Consolidated Financial Statements -
Commitments and Contingencies and the effects of adverse publicity relating to such matters;
competition from other healthcare providers (including physician owned facilities) in certain markets;
technological and pharmaceutical improvements that increase the cost of providing, or reduce the demand for healthcare;
our ability to attract and retain qualified personnel, nurses, physicians and other healthcare professionals and the impact
on our labor expenses resulting from a shortage of nurses and other healthcare professionals;
demographic changes;
there is a heightened risk of future cybersecurity threats, including ransomware attacks targeting healthcare providers. If
successful, future cyberattacks could have a material adverse effect on our business. Any costs that we incur as a result of
a data security incident or breach, including costs to update our security protocols to mitigate such an incident or breach
could be significant. Any breach or failure in our operational security systems can result in loss of data or an unauthorized
disclosure of or access to sensitive or confidential member or protected personal or health information and could result in
significant penalties or fines, litigation, loss of customers, significant damage to our reputation and business, and other
losses;
the availability of suitable acquisition and divestiture opportunities and our ability to successfully integrate and improve
our acquisitions since failure to achieve expected acquisition benefits from certain of our prior or future acquisitions could
result in impairment charges for goodwill and purchased intangibles;
the impact of severe weather conditions, including the effects of hurricanes and climate change;
as discussed below in Sources of Revenue, we receive revenues from various state and county-based programs, including
Medicaid in all the states in which we operate. We receive annual Medicaid revenues of approximately $100 million, or
greater, from each of Texas, California, Nevada, Illinois, Pennsylvania, Washington, D.C., Florida, Kentucky and
Massachusetts. We also receive Medicaid disproportionate share hospital payments in certain states including Texas and
South Carolina. We are therefore particularly sensitive to potential reductions in Medicaid and other state-based revenue
programs as well as regulatory, economic, environmental and competitive changes in those states. We can provide no
assurance that reductions to revenues earned pursuant to these programs, and the effect of the COVID-19 pandemic on
state budgets, particularly in the above-mentioned states, will not have a material adverse effect on our future results of
operations;
our ability to continue to obtain capital on acceptable terms, including borrowed funds, to fund the future growth of our
business;
our inpatient acute care and behavioral health care facilities may experience decreasing admission and length of stay
trends;
42
our financial statements reflect large amounts due from various commercial and private payers and there can be no
assurance that failure of the payers to remit amounts due to us will not have a material adverse effect on our future results
of operations;
the Budget Control Act of 2011 (the “2011 Act”) imposed annual spending limits for most federal agencies and programs
aimed at reducing budget deficits by $917 billion between 2012 and 2021, according to a report released by the
Congressional Budget Office. Among its other provisions, the law established a bipartisan Congressional committee,
known as the Joint Select Committee on Deficit Reduction (the “Joint Committee”), which was tasked with making
recommendations aimed at reducing future federal budget deficits by an additional $1.5 trillion over 10 years. The Joint
Committee was unable to reach an agreement by the November 23, 2011 deadline and, as a result, across-the-board cuts to
discretionary, national defense and Medicare spending were implemented on March 1, 2013 resulting in Medicare
payment reductions of up to 2% per fiscal year with a uniform percentage reduction across all Medicare programs. The
Bipartisan Budget Act of 2015, enacted on November 2, 2015, continued the 2% reductions to Medicare reimbursement
imposed under the 2011 Act. Recent legislation suspended payment reductions through December 31, 2021 in exchange
for extended cuts through 2030. Subsequent legislation extended the payment reduction suspension through March 31,
2022, with a 1% payment reduction from then until June 30, 2022 and the full 2% payment reduction thereafter. The most
recent legislation extended these reductions through 2032. We cannot predict whether Congress will restructure the
implemented Medicare payment reductions or what other federal budget deficit reduction initiatives may be proposed by
Congress going forward. See below in 2019 Novel Coronavirus Disease Medicare and Medicaid Payment Related
Legislation – Medicare Sequestration Relief, for additional disclosure related to the favorable effect the legislative
extensions have had on our results of operations;
uninsured and self-pay patients treated at our acute care facilities unfavorably impact our ability to satisfactorily and
timely collect our self-pay patient accounts;
changes in our business strategies or development plans;
in June, 2016, the United Kingdom affirmatively voted in a non-binding referendum in favor of the exit of the United
Kingdom (“U.K.”) from the European Union (the “Brexit”) and it was approved by vote of the British legislature. On
March 29, 2017, the United Kingdom triggered Article 50 of the Lisbon Treaty, formally starting negotiations regarding
its exit from the European Union. On January 31, 2020, the U.K. formally exited the European Union. On December 24,
2020, the United Kingdom and the European Union reached a post-Brexit trade and cooperation agreement that created
new business and security requirements and preserved the United Kingdom’s tariff- and quota-free access to the European
Union member states. The trade and cooperation agreement was provisionally applied as of January 1, 2021 and entered
into force on May 1, 2021, following ratification by the European Union. We do not know to what extent Brexit will
ultimately impact the business and regulatory environment in the U.K., the European Union, or other countries. Any of
these effects of Brexit, and others we cannot anticipate, could harm our business, financial condition and results of
operations;
in 2021, the rate of inflation in the United States began to increase and has since risen to levels not experienced in over 40
years. We are experiencing inflationary pressures, primarily in personnel costs, and we anticipate impacts on other cost
areas within the next twelve months. The extent of any future impacts from inflation on our business and our results of
operations will be dependent upon how long the elevated inflation levels persist and the extent to which the rate of
inflation further increases, if at all, neither of which we are able to predict. If elevated levels of inflation were to persist or
if the rate of inflation were to accelerate, our expenses could increase faster than anticipated and we may utilize our
capital resources sooner than expected. Further, given the complexities of the reimbursement landscape in which we
operate, our payers may be unwilling or unable to increase reimbursement rates to compensate for inflationary impacts.
Although we have hedged some of our floating rate indebtedness, the rapid increase in interest rates have increased our
interest expense significantly increasing our expenses and reducing our free cash flow and our ability to access the capital
markets on favorable terms. As such, the effects of inflation may adversely impact our results of operations, financial
condition and cash flows;
we have exposure to fluctuations in foreign currency exchange rates, primarily the pound sterling. We have international
subsidiaries that operate in the United Kingdom. We routinely hedge our exposures to foreign currencies with certain
financial institutions in an effort to minimize the impact of certain currency exchange rate fluctuations, but these hedges
may be inadequate to protect us from currency exchange rate fluctuations. To the extent that these hedges are inadequate,
our reported financial results or the way we conduct our business could be adversely affected. Furthermore, if a financial
counterparty to our hedges experiences financial difficulties or is otherwise unable to honor the terms of the foreign
currency hedge, we may experience material financial losses, and;
other factors referenced herein or in our other filings with the Securities and Exchange Commission.
43
Given these uncertainties, risks and assumptions, as outlined above, you are cautioned not to place undue reliance on such
forward-looking statements. Our actual results and financial condition could differ materially from those expressed in, or implied by,
the forward-looking statements. Forward-looking statements speak only as of the date the statements are made. We assume no
obligation to publicly update any forward-looking statements to reflect actual results, changes in assumptions or changes in other
factors affecting forward-looking information, except as may be required by law. All forward-looking statements attributable to us or
persons acting on our behalf are expressly qualified in their entirety by this cautionary statement.
Critical Accounting Policies and Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires
us to make estimates and assumptions that affect the amounts reported in our consolidated financial statements and accompanying
notes.
A summary of our significant accounting policies is outlined in Note 1 to the financial statements. We consider our critical
accounting policies to be those that require us to make significant judgments and estimates when we prepare our financial statements,
including the following:
Revenue Recognition: We report net patient service revenue at the estimated net realizable amounts from patients and third-
party payers and others for services rendered. We have agreements with third-party payers that provide for payments to us at amounts
different from our established rates. Payment arrangements include rates per discharge, reimbursed costs, discounted charges and per
diem payments. Estimates of contractual allowances under managed care plans, which represent explicit price concessions, are based
upon the payment terms specified in the related contractual agreements. We closely monitor our historical collection rates, as well as
changes in applicable laws, rules and regulations and contract terms, to assure that provisions are made using the most accurate
information available. However, due to the complexities involved in these estimations, actual payments from payers may be different
from the amounts we estimate and record.
See Note 10 to the Consolidated Financial Statements-Revenue Recognition, for additional disclosure related to our revenues
including a disaggregation of our consolidated net revenues by major source for each of the periods presented herein.
We estimate our Medicare and Medicaid revenues using the latest available financial information, patient utilization data,
government provided data and in accordance with applicable Medicare and Medicaid payment rules and regulations. The laws and
regulations governing the Medicare and Medicaid programs are extremely complex and subject to interpretation and as a result, there
is at least a reasonable possibility that recorded estimates will change by material amounts in the near term. Certain types of payments
by the Medicare program and state Medicaid programs (e.g. Medicare Disproportionate Share Hospital, Medicare Allowable Bad
Debts and Inpatient Psychiatric Services) are subject to retroactive adjustment in future periods as a result of administrative review
and audit and our estimates may vary from the final settlements. Such amounts are included in accounts receivable, net, on our
Consolidated Balance Sheets. The funding of both federal Medicare and state Medicaid programs are subject to legislative and
regulatory changes. As such, we cannot provide any assurance that future legislation and regulations, if enacted, will not have a
material impact on our future Medicare and Medicaid reimbursements. Adjustments related to the final settlement of these
retrospectively determined amounts did not materially impact our results in 2022, 2021 or 2020. If it were to occur, each 1%
adjustment to our estimated net Medicare revenues that are subject to retrospective review and settlement as of December 31, 2022,
would change our after-tax net income by approximately $1 million.
Charity Care, Uninsured Discounts and Other Adjustments to Revenue: Collection of receivables from third-party payers
and patients is our primary source of cash and is critical to our operating performance. Our primary collection risks relate to uninsured
patients and the portion of the bill which is the patient’s responsibility, primarily co-payments and deductibles. We estimate our
revenue adjustments for implicit price concessions based on general factors such as payer mix, the aging of the receivables and
historical collection experience. We routinely review accounts receivable balances in conjunction with these factors and other
economic conditions which might ultimately affect the collectability of the patient accounts and make adjustments to our allowances
as warranted. At our acute care hospitals, third party liability accounts are pursued until all payment and adjustments are posted to the
patient account. For those accounts with a patient balance after third party liability is finalized or accounts for uninsured patients, the
patient receives statements and collection letters.
Historically, a significant portion of the patients treated throughout our portfolio of acute care hospitals are uninsured patients
which, in part, has resulted from patients who are employed but do not have health insurance or who have policies with relatively high
deductibles. Patients treated at our hospitals for non-elective services, who have gross income of various amounts, dependent upon the
state, ranging from 200% to 400% of the federal poverty guidelines, are deemed eligible for charity care. The federal poverty
guidelines are established by the federal government and are based on income and family size. Because we do not pursue collection of
amounts that qualify as charity care, the transaction price is fully adjusted and there is no impact in our net revenues or in our accounts
receivable, net.
A portion of the accounts receivable at our acute care facilities are comprised of Medicaid accounts that are pending approval
from third-party payers but we also have smaller amounts due from other miscellaneous payers such as county indigent programs in
certain states. Our patient registration process includes an interview of the patient or the patient’s responsible party at the time of
44
registration. At that time, an insurance eligibility determination is made and an insurance plan code is assigned. There are various pre-
established insurance profiles in our patient accounting system which determine the expected insurance reimbursement for each
patient based on the insurance plan code assigned and the services rendered. Certain patients may be classified as Medicaid pending at
registration based upon a screening evaluation if we are unable to definitively determine if they are currently Medicaid eligible. When
a patient is registered as Medicaid eligible or Medicaid pending, our patient accounting system records net revenues for services
provided to that patient based upon the established Medicaid reimbursement rates, subject to the ultimate disposition of the patient’s
Medicaid eligibility. When the patient’s ultimate eligibility is determined, reclassifications may occur which impacts net revenues in
future periods. Although the patient’s ultimate eligibility determination may result in adjustments to net revenues, these adjustments
did not have a material impact on our results of operations in 2022 or 2021 since our facilities make estimates at each financial
reporting period to adjust revenue based on historical collections.
We also provide discounts to uninsured patients (included in “uninsured discounts” amounts below) who do not qualify for
Medicaid or charity care. Because we do not pursue collection of amounts classified as uninsured discounts, the transaction price is
fully adjusted and there is no impact in our net revenues or in our net accounts receivable. In implementing the discount policy, we
first attempt to qualify uninsured patients for governmental programs, charity care or any other discount program. If an uninsured
patient does not qualify for these programs, the uninsured discount is applied.
Uncompensated care (charity care and uninsured discounts):
The following table shows the amounts recorded at our acute care hospitals for charity care and uninsured discounts, based on
charges at established rates, for the years ended December 31, 2022 and 2021:
Charity care
Uninsured discounts
Total uncompensated care
(dollar amounts in thousands)
2022
2021
Amount
$
786,962
1,474,933
$ 2,261,895
%
Amount
%
35% $
661,965
65% 1,336,319
100% $ 1,998,284
33%
67%
100%
The estimated cost of providing uncompensated care:
The estimated cost of providing uncompensated care, as reflected below, were based on a calculation which multiplied the
percentage of operating expenses for our acute care hospitals to gross charges for those hospitals by the above-mentioned total
uncompensated care amounts. The percentage of cost to gross charges is calculated based on the total operating expenses for our acute
care facilities divided by gross patient service revenue for those facilities. An increase in the level of uninsured patients to our
facilities and the resulting adverse trends in the adjustments to net revenues and uncompensated care provided could have a material
unfavorable impact on our future operating results.
Estimated cost of providing charity care
Estimated cost of providing uninsured discounts related care
Estimated cost of providing uncompensated care
(amounts in thousands)
2022
2021
85,434 $
160,122
245,556 $
72,095
145,538
217,633
$
$
Self-Insured/Other Insurance Risks: We provide for self-insured risks, primarily general and professional liability claims,
workers’ compensation claims and healthcare and dental claims. Our estimated liability for self-insured professional and general
liability claims is based on a number of factors including, among other things, the number of asserted claims and reported incidents,
estimates of losses for these claims based on recent and historical settlement amounts, estimate of incurred but not reported claims
based on historical experience, and estimates of amounts recoverable under our commercial insurance policies. All relevant
information, including our own historical experience is used in estimating the expected amount of claims. While we continuously
monitor these factors, our ultimate liability for professional and general liability claims could change materially from our current
estimates due to inherent uncertainties involved in making this estimate. Our estimated self-insured reserves are reviewed and
changed, if necessary, at each reporting date and changes are recognized currently as additional expense or as a reduction of expense.
In addition, we also: (i) own commercial health insurers headquartered in Nevada and Puerto Rico, and; (ii) maintain self-
insured employee benefits programs for employee healthcare and dental claims. The ultimate costs related to these
programs/operations include expenses for claims incurred and paid in addition to an accrual for the estimated expenses incurred in
connection with claims incurred but not yet reported. Given our significant insurance-related exposure, there can be no assurance that
a sharp increase in the number and/or severity of claims asserted against us will not have a material adverse effect on our future results
of operations.
See Note 8 to the Consolidated Financial Statements-Commitments and Contingencies for additional disclosure related to our
self-insured general and professional liability and workers’ compensation liability.
45
Long-Lived Assets: We review our long-lived assets for impairment whenever events or circumstances indicate that the
carrying value of these assets may not be recoverable. The assessment of possible impairment is based on our ability to recover the
carrying value of our asset based on our estimate of its undiscounted future cash flow. If the analysis indicates that the carrying value
is not recoverable from future cash flows, the asset is written down to its estimated fair value and an impairment loss is recognized.
Fair values are determined based on estimated future cash flows using appropriate discount rates. Please see additional disclosure
below in Provision for Asset Impairment.
Goodwill and Intangible Assets: Goodwill and indefinite-lived intangible assets are reviewed for impairment at the reporting
unit level on an annual basis or more often if indicators of impairment arise. Our judgments regarding the existence of impairment
indicators are based on market conditions and operational performance of each reporting unit. We have designated October 1st as our
annual impairment assessment date for our goodwill and indefinite-lived intangible assets.
We performed an impairment assessment as of October 1, 2022 which indicated no impairment of goodwill. There was no
goodwill impairment during 2021.
Future changes in the estimates used to conduct the impairment review, including profitability and market value projections,
could indicate impairment in future periods potentially resulting in a write-off of a portion or all of our goodwill or indefinite-lived
intangible assets.
Income Taxes: Deferred tax assets and liabilities are recognized for the amount of taxes payable or deductible in future years as
a result of differences between the tax bases of assets and liabilities and their reported amounts in the financial statements. We believe
that future income will enable us to realize our deferred tax assets net of recorded valuation allowances relating to state and foreign net
operating loss carry-forwards, tax credits, and interest deduction limitations.
We operate in multiple jurisdictions with varying tax laws. We are subject to audits by any of these taxing authorities. Our tax
returns have been examined by the Internal Revenue Service through the year ended December 31, 2006. We believe that adequate
accruals have been provided for federal, foreign and state taxes.
See Note 6 to the Consolidated Financial Statements-Income Taxes for additional disclosure of our effective tax rates.
Recent Accounting Pronouncements: For a summary of recent accounting pronouncements, please see Note 1 to the
Consolidated Financial Statements-Accounting Standards as included in this Report on Form 10-K for the year ended December 31,
2022.
CARES Act and Other Governmental Grants and Medicare Accelerated Payments: Please see Sources of Revenue- 2019
Novel Coronavirus Disease Medicare and Medicaid Payment Related Legislation below for additional disclosure.
Results of Operations
COVID-19, Clinical Staffing Shortage and Effects of Inflation:
The impact of the COVID-19 pandemic, which began during the second half of March, 2020, has had a material effect on our
operations and financial results since that time. The length and extent of the disruptions caused by the COVID-19 pandemic are
currently unknown; however, we expect such disruptions to continue into the future. Since the future volumes and severity of COVID-
19 patients remain highly uncertain and subject to change, including potential increases in future COVID-19 patient volumes caused
by new variants of the virus, as well as related pressures on staffing and wage rates, we are not able to fully quantify the impact that
these factors will have on our future financial results. However, developments related to the COVID-19 pandemic could continue to
materially affect our financial performance.
The healthcare industry is labor intensive and salaries, wages and benefits are subject to inflationary pressures, as are supplies
expense and other operating expenses. In addition, the nationwide shortage of nurses and other clinical staff and support personnel has
been a significant operating issue facing us and other healthcare providers. Like others in the healthcare industry, we continue to
experience a shortage of nurses and other clinical staff and support personnel at our acute care and behavioral health care hospitals in
many geographic areas. In some areas, the labor scarcity is putting a strain on our resources and staff, which has required us to utilize
higher-cost temporary labor and pay premiums above standard compensation for essential workers. This staffing shortage has required
us to hire expensive temporary personnel and/or enhance wages and benefits to recruit and retain nurses and other clinical staff and
support personnel. At certain facilities, particularly within our behavioral health care segment, we have been unable to fill all vacant
positions and, consequently, have been required to limit patient volumes. This staffing shortage may require us to further enhance
wages and benefits to recruit and retain nurses and other clinical staff and support personnel or require us to hire expensive temporary
personnel. We have also experienced cost increases related to the procurement of medical supplies as well as certain of our other
operating expenses which we believe resulted from supply chain disruptions as well as general inflationary pressures. These factors,
which had a material unfavorable impact on our results of operations during 2022, have been moderating to a certain degree but are
expected to continue to have an unfavorable material impact on our results of operations for the foreseeable future.
Although our ability to pass on increased costs associated with providing healthcare to Medicare and Medicaid patients is
limited due to various federal, state and local laws which, in certain circumstances, limit our ability to increase prices, we have been
46
negotiating increased rates from commercial insurers to defray our increased cost of providing patient care. In addition, we have
implemented various productivity enhancement programs and cost reduction initiatives including, but not limited to, the following:
team-based patient care initiatives designed to optimize the level of patient care services provided by our licensed nurses/clinicians;
efforts to reduce utilization of, and rates paid for, premium pay labor; consolidation of medical supply vendors to increase purchasing
discounts; review and reduction of clinical variation in connection with the utilization of medical supplies, and; various other efforts to
increase productivity and/or reduce costs including investments in new information technology applications.
The following table summarizes our results of operations, and is used in the discussion below, for the years ended December 31,
2022 and 2021 (dollar amounts in thousands):
2022
Year Ended December 31,
2021
2020
% of Net
Revenues
Amount
% of Net
Revenues
Amount
% of Net
Revenues
100.0% $ 12,642,117
100.0% $ 11,558,897
100.0%
Net revenues
Operating charges:
Salaries, wages and benefits
Other operating expenses
Supplies expense
Depreciation and amortization
Lease and rental expense
Subtotal-operating expenses
Income from operations
Interest expense, net
Other (income) expense, net
Income before income taxes
Provision for income taxes
Net income
Less: Net income (loss) attributable
to noncontrolling interests
Net income attributable to UHS
Amount
$ 13,399,370
6,762,256
3,445,733
1,474,339
581,861
131,626
12,395,815
1,003,555
126,889
10,406
866,260
209,278
656,982
50.5%
25.7%
11.0%
4.3%
1.0%
6,163,944
3,035,869
1,427,134
533,213
118,863
92.5% 11,279,023
1,363,094
83,672
(13,891)
1,293,313
305,681
987,632
7.5%
0.9%
0.1%
6.5%
1.6%
4.9%
48.8%
24.0%
11.3%
4.2%
0.9%
5,613,097
2,672,762
1,288,132
510,493
116,059
89.2% 10,200,543
1,358,354
10.8%
106,285
0.7%
(14)
-0.1%
1,252,083
10.2%
299,293
2.4%
952,790
7.8%
48.6%
23.1%
11.1%
4.4%
1.0%
88.2%
11.8%
0.9%
0.0%
10.8%
2.6%
8.2%
0.1%
8.2%
(18,627)
675,609
$
-0.1%
5.0% $
(3,958)
991,590
0.0%
7.8% $
8,837
943,953
Net revenues increased by 6.0%, or $757 million, to $13.40 billion during 2022 as compared to $12.64 billion during 2021. The
increase in net revenues was primarily attributable to:
a $507 million or 4.1% increase in net revenues generated from our acute care and behavioral health care operations
owned during both periods (which we refer to as “same facility”), and;
$250 million of other combined net increases including the revenues generated at facilities and businesses acquired during
the past year, the revenues generated at a newly constructed, 158-bed acute care hospital located in Reno, Nevada, that
opened in early April, 2022, and a $77 million increase in provider tax assessments programs (which had no impact on net
income attributable to UHS as reflected above since the amounts were offset between net revenues and other operating
expenses).
Income before income taxes decreased by $427 million to $866 million during 2022 as compared to $1.29 billion during 2021.
The decrease was attributable to:
a decrease of $305 million at our acute care facilities, as discussed below in Acute Care Hospital Services;
a decrease of $45 million at our behavioral health care facilities, as discussed below in Behavioral Health Services;
a decrease of $43 million due to an increase in interest expense due to an increase in our aggregate average outstanding
borrowings as well as an increase in our weighted average cost of borrowings, as discussed below in Other Operating
Results-Interest Expense, and;
$34 million of other combined net decreases.
Net income attributable to UHS decreased by $316 million to $675 million during 2022 as compared to $992 million during
2021. This decrease was attributable to:
a decrease of $427 million in income before income taxes, as discussed above;
an increase of $15 million due to an increase in the loss attributable to noncontrolling interests, and;
47
an increase of $96 million resulting from a net decrease in the provision for income taxes due primarily to the income tax
benefit recorded in connection with the $412 million decrease in pre-tax income. Please see additional disclosure below in
Other Operating Results-Provision for Income Taxes and Effective Tax Rates.
Increase to self-insured professional and general liability reserves:
Our estimated liability for self-insured professional and general liability claims is based on a number of factors including,
among other things, the number of asserted claims and reported incidents, estimates of losses for these claims based on recent and
historical settlement amounts, estimates of incurred but not reported claims based on historical experience, and estimates of amounts
recoverable under our commercial insurance policies.
As a result of unfavorable trends experienced during 2022 and 2021, included in our results of operations were pre-tax increases
of $16 million during 2022, and $52 million during 2021, to our reserves for self-insured professional and general liability claims.
During 2022, approximately $10 million of the reserves increase is included in our Same Facility basis acute care hospitals services’
results, and approximately $6 million is included in our behavioral health services’ results. During 2021, approximately $39 million of
the reserves increase is included in our Same Facility basis acute care hospitals services’ results, and approximately $13 million is
included in our behavioral health services’ results.
Acute Care Hospital Services
The following table sets forth certain operating statistics for our acute care hospital services for the years ended December 31,
2022 and 2021.
Average licensed beds
Average available beds
Patient days
Average daily census
Occupancy-licensed beds
Occupancy-available beds
Admissions
Length of stay
Same Facility Basis
2022
6,760
6,588
1,546,067
4,235.8
62.7%
64.3%
307,462
5.0
2021
6,566
6,394
1,568,639
4,297.6
65.5%
67.2%
305,296
5.1
All
2022
6,923
6,751
1,569,611
4,300.3
62.1%
63.7%
311,537
5.0
2021
6,566
6,394
1,568,639
4,297.6
65.5%
67.2%
305,296
5.1
Acute Care Hospital Services-Same Facility Basis
We believe that providing our results on a “Same Facility” basis (which is a non-GAAP measure), which includes the operating
results for facilities and businesses operated in both the current year and prior year periods, is helpful to our investors as a measure of
our operating performance. Our Same Facility results also neutralize (if applicable) the effect of items that are non-operational in
nature including items such as, but not limited to, gains/losses on sales of assets and businesses, impacts of settlements, legal
judgments and lawsuits, impairments of long-lived and intangible assets and other amounts that may be reflected in the current or
prior year financial statements that relate to prior periods.
Our Same Facility basis results reflected on the tables below also exclude from net revenues and other operating expenses,
provider tax assessments incurred in each period as discussed below Sources of Revenue-Various State Medicaid Supplemental
Payment Programs. However, these provider tax assessments are included in net revenues and other operating expenses as reflected in
the table below under All Acute Care Hospital Services. The provider tax assessments had no impact on the income before income
taxes as reflected on the tables below since the amounts offset between net revenues and other operating expenses. To obtain a
complete understanding of our financial performance, the Same Facility results should be examined in connection with our net income
as determined in accordance with U.S. GAAP and as presented in the condensed consolidated financial statements and notes thereto as
contained in this Annual Report on Form 10-K.
48
The following table summarizes the results of operations for our acute care hospital services on a same facility basis and is used
in the discussions below for the years ended December 31, 2022 and 2021 (dollar amounts in thousands):
Net revenues
Operating charges:
Salaries, wages and benefits
Other operating expenses
Supplies expense
Depreciation and amortization
Lease and rental expense
Subtotal-operating expenses
Income from operations
Interest expense, net
Other (income) expense, net
Income before income taxes
Year Ended
December 31, 2022
Year Ended
December 31, 2021
Amount
$ 7,281,739
% of Net
Revenues
Amount
% of Net
Revenues
100.0% $ 6,998,257
100.0%
3,221,550
1,860,791
1,224,070
361,354
76,649
6,744,414
537,325
1,109
1,493
534,723
$
44.2% 2,964,934
25.6% 1,661,418
16.8% 1,224,499
329,755
5.0%
75,391
1.1%
92.6% 6,255,997
742,260
1,006
567
740,687
7.4%
0.0%
0.0%
7.3% $
42.4%
23.7%
17.5%
4.7%
1.1%
89.4%
10.6%
0.0%
0.0%
10.6%
During 2022, as compared to 2021, net revenues from our acute care hospital services, on a Same Facility basis, increased by
$283 million or 4.1%. Income before income taxes (and before income attributable to noncontrolling interests) decreased by $206
million, or 28%, amounting to $535 million, or 7.3% of net revenues during 2022, as compared to $741 million, or 10.6% of net
revenues during 2021.
During 2022, net revenue per adjusted admission decreased by 0.3% while net revenue per adjusted patient day increased by
1.9%, as compared to 2021. During 2022, as compared to 2021, inpatient admissions to our acute care hospitals increased by 0.7% and
adjusted admissions (adjusted for outpatient activity) increased by 3.1%. Patient days at these facilities decreased by 1.4% and
adjusted patient days increased by 0.9% during 2022, as compared to 2021. The average length of inpatient stay at these facilities was
5.0 days during 2022 and 5.1 days during 2021. The occupancy rate, based on the average available beds at these facilities, was 64%
during 2022, as compared to 67% during 2021.
On a Same Facility basis during 2022, as compared to 2021, salaries, wages and benefits expense increased $257 million or
8.7%. The increase during 2022, as compared to 2021, was due primarily to higher labor costs due, in part, to the healthcare labor
shortage as well as an increase in patients at our hospitals, during the first quarter of 2022, with COVID-19 which increased the
demand for care and pressured our staffing resources requiring us to utilize higher-cost temporary labor and pay premiums above
standard compensation for essential workers. As compared to the first quarter of 2022, we experienced a decrease in patients with
COVID-19 during the remaining 9 months of the year which eased the need for higher-cost temporary labor and pay premiums.
Other operating expenses increased $199 million, or 12.0%, during 2022, as compared to 2021. Operating expenses incurred in
connection with our commercial health insurer, consisting primarily of medical costs, increased approximately $97 million during
2022, as compared to 2021. Excluding the operating expenses incurred in connection with our commercial health insurer, other
operating expenses increased $103 million, or 7.6%.
Supplies expense decreased slightly during 2022, as compared to 2021. Offsetting the increased cost of supplies experienced
during 2022, as compared to 2021, was a decrease in the number of patients treated with COVID-19 at our hospitals during 2022, as
compared to 2021. Patients diagnosed with COVID-19 generally require more intensive medical resources and supplies.
All Acute Care Hospital Services
The following table summarizes the results of operations for all our acute care operations during 2022 and 2021. These amounts
include: (i) our acute care results on a same facility basis, as indicated above; (ii) the impact of provider tax assessments which
increased net revenues and other operating expenses but had no impact on income before income taxes, and; (iii) certain other
amounts including, if applicable, the operating results of businesses the were acquired/opened, or divested/closed, during the past year
as well as provisions for asset impairments. Dollar amounts below are reflected in thousands.
49
Net revenues
Operating charges:
Salaries, wages and benefits
Other operating expenses
Supplies expense
Depreciation and amortization
Lease and rental expense
Subtotal-operating expenses
Income from operations
Interest expense, net
Other (income) expense, net
Income before income taxes
Year Ended
December 31, 2022
Year Ended
December 31, 2021
Amount
$ 7,646,749
% of Net
Revenues
Amount
% of Net
Revenues
100.0% $ 7,108,254
100.0%
3,332,535
2,146,196
1,264,688
383,115
86,654
7,213,188
433,561
1,109
2,788
429,664
$
43.6% 2,968,140
28.1% 1,772,312
16.5% 1,224,664
331,508
5.0%
75,391
1.1%
94.3% 6,372,015
736,239
1,006
567
734,666
5.7%
0.0%
0.0%
5.6% $
41.8%
24.9%
17.2%
4.7%
1.1%
89.6%
10.4%
0.0%
0.0%
10.3%
During 2022, as compared to 2021, net revenues from our acute care hospital services increased by $538 million, or 7.6%, due
to: (i) the $283 million, or 4.1% increase in Same Facility revenues, as discussed above, and; (ii) $255 million of other combined
increases due to facilities and businesses acquired during the past year, the revenues generated at the newly constructed hospital
located in Reno, Nevada, that opened during the first quarter of 2022, and a $66 million increase in provider tax assessments.
Income before income taxes decreased by $305 million, or 42%, to $430 million, or 5.6% of net revenues during 2022, as
compared to $735 million, or 10.3% of net revenues during 2021. The decrease in income before income taxes resulted from: (i) the
$206 million, or 28%, decrease in income before income taxes at our hospitals, on a Same Facility basis, as discussed above; (ii) a $58
million provision for asset impairment recorded during 2022, as discussed below in Other Operating Results-Provision for Asset
Impairments, and; (iii) $41 million of other combined net decreases related primarily to the start-up losses incurred at the newly
constructed acute care hospital located in Reno, Nevada, that opened during the first quarter of 2022.
During 2022, as compared to 2021, salaries, wages and benefits expense increased $364 million or 12.3%. The increase was due
to the $257 million, or 8.7%, above-mentioned increase related to our acute care hospital services, on a Same Facility basis, as well as
a combined increase of $107 million related to the facilities and businesses acquired/opened during the past year.
Other operating expenses increased $374 million, or 21.1%, during 2022, as compared to 2021. The increase was due to the
$199 million, or 12.0%, above-mentioned increase related to our acute care hospital services, on a Same Facility basis, a combined
increase of $109 million related to the facilities and businesses acquired/opened during the past year, and a $66 million increase in
provider tax assessments.
Supplies expense increased $40 million, or 3.3%, during 2022, as compared to 2021. Since, as discussed above, supplies
expense decreased slightly for our acute care hospital services, on a Same Facility basis, the increase was due to the expense incurred
at the facilities and businesses acquired/opened during the past year.
Please see Results of Operations - COVID-19, Clinical Staffing Shortage and Effects of Inflation above for additional disclosure
regarding the factors impacting our operating costs.
50
Behavioral Health Care Services
The following table sets forth certain operating statistics for our behavioral health care services for the years ended December
31, 2022 and 2021.
Average licensed beds
Average available beds
Patient days
Average daily census
Occupancy-licensed beds
Occupancy-available beds
Admissions
Length of stay
Same Facility Basis
2022
23,835
23,735
6,164,887
16,890.1
70.9%
71.2%
452,772
13.6
2021
23,749
23,647
6,091,704
16,689.6
70.3%
70.6%
449,670
13.5
All
2022
24,259
24,159
6,230,124
17,068.8
70.4%
70.7%
459,245
13.6
2021
24,132
24,030
6,162,780
16,884.3
70.0%
70.3%
457,006
13.5
Behavioral Health Care Services-Same Facility Basis
We believe that providing our results on a “Same Facility” basis (which is a non-GAAP measure), which includes the operating
results for facilities and businesses operated in both the current year and prior year periods, is helpful to our investors as a measure of
our operating performance. Our Same Facility results also neutralize (if applicable) the effect of items that are non-operational in
nature including items such as, but not limited to, gains/losses on sales of assets and businesses, impacts of settlements, legal
judgments and lawsuits, impairments of long-lived and intangible assets and other amounts that may be reflected in the current or
prior year financial statements that relate to prior periods.
Our Same Facility basis results reflected on the table below also excludes from net revenues and other operating expenses,
provider tax assessments incurred in each period as discussed below Sources of Revenue-Various State Medicaid Supplemental
Payment Programs. However, these provider tax assessments are included in net revenues and other operating expenses as reflected in
the table below under All Behavioral Health Care Services. The provider tax assessments had no impact on the income before income
taxes as reflected on the tables below since the amounts offset between net revenues and other operating expenses. To obtain a
complete understanding of our financial performance, the Same Facility results should be examined in connection with our net income
as determined in accordance with U.S. GAAP and as presented in the condensed consolidated financial statements and notes thereto as
contained in this Annual Report on Form 10-K.
The following table summarizes the results of operations for our behavioral health care services, on a same facility basis, and is
used in the discussions below for the years ended December 31, 2022 and 2021 (dollar amounts in thousands):
Year Ended
December 31, 2022
Year Ended
December 31, 2021
Net revenues
Operating charges:
Salaries, wages and benefits
Other operating expenses
Supplies expense
Depreciation and amortization
Lease and rental expense
Subtotal-operating expenses
Income from operations
Interest expense, net
Other (income) expense, net
Income before income taxes
Amount
$5,595,179
3,075,718
1,071,443
210,136
180,958
42,657
4,580,912
1,014,267
3,749
(6,343)
$1,016,861
% of Net
Revenues
Amount
100.0% $5,371,512
% of Net
Revenues
55.0% 2,863,708
19.1% 1,036,089
3.8% 202,816
3.2% 183,843
0.8%
40,438
81.9% 4,326,894
18.1% 1,044,618
3,312
0.1%
-0.1%
96
18.2% $1,041,210
100.0%
53.3%
19.3%
3.8%
3.4%
0.8%
80.6%
19.4%
0.1%
0.0%
19.4%
During 2022, as compared to 2021, net revenues from our behavioral health services, on a Same Facility basis, increased by
$224 million or 4.2%. Income before income taxes (and before income attributable to noncontrolling interests) decreased by $24
million, or 2%, amounting to $1.02 billion or 18.2% of net revenues during 2022 as compared to $1.04 billion or 19.4% of net
revenues during 2021.
During 2022, net revenue per adjusted admission increased by 4.0% while net revenue per adjusted patient day increased by
3.5%, as compared to 2021. During 2022, as compared to 2021, inpatient admissions and adjusted admissions to our behavioral health
care hospitals each increased by 0.7%. Patient days and adjusted patient days at these facilities each increased by 1.2% during 2022, as
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compared to 2021. The average length of inpatient stay at these facilities was 13.6 days during 2022 and 13.5 days during 2021. The
occupancy rate, based on the average available beds at these facilities, was 71% during each of 2022 and 2021.
On a Same Facility basis during 2022, as compared to 2021, salaries, wages and benefits expense increased $212 million or
7.4%. The increase during 2022, as compared to 2021, was due, in part, to a nationwide shortage of nurses and other clinical staff and
support personnel at our behavioral health care hospitals which pressured our staffing resources and required us to pay premiums
above standard compensation for essential workers and to utilize higher-cost temporary labor.
Other operating expenses increased $35 million, or 3.4%, during 2022, as compared to 2021. Supplies expense increased $7
million, or 3.6%, during 2022, as compared to 2021.
All Behavioral Health Care Services
The following table summarizes the results of operations for all our behavioral health care services during 2022 and 2021. These
amounts include: (i) our behavioral health care results on a same facility basis, as indicated above; (ii) the impact of provider tax
assessments which increased net revenues and other operating expenses but had no impact on income before income taxes, and; (iii)
certain other amounts, if applicable, including the results of facilities acquired or opened during the past year as well as the results of
certain facilities that were closed or restructured during the past year. Dollar amounts below are reflected in thousands.
Year Ended
December 31, 2022
Year Ended
December 31, 2021
Net revenues
Operating charges:
Salaries, wages and benefits
Other operating expenses
Supplies expense
Depreciation and amortization
Lease and rental expense
Subtotal-operating expenses
Income from operations
Interest expense, net
Other (income) expense, net
Income before income taxes
Amount
$5,729,758
3,107,216
1,201,563
211,786
186,555
43,868
4,750,988
978,770
5,323
(6,843)
$ 980,290
% of Net
Revenues
Amount
100.0% $5,503,644
% of Net
Revenues
54.2% 2,893,028
21.0% 1,145,879
3.7% 204,840
3.3% 187,761
0.8%
41,703
82.9% 4,473,211
17.1% 1,030,433
0.1%
4,780
96
-0.1%
17.1% $1,025,557
100.0%
52.6%
20.8%
3.7%
3.4%
0.8%
81.3%
18.7%
0.1%
0.0%
18.6%
During 2022, as compared to 2021, net revenues generated from our behavioral health services increased by $226 million, or
4.1% due primarily to the above-mentioned $224 million, or 4.2% increase in net revenues on a Same Facility basis.
Income before income taxes decreased by $45 million, or 4%, to $980 million or 17.1% of net revenues during 2022, as
compared to $1.03 billion or 18.6% of net revenues during 2021. The decrease during 2022, as compared to 2021, was attributable to:
(i) the $24 million, or 2% decrease in income before income taxes experienced at our behavioral health facilities, on a Same Facility
basis, as discussed above, and; (ii) $21 million of other combined net decreases consisting primarily of the startup losses incurred at
various facilities opened during the past year.
During 2022, as compared to 2021, salaries, wages and benefits expense increased $215 million or 7.4%. The increase was due
primarily to the $212 million, or 7.4%, increase related to our behavioral health services, on a Same Facility basis, as discussed above.
Other operating expenses increased $56 million, or 4.9%, during 2022, as compared to 2021. The increase was due primarily to
the $35 million, or 3.4%, above-mentioned increase related to our behavioral health services, on a Same Facility basis, as well as the
other operating expenses incurred at various facilities opened during the past year.
Supplies expense increased $7 million, or 3.4%, during 2022, as compared to 2021, due to the above-mentioned increase related
to our behavioral health services, on a Same Facility basis.
Please see Results of Operations - COVID-19, Clinical Staffing Shortage and Effects of Inflation above for additional disclosure
regarding the factors impacting our operating costs.
Sources of Revenue
Overview: We receive payments for services rendered from private insurers, including managed care plans, the federal
government under the Medicare program, state governments under their respective Medicaid programs and directly from patients.
Hospital revenues depend upon inpatient occupancy levels, the medical and ancillary services and therapy programs ordered by
physicians and provided to patients, the volume of outpatient procedures and the charges or negotiated payment rates for such
services. Charges and reimbursement rates for inpatient routine services vary depending on the type of services provided (e.g.,
medical/surgical, intensive care or behavioral health) and the geographic location of the hospital. Inpatient occupancy levels fluctuate
52
for various reasons, many of which are beyond our control. The percentage of patient service revenue attributable to outpatient
services has generally increased in recent years, primarily as a result of advances in medical technology that allow more services to be
provided on an outpatient basis, as well as increased pressure from Medicare, Medicaid and private insurers to reduce hospital stays
and provide services, where possible, on a less expensive outpatient basis. We believe that our experience with respect to our
increased outpatient levels mirrors the general trend occurring in the health care industry and we are unable to predict the rate of
growth and resulting impact on our future revenues.
Patients are generally not responsible for any difference between customary hospital charges and amounts reimbursed for such
services under Medicare, Medicaid, some private insurance plans, and managed care plans, but are responsible for services not
covered by such plans, exclusions, deductibles or co-insurance features of their coverage. The amount of such exclusions, deductibles
and co-insurance has generally been increasing each year. Indications from recent federal and state legislation are that this trend will
continue. Collection of amounts due from individuals is typically more difficult than from governmental or business payers which
unfavorably impacts the collectability of our patient accounts.
As described below in the section titled 2019 Novel Coronavirus Disease Medicare and Medicaid Payment Related Legislation,
the federal government has enacted multiple pieces of legislation to assist healthcare providers during the COVID-19 world-wide
pandemic and U.S. National Emergency declaration. We have outlined those legislative changes related to Medicare and Medicaid
payment and their estimated impact on our financial results, where estimates are possible.
Sources of Revenues and Health Care Reform: Given increasing budget deficits, the federal government and many states are
currently considering additional ways to limit increases in levels of Medicare and Medicaid funding, which could also adversely affect
future payments received by our hospitals. In addition, the uncertainty and fiscal pressures placed upon the federal government as a
result of, among other things, impacts on state revenue and expenses resulting from the COVID-19 pandemic, economic recovery
stimulus packages, responses to natural disasters, and the federal and state budget deficits in general may affect the availability of
government funds to provide additional relief in the future. We are unable to predict the effect of future policy changes on our
operations.
On March 23, 2010, President Obama signed into law the Legislation. Two primary goals of the Legislation are to provide for
increased access to coverage for healthcare and to reduce healthcare-related expenses.
The Legislation revises reimbursement under the Medicare and Medicaid programs to emphasize the efficient delivery of high-
quality care and contains a number of incentives and penalties under these programs to achieve these goals. The Legislation and
subsequent revisions provide for reductions to both Medicare DSH and Medicaid DSH payments. The Medicare DSH reductions
began in October, 2013 while the Medicaid DSH reductions are scheduled to begin in 2024. The Legislation implemented a value-
based purchasing program, which will reward the delivery of efficient care. Conversely, certain facilities will receive reduced
reimbursement for failing to meet quality parameters; such hospitals will include those with excessive readmission or hospital-
acquired condition rates.
A 2012 U.S. Supreme Court ruling limited the federal government’s ability to expand health insurance coverage by holding
unconstitutional sections of the Legislation that sought to withdraw federal funding for state noncompliance with certain Medicaid
coverage requirements. Pursuant to that decision, the federal government may not penalize states that choose not to participate in the
Medicaid expansion by reducing their existing Medicaid funding. Therefore, states can choose to expand or not to expand their
Medicaid program without risking the loss of federal Medicaid funding. As a result, many states, including Texas, have not expanded
their Medicaid programs without the threat of loss of federal funding. CMS has previously granted section 1115 demonstration
waivers providing for work and community engagement requirements for certain Medicaid eligible individuals. CMS has also released
guidance to states interested in receiving their Medicaid funding through a block grant mechanism. The Biden administration has
signaled its intent to withdraw previously issued section 1115 demonstrations aligned with these policies. However, if implemented,
the previously issued section 1115 demonstrations are anticipated to lead to reductions in coverage, and likely increases in
uncompensated care, in states where these demonstration waivers are granted.
On December 14, 2018, a Texas Federal District Court deemed the Legislation to be unconstitutional in its entirety. The Court
concluded that the Individual Mandate is no longer permissible under Congress’s taxing power as a result of the Tax Cut and Jobs Act
of 2017 (“TCJA”) reducing the individual mandate’s tax to $0 (i.e., it no longer produces revenue, which is an essential feature of a
tax), rendering the Legislation unconstitutional. The Court also held that because the individual mandate is “essential” to the
Legislation and is inseverable from the rest of the law, the entire Legislation is unconstitutional. That ruling was ultimately appealed
to the United States Supreme Court, which decided in California v. Texas that the plaintiffs in the matter lacked standing to bring their
constitutionality claims. The Court did not reach the plaintiffs’ merits arguments, which specifically challenged the constitutionality
of the Legislation’s individual mandate and the entirety of the Legislation itself. As a result, the Legislation will continue to be law,
and HHS and its respective agencies will continue to enforce regulations implementing the law. However, on September 7, 2022, the
Legislation faced its most recent challenge when a Texas Federal District Court judge, in the case of Braidwood Management v.
Becerra, ruled that a requirement that certain health plans cover services without cost sharing violates the Appointments Clause of the
U.S. Constitution and that the coverage of certain HIV prevention medication violates the Religious Freedom Restoration Act.
53
The various provisions in the Legislation that directly or indirectly affect Medicare and Medicaid reimbursement took effect
over a number of years. The impact of the Legislation on healthcare providers will be subject to implementing regulations, interpretive
guidance and possible future legislation or legal challenges. Certain Legislation provisions, such as that creating the Medicare Shared
Savings Program creates uncertainty in how healthcare may be reimbursed by federal programs in the future. Thus, we cannot predict
the impact of the Legislation on our future reimbursement at this time and we can provide no assurance that the Legislation will not
have a material adverse effect on our future results of operations.
The Legislation also contained provisions aimed at reducing fraud and abuse in healthcare. The Legislation amends several
existing laws, including the federal Anti-Kickback Statute and the False Claims Act, making it easier for government agencies and
private plaintiffs to prevail in lawsuits brought against healthcare providers. While Congress had previously revised the intent
requirement of the Anti-Kickback Statute to provide that a person is not required to “have actual knowledge or specific intent to
commit a violation of” the Anti-Kickback Statute in order to be found in violation of such law, the Legislation also provides that any
claims for items or services that violate the Anti-Kickback Statute are also considered false claims for purposes of the federal civil
False Claims Act. The Legislation provides that a healthcare provider that retains an overpayment in excess of 60 days is subject to the
federal civil False Claims Act. The Legislation also expands the Recovery Audit Contractor program to Medicaid. These amendments
also make it easier for severe fines and penalties to be imposed on healthcare providers that violate applicable laws and regulations.
We have partnered with local physicians in the ownership of certain of our facilities. These investments have been permitted
under an exception to the physician self-referral law. The Legislation permits existing physician investments in a hospital to continue
under a “grandfather” clause if the arrangement satisfies certain requirements and restrictions, but physicians are prohibited from
increasing the aggregate percentage of their ownership in the hospital. The Legislation also imposes certain compliance and disclosure
requirements upon existing physician-owned hospitals and restricts the ability of physician-owned hospitals to expand the capacity of
their facilities. As discussed below, should the Legislation be repealed in its entirety, this aspect of the Legislation would also be
repealed restoring physician ownership of hospitals and expansion right to its position and practice as it existed prior to the
Legislation.
The impact of the Legislation on each of our hospitals may vary. Because Legislation provisions are effective at various times
over the next several years, we anticipate that many of the provisions in the Legislation may be subject to further revision. Initiatives
to repeal the Legislation, in whole or in part, to delay elements of implementation or funding, and to offer amendments or supplements
to modify its provisions have been persistent. The ultimate outcomes of legislative attempts to repeal or amend the Legislation and
legal challenges to the Legislation are unknown. Legislation has already been enacted that eliminated the individual mandate penalty,
effective January 1, 2019, related to the obligation to obtain health insurance that was part of the original Legislation. In addition,
Congress previously considered legislation that would, in material part: (i) eliminate the large employer mandate to offer health
insurance coverage to full-time employees; (ii) permit insurers to impose a surcharge up to 30 percent on individuals who go
uninsured for more than two months and then purchase coverage; (iii) provide tax credits towards the purchase of health insurance,
with a phase-out of tax credits accordingly to income level; (iv) expand health savings accounts; (v) impose a per capita cap on federal
funding of state Medicaid programs, or, if elected by a state, transition federal funding to block grants, and; (vi) permit states to seek a
waiver of certain federal requirements that would allow such state to define essential health benefits differently from federal standards
and that would allow certain commercial health plans to take health status, including pre-existing conditions, into account in setting
premiums.
In addition to legislative changes, the Legislation can be significantly impacted by executive branch actions. President Biden is
expected to undertake executive actions that will strengthen the Legislation and may reverse the policies of the prior administration.
To date, the Biden administration has issued executive orders implementing a special enrollment period permitting individuals to
enroll in health plans outside of the annual open enrollment period and reexamining policies that may undermine the ACA or the
Medicaid program. The ARPA’s expansion of subsidies to purchase coverage through an exchange contributed to increased exchange
enrollment in 2021. The IRA’s extension of the subsidies through 2025 is expected to increase exchange enrollment in future years.
The recent and on-going COVID-19 pandemic and related U.S. National Emergency declaration may significantly increase the
number of uninsured patients treated at our facilities extending beyond the most recent CBO published estimates due to increased
unemployment and loss of group health plan health insurance coverage. It is also anticipated that these policies may create additional
cost and reimbursement pressures on hospitals.
It remains unclear what portions of the Legislation may remain, or whether any replacement or alternative programs may be
created by any future legislation. Any such future repeal or replacement may have significant impact on the reimbursement for
healthcare services generally, and may create reimbursement for services competing with the services offered by our hospitals.
Accordingly, there can be no assurance that the adoption of any future federal or state healthcare reform legislation will not have a
negative financial impact on our hospitals, including their ability to compete with alternative healthcare services funded by such
potential legislation, or for our hospitals to receive payment for services.
For additional disclosure related to our revenues including a disaggregation of our consolidated net revenues by major source for
each of the periods presented herein, please see Note 10 to the Consolidated Financial Statements-Revenue Recognition.
54
Medicare: Medicare is a federal program that provides certain hospital and medical insurance benefits to persons aged 65 and
over, some disabled persons and persons with end-stage renal disease. All of our acute care hospitals and many of our behavioral
health centers are certified as providers of Medicare services by the appropriate governmental authorities. Amounts received under the
Medicare program are generally significantly less than a hospital’s customary charges for services provided. Since a substantial
portion of our revenues will come from patients under the Medicare program, our ability to operate our business successfully in the
future will depend in large measure on our ability to adapt to changes in this program.
Under the Medicare program, for inpatient services, our general acute care hospitals receive reimbursement under the inpatient
prospective payment system (“IPPS”). Under the IPPS, hospitals are paid a predetermined fixed payment amount for each hospital
discharge. The fixed payment amount is based upon each patient’s Medicare severity diagnosis related group (“MS-DRG”). Every
MS-DRG is assigned a payment rate based upon the estimated intensity of hospital resources necessary to treat the average patient
with that particular diagnosis. The MS-DRG payment rates are based upon historical national average costs and do not consider the
actual costs incurred by a hospital in providing care. This MS-DRG assignment also affects the predetermined capital rate paid with
each MS-DRG. The MS-DRG and capital payment rates are adjusted annually by the predetermined geographic adjustment factor for
the geographic region in which a particular hospital is located and are weighted based upon a statistically normal distribution of
severity. While we generally will not receive payment from Medicare for inpatient services, other than the MS-DRG payment, a
hospital may qualify for an “outlier” payment if a particular patient’s treatment costs are extraordinarily high and exceed a specified
threshold. MS-DRG rates are adjusted by an update factor each federal fiscal year, which begins on October 1. The index used to
adjust the MS-DRG rates, known as the “hospital market basket index,” gives consideration to the inflation experienced by hospitals
in purchasing goods and services. Generally, however, the percentage increases in the MS-DRG payments have been lower than the
projected increase in the cost of goods and services purchased by hospitals.
In August, 2022, CMS published its IPPS 2023 final payment rule which provides for a 4.1% market basket increase to the base
Medicare MS-DRG blended rate. When statutorily mandated budget neutrality factors, annual geographic wage index updates,
documenting and coding adjustments, and adjustments mandated by the Legislation are considered, without consideration for the
required Medicare DSH payments changes and increase to the Medicare Outlier threshold, the overall increase in IPPS payments is
approximately 4.6.%. Including DSH payments, an increase to the Medicare Outlier threshold and certain other adjustments, we
estimate our overall increase from the final IPPS 2023 rule (covering the period of October 1, 2022 through September 30, 2023) will
approximate 4.4%. This projected impact from the IPPS 2023 final rule includes an increase of approximately 0.5% to partially restore
cuts made as a result of the American Taxpayer Relief Act of 2012 (“ATRA”), as required by the 21st Century Cures Act, but
excludes the impact of the sequestration reductions related to the 2011 Act, Bipartisan Budget Act of 2015, and Bipartisan Budget Act
of 2018, as discussed below.
In August, 2021, CMS published its IPPS 2022 final payment rule which provides for a 2.7% market basket increase to the base
Medicare MS-DRG blended rate. When statutorily mandated budget neutrality factors, annual geographic wage index updates,
documenting and coding adjustments, and adjustments mandated by the Legislation are considered, without consideration for the
required Medicare DSH payments changes and increase to the Medicare Outlier threshold, the overall final increase in IPPS payments
is approximately 2.5%. Including DSH payments and certain other adjustments, we estimate our overall increase from the final IPPS
2022 rule (covering the period of October 1, 2021 through September 30, 2022) will approximate 1.5%. This projected impact from
the IPPS 2022 final rule includes an increase of approximately 0.5% to partially restore cuts made as a result of the ATRA, as required
by the 21st Century Cures Act but excludes the impact of the sequestration reductions related to the 2011 Act, Bipartisan Budget Act
of 2015, and Bipartisan Budget Act of 2018, as discussed below.
In June, 2019, the Supreme Court of the United States issued a decision favorable to hospitals impacting prior year Medicare
DSH payments (Azar v. Allina Health Services, No. 17-1484 (U.S. Jun. 3, 2019)). In Allina, the hospitals challenged the Medicare
DSH adjustments for federal fiscal year 2012, specifically challenging CMS’s decision to include inpatient hospital days attributable
to Medicare Part C enrollee patients in the numerator and denominator of the Medicare/SSI fraction used to calculate a hospital’s DSH
payments. This ruling addresses CMS’s attempts to impose the policy espoused in its vacated 2004 rulemaking to a fiscal year in the
2004–2013 time period without using notice-and-comment rulemaking. This decision should require CMS to recalculate hospitals’
DSH Medicare/SSI fractions, with Medicare Part C days excluded, for at least federal fiscal year 2012, but likely federal fiscal years
2005 through 2013. In August, 2020, CMS issued a rule that proposed to retroactively negate the effects of the aforementioned
Supreme Court decision, which rule has yet to be finalized. Although we can provide no assurance that we will ultimately receive
additional funds, we estimate that the favorable impact of this court ruling on certain prior year hospital Medicare DSH payments
could range between $18 million to $28 million in the aggregate.
The 2011 Act included the imposition of annual spending limits for most federal agencies and programs aimed at reducing
budget deficits by $917 billion between 2012 and 2021, according to a report released by the Congressional Budget Office. Among its
other provisions, the law established a bipartisan Congressional committee, known as the Joint Committee, which was responsible for
developing recommendations aimed at reducing future federal budget deficits by an additional $1.5 trillion over 10 years. The Joint
Committee was unable to reach an agreement by the November 23, 2011 deadline and, as a result, across-the-board cuts to
discretionary, national defense and Medicare spending were implemented on March 1, 2013 resulting in Medicare payment reductions
of up to 2% per fiscal year. Recent legislation suspended payment reductions through December 31, 2021, in exchange for extended
55
cuts through 2030. In December, 2021, the suspended 2% payment reduction was extended until June 30, 2022 and partially
suspended at a 1% payment reduction for an additional three-month period that ended on June 30, 2022.
Inpatient services furnished by psychiatric hospitals under the Medicare program are paid under a Psychiatric Prospective
Payment System (“Psych PPS”). Medicare payments to psychiatric hospitals are based on a prospective per diem rate with
adjustments to account for certain facility and patient characteristics. The Psych PPS also contains provisions for outlier payments and
an adjustment to a psychiatric hospital’s base payment if it maintains a full-service emergency department.
In July, 2022, CMS published its Psych PPS final rule for the federal fiscal year 2023. Under this final rule, payments to our
behavioral health care hospitals and units are estimated to increase by 3.8% compared to federal fiscal year 2022. This amount
includes the effect of the 4.1% net market basket update which reflects the offset of a 0.3% productivity adjustment.
In July, 2021, CMS published its Psych PPS final rule for the federal fiscal year 2022. Under this final rule, payments to our
psychiatric hospitals and units are estimated to increase by 2.2% compared to federal fiscal year 2021. This amount includes the effect
of the 2.0% net market basket update which reflects the offset of a 0.7% productivity adjustment.
CMS’s calendar year 2018 final OPPS rule, issued on November 13, 2017, substantially reduced Medicare Part B
reimbursement for 340B Program drugs paid to hospitals. Beginning January 1, 2018, CMS reimbursement for certain separately
payable drugs or biologicals that are acquired through the 340B Program by a hospital paid under the OPPS (and not excepted from
the payment adjustment policy) is the average sales price of the drug or biological minus 22.5 percent, an effective reduction of
26.89% in payments for 340B program drugs. In December, 2018, the U.S. District Court for the District of Columbia ruled that HHS
did not have statutory authority to implement the 2018 Medicare OPPS rate reduction related to hospitals that qualify for drug
discounts under the federal 340B Program and granted a permanent injunction against the payment reduction. On July 31, 2020, the
U.S. Court of Appeals for the D.C. Circuit reversed the District Court and held that HHS’s decision to lower drug reimbursement rates
for 340B hospitals rests on a reasonable interpretation of the Medicare statute. As a result, we recognized $8 million of revenues
during 2020 that were previously reserved in a prior year. These payment reductions were challenged before the U.S. Supreme Court,
which held in American Hospital Association v. Becerra that because HHS did not conduct a survey of hospitals’ acquisition costs in
2018 and 2019, its decision to vary reimbursement rates only for 340B hospitals in those years was unlawful. As a result of the
Supreme Court’s decision, CMS finalized for calendar year 2023 a payment rate of average sales price plus 6% for 340B Program
drugs, consistent with CMS policy for drugs not acquired through the program. CMS further implemented a 3.09% reduction to
payment rates for non-drug services to achieve budget neutrality for the 340B Program payment rate change for calendar year 2023.
CMS will address the remedy for 340B drug payments from 2018-2022 in future rulemaking prior to the calendar year 2024 OPPS
proposed rule.
In November, 2022, CMS issued its OPPS final rule for 2023. The hospital market basket increase is 4.1% and the
productivity adjustment reduction is -0.3% for a net market basket increase of 3.8%. The final rule provides that in light of the
Supreme Court decision in American Hospital Association v. Becerra, CMS is applying the default rate, generally average sales price
plus 6 percent, to 340B acquired drugs and biologicals for 2023. CMS stated they will address the remedy for 340B drug payments
from 2018-2022 in future rulemaking prior to the CY 2024 OPPS/ASC proposed rule. During the 2018-2022 time period, we
recorded an aggregate of approximately $45 million to $50 million of Medicare revenues related to the prior 340B payment policy.
When other statutorily required adjustments and hospital patient service mix are considered as well as impact of the aforementioned
340B Program policy change, we estimate that our overall Medicare OPPS update for 2023 will aggregate to a net increase of 0.9%
which includes a 0.3% increase to behavioral health division partial hospitalization rates.
On November 2, 2021, CMS issued its OPPS final rule for 2022. The hospital market basket increase is 2.7% and the
productivity adjustment reduction is -0.7% for a net market basket increase of 2.0%. When other statutorily required adjustments and
hospital patient service mix are considered, we estimate that our overall Medicare OPPS update for 2022 will aggregate to a net
increase of 2.4% which includes a 3.0% increase to behavioral health division partial hospitalization rates.
In December, 2020, CMS published its OPPS final rule for 2021. The hospital market basket increase is 2.4% and there is no
productivity adjustment reduction to the 2021 OPPS market basket. When other statutorily required adjustments and hospital patient
service mix are considered, we estimate that our overall Medicare OPPS update for 2021 will aggregate to a net increase of 3.3%
which includes a 9.2% increase to behavioral health division partial hospitalization rates.
In November, 2019, CMS finalized its Hospital Price Transparency rule that implements certain requirements under the June 24,
2019 Presidential Executive Order related to Improving Price and Quality Transparency in American Healthcare to Put Patients First.
Under this final rule, effective January 1, 2021, CMS will require: (1) hospitals make public their standard changes (both gross
charges and payer-specific negotiated charges) for all items and services online in a machine-readable format, and; (2) hospitals to
make public standard charge data for a limited set of “shoppable services” the hospital provides in a form and manner that is more
consumer friendly. On November 2, 2021, CMS released a final rule increasing the monetary penalty that CMS can impose on
hospitals that fail to comply with the price transparency requirements. We believe that our hospitals are in full compliance with the
applicable federal regulations.
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Medicaid: Medicaid is a joint federal-state funded health care benefit program that is administered by the states to provide
benefits to qualifying individuals. Most state Medicaid payments are made under a PPS-like system, or under programs that negotiate
payment levels with individual hospitals. Amounts received under the Medicaid program are generally significantly less than a
hospital’s customary charges for services provided. In addition to revenues received pursuant to the Medicare program, we receive a
large portion of our revenues either directly from Medicaid programs or from managed care companies managing Medicaid. All of our
acute care hospitals and most of our behavioral health centers are certified as providers of Medicaid services by the appropriate
governmental authorities.
We receive revenues from various state and county-based programs, including Medicaid in all the states in which we operate.
We receive annual Medicaid revenues of approximately $100 million, or greater, from each of Texas, California, Nevada, Illinois,
Pennsylvania, Washington, D.C., Florida, Kentucky and Massachusetts. We also receive Medicaid disproportionate share hospital
payments from certain states including, most significantly, Texas. We are therefore particularly sensitive to potential reductions in
Medicaid and other state-based revenue programs as well as regulatory, economic, environmental and competitive changes in those
states. We can provide no assurance that reductions to revenues earned pursuant to these programs, particularly in the above-
mentioned states, will not have a material adverse effect on our future results of operations.
The Legislation substantially increases the federally and state-funded Medicaid insurance program, and authorizes states to
establish federally subsidized non-Medicaid health plans for low-income residents not eligible for Medicaid starting in 2014.
However, the Supreme Court has struck down portions of the Legislation requiring states to expand their Medicaid programs in
exchange for increased federal funding. Accordingly, many states in which we operate have not expanded Medicaid coverage to
individuals at 133% of the federal poverty level. Facilities in states not opting to expand Medicaid coverage under the Legislation may
be additionally penalized by corresponding reductions to Medicaid disproportionate share hospital payments beginning in fiscal year
2024, as discussed below. We can provide no assurance that further reductions to Medicaid revenues, particularly in the above-
mentioned states, will not have a material adverse effect on our future results of operations.
In January, 2020, CMS announced a new opportunity to support states with greater flexibility to improve the health of their
Medicaid populations. The new 1115 Waiver Block Grant Type Demonstration program, titled Healthy Adult Opportunity (“HAO”),
emphasizes the concept of value-based care while granting states extensive flexibility to administer and design their programs within a
defined budget. CMS believes this state opportunity will enhance the Medicaid program’s integrity through its focus on accountability
for results and quality improvement, making the Medicaid program stronger for states and beneficiaries. The Biden administration has
signaled its intent to withdraw the HAO demonstration. Accordingly, we are unable to predict whether the HAO demonstration will
impact our future results of operations.
Various State Medicaid Supplemental Payment Programs:
We incur health-care related taxes (“Provider Taxes”) imposed by states in the form of a licensing fee, assessment or other
mandatory payment which are related to: (i) healthcare items or services; (ii) the provision of, or the authority to provide, the health
care items or services, or; (iii) the payment for the health care items or services. Such Provider Taxes are subject to various federal
regulations that limit the scope and amount of the taxes that can be levied by states in order to secure federal matching funds as part of
their respective state Medicaid programs. As outlined below, we derive a related Medicaid reimbursement benefit from assessed
Provider Taxes in the form of Medicaid claims based payment increases and/or lump sum Medicaid supplemental payments.
Included in these Provider Tax programs are reimbursements received in connection with the Texas Uncompensated Care/Upper
Payment Limit program (“UC/UPL”) and Texas Delivery System Reform Incentive Payments program (“DSRIP”). Additional
disclosure related to the Texas UC/UPL and DSRIP programs is provided below.
Texas Uncompensated Care/Upper Payment Limit Payments:
Certain of our acute care hospitals located in various counties of Texas (Grayson, Hidalgo, Maverick, Potter and Webb)
participate in Medicaid supplemental payment Section 1115 Waiver indigent care programs. Section 1115 Waiver Uncompensated
Care (“UC”) payments replace the former Upper Payment Limit (“UPL”) payments. These hospitals also have affiliation agreements
with third-party hospitals to provide free hospital and physician care to qualifying indigent residents of these counties. Our hospitals
receive both supplemental payments from the Medicaid program and indigent care payments from third-party, affiliated hospitals. The
supplemental payments are contingent on the county or hospital district making an Inter-Governmental Transfer (“IGT”) to the state
Medicaid program while the indigent care payment is contingent on a transfer of funds from the applicable affiliated hospitals.
However, the county or hospital district is prohibited from entering into an agreement to condition any IGT on the amount of any
private hospital’s indigent care obligation.
On December 21, 2017, CMS approved the 1115 Waiver for the period January 1, 2018 to September 30, 2022. The Waiver
continued to include UC and DSRIP payment pools with modifications and new state specific reporting deadlines that if not met by
THHSC will result in material decreases in the size of the UC and DSRIP pools. For UC during the initial two years of this renewal,
the UC program will remain relatively the same in size and allocation methodology. For year three of this waiver renewal, the federal
fiscal year (“FFY”) 2020, and through FFY 2022, the size and distribution of the UC pool will be determined based on charity care
costs reported to HHSC in accordance with Medicare cost report Worksheet S-10 principles. In September 2019, CMS approved the
57
annual UC pool size in the amount of $3.9 billion for demonstration years (“DYs”) 9, 10 and 11 (October 1, 2019 to September 30,
2022). In June 2022, HHSC announced that CMS approved the UC Pool size for Demonstration Years 12 through 16 (October 1, 2022
to September 30, 2027) for the current 1115 Waiver which will be $4.51 billion per year. The UC pool will be resized again in 2027
for DYs 17 through 19 (October 1, 2027 to September 30, 2030).
On April 16, 2021, CMS rescinded its January 15, 2021, 1115 Waiver ten year expedited renewal approval that was effective
through September 30, 2030. In July, 2021, HHSC submitted another 1115 Waiver renewal application to CMS which reflects the
same terms and conditions agreed to by CMS on January 15, 2021, in order to receive an extension beyond September 30, 2022. On
April 22, 2022, CMS withdrew its rescission of the 1115 Waiver and now considers the 1115 Waiver approved as extended and
governed by the special terms and conditions that CMS approved on January 15, 2021.
Effective April 1, 2018, certain of our acute care hospitals located in Texas began to receive Medicaid managed care rate
enhancements under the Uniform Hospital Rate Increase Program (“UHRIP”). The non-federal share component of these UHRIP rate
enhancements are financed by Provider Taxes. The Texas 1115 Waiver rules require UHRIP rate enhancements be considered in the
Texas UC payment methodology which results in a reduction to our UC payments. The UC amounts reported in the State Medicaid
Supplemental Payment Program Table below reflect the impact of this new UHRIP program. In July 2020, THHSC announced CMS
approval of an increase to UHRIP pool for the state’s 2021 fiscal year to $2.7 billion from its prior funding level of $1.6 billion.
On March 26, 2021, HHSC published a final rule that will apply to program periods on or after September 1, 2021, and UHRIP
was re-named the Comprehensive Hospital Increase Reimbursement Program (“CHIRP”). CHIRP is comprised of a UHRIP
component and an Average Commercial Incentive Award component. CHIRP has a pool size of $4.7 billion. On March 25, 2022,
CMS approved the CHIRP program retroactive to September 1, 2021 through August 31, 2022. The impact of the CHIRP program is
reflected in the State Medicaid Supplemental Payment Program Table below including approximately $12 million of estimated CHIRP
revenues which were recorded during the first quarter of 2022, attributable to the period September 1, 2021 through December 31,
2021, net of associated provider taxes. On August 1, 2022, CMS approved the CHIRP program, with a pool of $5.2 billion, for the rate
period effective September 1, 2022 to August 31, 2023.
During, 2022, certain of our acute care hospitals located in Texas recorded an aggregate of $33 million in Quality Incentive
Fund (“QIF”) payments, applicable to the period September 1, 2020 to August 31, 2021 in connection with the state’s UHRIP
program. This revenue was earned pursuant to contract terms with various Medicaid managed care plans which requires the annual
payout of QIF funds when a managed care service delivery area’s actual claims-based UHRIP payments are less than targeted UHRIP
payments for a specific rate year. We also anticipate that these hospitals may be entitled to a comparable amount of aggregate QIF
revenue during 2023.
On January 11, 2021, HHSC announced that CMS approved the pre-print modification that HHSC submitted for UHRIP period
March 1, 2021 through August 31, 2021. CMS approved rate changes that will now increase rates for private Institutions of Mental
Disease (“IMD”) for services provided to patients under age 21 or patients 65 years of age or older. Subsequent CMS UHRIP and
CHIRP program approvals continue to include IMD’s eligible patient population. The impact of these programs are included in the
Medicaid Supplemental Payment Programs table below.
On September 24, 2021, HHSC finalized New Fee-for-Service Supplemental Payment Program: Hospital Augmented
Reimbursement Program (“HARP”) to be effective October 1, 2021. The HARP program continues the financial transition for
providers who have historically participated in the Delivery System Reform Incentive Payment program described below. The
program will provide additional funding to hospitals to help offset the cost hospitals incur while providing Medicaid services. HHSC
financial model released concurrent with the publication of the final rule indicates net potential incremental Medicaid reimbursements
to us of approximately $15 million annually, without consideration of any potential adverse impact on future Medicaid DSH or
Medicaid UC payments. This program remains subject to CMS approval.
Texas Delivery System Reform Incentive Payments:
In addition, the Texas Medicaid Section 1115 Waiver included a DSRIP pool to incentivize hospitals and other providers to
transform their service delivery practices to improve quality, health status, patient experience, coordination, and cost-effectiveness.
DSRIP pool payments are incentive payments to hospitals and other providers that develop programs or strategies to enhance access to
health care, increase the quality of care, the cost-effectiveness of care provided and the health of the patients and families served. In
FFY 2022, DSRIP funding under the waiver is eliminated except for certain carryover DSRIP projects. In connection with this DSRIP
program, our results of operations included revenues of approximately $18 million in 2022 and $34 million in 2021.
Summary of Amounts Related To The Above-Mentioned Various State Medicaid Supplemental Payment Programs:
The following table summarizes the revenues, Provider Taxes and net benefit related to each of the above-mentioned Medicaid
supplemental programs for the years ended December 31, 2022 and 2021. The Provider Taxes are recorded in other operating
expenses on the Condensed Consolidated Statements of Income as included herein.
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Texas UC/UPL:
Revenues
Provider Taxes
Net benefit
Texas DSRIP:
Revenues
Provider Taxes
Net benefit
Various other state programs:
Revenues
Provider Taxes
Net benefit
Total all Provider Tax programs:
Revenues
Provider Taxes
Net benefit
(amounts in millions)
2022
2021
$
$
$
$
$
$
$
$
258 $
(101)
157 $
27 $
(9)
18 $
499 $
(177)
322 $
784 $
(287)
497 $
120
(35)
85
49
(16)
33
472
(160)
312
641
(211)
430
We estimate that our aggregate net benefit from the Texas and various other state Medicaid supplemental payment programs
will approximate $469 million (net of Provider Taxes of $278 million) during the year ending December 31, 2023. These amounts are
based upon various terms and conditions that are out of our control including, but not limited to, the states’/CMS’s continued approval
of the programs and the applicable hospital district or county making IGTs consistent with 2022 levels.
Future changes to these terms and conditions could materially reduce our net benefit derived from the programs which could
have a material adverse impact on our future consolidated results of operations. In addition, Provider Taxes are governed by both
federal and state laws and are subject to future legislative changes that, if reduced from current rates in several states, could have a
material adverse impact on our future consolidated results of operations. As described below in 2019 Novel Coronavirus Disease
Medicare and Medicaid Payment Related Legislation, a 6.2% increase to the Medicaid Federal Matching Assistance Percentage
(“FMAP”) is included in the Families First Coronavirus Response Act. The impact of the enhanced FMAP Medicaid supplemental
and DSH payments are reflected in our financial results during 2022 and 2021. We are unable to estimate the prospective financial
impact of this provision at this time as our financial impact is contingent on unknown state action during future eligible federal fiscal
quarters.
Texas and South Carolina Medicaid Disproportionate Share Hospital Payments:
Hospitals that have an unusually large number of low-income patients (i.e., those with a Medicaid utilization rate of at least one
standard deviation above the mean Medicaid utilization, or having a low income patient utilization rate exceeding 25%) are eligible to
receive a DSH adjustment. Congress established a national limit on DSH adjustments. Although this legislation and the resulting state
broad-based provider taxes have affected the payments we receive under the Medicaid program, to date the net impact has not been
materially adverse.
Upon meeting certain conditions and serving a disproportionately high share of Texas’ and South Carolina’s low income
patients, five of our facilities located in Texas and one facility located in South Carolina received additional reimbursement from each
state’s DSH fund. The South Carolina and Texas DSH programs were renewed for each state’s 2023 DSH fiscal year (covering the
period of October 1, 2022 through September 30, 2023).
In connection with these DSH programs, included in our financial results was an aggregate of approximately $54 million during
2022 and $51 million during 2021. We expect the aggregate reimbursements to our hospitals pursuant to the Texas and South Carolina
2023 fiscal year programs to be approximately $49 million.
The Legislation and subsequent federal legislation provides for a significant reduction in Medicaid disproportionate share
payments beginning in federal fiscal year 2024 (see above in Sources of Revenues and Health Care Reform-Medicaid for additional
disclosure related to the delay of these DSH reductions). HHS is to determine the amount of Medicaid DSH payment cuts imposed on
each state based on a defined methodology. As Medicaid DSH payments to states will be cut, consequently, payments to Medicaid-
participating providers, including our hospitals in Texas and South Carolina, will be reduced in the coming years. Based on the CMS
final rule published in September, 2019, beginning in fiscal year 2024 (as amended by the CARES Act and the CAA), annual
Medicaid DSH payments in South Carolina and Texas could be reduced by approximately 65% and 41%, respectively, from 2022
DSH payment levels.
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Our behavioral health care facilities in Texas have been receiving Medicaid DSH payments since FFY 2016. As with all
Medicaid DSH payments, hospitals are subject to state audits that typically occur up to three years after their receipt. DSH payments
are subject to a federal Hospital Specific Limit (“HSL”) and are not fully known until the DSH audit results are concluded. In general,
freestanding psychiatric hospitals tend to provide significantly less charity care than acute care hospitals and therefore are at more risk
for retroactive recoupment of prior year DSH payments in excess of their respective HSL. In light of the retroactive HSL audit risk for
freestanding psychiatric hospitals, we have established DSH reserves for our facilities that have been receiving funds since FFY 2016.
These DSH reserves are also impacted by the resolution of federal DSH litigation related to Children’s Hospital Association of Texas
v. Azar (“CHAT”) where the calculation of HSL was being challenged. In August, 2019, DC Circuit Court of Appeals issued a
unanimous decision in CHAT and reversed the judgment of the district court in favor of CMS and ordered that CMS’s “2017 Rule”
(regarding Medicaid DSH Payments—Treatment of Third Party Payers in Calculating Uncompensated Care Costs) be reinstated. CMS
has not issued any additional guidance post the ruling. In April 2020, the plaintiffs in the case have petitioned the Supreme Court of
the United States to hear their case. Additionally, there have been separate legal challenges on this same issue in the Fifth and Eight
Circuits. On November 4, 2019, in Missouri Hosp. Ass’n v. Azar, the United States Court of Appeals for the Eighth Circuit issued an
opinion upholding the 2017 Rule. On April 20, 2020, in Baptist Memorial Hospital v. Azar, the United States Court of Appeals of the
Fifth Circuit issued a decision also upholding the 2017 Rule. In light of these court decisions, we continue to maintain reserves in the
financial statements for cumulative Medicaid DSH and UC reimbursements related to our behavioral health hospitals located in Texas
that amounted to $42 million as of December 31, 2022 and $40 million as of December 31, 2021.
Nevada - SPA and SDP:
State Plan Amendment ("SPA")
CMS initially approved an SPA in Nevada in August, 2014 and this SPA has been approved for additional state fiscal years,
including the 2022 fiscal year covering the period of July 1, 2021 through June 30, 2022. CMS's approval for the 2023 fiscal year,
which is still pending, is expected to occur.
In connection with this program, included in our financial results was approximately $21 million during 2022 and approximately
$23 million during 2021. We estimate that our reimbursements pursuant to this program will approximate $19 million during the year
ended December 31, 2023.
State Directed Payment Program ("SDP")
On February 7, 2023, the Division of Health Care Financing and Policy (“DHCFP”) held a public workshop that outlined a new
provider fee on private hospitals located in Nevada that would effectively capture new Medicaid federal share for certain categories of
services eligible for the new payment programs. Final approval of each of these Medicaid supplemental payment programs is subject
to various state and federal actions. If ultimately approved, DHCFP intends to have both components implemented retroactively to
January 1, 2023.
DHCFP indicated the new Medicaid supplemental payments will include two components as follows:
Medicaid fee for service upper payment limit component.
We anticipate state and federal approval of the fee for service upper payment limit component to occur during 2023.
If approved, we estimate that our aggregate net reimbursements pursuant to this program (net of related provider
taxes) will approximate $25 million during the year ended December 31, 2023.
Medicaid managed care component.
We cannot predict whether or not the managed care component will ultimately receive state and federal approval. If
approved, we cannot predict the timing and aggregate net reimbursements that we may receive in connection with
this program.
California SPA:
In California, CMS issued formal approval of the 2017-19 Hospital Fee Program in December, 2017 retroactive to January 1,
2017 through September 30, 2019. In September, 2019, the state submitted a request to renew the Hospital Fee Program for the period
July 1, 2019 to December 31, 2021. On February 25, 2020, CMS approved this renewed program. These approvals include the
Medicaid inpatient and outpatient fee-for-service supplemental payments and the overall provider tax structure but did not yet include
the approval of the managed care rate setting payment component for certain rate periods (see table below). The managed care
payment component consists of two categories of payments, “pass-through” payments and “directed” payments. The pass-through
payments are similar in nature to the prior Hospital Fee Program payment method whereas the directed payment method will be based
on actual concurrent hospital Medicaid managed care in-network patient volume.
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California Hospital Fee Program CMS Approval Status:
Hospital Fee Program
Component
CMS Methodology Approval
Status
CMS Rate Setting Approval Status
Fee For Service Payment
Approved through December
31, 2022
Approved through December 31, 2022;
Paid through June 30, 2022
Managed Care-Pass-Through
Payment
Approved through December
31, 2022
Managed Care-Directed Payment Approved through December
31, 2022
Approved through June 30, 2019; Paid
in advance of approval through
December 31, 2021
Approved through June 30, 2019; Paid
in advance of approval through
December 30, 2020
In connection with the existing program, included in our financial results was approximately $50 million during 2022 and $46
million during 2021. We estimate that our reimbursements pursuant to this program will approximate $51 million during the year
ended December 31, 2023. The aggregate impact of the California supplemental payment program, as outlined above, is included in
the above State Medicaid Supplemental Payment Program table.
Kentucky Hospital Rate Increase Program (“HRIP”):
In early 2021, CMS approved the Kentucky Medicaid Managed Care Hospital Rate Increase Program (“HRIP”) for SFY 2021,
which covered the period of July 1, 2020 through June 30, 2021. In December 2021, CMS approved the HRIP program period for the
period July 1, 2021 to December 31, 2021. Included in our financial results was approximately $69 million during 2022 and
approximately $97 million during 2021 (covering the eighteen month period of July 1, 2020 through December 31, 2021),
respectively.
Programs such as HRIP require an annual state submission and approval by CMS. In December, 2021, CMS approved the
program for the period of January 1, 2022 through December 31, 2022 at rates similar to the prior year. We estimate that our
reimbursements pursuant to HRIP will approximate $60 million during the year ended December 31, 2023.
Florida Medicaid Managed Care Directed Payment Program (“DPP”):
The Florida Medicaid Managed Care Directed Payment Program (“DPP”) provides for an additional payment for Medicaid
managed care contracted services. The DPP program requires various related legislative and regulatory approvals each year. In
connection with this program, included in our financial results was approximately $36 million during 2022 and $23 million during
2021 (recorded during fourth quarters of each year). We estimate that our reimbursements pursuant to this DPP will approximate $34
million during the year ended December 31, 2023.
Oklahoma Transition to Managed Care and Implementation of a Medicaid Managed Care DPP
In May, 2022, Oklahoma enacted legislation (SB 1337 and SB 1396) that directs the Oklahoma Health Care Authority
(“OHCA”) to: (i) transition its Medicaid program from a fee for service payment model to a managed care payment model by no later
than October 1, 2023, and: (ii) concurrently implement a Medicaid managed care DPP using a managed care gap of ninety percent
(90%) average commercial rates. In December, 2022, the OHCA delayed the implementation date of the Medicaid managed care
change and related DPP until April 1, 2024. Although we estimate that the DPP as enacted may have a favorable impact on our future
results of operations, we are unable to quantify the ultimate impact since implementation of this legislation is subject to various
administrative and regulatory steps including the awarding of managed care contracts as well as CMS’s approval of the DPP.
Illinois Medicaid Supplemental Payment Programs
The Illinois Medicaid Supplemental Payment Programs are comprised of three components (1) Medicaid managed care directed
payment program (2) Medicaid managed care pass-through program and (3) Medicaid fee for service supplemental payment program.
The results of this program are included in the above State Medicaid Supplemental Payment Program table. These programs require
various related legislative and regulatory approvals each year. In connection with this program, included in our financial results was
approximately $49 million during 2022 and $30 million during 2021. Included in the 2022 amount was a non-recurring Medicaid
managed care claims processing catchup payment amounting to approximately $10 million. We estimate that our reimbursements
pursuant to these supplemental payment programs will approximate $39 million during the year ended December 31, 2023.
Risk Factors Related To State Supplemental Medicaid Payments:
As outlined above, we receive substantial reimbursement from multiple states in connection with various supplemental
Medicaid payment programs. The states include, but are not limited to, Texas, Kentucky, California, Illinois, Indiana and Nevada.
Failure to renew these programs beyond their scheduled termination dates, failure of the public hospitals to provide the necessary
IGTs for the states’ share of the DSH programs, failure of our hospitals that currently receive supplemental Medicaid revenues to
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qualify for future funds under these programs, or reductions in reimbursements, could have a material adverse effect on our future
results of operations.
In April, 2016, CMS published its final Medicaid Managed Care Rule which explicitly permits but phases out the use of pass-
through payments (including supplemental payments) by Medicaid Managed Care Organizations (“MCO”) to hospitals over ten years
but allows for a transition of the pass-through payments into value-based payment structures, delivery system reform initiatives or
payments tied to services under a MCO contract. Since we are unable to determine the financial impact of this aspect of the final rule,
we can provide no assurance that the final rule will not have a material adverse effect on our future results of operations. In
November, 2020, CMS issued a final rule permitting pass-through supplemental provider payments during a time-limited period when
states transition populations or services from fee-for-service Medicaid to managed care.
HITECH Act: In July 2010, HHS published final regulations implementing the health information technology (“HIT”)
provisions of the American Recovery and Reinvestment Act (referred to as the “HITECH Act”). The final regulation defines the
“meaningful use” of Electronic Health Records (“EHR”) and establishes the requirements for the Medicare and Medicaid EHR
payment incentive programs. The final rule established an initial set of standards and certification criteria. The implementation period
for these Medicare and Medicaid incentive payments started in federal fiscal year 2011 and can end as late as 2016 for Medicare and
2021 for the state Medicaid programs. State Medicaid program participation in this federally funded incentive program is voluntary
but all of the states in which our eligible hospitals operate have chosen to participate. Our acute care hospitals qualified for these EHR
incentive payments upon implementation of the EHR application assuming they meet the “meaningful use” criteria. The government’s
ultimate goal is to promote more effective (quality) and efficient healthcare delivery through the use of technology to reduce the total
cost of healthcare for all Americans and utilizing the cost savings to expand access to the healthcare system.
All of our acute care hospitals have met the applicable meaningful use criteria. However, under the HITECH Act, hospitals
must continue to meet the applicable meaningful use criteria in each fiscal year or they will be subject to a market basket update
reduction in a subsequent fiscal year. Failure of our acute care hospitals to continue to meet the applicable meaningful use criteria
would have an adverse effect on our future net revenues and results of operations.
In the 2019 IPPS final rule, CMS overhauled the Medicare and Medicaid EHR Incentive Program to focus on interoperability,
improve flexibility, relieve burden and place emphasis on measures that require the electronic exchange of health information between
providers and patients. We can provide no assurance that the changes will not have a material adverse effect on our future results of
operations.
Managed Care: A significant portion of our net patient revenues are generated from managed care companies, which include
health maintenance organizations, preferred provider organizations and managed Medicare (referred to as Medicare Part C or
Medicare Advantage) and Medicaid programs. In general, we expect the percentage of our business from managed care programs to
continue to grow. The consequent growth in managed care networks and the resulting impact of these networks on the operating
results of our facilities vary among the markets in which we operate. Typically, we receive lower payments per patient from managed
care payers than we do from traditional indemnity insurers, however, during the past few years we have secured price increases from
many of our commercial payers including managed care companies.
Commercial Insurance: Our hospitals also provide services to individuals covered by private health care insurance. Private
insurance carriers typically make direct payments to hospitals or, in some cases, reimburse their policy holders, based upon the
particular hospital’s established charges and the particular coverage provided in the insurance policy. Private insurance reimbursement
varies among payers and states and is generally based on contracts negotiated between the hospital and the payer.
Commercial insurers are continuing efforts to limit the payments for hospital services by adopting discounted payment
mechanisms, including predetermined payment or DRG-based payment systems, for more inpatient and outpatient services. To the
extent that such efforts are successful and reduce the insurers’ reimbursement to hospitals and the costs of providing services to their
beneficiaries, such reduced levels of reimbursement may have a negative impact on the operating results of our hospitals.
Surprise Billing Interim Final Rule: On September 30, 2021, the Department of Labor, and the Department of the Treasury,
along with the Office of Personnel Management (“OPM”), released an interim final rule with comment period, entitled “Requirements
Related to Surprise Billing; Part II.” This rule is related to Title I (the “No Surprises Act”) of Division BB of the Consolidated
Appropriations Act, 2021, and establishes new protections from surprise billing and excessive cost sharing for consumers receiving
health care items/services. It implements additional protections against surprise medical bills under the No Surprises Act, including
provisions related to the independent dispute resolution process, good faith estimates for uninsured (or self-pay) individuals, the
patient-provider dispute resolution process, and expanded rights to external review. On February 28, 2022, a district judge in the
Eastern District of Texas invalidated portions of the rule governing aspects of the Independent Dispute Resolution (“IDR”) process. In
light of this decision, the government issued a final rule on August 19, 2022 eliminating the rebuttable presumption in favor of the
qualifying payment amount (“QPA”) by the IDR entity and providing additional factors the IDR entity should consider when choosing
between two competing offers. On September 22, 2022, the Texas Medical Association filed a lawsuit challenging the IDR process
provided in the updated final rule and alleging that the final rule unlawfully elevates the QPA above other factors the IDR entity must
consider. The American Hospital Association and American Medical Association have announced their intent to join this case as
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amici supporting the Texas Medical Association. On February 10, 2023, CMS instructed certified IDR entities to hold all payment
determinations until further guidance is issued by the departments of Health & Human Services, Labor, and Treasury. This decision
stems from the February 6, 2023, court decision that vacated the federal government’s revised IDR process for determining payment
for out-of-network services under the No Surprises Act. Certified IDR entities have also been instructed to recall any payment
determinations issued after February 6, 2023. We do not expect the interim final rule or the August 19, 2022, final rule to have a
material impact on our results of operations.
Other Sources: Our hospitals provide services to individuals that do not have any form of health care coverage. Such patients
are evaluated, at the time of service or shortly thereafter, for their ability to pay based upon federal and state poverty guidelines,
qualifications for Medicaid or other state assistance programs, as well as our local hospitals’ indigent and charity care policy. Patients
without health care coverage who do not qualify for Medicaid or indigent care write-offs are offered substantial discounts in an effort
to settle their outstanding account balances.
Health Care Reform: Many Medicare, Medicaid and other health care industry changes were implemented as a result of the
Legislation. Some of these key changes are outlined below.
Medicaid Federal DSH Allotment:
Although the implementation has been delayed several times, the Legislation (as amended by subsequent federal legislation)
requires annual aggregate reductions in federal Medicaid DSH allotment from FFY 2024 through FFY 2027. Commencing in federal
fiscal year 2024, and continuing through 2027, DSH payments are scheduled to be reduced by $8 billion annually.
Value-Based Purchasing:
There is a trend in the healthcare industry toward value-based purchasing of healthcare services. These value-based purchasing
programs include both public reporting of quality data and preventable adverse events tied to the quality and efficiency of care
provided by facilities. Governmental programs including Medicare and Medicaid currently require hospitals to report certain quality
data to receive full reimbursement updates. In addition, Medicare does not reimburse for care related to certain preventable adverse
events. Many large commercial payers currently require hospitals to report quality data, and several commercial payers do not
reimburse hospitals for certain preventable adverse events.
The Legislation required HHS to implement a value-based purchasing program for inpatient hospital services which became
effective on October 1, 2012. The Legislation requires HHS to reduce inpatient hospital payments for all discharges by 2% in FFY
2017 and subsequent years. HHS will pool the amount collected from these reductions to fund payments to reward hospitals that meet
or exceed certain quality performance standards established by HHS. HHS will determine the amount each hospital that meets or
exceeds the quality performance standards will receive from the pool of dollars created by these payment reductions. As part of the
FFY 2022 IPPS final rule and FFY 2023 final rule, as discussed above, and as a result of the on-going COVID-19 pandemic, CMS has
implemented a budget neutral payment policy to fully offset the 2% VBP withhold during each of FFY 2022 and FFY 2023.
Hospital Acquired Conditions:
The Legislation prohibits the use of federal funds under the Medicaid program to reimburse providers for medical assistance
provided to treat hospital acquired conditions (“HAC”). Beginning in FFY 2015, hospitals that fall into the top 25% of national risk-
adjusted HAC rates for all hospitals in the previous year will receive a 1% reduction in their total Medicare payments. As part of the
FFY 2023 final rule discussed above, and as a result of the on-going COVID-19 pandemic, CMS will suppress all six measures in the
HAC Reduction Program for the FY 2023 program year and eliminate the HAC reduction program’s one percent payment penalty.
Readmission Reduction Program:
In the Legislation, Congress also mandated implementation of the hospital readmission reduction program (“HRRP”). Hospitals
with excessive readmissions for conditions designated by HHS will receive reduced payments for all inpatient discharges, not just
discharges relating to the conditions subject to the excessive readmission standard. The HRRP currently assesses penalties on hospitals
having excess readmission rates for heart failure, myocardial infarction, pneumonia, acute exacerbation of chronic obstructive
pulmonary disease (COPD) and elective total hip arthroplasty (THA) and/or total knee arthroplasty (TKA), excluding planned
readmissions, when compared to expected rates. In the fiscal year 2015 IPPS final rule, CMS added readmissions for coronary artery
bypass graft (CABG) surgical procedures beginning in fiscal year 2017. To account for excess readmissions, an applicable hospital's
base operating DRG payment amount is adjusted for each discharge occurring during the fiscal year. Readmissions payment
adjustment factors can be no more than a 3 percent reduction. As part of the FFY 2023 IPPS final rule discussed above, CMS will
modify all of the condition-specific readmission measures to include an adjustment for patient history of COVID-19 for FFY 2024.
Accountable Care Organizations:
The Legislation requires HHS to establish a Medicare Shared Savings Program that promotes accountability and coordination of
care through the creation of accountable care organizations (“ACOs”). The ACO program allows providers (including hospitals),
physicians and other designated professionals and suppliers to voluntarily work together to invest in infrastructure and redesign
delivery processes to achieve high quality and efficient delivery of services. The program is intended to produce savings as a result of
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improved quality and operational efficiency. ACOs that achieve quality performance standards established by HHS will be eligible to
share in a portion of the amounts saved by the Medicare program. CMS is also developing and implementing more advanced ACO
payment models that require ACOs to assume greater risk for attributed beneficiaries. On December 21, 2018, CMS published a final
rule that, in general, requires ACO participants to take on additional risk associated with participation in the program. On April 30,
2020, CMS issued an interim final rule with comment in response to the COVID-19 national emergency permitting ACOs with current
agreement periods expiring on December 31, 2020 the option to extend their existing agreement period by one year, and permitting
certain ACOs to retain their participation level through 2021. It remains unclear to what extent providers will pursue federal ACO
status or whether the required investment would be warranted by increased payment.
2019 Novel Coronavirus Disease Medicare and Medicaid Payment Related Legislation
In response to the growing threat of COVID-19, on March 13, 2020 a national emergency was declared. The declaration
empowered the HHS Secretary to waive certain Medicare, Medicaid and Children’s Health Insurance Program (“CHIP”) program
requirements and Medicare conditions of participation under Section 1135 of the Social Security Act. Having been granted this
authority by HHS, CMS issued a broad range of blanket waivers, which eased certain requirements for impacted providers, including:
Waivers and Flexibilities for Hospitals and other Healthcare Facilities including those for physical environment
requirements and certain Emergency Medical Treatment & Labor Act provisions
Provider Enrollment Flexibilities
Flexibility and Relief for State Medicaid Programs including those under section 1135 Waivers
Suspension of Certain Enforcement Activities
In addition to the national emergency declaration, Congress passed and Presidents Trump and Biden have signed various forms
of legislation intended to support state and local authority responses to COVID-19 as well as provide fiscal support to businesses,
individuals, financial markets, hospitals and other healthcare providers.
Some of the financial support included in the various legislative actions include:
Medicaid FMAP Enhancement
The FMAP was increased by 6.2% retroactive to the federal fiscal quarter beginning January 1, 2020 and each
subsequent federal fiscal quarter for all states and U.S. territories during the declared public health emergency through
December 31, 2022, in accordance with specified conditions. The Consolidated Appropriations Act of 2023 (“CAA of
2023”), signed into law on December 29, 2022, provides for the transitional reduction of the 6.2% enhanced FMAP
during 2023 to 5.0% during the second quarter, 2.5% during the third quarter and 1.5% during the fourth quarter of
2023.
Effective April 1, 2023, the CAA of 2023 allows states to initiate Medicaid renewals, post-enrollment verifications, and
redeterminations over a 12-month period for all individuals who are enrolled in such plan (or waiver) as of April 1,
2023. This activity was previously prohibited as a condition for the receipt of the enhanced FMAP during the PHE. This
Medicaid enrollment related activity is likely to reduce Medicaid beneficiary enrollment as states initiate this activity
but the level of Medicaid disenrollment cannot be predicted.
Public Health Emergency Declaration
The HHS Secretary renewed the PHE effective January 11, 2023, for 90 days. As a result, certain Medicare payment
provisions contingent on the PHE are extended including the twenty percent (20%) Medicare add-on for inpatient
hospital COVID-19 patients noted below. However, HHS has published guidance indicating its intent for the PHE to
expire on May 11, 2023. We cannot predict whether the loss of any such favorable payment provisions available to
providers during the declared PHE will ultimately have a negative financial impact on us.
Creation of a $250 billion Public Health and Social Services Emergency Fund (“PHSSEF”)
Makes grants available to hospitals and other healthcare providers to cover unreimbursed healthcare related expenses or
lost revenues attributable to the public health emergency resulting from the coronavirus.
During 2021, we received approximately $189 million in PHSSEF grants from the federal government as provided for
by the CARES Act. As previously disclosed, we returned these funds to HHS during the second quarter of 2021. Since
our intent was to return these funds, our financial results for the year ended December 31, 2021 include no impact from
the receipt of these federal funds. Reimbursements recorded pursuant the PHSSEF and other various state and local
governmental stimulus programs did not have a significant impact on our financial results during the nine-month period
ended September 30, 2022. Our results of operations for the nine-month period ended September 30, 2021 included
approximately $13 million of reimbursements recorded in connection with these programs.
During the year ended December 31, 2020, we received approximately $417 million of funds from various
governmental stimulus programs, most notably the PHSSEF as provided for by the CARES Act. As mentioned above,
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included financial results for the year ended December 31, 2020 was approximately $413 million of revenues
recognized in connection with funds received from these federal, state and local governmental stimulus programs.
All PHSSEF receipts are subject to meeting the applicable terms and conditions of the various distribution programs as
of September 30, 2021. The Consolidated Appropriations Act, 2021 (H.R. 133) enacted on December 27, 2020 includes
language that provides specific instructions on: (1) the redistribution of PHSSEF grant payments by a parent company
among its subsidiaries, and; (2) the calculation of lost revenue in a PHSSEF grant entitlement determination. The HHS
terms and conditions for all grant recipients and specific fund distributions are located at
https://www.hhs.gov/coronavirus/cares-act-provider-relief-fund/for-providers/index.html
Reimburse hospitals at Medicare rates for uncompensated COVID-19 care for the uninsured
Our financial results for the years ended December 31, 2022 and 2021 included approximately $22 million and $71
million, respectively, of revenues recorded in connection with this COVID-19 uninsured program. Revenue for the
eligible patient encounters is recorded in the period in which the encounter is deemed eligible for this program net of
any normal accounting reserves.
Effective March 22, 2022, HHS announced that the HRSA COVID-19 Uninsured Program and Coverage Assistance
Fund is no longer accepting claims due to insufficient funding.
Medicare Sequestration Relief
Suspension of the 2% Medicare sequestration offset for Medicare services provided from May 1, 2020 through
December 31, 2021 by various legislative extensions. In December, 2021, the suspended 2% payment reduction was
extended until March 31, 2022 and partially suspended at a 1% payment reduction for an additional three-month period
that ended on June 30, 2022.
Our financial results for the years ended December 31, 2022 and 2021 included approximately $17 million and $45
million, respectively, of revenues recorded in connection with this Medicare sequestration relief program.
Medicare add-on for inpatient hospital COVID-19 patients
Increases the payment that would otherwise be made to a hospital for treating a Medicare patient admitted with COVID-
19 by twenty percent (20%) for the duration of the COVID-19 public health emergency.
Our financial results for the years ended December 31, 2022 and 2021 included approximately $30 million and $34
million, respectively, of revenues recorded in connection with this COVID-19 Medicare add-on program. These
payments were intended to offset the increased expenses associated with the treatment of Medicare COVID-19 patients.
Expansion of the Medicare Accelerated and Advance Payment Program (“MAAPP”)
In March, 2021, we fully repaid the $695 million of Medicare Accelerated payments received during 2020.
In addition to statutory and regulatory changes to the Medicare program and each of the state Medicaid programs, our
operations and reimbursement may be affected by administrative rulings, new or novel interpretations and determinations of existing
laws and regulations, post-payment audits, requirements for utilization review and new governmental funding restrictions, all of which
may materially increase or decrease program payments as well as affect the cost of providing services and the timing of payments to
our facilities. The final determination of amounts we receive under the Medicare and Medicaid programs often takes many years,
because of audits by the program representatives, providers’ rights of appeal and the application of numerous technical reimbursement
provisions. We believe that we have made adequate provisions for such potential adjustments. Nevertheless, until final adjustments are
made, certain issues remain unresolved and previously determined allowances could become either inadequate or more than ultimately
required.
Finally, we expect continued third-party efforts to aggressively manage reimbursement levels and cost controls. Reductions in
reimbursement amounts received from third-party payers could have a material adverse effect on our financial position and our results.
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Other Operating Results
Interest Expense
Reflected below are the components of our interest expense which amounted to $127 million during 2022 and $84 million
during 2021 (amounts in thousands):
Revolving credit & demand notes (a.)
Tranche A term loan facility (a.)
Tranche B term loan facility (a.)
$400 million, 5.00% Senior Notes due 2026 (b.)
$800 million, 2.65% Senior Notes due 2030 (c.)
$700 million, 1.65% Senior Notes due 2026 (d.)
$500 million, 2.65% Senior Notes due 2032 (e.)
Accounts receivable securitization program (f.)
Subtotal - revolving credit, demand notes, Senior Notes, term
loan facilities and accounts receivable securitization
program
Amortization of financing fees
Other combined interest expense
Capitalized interest on major projects
Interest income
Interest expense, net
2022
2021
$
$
9,791 $
68,782
—
—
21,426
11,725
13,380
39
125,143
4,903
5,844
(8,623)
(378)
126,889 $
2,318
26,408
5,941
14,000
21,470
4,137
4,720
787
79,781
4,310
5,588
(4,411)
(1,596)
83,672
(a.) In June, 2022 we entered into the ninth amendment to our credit agreement dated November 15, 2010, as amended (the
“Credit Agreement”), which, among other things, added a new incremental tranche A term loan facility in the aggregate
principal amount of $700 million. In September, 2021, we entered into an eighth amendment which modified the definition
of “Adjusted LIBO Rate”. In August, 2021, we entered into a seventh amendment to our Credit Agreement which provided
for the amendment and restatement of the previously existing credit facility including, among other things, the following: (i)
a $1.2 billion aggregate amount revolving credit facility that is scheduled to mature in August, 2026 ($310.4 million of
borrowings outstanding as of December 31, 2022); (ii) a tranche A term loan facility with $2.34 billion of outstanding
borrowings as of December 31, 2022 (including the $700 million increase provided for by the ninth amendment in June,
2022), and; (iii) repayment of a portion of the previously outstanding tranche A term loan facility borrowings ($150
million) and all of the tranche B term loan facility borrowings ($488 million). Repayment of the $638 million of previously
outstanding borrowings under the tranche A and tranche B term loan facilities were funded utilizing a portion of the
proceeds generated from the August, 2021, issuance of the $700 million, 1.65% Senior Notes due in 2026, and the $500
million, 2.65%, Senior Notes due in 2032.
(b.) In September, 2021 we redeemed the entire $400 million aggregate principal amount of our previously outstanding 5.00%
Senior Secured Notes that were scheduled to mature in 2026 at a cash redemption price equal to the sum of 102.50% of the
aggregate principal amount. This redemption was funded utilizing a portion of the proceeds generated from the August,
2021 issuance of the $700 million, 1.65% Senior Notes due in 2026, and the $500 million, 2.65% Senior Notes due in 2032,
as discussed in (d.) and (e.) below.
(c.) In September, 2020, we completed the offering of $800 million aggregate principal amount of 2.65% Senior Notes due in
2030.
(d.) In August, 2021, we completed the offering of $700 million aggregate principal amount of 1.65% Senior Notes due in 2026.
(e.) In August, 2021, we completed the offering of $500 million aggregate principal amount of 2.65% Senior Notes due in 2032.
(f.) The accounts receivable securitization program was amended in April, 2021, to reduce the borrowing commitment to $20
million (from $450 million previously). As of the maturity date on December 20, 2022, the Securitization expired and was
not renewed or replaced.
Interest expense increased by $43 million during 2022 to $127 million as compared to $84 million during 2021. The increase
was primarily due to: (i) a net $45 million increase in aggregate interest expense on our revolving credit, demand notes, senior notes,
term loan facilities and accounts receivable securitization program, resulting from an increase in our aggregate average cost of
borrowings pursuant to these facilities (2.8% during 2022 as compared to 2.1% during 2021), as well as an increase in the aggregate
average outstanding borrowings ($4.40 billion during 2022 as compared to $3.72 billion during 2021), partially offset by; (ii) a net $2
million decrease in other combined interest expenses, including a $4 million increase in capitalized interest on major projects.
The average effective interest rate, including amortization of deferred financing costs, original issue discount and designated
interest rate swap expense/income, on borrowings outstanding under our revolving credit, demand notes, senior notes, term loan A and
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B facilities and accounts receivable securitization program, which amounted to approximately $4.40 billion during 2022 and $3.72
billion during 2021, were 2.9% during 2022 and 2.2% during 2021.
Costs Related to Early Extinguishment of Debt
In connection with financing transactions completed during 2021, our 2021 results of operations included pre-tax charges of
approximately $17 million, incurred for the costs related to the extinguishment of debt. These charges, which were included in other
(income) expense, net, consisted of the write-off of deferred charges (approximately $7 million) as well as the make-whole premium
paid on the early redemption of the $400 million, 5% senior notes (approximately $10 million).
Provision for Asset Impairments
Our financial statements for the year ended December 31, 2022, include a pre-tax provision for asset impairment of
approximately $58 million, which is included in other operating expenses on the accompanying consolidated statements of income, to
write-down the asset value of Desert Springs Hospital Medical Center, a 282-bed acute care hospital located in Las Vegas, Nevada. In
early 2023, as a result of various competitive pressures and operational challenges experienced in the market, which had a significant
unfavorable impact on the hospital's results of operations during the past year, as well as physical plant constraints and limitations
resulting from the advanced age of the facility (which opened in 1971), we announced plans to discontinue all inpatient operations by
March of 2023. During the next two years, we plan to continue providing emergency department services within a portion of the
existing facility while we construct a new free-standing emergency department on the hospital's campus. The provision for asset
impairment reduced the asset values of the facility's real estate and equipment to their estimated fair values.
During 2021, in connection with the discontinuation of a certain module of a new clinical/financial information technology
application under development, our financial results included a pre-tax provision for asset impairment of approximately $14 million to
write-off the applicable portion of the capitalized costs incurred and is included in other operating expenses on the accompanying
consolidated statement of income.
Provision for Income Taxes and Effective Tax Rates
The effective tax rates, as calculated by dividing the provision for income taxes by income before income taxes, were as follows
for each of the years ended December 31, 2022 and 2021 (dollar amounts in thousands):
Provision for income taxes
Income before income taxes
Effective tax rate
$
2022
209,278
866,260
$
24.2%
2021
305,681
1,293,313
23.6%
The provision for income taxes decreased $96 million during 2022, as compared to 2021, due primarily to the income tax
benefit recorded in connection with the $412 million decrease in pre-tax income ($427 million decrease in income before income
taxes partially offset by a $15 million increase in net loss attributable to noncontrolling interests).
Effects of Inflation and Seasonality
Seasonality —Our acute care services business is typically seasonal, with higher patient volumes and net patient service
revenue in the first and fourth quarters of the year. This seasonality occurs because, generally, more people become ill during the
winter months, which results in significant increases in the number of patients treated in our hospitals during those months.
Inflation — See disclosure above in Results of Operations-COVID-19, Clinical Staffing Shortage and Effects of Inflation.
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Liquidity
Year ended December 31, 2022 as compared to December 31, 2021:
Net cash provided by operating activities
Net cash provided by operating activities was $996 million during 2022 as compared to $884 million during 2021. The net
increase of $112 million was primarily attributable to the following:
a favorable change of $695 million from the early return of the Medicare accelerated payments which were received
during 2020 and repaid during the first quarter of 2021;
an unfavorable change of $249 million in accounts receivable due, in part, to increased receivables related to supplemental
Medicaid programs in various states as well as amounts outstanding at December 31, 2022, related to facilities and
businesses that were opened/acquired during the past year;
an unfavorable change of $238 million resulting from a decrease in net income plus/minus depreciation and amortization
expense, stock-based compensation, gain/loss on sale of assets and businesses, costs related to extinguishment of debt and
provision for asset impairments;
an unfavorable change of $193 million from other working capital accounts due primarily to the timing of disbursements
for accounts payable, accrued expenses and accrued compensation, as well as the payment during 2022, of a portion of the
employer's share of the 2020 Social Security taxes which were deferred pursuant to the CARES Act;
an unfavorable change of $62 million in accrued insurance expense, net of commercial premiums paid;
a favorable change of $59 million in other assets and deferred charges;
a favorable change of $25 million in accrued and deferred income taxes, and;
$75 million of other combined net favorable changes.
Days sales outstanding (“DSO”): Our DSO are calculated by dividing our net revenue by the number of days in the year. The
result is divided into the accounts receivable balance at the end of the year. Our DSO were 55 days at December 31, 2022 and 50 days
at December 31, 2021. The increase in our DSO at December 31, 2022, as compared to December 31, 2021, was due, in part, to the
above-mentioned increase in receivables during 2022 related to supplemental Medicaid programs in various states and facilities that
were opened or acquired during the year.
Net cash used in investing activities
Net cash used in investing activities was $647 million during 2022 and $914 million during 2021.
2022:
The $647 million of net cash used in investing activities during 2022 consisted of:
$734 million spent on capital expenditures including capital expenditures for equipment, renovations and new projects at
various existing facilities;
$95 million received in connection with net cash inflows from forward exchange contracts that hedge our investment in
the U.K. against movements in exchange rates;
$20 million spent on the acquisition of businesses and property, and;
$12 million of proceeds received from sales of assets and businesses.
2021:
The $914 million of net cash used in investing activities during 2021 consisted of:
$856 million spent on capital expenditures including capital expenditures for equipment, renovations and new projects at
various existing facilities;
$105 million spent to acquire businesses and property, consisting primarily of a micro acute care hospital located in Las
Vegas, Nevada, and a physician practice management company located in California;
$25 million of proceeds received from sales of assets and businesses;
$20 million received in connection with the implementation of information technology applications (consists primarily of
refunded costs previously paid), and;
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$1 million received in connection with net cash inflows from forward exchange contracts that hedge our investment in the
U.K. against movements in exchange rates.
Net cash used in financing activities
Net cash used in financing activities was $318 million during 2022 and $1.069 billion during 2021.
2022:
The $318 million of net cash used in financing activities during 2022 consisted of the following:
generated $705 million of proceeds from new borrowings consisting primarily of $700 million of proceeds generated from
the new tranche A term loan facility which commenced in June, 2022;
spent $833 million to repurchase shares of our Class B Common Stock in connection with: (i) open market purchases
pursuant to our stock repurchase program ($811 million), and; (ii) income tax withholding obligations related to stock-
based compensation programs ($22 million);
spent $89 million on net repayment of debt as follows: (i) $51 million related to our tranche A term loan facility; (ii) $32
million related to our revolving credit facility, and; (iii) $6 million related to other debt facilities;
spent $58 million to pay quarterly cash dividends of $.20 per share;
spent $49 million in connection with the purchase of ownership interests from minority members, net of sales, consisting
primarily of our purchase of George Washington University's 20% ownership in the George Washington University
Hospital (we now own 100% of the hospital);
generated $14 million from the issuance of shares of our Class B Common Stock pursuant to the terms of employee stock
purchase plans;
spent $5 million to pay profit distributions related to noncontrolling interests in majority owned businesses, and;
spent $3 million to pay financing costs.
2021:
The $1.069 billion of net cash used in financing activities during 2021 consisted of the following:
spent $3.038 billion on net repayment of debt as follows: (i) $1.911 billion related to our tranche A term loan facility; (ii)
$490 million related to our terminated tranche B term loan facility; (iii) $410 million related to the early redemption of our
previously outstanding $400 million, 5.00% senior secured notes which were scheduled to mature in June, 2026; (iv) $225
million related to our accounts receivable securitization program, and; (v) $2 million related to other debt facilities;
generated $3.255 billion of proceeds related to new borrowings as follows: (i) $1.7 billion related to our tranche A term
loan facility; (ii) $699 million (net of discount) related to the August, 2021 issuance of $700 million, 1.65% senior
secured notes due in September, 2026; (iii) $499 million (net of discount) related to the August, 2021 issuance of $500
million, 2.65% senior secured notes due in January, 2032; (iv) $343 million pursuant to our revolving credit facility, and;
(v) $14 million of proceeds received related to other debt facilities;
spent $1.221 billion to repurchase shares of our Class B Common Stock in connection with: (i) open market purchases
pursuant to our stock repurchase program ($1.201 billion), and; (ii) income tax withholding obligations related to stock-
based compensation programs ($20 million);
spent $66 million to pay quarterly cash dividends of $.20 per share;
spent $19 million to pay financing costs incurred in connection with various financing transactions;
generated $13 million from the issuance of shares of our Class B Common Stock pursuant to the terms of employee stock
purchase plans;
received $13 million in capital contributions from minority members in majority owned businesses, and;
spent $7 million to pay profit distributions related to noncontrolling interests in majority owned businesses.
2023 Expected Capital Expenditures:
During 2023, we expect to spend approximately $725 million to $875 million on capital expenditures which includes
expenditures for capital equipment, construction of new facilities, and renovations and expansions at existing hospitals. We believe
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that our capital expenditure program is adequate to expand, improve and equip our existing hospitals. We expect to finance all capital
expenditures and acquisitions with internally generated funds and/or additional funds, as discussed below.
Capital Resources:
Credit Facilities and Outstanding Debt Securities
In June, 2022 we entered into a ninth amendment to our credit agreement dated as of November 15, 2010, as amended and
restated as of September, 2012, August, 2014, October, 2018, August, 2021, and September, 2021, among UHS, as borrower, the
several banks and other financial institutions from time to time parties thereto, as lenders, and JPMorgan Chase Bank, N.A., as
administrative agent, (the “Credit Agreement”). The ninth amendment provided for, among other things, the following: (i) a new
incremental tranche A term loan facility in the aggregate principal amount of $700 million which is scheduled to mature on August 24,
2026, and; (ii) replaces the option to make Eurodollar borrowings (which bear interest by reference to the LIBO Rate) with Term
Benchmark Loans, which will bear interest by reference to the Secured Overnight Financing Rate (“SOFR”). The net proceeds
generated from the incremental tranche A term loan facility were used to repay a portion of the borrowings that were previously
outstanding under our revolving credit facility.
In September, 2021 we entered into an eighth amendment to our Credit Agreement which modified the definition of “Adjusted
LIBO Rate”.
In August, 2021 we entered into a seventh amendment to our Credit Agreement which, among other things, provided for the
following:
a $1.2 billion aggregate amount revolving credit facility, which is scheduled to mature on August 24, 2026,
representing an increase of $200 million over the $1.0 billion previous commitment. As of December 31, 2022, this
facility had $310 million of borrowings outstanding and $886 million of available borrowing capacity, net of $4
million of outstanding letters of credit;
a $1.7 billion initial tranche A term loan facility which was subsequently increased by $700 million in June, 2022
by the above-mentioned ninth amendment. The seventh amendment also provided for repayment of $150 million of
borrowings outstanding pursuant to the previous tranche A term loan facility, and;
repayment of approximately $488 million of outstanding borrowings and termination of the previous tranche B term
loan facility.
The terms of the tranche A term loan facility, as amended, which had $2.338 billion of outstanding borrowings as of December
31, 2022, provides for installment payments of $15.0 million per quarter during the period of September, 2022 through September,
2023, and $30.0 million per quarter during the period of December, 2023 through June, 2026. The unpaid principal balance at June 30,
2026 is payable on the August 24, 2026 scheduled maturity date of the Credit Agreement.
Revolving credit and tranche A term loan borrowings under the Credit Agreement bear interest at our election at either (1) the
ABR rate which is defined as the rate per annum equal to the greatest of (a) the lender’s prime rate, (b) the weighted average of the
federal funds rate, plus 0.5% and (c) one month SOFR rate plus 1%, in each case, plus an applicable margin based upon our
consolidated leverage ratio at the end of each quarter ranging from 0.25% to 0.625%, or (2) the one, three or six month SOFR rate plus
0.1% (at our election), plus an applicable margin based upon our consolidated leverage ratio at the end of each quarter ranging from
1.25% to 1.625%. As of December 31, 2022, the applicable margins were 0.50% for ABR-based loans and 1.50% for SOFR-based
loans under the revolving credit and term loan A facilities. The revolving credit facility includes a $125 million sub-limit for letters of
credit. The Credit Agreement is secured by certain assets of the Company and our material subsidiaries (which generally excludes
asset classes such as substantially all of the patient-related accounts receivable of our acute care hospitals, and certain real estate assets
and assets held in joint-ventures with third parties) and is guaranteed by our material subsidiaries.
The Credit Agreement includes a material adverse change clause that must be represented at each draw. The Credit Agreement
also contains covenants that include a limitation on sales of assets, mergers, change of ownership, liens, indebtedness, transactions
with affiliates, dividends and stock repurchases; and requires compliance with financial covenants including maximum leverage. We
were in compliance with all required covenants as of December 31, 2022 and December 31, 2021.
On August 24, 2021, we completed the following via private offerings to qualified institutional buyers under Rule 144A and to
non-U.S. persons outside the United States in reliance on Regulation S under the Securities Act of 1933, as amended:
Issued $700 million of aggregate principal amount of 1.65% senior secured notes due on September 1, 2026, and;
Issued $500 million of aggregate principal amount of 2.65% senior secured notes due on January 15, 2032.
In April, 2021 our accounts receivable securitization program (“Securitization”) was amended (the eighth amendment) to: (i)
reduce the aggregate borrowing commitments to $20 million (from $450 million previously); (ii) slightly reduce the borrowing rates
and commitment fee, and; (iii) extend the maturity date to April 25, 2022. At various times from April, 2022 to September, 2022, the
70
Securitization was amended to extend the maturity date to various dates including, most recently, December 20, 2022. As of the
December 20, 2022 maturity date, the Securitization expired and was not renewed or replaced.
On September 13, 2021, we redeemed $400 million of aggregate principal amount of 5.00% senior secured notes, that were
scheduled to mature on June 1, 2026, at 102.50% of the aggregate principal, or $410 million.
As of December 31, 2022, we had combined aggregate principal of $2.0 billion from the following senior secured notes:
o
o
o
$700 million aggregate principal amount of 1.65% senior secured notes due in September, 2026 (“2026 Notes”) which were
issued on August 24, 2021.
$800 million aggregate principal amount of 2.65% senior secured notes due in October, 2030 (“2030 Notes”) which were
issued on September 21, 2020.
$500 million of aggregate principal amount of 2.65% senior secured notes due in January, 2032 (“2032 Notes”) which were
issued on August 24, 2021.
Interest on the 2026 Notes is payable on March 1st and September 1st until the maturity date of September 1, 2026. Interest on
the 2030 Notes payable on April 15th and October 15th, until the maturity date of October 15, 2030. Interest on the 2032 Notes is
payable on January 15thand July 15th until the maturity date of January 15, 2032.
The 2026 Notes, 2030 Notes and 2032 Notes (collectively “The Notes”) were initially issued only to qualified institutional
buyers under Rule 144A and to non-U.S. persons outside the United States in reliance on Regulation S under the Securities Act of
1933, as amended (the “Securities Act”). In December, 2022, we completed a registered exchange offer in which virtually all
previously outstanding Notes were exchanged for identical Notes that were registered under the Securities Act, and thereby became
freely transferable (subject to certain restrictions applicable to affiliates and broker dealers). Notes originally issued under Rule 144A
or Regulation S that were not exchanged in the exchange offer remain outstanding and may not be offered or sold in the United States
absent registration under the Securities Act or an applicable exemption from registration requirements thereunder.
The Notes are guaranteed (the “Guarantees”) on a senior secured basis by all of our existing and future direct and indirect
subsidiaries (the “Subsidiary Guarantors”) that guarantee our Credit Agreement, or other first lien obligations or any junior lien
obligations. The Notes and the Guarantees are secured by first-priority liens, subject to permitted liens, on certain of the Company’s
and the Subsidiary Guarantors’ assets now owned or acquired in the future by the Company or the Subsidiary Guarantors (other than
real property, accounts receivable sold pursuant to the Company’s Existing Receivables Facility (as defined in the Indenture pursuant
to which The Notes were issued (the “Indenture”)), and certain other excluded assets). The Company’s obligations with respect to The
Notes, the obligations of the Subsidiary Guarantors under the Guarantees, and the performance of all of the Company’s and the
Subsidiary Guarantors’ other obligations under the Indenture, are secured equally and ratably with the Company’s and the Subsidiary
Guarantors’ obligations under the Credit Agreement and The Notes by a perfected first-priority security interest, subject to permitted
liens, in the collateral owned by the Company and its Subsidiary Guarantors, whether now owned or hereafter acquired. However, the
liens on the collateral securing The Notes and the Guarantees will be released if: (i) The Notes have investment grade ratings; (ii) no
default has occurred and is continuing, and; (iii) the liens on the collateral securing all first lien obligations (including the Credit
Agreement and The Notes) and any junior lien obligations are released or the collateral under the Credit Agreement, any other first
lien obligations and any junior lien obligations is released or no longer required to be pledged. The liens on any collateral securing
The Notes and the Guarantees will also be released if the liens on that collateral securing the Credit Agreement, other first lien
obligations and any junior lien obligations are released.
As discussed in Note 9 to the Consolidated Financial Statements-Relationship with Universal Health Realty Income Trust and
Other Related Party Transactions, on December 31, 2021, we (through wholly-owned subsidiaries of ours) entered into an asset
purchase and sale agreement with Universal Health Realty Income Trust (the “Trust”). Pursuant to the terms of the agreement, which
was amended during the first quarter of 2022, we, among other things, transferred to the Trust, the real estate assets of Aiken Regional
Medical Center (“Aiken”) and Canyon Creek Behavioral Health (“Canyon Creek”). In connection with this transaction, Aiken and
Canyon Creek (as lessees), entered into a master lease and individual property leases, as amended, (with the Trust as lessor), for initial
lease terms on each property of approximately twelve years, ending on December 31, 2033. As a result of our purchase option within
the Aiken and Canyon Creek lease agreements, this asset purchase and sale transaction is accounted for as a failed sale leaseback in
accordance with U.S. GAAP and we have accounted for the transaction as a financing arrangement. Our lease payments payable to the
Trust are recorded to interest expense and as a reduction of the outstanding financial liability, and the amount allocated to interest
expense is determined based upon our incremental borrowing rate and the outstanding financial liability. In connection with this
transaction, our Consolidated Balance Sheets at December 31, 2022 and December 31, 2021 reflect financial liabilities, which are
included in debt, of approximately $81 million and $82 million, respectively.
At December 31, 2022, the carrying value and fair value of our debt were approximately $4.8 billion and $4.4 billion,
respectively. At December 31, 2021, the carrying value and fair value of our debt were each approximately $4.2 billion. The fair value
of our debt was computed based upon quotes received from financial institutions. We consider these to be “level 2” in the fair value
hierarchy as outlined in the authoritative guidance for disclosures in connection with debt instruments.
71
Our total debt as a percentage of total capitalization was approximately 45% at December 31, 2022 and 41% at December 31,
2021.
We expect to finance all capital expenditures and acquisitions and pay dividends and potentially repurchase shares of our
common stock utilizing internally generated and additional funds. Additional funds may be obtained through: (i) borrowings under our
existing revolving credit facility, which had $886 million of available borrowing capacity as of December 31, 2022, or through
refinancing the existing Credit Agreement; (ii) the issuance of other short-term and/or long-term debt, and/or; (iii) the issuance of
equity. We believe that our operating cash flows, cash and cash equivalents, available commitments under existing agreements, as
well as access to the capital markets, provide us with sufficient capital resources to fund our operating, investing and financing
requirements for the next twelve months. However, in the event we need to access the capital markets or other sources of financing,
there can be no assurance that we will be able to obtain financing on acceptable terms or within an acceptable time. Our inability to
obtain financing on terms acceptable to us could have a material unfavorable impact on our results of operations, financial condition
and liquidity.
Supplemental Guarantor Financial Information
As of December 31, 2022, we had combined aggregate principal of $2.0 billion from The Notes:
$700 million aggregate principal amount of the 2026 Notes;
$800 million aggregate principal amount of the 2030 Notes, and;
$500 million of aggregate principal amount of the 2032 Notes.
The Notes are fully and unconditionally guaranteed pursuant to the Guarantees on a senior secured basis by the Subsidiary
Guarantors. The Notes and the Guarantees are secured by first-priority liens, subject to permitted liens, on certain of the Company’s
and the Subsidiary Guarantors’ assets now owned or acquired in the future by the Company or the Subsidiary Guarantors (other than
real property, accounts receivable sold pursuant to the Company’s existing receivables facility (as defined in the Indentures pursuant
to which The Notes were issued ), and certain other excluded assets). The Company’s obligations with respect to The Notes, the
obligations of the Subsidiary Guarantors under the Guarantees, and the performance of all of the Company’s and the Subsidiary
Guarantors’ other obligations under the Indentures, are secured equally and ratably with the Company’s and the Subsidiary
Guarantors’ obligations under the Credit Agreement and The Notes by a perfected first-priority security interest, subject to permitted
liens, in the collateral owned by the Company and its Subsidiary Guarantors, whether now owned or hereafter acquired. However, the
liens on the collateral securing The Notes and the Guarantees will be released if: (i) The Notes have investment grade ratings; (ii) no
default has occurred and is continuing, and; (iii) the liens on the collateral securing all first lien obligations (including the Credit
Agreement and The Notes) and any junior lien obligations are released or the collateral under the Credit Agreement, any other first
lien obligations and any junior lien obligations is released or no longer required to be pledged. The liens on any collateral securing
The Notes and the Guarantees will also be released if the liens on that collateral securing the Credit Agreement, other first lien
obligations and any junior lien obligations are released.
The Notes will be structurally subordinated to all obligations of our existing and future subsidiaries that are not and do not
become Subsidiary Guarantors of The Notes. No appraisal of the value of the collateral has been made, and the value of the collateral
in the event of liquidation will depend on market and economic conditions, the availability of buyers and other factors. Consequently,
liquidating the collateral securing The Notes may not produce proceeds in an amount sufficient to pay any amounts due on The Notes.
We and our subsidiaries may be able to incur significant additional indebtedness in the future. Although our Credit Agreement
contains restrictions on the incurrence of additional indebtedness and our Credit Agreement and The Notes contain restrictions on our
ability to incur liens to secure additional indebtedness, these restrictions are subject to a number of qualifications and exceptions, and
the additional indebtedness incurred in compliance with these restrictions could be substantial. These restrictions also will not prevent
us from incurring obligations that do not constitute indebtedness. In addition, if we incur any additional indebtedness secured by liens
that rank equally with The Notes, subject to collateral arrangements, the holders of that debt will be entitled to share ratably with you
in any proceeds distributed in connection with any insolvency, liquidation, reorganization, dissolution or other winding up of our
company. This may have the effect of reducing the amount of proceeds paid to holders of The Notes.
Federal and state fraudulent transfer and conveyance statutes may apply to the issuance of The Notes and the incurrence of the
Guarantees. Under federal bankruptcy law and comparable provisions of state fraudulent transfer or conveyance laws, which may vary
from state to state, The Notes or the Guarantees (or the grant of collateral securing any such obligations) could be voided as a
fraudulent transfer or conveyance if we or any of the Subsidiary Guarantors, as applicable, (a) issued The Notes or incurred the
Guarantees with the intent of hindering, delaying or defrauding creditors or (b) under certain circumstances received less than
reasonably equivalent value or fair consideration in return for either issuing The Notes or incurring the Guarantees.
Basis of Presentation
The following tables include summarized financial information of Universal Health Services, Inc. and the other obligors in
respect of debt issued by Universal Health Services, Inc. The summarized financial information of each obligor group is presented on
a combined basis with balances and transactions within the obligor group eliminated. Investments in and the equity in earnings of non-
72
guarantor subsidiaries, which would otherwise be consolidated in accordance with GAAP, are excluded from the below summarized
financial information pursuant to SEC Regulation S-X Rule 13-01.
The summarized balance sheet information for the consolidated obligor group of debt issued by Universal Health Services, Inc. is
presented in the table below:
(in thousands)
Current assets
Noncurrent assets (1)
Current liabilities
Noncurrent liabilities
Due to non-guarantors
(1) Includes goodwill of $3,273 million and $3,257 million as of December 31, 2022 and 2021, respectively.
2,062,900 $
8,773,036 $
1,686,005 $
5,587,141 $
942,731 $
December 31, 2022
$
$
$
$
$
December 31, 2021
1,865,568
8,695,985
1,818,415
6,164,650
940,852
The summarized results of operations information for the consolidated obligor group of debt issued by Universal Health Services, Inc.
is presented in the table below:
(in thousands)
Net revenues
Operating charges
Interest expense, net
Other (income) expense, net
Net income
Twelve Months Ended
December 31, 2022
Twelve Months
Ended
10,853,259 $
9,947,778
193,486
7,487
532,047 $
December 31, 2021
10,310,332
9,044,261
149,394
(14,513)
878,065
$
$
Affiliates Whose Securities Collateralize the Senior Secured Notes
The Notes and the Guarantees are secured by, among other things, pledges of the capital stock of our subsidiaries held by us or by
our secured Guarantors, in each case other than certain excluded assets and subject to permitted liens. Such collateral securities are
secured equally and ratably with our and the Guarantors’ obligations under our Credit Agreement. For a list of our subsidiaries the
capital stock of which has been pledged to secure The Notes, see Exhibit 22.1 to this Report.
Upon the occurrence and during the continuance of an event of default under the indentures governing The Notes, subject to the
terms of the Security Agreement relating to The Notes provide for (among other available remedies) the foreclosure upon and sale of
the Collateral (including the pledged stock) and the distribution of the net proceeds of any such sale to the holders of The Notes, the
lenders under the Credit Agreement and the holders of any other permitted first priority secured obligations on a pro rata basis, subject
to any prior liens on the collateral.
No appraisal of the value of the collateral securities has been made, and the value of the collateral securities in the event of
liquidation will depend on market and economic conditions, the availability of buyers and other factors. Consequently, liquidating the
collateral securities securing The Notes may not produce proceeds in an amount sufficient to pay any amounts due on The Notes.
The security agreement relating to The Notes provides that the representative of the lenders under our Credit Agreement will
initially control actions with respect to that collateral and, consequently, exercise of any right, remedy or power with respect to
enforcing interests in or realizing upon such collateral will initially be at the direction of the representative of the lenders.
No trading market exists for the capital stock pledged as collateral.
The assets, liabilities and results of operations of the combined affiliates whose securities are pledged as collateral are not
materially different than the corresponding amounts presented in the consolidated financial information of Universal Health Services,
Inc.
Contractual Obligations and Off-Balance Sheet Arrangements
As of December 31, 2022 we were party to certain off balance sheet arrangements consisting of standby letters of credit and
surety bonds which totaled $169 million consisting of: (i) $159 million related to our self-insurance programs, and; (ii) $10 million of
other debt and public utility guarantees.
Obligations under operating leases for real property, real property master leases and equipment amount to $922 million as of
December 31, 2022. The real property master leases are leases for buildings on or near hospital property for which we guarantee a
certain level of rental income. We sublease space in these buildings and any amounts received from these subleases are offset against
the expense. In addition, we lease certain hospital facilities from Universal Health Realty Trust (the “Trust”) with terms scheduled to
expire in 2026, 2033 and 2040. These leases contain various renewal options, as disclosed in Note 9 to the Consolidated Financial
73
Statements-Relationship with Universal Health Realty Income Trust and Other Related Party Transactions. We also lease two free-
standing emergency departments and space in certain medical office buildings which are owned by the Trust. In addition, we lease the
real property of certain other facilities from non-related parties as indicated in Item 2. Properties, as included herein.
The following represents the scheduled maturities of our contractual obligations as of December 31, 2022:
Long-term debt obligations (a)
Estimated future interest payments on debt
outstanding as of December 31, 2022 (b)
Construction commitments (c)
Purchase and other obligations (d)
Operating leases (e)
Estimated future payments for defined benefit
pension plan, and other retirement plan (f)
Health and dental unpaid claims (g)
Total contractual cash obligations
Total
$4,807,980
1,031,021
23,563
369,259
921,753
Payments Due by Period (dollars in thousands)
2-3
years
Less than
1 year
4-5
years
$
81,447
$ 253,263 $ 3,035,768
After
5 years
$1,437,502
225,637
5,000
58,589
83,573
418,642
18,563
107,057
143,634
190,747
0
76,727
98,810
195,995
0
126,886
595,736
169,337
133,624
$7,456,537
19,535
133,624
$ 607,405
18,470
15,176
0
0
$ 956,335 $ 3,420,522
116,156
0
$2,472,275
(a) Reflects debt outstanding, after unamortized financing costs, as of December 31, 2022 as discussed in Note 4 to the
Consolidated Financial Statements.
(b) Assumes that all debt outstanding as of December 31, 2022, including borrowings under our Credit Agreement, remain
outstanding until the final maturity of the debt agreements at the same interest rates (some of which are floating) which were in
effect as of December 31, 2022. We have the right to repay borrowings upon short notice and without penalty, pursuant to the
terms of the Credit Agreement.
(c) Our share of the estimated construction cost of a behavioral health care facility scheduled to be completed in 2025 that, subject
to approval of certain regulatory conditions, we are required to build pursuant to a joint-venture agreement with a third party. In
addition, we had various other projects under construction as of December 31, 2022. Because we can terminate substantially all
of the construction contracts related to the various other projects at any time without paying a termination fee, these costs are
excluded from the table above.
(d) Consists of: (i) $54 million related to long-term contracts with third-parties consisting primarily of certain revenue cycle data
processing services for our acute care facilities; (ii) $224 million related to the future expected costs to be paid to a third-party
vendor in connection with the ongoing operation of an electronic health records application and purchase and implementation of
a revenue cycle and other applications for our facilities; (iii) $16 million for other software applications, and; (iv) $75 million in
healthcare infrastructure in Washington D.C. in connection with various agreements with the District of Columbia, as discussed
below.
(e) Reflects our future minimum operating lease payment obligations related to our operating lease agreements outstanding as of
December 31, 2022 as discussed in Note 7 to the Consolidated Financial Statements. Some of the lease agreements provide us
with the option to renew the lease and our future lease obligations would change if we exercised these renewal options. In
connection with these operating lease commitments, our consolidated balance sheet as of December 31, 2022 includes right of
use assets amounting to $455 million and aggregate operating lease liabilities of $463 million ($68 million included in current
liabilities and $395 million included in noncurrent liabilities).
(f) Consists of $146 million of estimated future payments related to our non-contributory, defined benefit pension plan (estimated
through 2080), as disclosed in Note 8 to the Consolidated Financial Statements, and $23 million of estimated future payments
related to other retirement plan liabilities ($19 million of liabilities recorded in other non-current liabilities as of December 31,
2022 in connection with these retirement plans).
(g) Consists of accrued and unpaid estimated claims expense incurred in connection with our commercial health insurers and self-
insured employee benefit plans.
As of December 31, 2022, the total net accrual for our professional and general liability claims was $372 million, of which $74
million is included in other current liabilities and $298 million is included in other non-current liabilities. We exclude the $372 million
for professional and general liability claims from the contractual obligations table because there are no significant contractual
obligations associated with these liabilities and because of the uncertainty of the dollar amounts to be ultimately paid as well as the
timing of such payments. Please see Self-Insured/Other Insurance Risks above for additional disclosure related to our professional and
general liability claims and reserves.
During 2020, we entered into a various agreements with the District of Columbia (the “District”) related to the development,
leasing and operation of an acute care hospital and certain other facilities/structures on land owned by the District (“District
Facilities”). The agreements contemplate that we will serve as manager for development and construction of the District Facilities on
behalf of the District, with a projected aggregate cost of approximately $439 million, approximately $64 million of which was
74
incurred as of December 31, 2022, which will be entirely funded by the District. Construction of the District Facilities is expected to
be completed during 2025. Upon completion of the District Facilities, we will lease the District Facilities for a nominal rental amount
for a period of 75 years and are obligated to operate the District Facilities during the lease term. We have certain lease termination
rights in connection with the District Facilities beginning on the tenth anniversary of the lease commencement date for various and
decreasing amounts as provided for in the agreements. Additionally, any time after the 10th anniversary of the lease term, we have a
right to purchase the District Facilities for a price equal to the greater of fair market value of the District Facilities or the amount
necessary to defease the bonds issued by the District to fund the construction of the District Facilities. The lease agreement also
entitles the District to participation rent should certain specified earnings before interest, taxes, depreciation and amortization
thresholds be achieved by the acute care hospital. Additionally, we have committed to expend no less than $75 million, over a
projected 12-year period, in healthcare infrastructure including expenditures related to the District Facilities as well as other healthcare
related expenditures in certain specified areas of Washington, D.C. This financial commitment is included in “Purchase and other
obligations” as reflected on the contractual obligations table above. Pursuant to the agreements, the District is entitled to certain
termination fees and other amounts as specified in the agreements in the event we, within certain specified periods of time, cease to
operate the acute care hospital or there is a transfer of control of us or our subsidiary operating the hospital.
ITEM 7A. Quantitative and Qualitative Disclosures About Market Risk
We manage our ratio of fixed and floating rate debt with the objective of achieving a mix that management believes is
appropriate. To manage this risk in a cost-effective manner, we, from time to time, enter into interest rate swap agreements in which
we agree to exchange various combinations of fixed and/or variable interest rates based on agreed upon notional amounts. We account
for our derivative and hedging activities using the Financial Accounting Standard Board’s guidance which requires all derivative
instruments, including certain derivative instruments embedded in other contracts, to be carried at fair value on the balance sheet. For
derivative transactions designated as hedges, we formally document all relationships between the hedging instrument and the related
hedged item, as well as its risk-management objective and strategy for undertaking each hedge transaction.
Derivative instruments designated in a hedge relationship to mitigate exposure to variability in expected future cash flows, or
other types of forecasted transactions, are considered cash flow hedges. Cash flow hedges are accounted for by recording the fair value
of the derivative instrument on the balance sheet as either an asset or liability, with a corresponding amount recorded in accumulated
other comprehensive income (“AOCI”) within shareholders’ equity. Amounts are reclassified from AOCI to the income statement in
the period or periods the hedged transaction affects earnings. From time to time, we use interest rate derivatives in our cash flow
hedge transactions. Such derivatives are designed to be highly effective in offsetting changes in the cash flows related to the hedged
liability.
For hedge transactions that do not qualify for the short-cut method, at the hedge’s inception and on a regular basis thereafter, a
formal assessment is performed to determine whether changes in the fair values or cash flows of the derivative instruments have been
highly effective in offsetting changes in cash flows of the hedged items and whether they are expected to be highly effective in the
future.
The fair value of interest rate swap agreements approximates the amount at which they could be settled, based on estimates
obtained from the counterparties. When applicable, we assess the effectiveness of our hedge instruments on a quarterly basis.
Although we do not anticipate nonperformance by our counterparties to interest rate swap agreements, the counterparties expose us to
credit risk in the event of nonperformance. We do not hold or issue derivative financial instruments for trading purposes.
During the years ended December 31, 2022, 2021 and 2020, we had no cash flow hedges outstanding.
When applicable, we measure our interest rate swaps at fair value on a recurring basis. The fair value of our interest rate swaps
is based on quotes from our counterparties. We consider those inputs to be “level 2” in the fair value hierarchy as outlined in the
authoritative guidance for disclosures in connection with derivative instruments and hedging activities.
75
The table below presents information about our long-term financial instruments that are sensitive to changes in interest rates as
of December 31, 2022. For debt obligations, the table presents principal cash flows and related weighted-average interest rates by
contractual maturity dates.
Maturity Date, Fiscal Year Ending December 31
(dollar amounts in thousands)
2023
2024
2025
2026
2027
Thereafter
Total
Long-term debt:
Fixed rate:
Debt
Average interest rates
Variable rate:
Debt
Average interest rates
Interest rate swaps:
Notional amount
Average interest rates
$
6,447
$
2.4 %
7,008
$
6,255
$
701,345
$
7,136
$
1,437,502
2.4%
2.4%
2.4%
$
75,000
$ 120,000
120,000
2,327,287
5.9 %
5.9%
5.9%
5.9%
2.8%
0
0.0%
3.2%
0
0.0%
$
$
2,165,693
2.6%
2,642,287
5.9%
As calculated based upon our variable rate debt outstanding as of December 31, 2022 that is subject to interest rate fluctuations,
each 1% change in interest rates would impact our pre-tax income by approximately $26 million.
ITEM 8.
Financial Statements and Supplementary Data
Our Consolidated Balance Sheets, Consolidated Statements of Income, Consolidated Statements of Changes in Equity,
Consolidated Statements of Cash Flows and Consolidated Statements of Comprehensive Income, together with the reports of
PricewaterhouseCoopers LLP, independent registered public accounting firm, are included elsewhere herein. Reference is made to the
“Index to Financial Statements and Financial Statement Schedule.”
ITEM 9.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
ITEM 9A. Controls and Procedures.
As of December 31, 2022, under the supervision and with the participation of our management, including our Chief Executive
Officer (“CEO”) and Chief Financial Officer (“CFO”), we performed an evaluation of the effectiveness of our disclosure controls and
procedures as defined in Rule 13a-15(e) or Rule 15d-15(e) of the Securities Exchange Act of 1934, as amended. Based on this
evaluation, the CEO and CFO have concluded that our disclosure controls and procedures are effective to ensure that material
information is recorded, processed, summarized and reported by management on a timely basis in order to comply with our disclosure
obligations under the Securities Exchange Act of 1934, as amended, and the SEC rules thereunder.
Changes in Internal Control Over Financial Reporting
There have been no changes in our internal control over financial reporting or in other factors during the fourth quarter of 2022
that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Management’s Report on Internal Control Over Financial Reporting
Management is responsible for establishing and maintaining an adequate system of internal control over our financial reporting.
In order to evaluate the effectiveness of internal control over financial reporting, as required by Section 404 of the Sarbanes-Oxley
Act, management has conducted an assessment, including testing, using the criteria on Internal Control—Integrated Framework
(2013), issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Our system of internal control
over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation
and fair presentation of financial statements for external purposes in accordance with U.S. generally accepted accounting principles.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections
of any evaluation of effectiveness of internal control over financial reporting to future periods are subject to the risk that controls may
become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Based on its assessment, management has concluded that we maintained effective internal control over financial reporting as of
December 31, 2022, based on criteria in Internal Control—Integrated Framework (2013), issued by the COSO. The effectiveness of
the Company’s internal control over financial reporting as of December 31, 2022 has been audited by PricewaterhouseCoopers LLP,
an independent registered public accounting firm as stated in its report which appears herein.
76
ITEM 9B Other Information
None.
ITEM 9C Disclosure Regarding Foreign Jurisdictions that Prevent Inspections. Other Information
Not applicable.
77
ITEM 10. Directors, Executive Officers and Corporate Governance
PART III
There is hereby incorporated by reference the information to appear under the captions “Election of Directors”, “Section 16(a)
Beneficial Ownership Reporting Compliance” and “Corporate Governance” in our Proxy Statement, to be filed with the Securities and
Exchange Commission within 120 days after December 31, 2022. See also “Executive Officers of the Registrant” appearing in Item 1
hereof.
ITEM 11. Executive Compensation
There is hereby incorporated by reference the information to appear under the caption “Executive Compensation” in our Proxy
Statement to be filed with the Securities and Exchange Commission within 120 days after December 31, 2022.
ITEM 12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
There is hereby incorporated by reference the information to appear under the caption “Security Ownership of Certain
Beneficial Owners and Management” and “Executive Compensation” in our Proxy Statement, to be filed with the Securities and
Exchange Commission within 120 days after December 31, 2022.
ITEM 13. Certain Relationships and Related Transactions, and Director Independence
There is hereby incorporated by reference the information to appear under the captions “Certain Relationships and Related
Transactions” and “Corporate Governance” in our Proxy Statement, to be filed with the Securities and Exchange Commission within
120 days after December 31, 2022.
ITEM 14. Principal Accountant Fees and Services.
There is hereby incorporated by reference the information to appear under the caption “Relationship with Independent Auditors”
in our Proxy Statement, to be filed with the Securities and Exchange Commission within 120 days after December 31, 2022.
78
PART IV
ITEM 15. Exhibits and Financial Statement Schedules
(a) Documents filed as part of this report:
(1) Financial Statements:
See “Index to Financial Statements and Financial Statement Schedule.”
(2) Financial Statement Schedules:
See “Index to Financial Statements and Financial Statement Schedule.”
(3) Exhibits:
No.
3.1
Description
Registrant’s Restated Certificate of Incorporation, and Amendments thereto, previously filed as Exhibit 3.1 to the
Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 1997, are incorporated herein by reference
(P).
3.2
Amended and Restated Bylaws of Registrant, previously filed as Exhibit 3.1 to the Company’s Current Report on Form
8-K dated September 21, 2022, is incorporated herein by reference.
3.3
Amendment to the Registrant’s Restated Certificate of Incorporation previously filed as Exhibit 3.1 to the Company’s
Current Report on Form 8-K dated July 3, 2001 is incorporated herein by reference.
4.1
Description of Securities of the Registrant previously filed as Exhibit 4.5 to the Company’s Annual Report on Form 10-
K for the year ended December 31, 2019, is incorporated herein by reference.
4.2
4.3
4.4
4.5
4.6
4.7
Indenture, dated as of September 21, 2020, by and among the Company, the Subsidiary Guarantors party thereto, MUFG
Union Bank, N.A., as trustee, and JPMorgan Chase Bank, N.A., as collateral agent., previously filed as Exhibit 4.1 to the
Company’s Current Report on Form 8-K dated September 21, 2020, is incorporated herein by reference.
Additional Authorized Representative Joinder Agreement, dated as of September 21, 2020, among the Company, the
Subsidiary Guarantors party thereto, JPMorgan Chase Bank, N.A., as collateral agent, the Authorized Representatives
specified therein and MUFG Union Bank, N.A., as trustee, as an Additional Authorized Representative, previously filed
as Exhibit 4.2 to the Company’s Current Report on Form 8-K dated September 21, 2020, is incorporated herein by
reference.
Registration Rights Agreement, dated as of September 21, 2020, by and among the Company, the Subsidiary Guarantors
party thereto, and J.P. Morgan Securities LLC, BofA Securities, Inc. and Goldman Sachs & Co. LLC, as representatives
of the several Initial Purchasers, previously filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K dated
September 21, 2020, is incorporated herein by reference.
Indenture, dated as of August 24, 2021, by and among the Company, the Subsidiary Guarantors party thereto, U.S. Bank
National Association, as Trustee, and JPMorgan Chase Bank, N.A., as collateral agent, previously filed as Exhibit 4.1 to
the Company’s Current Report on Form 8-K dated August 24, 2021, is incorporated herein by reference.
Additional Authorized Representative Joinder Agreement, dated as of August 24, 2021, among U.S. Bank National
Association, as Trustee and Additional Authorized Representative, the Company, the Subsidiary Guarantors party
thereto, and JPMorgan Chase Bank, N.A., as collateral agent and administrative agent, previously filed as Exhibit 4.2 to
the Company’s Current Report on Form 8-K dated August 24, 2021, is incorporated herein by reference.
Supplemental Indenture, dated as of August 24, 2021, among the Company, the Subsidiary Guarantors party thereto,
U.S. Bank National Association (as successor to MUFG Union Bank, N.A.), as trustee, and JPMorgan Chase Bank,
N.A., as collateral agent, to the indenture, dated as of September 21, 2020, governing the Existing 2030 Notes,
previously filed as Exhibit 4.3 to the Company’s Current Report on Form 8-K dated August 24, 2021, is incorporated
herein by reference.
4.8
Registration Rights Agreement, dated as of August 24, 2021, by and among the Company, the Subsidiary Guarantors
party thereto, and J.P. Morgan Securities LLC, BofA Securities, Inc., Goldman Sachs & Co. LLC and Truist Securities,
79
No.
Description
Inc., as representatives of the several Initial Purchasers, previously filed as Exhibit 10.1 to the Company’s Current
Report on Form 8-K dated August 24, 2021, is incorporated herein by reference.
4.9
Second Supplemental Indenture, dated as of June 23, 2022, among the Company, the Subsidiary Guarantors party
thereto, U.S. Bank Trust Company, National Association (as successor to U.S. Bank National Association), as trustee,
and JPMorgan Chase Bank, N.A., as collateral agent, to the indenture, dated as of September 21, 2020, previously filed
as Exhibit 4.1 to the Company’s Current Report on Form 8-K dated June 27, 2022, is incorporated herein by reference.
4.10
First Supplemental Indenture, dated as of June 23, 2022, among the Company, the Subsidiary Guarantors party thereto,
U.S. Bank Trust Company, National Association (as successor to U.S. Bank National Association), as trustee, and
JPMorgan Chase Bank, N.A., as collateral agent, to the indenture, dated as of August 24, 2021, previously filed as
Exhibit 4.2 to the Company’s Current Report on Form 8-K dated June 27, 2022, is incorporated herein by reference.
4.11
Third Supplemental Indenture, dated as of November 4, 2022, among the Company, the Subsidiary Guarantors party
thereto, U.S. Bank Trust Company, National Association (as successor to U.S. Bank National Association), as trustee,
and JPMorgan Chase Bank, N.A., as collateral agent, to the indenture, dated as of September 21, 2020, previously filed
as Exhibit 4.1 to the Company’s Quarterly Report on Form 10-Q dated November 8, 2022, is incorporated herein by
reference.
4.12
Second Supplemental Indenture, dated as of November 4, 2022, among the Company, the Subsidiary Guarantors party
thereto, U.S. Bank Trust Company, National Association (as successor to U.S. Bank National Association), as trustee,
and JPMorgan Chase Bank, N.A., as collateral agent, to the indenture, dated as of August 24, 2021, previously filed as
Exhibit 4.2 to the Company’s Quarterly Report on Form 10-Q dated November 8, 2022, is incorporated herein by
reference.
10.1
Agreement, dated November 30, 2022, to renew Advisory Agreement dated as of December 24, 1986, and amended and
restated effective as of January 1, 2019 between Universal Health Realty Income Trust and UHS of Delaware, Inc.
10.2
10.3
10.4
Agreement, dated as of December 4, 2019, to renew Advisory Agreement, dated as of December 24, 1986, and amended
and restated effective as of January 1, 2019 between Universal Health Realty Income Trust and UHS of Delaware, Inc.,
previously filed as Exhibit 10.3 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2018,
is incorporated herein by reference.
Form of Leases, including Form of Master Lease Document for Leases, between certain subsidiaries of the Company and
Universal Health Realty Income Trust, filed as Exhibit 10.3 to Amendment No. 3 of the Registration Statement on Form
S-11 and Form S-2 of Registrant and Universal Health Realty Income Trust (Registration No. 33-7872), is incorporated
herein by reference (P).
Corporate Guaranty of Obligations of Subsidiaries Pursuant to Leases and Contract of Acquisition, dated December 24,
1986, issued by the Company in favor of Universal Health Realty Income Trust, previously filed as Exhibit 10.5 to the
Company’s Current Report on Form 8-K dated December 24, 1986, is incorporated herein by reference (P).
10.5
Universal Health Services, Inc. Executive Retirement Income Plan dated January 1, 1993, previously filed as Exhibit
10.7 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2002, is incorporated herein by
reference.
10.6
Universal Health Services, Inc. Supplemental Executive Retirement Income Plan effective as of June 1, 2018, dated as of
June 18, 2018, previously filed as Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarterly
period ended March 31, 2019, is incorporated herein by reference.
10.7
Asset Purchase Agreement dated as of February 6, 1996, among Amarillo Hospital District, UHS of Amarillo, Inc. and
Universal Health Services, Inc., previously filed as Exhibit 10.28 to the Company’s Annual Report on Form 10-K for the
year ended December 31, 1995, is incorporated herein by reference (P).
10.8*
Amended and Restated Universal Health Services, Inc. Supplemental Deferred Compensation Plan dated as of January 1,
2002, previously filed as Exhibit 10.29 to the Company’s Annual Report on Form 10-K for the year ended December 31,
2002, is incorporated herein by reference.
80
No.
10.9*
Description
Universal Health Services, Inc. Employee Stock Purchase Plan, previously filed as Exhibit 4.1 to the Company’s
Registration Statement on Form S-8 (File No. 333-122188), dated January 21, 2005 is incorporated herein by reference.
10.10*
Universal Health Services, Inc. Third Amended and Restated 2005 Stock Incentive Plan as Amended, previously filed as
Exhibit 99.1 to the Company’s Registration Statement on Form S-8 (File No.333-218359), dated May 31, 2017, is
incorporated herein by reference.
10.11*
Form of Stock Option Agreement, previously filed as Exhibit 10.4 to the Company’s Current Report on Form 8-K,
dated June 8, 2005, is incorporated herein by reference.
10.12*
Form of Stock Option Agreement for Non-Employee Directors, previously filed as Exhibit 10.2 to the Company’s
Current Report on Form 8-K, dated October 3, 2005, is incorporated herein by reference.
10.13
Amendment No. 1 to the Master Lease Document, between certain subsidiaries of Universal Health Services, Inc. and
Universal Health Realty Income Trust, dated April 24, 2006, previously filed as Exhibit 10.29 to the Company’s Annual
Report on Form 10-K for the year ended December 31, 2006, is incorporated herein by reference.
10.14*
Amended and Restated Universal Health Services, Inc. 2010 Employees’ Restricted Stock Purchase Plan, previously
filed as Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q filed on August 7, 2015, is incorporated herein
by reference.
10.15*
Universal Health Services, Inc. 2010 Executive Incentive Plan, previously filed as Exhibit 10.3 to the Company’s
Quarterly Report on Form 10-Q filed on August 7, 2015, is incorporated herein by reference.
10.16
Omnibus Amendment to Receivables Sale Agreements, dated as of October 27, 2010, previously filed as Exhibit 10.1 to
the Company’s Current Report on Form 8-K dated November 2, 2010, is incorporated herein by reference.
10.17
Amended and Restated Credit and Security Agreement, dated as of October 27, 2010, previously filed as Exhibit 10.2 to
the Company’s Current Report on Form 8-K dated November 2, 2010, is incorporated herein by reference.
10.18
10.19
10.20
Second Amendment to Amended and Restated Credit and Security Agreement, dated as of October 25, 2013, previously
filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K dated October 30, 2013, is incorporated herein by
reference.
Third Amendment to Amended and Restated Credit and Security Agreement, dated as of August 1, 2014, previously
filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K dated August 4, 2014, is incorporated herein by
reference.
Fourth Amendment to Amended and Restated Credit and Security Agreement, dated as of December 22, 2015,
previously filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K dated December 22, 2015, is
incorporated herein by reference.
10.21
Fifth Amendment to Amended and Restated Credit and Security Agreement, dated as of July 7, 2017, previously filed as
Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q filed on August 7, 2017, is incorporated herein by
reference.
10.22
10.23
10.24
Sixth Amendment to Amended and Restated Credit and Security Agreement, dated as of April 26, 2018, previously filed
as Exhibit 10.1 to the Company’s Current Report on Form 8-K dated April 27, 2018, is incorporated herein by reference.
Eighth Amendment to Amended and Restated Credit and Security Agreement, dated as of April 26, 2021, previously
filed as Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q dated May 7, 2021, is incorporated herein by
reference.
Ninth Amendment to Amended and Restated Credit and Security Agreement, dated as of April 22, 2022. previously filed
as Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the Quarter dated May 6, 2022, is incorporated
herein by reference.
81
No.
10.25
10.26
Description
Tenth Amendment to Amended and Restated Credit and Security Agreement, dated as of July 22, 2022, previously filed
as Exhibit 10.5 to the Company’s Quarterly Report on Form 10-Q dated August 8, 2022, is incorporated herein by
reference.
Eleventh Amendment to Amended and Restated Credit and Security Agreement, dated as of September 20, 2022,
previously filed as Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q dated November 8, 2022, is
incorporated herein by reference.
10.27
Assignment and Assumption Agreement, dated as of October 27, 2010, previously filed as Exhibit 10.3 to the
Company’s Current Report on Form 8-K dated November 2, 2010, is incorporated herein by reference.
10.28
Credit Agreement, dated as of November 15, 2010, by and among Universal Health Services, Inc., JPMorgan Chase
Bank, N.A. and the various financial institutions as are or may become parties thereto, as Lenders, SunTrust Bank, The
Royal Bank of Scotland, Plc, Bank of Tokyo-Mitsubishi UFJ Trust Company and Credit Agricole Corporate and
Investment Bank, as co-documentation agents, Deutsche Bank Securities Inc. and Bank of America N.A. as co-
syndication agents, and JPMorgan Chase Bank, N.A., as administrative agent for the Lenders and as collateral agent for
the secured parties, previously filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K dated November 17,
2010, is incorporated herein by reference.
10.29
10.30
First Amendment, dated as of March 15, 2011, to the Credit Agreement, dated as of November 15, 2010, by and among
Universal Health Services, Inc., JPMorgan Chase Bank, N.A. and the various financial institutions as are or may become
parties thereto, as Lenders, certain banks as co-documentation agents, and as co-syndication agents, and JPMorgan
Chase Bank, N.A., as administrative agent for the Lenders and as collateral agent for the secured parties, previously filed
as Exhibit 10.1 to the Company’s Current Report on Form 8-K dated March 15, 2011, is incorporated herein by
reference.
Credit Agreement, dated as of November 15, 2010 and amended and restated as of September 21, 2012, by and among
Universal Health Services, Inc. (the borrower), the several lenders from time to time parties thereto, Credit Agricole
Corporate and Investment Bank, Mizuho Corporate Bank LTD., Royal Bank of Canada and The Royal Bank of Scotland
PLC (as co-documentation agents), Bank of Tokyo-Mitsubishi UFJ Trust Company, Bank of America N.A. and
SunTrust Bank (as co-syndication agents), and JPMorgan Chase Bank, N.A. (as administrative agent), previously filed as
Exhibit 10.1 to the Company’s Current Report on Form 8-K dated September 26, 2012, is incorporated herein by
reference.
10.31
Second Amendment, dated as of September 21, 2012, to the Credit Agreement, dated as of November 15, 2010 (as
amended from time to time), among Universal Health Services, Inc., a Delaware corporation, the several banks and other
financial institutions from time to time parties thereto, JPMorgan Chase Bank, N.A., as administrative agent and the
other agents party thereto, previously filed as Exhibit 10.2 to the Company’s Current Report on Form 8-K dated
September 26, 2012, is incorporated herein by reference.
10.32
Third Amendment, dated as of May 16, 2013, to the Credit Agreement, dated as of November 15, 2010, as amended
from time to time, among Universal Health Services, Inc., a Delaware corporation, the several banks and other financial
institutions from time to time parties thereto, JPMorgan Chase Bank, N.A., as administrative agent and the other agents
party thereto, previously filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K dated May 17, 2013, is
incorporated herein by reference.
10.33
Fourth Amendment, dated as of August 7, 2014, to the Credit Agreement, dated as of November 15, 2010, as previously
amended from time to time, by and among Universal Health Services, Inc., the several banks and other financial
institutions from time to time parties thereto, JPMorgan Chase Bank, N.A., as administrative agent and the other agents
party thereto, previously filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K dated August 12, 2014, is
incorporated herein by reference.
10.34
Credit Agreement, dated as of November 15, 2010 and amended and restated as of August 7, 2014, by and among
Universal Health Services, Inc., the several banks and other financial institutions from time to time parties thereto,
JPMorgan Chase Bank, N.A., as administrative agent and the other agents party thereto, previously filed as Exhibit 10.2
to the Company’s Current Report on Form 8-K dated August 12, 2014, is incorporated herein by reference.
10.35
Fifth Amendment to the Credit Agreement, dated as of November 15, 2010, as amended on March 15, 2011, September
21, 2012, May 16, 2013 and August 7, 2014, among the Company, as borrower, the several banks and other financial
82
No.
Description
institutions from time to time parties thereto, as lenders, JPMorgan Chase Bank, N.A., as administrative agent, and the
other agents party thereto, previously filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K dated June 8,
2016, is incorporated herein by reference.
10.36
10.37
10.38
Sixth Amendment, dated as of October 23, 2018, to the Credit Agreement, dated as of November 15, 2010, as amended
on March 15, 2011, September 21, 2012, May 16, 2013, August 7, 2014 and June 7, 2016, among the Company, as
borrower, the several banks and other financial institutions from time to time parties thereto, as lenders, JPMorgan Chase
Bank, N.A., as administrative agent, and the other agents party thereto, previously filed as Exhibit 10.1 to the Company’s
Current Report on Form 8-K dated October 24, 2018, is incorporated herein by reference.
Increased Facility Activation Notice – Incremental Term Loans, dated as of October 31, 2018, to the Credit Agreement,
dated as of November 15, 2010, as amended on March 15, 2011, September 21, 2012, May 16, 2013, August 7, 2014,
June 7, 2016 and October 23, 2018, among the Company, as borrower, the several banks and other financial institutions
from time to time parties thereto, as lenders, JPMorgan Chase Bank, N.A., as administrative agent, and the other agents
party thereto, previously filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K dated November 2, 2018, is
incorporated herein by reference.
Seventh Amendment, dated as of August 24, 2021, to the Credit Agreement, dated as of November 15, 2010, as amended
on March 15, 2011, September 21, 2012, May 16, 2013, August 7, 2014, June 7, 2016 and October 23, 2018, among the
Company, as borrower, the several banks and other financial institutions from time to time parties thereto, as lenders,
JPMorgan Chase Bank, N.A., as administrative agent, and the other agents party thereto, previously filed as Exhibit 10.2
to the Company’s Current Report on Form 8-K dated August 24, 2021, is incorporated herein by reference.
10.39
Eighth Amendment, dated as of September 10, 2021, to the Credit Agreement, dated as of November 15, 2010, as
amended on March 15, 2011, September 21, 2012, May 16, 2013, August 7, 2014, June 7, 2016, October 23, 2018 and
August 24, 2021, among the Company, as borrower, the several banks and other financial institutions from time to time
parties thereto, as lenders, JPMorgan Chase Bank, N.A., as administrative agent, and the other agents party thereto,
previously filed as Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q dated November 8, 2021, is
incorporated herein by reference.
10.40
Ninth Amendment and Increased Facility Activation Notice dated as of June 23, 2022, to Credit Agreement, dated as of
November 15, 2010 and as amended and restated as of March 15, 2011, September 21, 2012, May 16, 2013, August 7,
2014, June 7, 2016, October 23, 2018, August 24, 2021 and September 10, 2021, among the Company, JP Morgan Chase
Bank, N.A., as administrative agent and other financial institutions or entities from time to time parties thereto,
previously filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K dated June 27, 2022, is incorporated
herein by reference.
10.41*
Form of Supplemental Life Insurance Plan and Agreement Part A: Alan B. Miller 1998 Dual Life Insurance Trust
(effective December 9, 2010, by and between Universal Health Services, Inc., a Delaware corporation (the “Company”),
and Anthony Pantaleoni as Trustee), previously filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K
dated December 10, 2010, is incorporated herein by reference.
10.42*
Form of Supplemental Life Insurance Plan and Agreement Part B: Alan B. Miller 2002 Trust (effective December 9,
2010, by and between Universal Health Services, Inc., a Delaware corporation (the “Company”), and Anthony
Pantaleoni as Trustee), previously filed as Exhibit 10.2 to the Company’s Current Report on Form 8-K dated December
10, 2010, is incorporated herein by reference.
10.43*
Universal Health Services, Inc. Termination, Assignment and Release Agreement (effective December 9, 2010, by and
between Universal Health Services, Inc., a Delaware corporation (the “Company”), Anthony Pantaleoni as Trustee of the
Alan B. Miller 1998 Dual Life Insurance Trust, and Alan B. Miller, Executive), previously filed as Exhibit 10.3 to the
Company’s Current Report on Form 8-K dated December 10, 2010, is incorporated herein by reference.
10.44*
Universal Health Services, Inc. Termination, Assignment and Release Agreement (effective December 9, 2010, by and
between Universal Health Services, Inc., a Delaware corporation (the “Company”), Anthony Pantaleoni as Trustee of the
Alan B. Miller 2002 Trust, and Alan B. Miller, Executive), previously filed as Exhibit 10.4 to the Company’s Current
Report on Form 8-K dated December 10, 2010, is incorporated herein by reference.
10.45
Collateral Agreement, dated as of August 7, 2014, among Universal Health Services, Inc., the subsidiary guarantors
party thereto, MUFG Union Bank, N.A., as 2014 Trustee, The Bank of New York Mellon Trust Company, N.A., as 2006
83
No.
Description
Trustee, and JPMorgan Chase Bank, N.A., as collateral agent, previously filed as Exhibit 10.4 to the Company’s Current
Report on Form 8-K dated August 12, 2014, is incorporated herein by reference.
10.46
Universal Health Services, Inc. 2020 Omnibus Stock and Incentive Plan, previously filed as Exhibit 99.1 to the
Company’s Registration Statement on Form S-8 (File No. 333-238880) dated June 2, 2020, is incorporated herein by
reference.
10.47
Form of Stock Option Award Agreement under the Universal Health Services, Inc. 2020 Omnibus Stock and Incentive
Plan, previously filed as Exhibit 10.5 to the Company’s Quarterly Report on Form 10-Q filed on August 7, 2020, is
incorporated herein by reference.
10.48
Form of Restricted Stock Award Agreement under the Universal Health Services, Inc. 2020 Omnibus Stock and
Incentive Plan, previously filed as Exhibit 10.6 to the Company’s Quarterly Report on Form 10-Q filed on August 7,
2020, is incorporated herein by reference.
10.49
10.50
10.51
10.52
Form of Restricted Stock Unit Award Agreement under the Universal Health Services, Inc. 2020 Omnibus Stock and
Incentive Plan, previously filed as Exhibit 10.7 to the Company’s Quarterly Report on Form 10-Q filed on August 7,
2020, is incorporated herein by reference.
Settlement Agreement among: (i) the United States of America, acting through the United States Department of Justice
and on behalf of the Office of Inspector General (OIG-HHS) of the Department of Health and Human Services (HHS);
the Defense Health Agency (DHA), acting on behalf of the TRICARE Program; the Office of Personnel Management
(OPM), which administers the Federal Employees Health Benefits Program (FEHBP); and the United States Department
of Veteran Affairs (VA) (collectively, the United States); (ii) Universal Health Services, Inc. (“UHS, Inc.”) and UHS of
Delaware, Inc. (“UHS of Delaware, Inc.”), acting on behalf of the entities listed on Exhibits A and B, (collectively the
“Defendants” or “UHS”); and (iii) various individuals (collectively, the “Relators”), previously filed as Exhibit 10.1 to
the Company’s Current Report on Form 8-K dated July 10, 2020, is incorporated herein by reference.
Form of Settlement Agreement between various states and Universal Health Services, Inc. and UHS of Delaware, Inc.,
acting on behalf of the entities listed on Exhibits A and B, previously filed as Exhibit 10.2 to the Company’s Current
Report on Form 8-K dated July 10, 2020, is incorporated herein by reference.
Corporate Integrity Agreement between the Office of Inspector General of the Department of Health and Human
Services and Universal Health Services, Inc. and UHS of Delaware, Inc., previously filed as Exhibit 10.3 to the
Company’s Current Report on Form 8-K dated July 10, 2020, is incorporated herein by reference.
10.53
Stipulation and Agreement of Settlement, dated as of September 15, 2021, by and among (a) lead plaintiffs in the
stockholder derivative action captioned In re Universal Health Services, Inc., Derivative Litigation, Case No. 2:17-cv-
02187-JHS (including each of its member cases, the “Federal Action”), pending in the United States District Court for
the Eastern District of Pennsylvania; (b) plaintiffs in the stockholder derivative litigation captioned Delaware County
Employees’ Retirement Fund and the Chester County Employees’ Retirement System v. Alan B. Miller, et al., C.A. No.
2017-0475-JTL (the “Delaware Action”), brought in the Court of Chancery of the State of Delaware; (c) Dr. Eli Inzlicht-
Sprei; (d) defendants in the Federal Action; (e) defendants in the Delaware Action; and (f) nominal defendant in the
Federal Action and Delaware Action: Universal Health Services, Inc., by and through their respective undersigned
counsel, previously filed as Exhibit 99.3 to the Company’s Current Report on Form 8-K dated October 25, 2021, is
incorporated herein by reference.
10.54*
Employment Agreement between Universal Health Services, Inc. and Marc D. Miller dated as of December 23, 2020,
previously filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K dated December 23, 2020, is
incorporated herein by reference.
10.55*
Amendment, dated as of March 23, 2022, to Employment Agreement, dated as of December 23, 2020, between
Universal Health Services, Inc. and Marc D. Miller, previously filed as Exhibit 10.2 to the Company’s Current Report on
Form 8-K dated March 23, 2022, is incorporated herein by reference.
10.56*
Employment Agreement between Universal Health Services, Inc. and Alan B. Miller dated as of December 23, 2020,
previously filed as Exhibit 10.2 to the Company’s Current Report on Form 8-K dated December 23, 2020, is
incorporated herein by reference.
84
No.
Description
10.57*
Amendment, dated as of March 23, 2022, to Employment Agreement, dated as of December 23, 2020, between
Universal Health Services, Inc. and Alan B. Miller, previously filed as Exhibit 10.3 to the Company’s Current Report on
Form 8-K dated March 23, 2022, is incorporated herein by reference.
10.58
Master Lease Document between certain subsidiaries of Universal Health Services, Inc. and Universal Health Realty
Income Trust, dated December 31, 2021 previously filed as Exhibit 10.54 to the Company’s Annual Report on Form 10-
K dated February 24, 2022, is incorporated herein by reference.
10.59*
Universal Health Services, Inc. 2022 Executive Incentive Plan, previously filed as Exhibit 10.1 to the Company’s
Current Report on Form 8-K dated March 23, 2022, is incorporated herein by reference.
10.60
10.61
Universal Health Services, Inc. Amended and Restated 2020 Omnibus Stock and Incentive Plan, previously filed as
Exhibit 99.1 to the Company’s Registration Statement on Form S-8 (File No. 333-265495) dated June 9, 2022, is
incorporated herein by reference.
Form of Restricted Stock Unit Award Agreement under the Universal Health Services, Inc. 2020 Omnibus Stock and
Incentive Plan, previously filed as Exhibit 10.4 to the Company’s Quarterly Report on Form 10-Q filed on August 8,
2022, is incorporated herein by reference.
10.62*
Form of Restricted Stock Units Award Agreement for Named Executive Officers with Employment Agreements, ,
previously filed as Exhibit 10.5 to the Company’s Quarterly Report on Form 10-Q filed on May 6, 2022, is incorporated
herein by reference.
10.63*
Form of Restricted Stock Units Award Agreement for Named Executive Officers without Employment Agreements,
previously filed as Exhibit 10.6 to the Company’s Quarterly Report on Form 10-Q filed on May 6, 2022, is incorporated
herein by reference.
10.64*
Form of Restricted Stock Units Award Agreement for Directors, previously filed as Exhibit 10.7 to the Company’s
Quarterly Report on Form 10-Q filed on May 6, 2022, is incorporated herein by reference.
10.65*
Separation Agreement and General Release by and between UHS of Delaware, Inc. and Marvin Pember effective as of
December 31, 2022, previously filed as Exhibit 99.1 to the Company’s Current Report on Form 8-K/A dated December
7, 2022, is incorporated herein by reference.
10.66*
Employment Agreement between Universal Health Services, Inc. and Edward Sim dated October 18, 2022.
11
21
Statement regarding computation of per share earnings is set forth in Note 1 of the Notes to the Consolidated Financial
Statements.
Subsidiaries of Registrant.
22.1
List of Guarantor Subsidiaries and Issuers of Guaranteed Securities and Affiliates Whose Securities Collateralize
Securities of the Registrant.
23.1
Consent of Independent Registered Public Accounting Firm-PricewaterhouseCoopers LLP.
31.1
Certification from the Company’s Chief Executive Officer Pursuant to Rule 13a-14(a)/15(d)-14(a) of the Securities
Exchange Act of 1934.
31.2
Certification from the Company’s Chief Financial Officer Pursuant to Rule 13a-14(a)/15(d)-14(a) of the Securities
Exchange Act of 1934.
32.1
Certification from the Company’s Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
32.2
Certification from the Company’s Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
85
No.
101.INS
Description
Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL
tags are embedded within the Inline XBRL document)
101.SCH
Inline XBRL Taxonomy Extension Schema Document
101.CAL
Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF
Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB
Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE
Inline XBRL Taxonomy Extension Presentation Linkbase Document
104
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)
* Management contract or compensatory plan or arrangement.
Exhibits, other than those incorporated by reference, have been included in copies of this Annual Report filed with the Securities and
Exchange Commission. Stockholders of the Company will be provided with copies of those exhibits upon written request to the
Company.
ITEM 16. Form 10-K Summary
None.
86
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly
caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
SIGNATURES
UNIVERSAL HEALTH SERVICES, INC.
By:
/s/ MARC D. MILLER
Marc D. Miller
Chief Executive Officer
February 27, 2023
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following
persons on behalf of the Registrant and in the capacities and on the dates indicated.
Signatures
/s/ ALAN B. MILLER
Alan B. Miller
/s/ MARC D. MILLER
Marc D. Miller
/s/ NINA CHEN-LANGENMAYR
Nina Chen-Langenmayr
/s/ LAWRENCE S. GIBBS
Lawrence S. Gibbs
/s/ EILEEN C. MCDONNELL
Eileen C. McDonnell
/s/ WARREN J. NIMETZ
Warren J. Nimetz
/s/ MARIA SINGER
Maria Singer
/s/ ELLIOTT J. SUSSMAN M.D.
Elliot J. Sussman M.D.
/s/ STEVE FILTON
Steve Filton
Title
Date
Executive Chairman of the Board
February 27, 2023
Director, President and Chief Executive Officer (Principal
Executive Officer)
February 27, 2023
February 27, 2023
February 27, 2023
February 27, 2023
February 27, 2023
February 27, 2023
February 27, 2023
February 27, 2023
Director
Director
Director
Director
Director
Director
Executive Vice President, Chief Financial Officer and
Secretary
(Principal Financial and Accounting Officer)
87
UNIVERSAL HEALTH SERVICES, INC.
INDEX TO FINANCIAL STATEMENTS
AND FINANCIAL STATEMENT SCHEDULE
Consolidated Financial Statements:
Report of Independent Registered Public Accounting Firm (PCAOB ID: 238)
Consolidated Statements of Income for December 31, 2022, 2021, and 2020
Consolidated Statements of Comprehensive Income for December 31, 2022, 2021, and 2020
Consolidated Balance Sheets as of December 31, 2022 and 2021
Consolidated Statements of Changes in Equity for December 31, 2022, 2021 and 2020
Consolidated Statements of Cash Flows for December 31, 2022, 2021 and 2020
Notes to Consolidated Financial Statements
Supplemental Financial Statement Schedule II: Valuation and Qualifying Accounts as of and for December 31, 2022,
2021, and 2020
89
91
92
93
94
97
98
128
88
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Stockholders of Universal Health Services, Inc.
Opinions on the Financial Statements and Internal Control over Financial Reporting
We have audited the accompanying consolidated balance sheets of Universal Health Services, Inc. and its subsidiaries (the
“Company”) as of December 31, 2022 and 2021, and the related consolidated statements of income, of comprehensive income, of
changes in equity and of cash flows for each of the three years in the period ended December 31, 2022, including the related notes and
financial statement schedule listed in the accompanying index (collectively referred to as the “consolidated financial statements”). We
also have audited the Company's internal control over financial reporting as of December 31, 2022, based on criteria established in
Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission
(COSO).
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of
the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the three years in the
period ended December 31, 2022 in conformity with accounting principles generally accepted in the United States of America. Also in
our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31,
2022, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.
Basis for Opinions
The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over
financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in Management’s
Report on Internal Control Over Financial Reporting appearing under Item 9A. Our responsibility is to express opinions on the
Company’s consolidated financial statements and on the Company's internal control over financial reporting based on our audits. We
are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are
required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules
and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits
to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to
error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.
Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the
consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such
procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial
statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well
as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting
included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and
testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included
performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable
basis for our opinions.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting
principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the
maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the
company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in
accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in
accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding
prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect
on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections
of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in
conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Critical Audit Matters
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements
that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are
89
material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The
communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a
whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or
on the accounts or disclosures to which it relates.
Valuation of accounts receivable
As described in Notes 1, 10 and 12 to the consolidated financial statements, the Company reports net patient service revenue at the
estimated net realizable amounts from patients and third-party payers and others for services rendered. The Company has agreements
with third-party payers that provide for payments to the Company at amounts different from established rates. Payment arrangements
include rates per discharge, reimbursed costs, discounted charges and per diem payments. Estimates of contractual allowances, which
represent explicit price concessions, under managed care plans are based upon the payment terms specified in the related contractual
agreements. Management estimates Medicare and Medicaid revenues using the latest available financial information, patient
utilization data, government provided data and in accordance with applicable Medicare and Medicaid payment rules and regulations.
Management monitors the historical collection rates, as well as changes in applicable laws, rules and regulations and contract terms, to
assure that provisions are made using the most accurate information available. In addition to explicit price concessions, management
estimates revenue adjustments for implicit price concessions based on general factors such as payer mix, the aging of the receivables
and historical collection experience. Management routinely reviews accounts receivable balances in conjunction with these factors and
other economic conditions which might ultimately affect the collectability of the patient accounts and make adjustments to the
allowances as warranted. As of December 31, 2022, the net accounts receivable balance was $2.0 billion.
The principal considerations for our determination that performing procedures relating to the valuation of accounts receivable is a
critical audit matter are the significant judgment by management in estimating net accounts receivable, specifically as it relates to
developing the estimate for explicit and implicit price concessions, which in turn led to significant auditor judgment, subjectivity and
effort in performing procedures and evaluating audit evidence obtained related to the estimation of price concessions.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion
on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to the valuation of
accounts receivable, including controls over management’s valuation approach, assumptions and data used to estimate the explicit and
implicit price concessions. These procedures also included, among others, (i) testing management’s process for developing the
estimate for price concessions, as well as the relevance of the historical billing and collection data as an input to the valuation
approach; (ii) testing the accuracy of a sample of revenue transactions and a sample of cash collections from the historical billing data
and historical collection data used in management’s estimation of price concessions; (iii) evaluating the historical accuracy of
management’s process for developing the estimate of the amount which will ultimately be collected by comparing actual cash
collections to the previously recorded net accounts receivable balance; and (iv) developing an independent expectation of the net
accounts receivable balance. Developing an independent expectation involved calculating the percentage of cash collections as
compared to the recorded net accounts receivable balance as of the end of the prior year, applying those calculated percentages to the
recorded accounts receivable balance as of December 31, 2022, and comparing the calculated balance to management’s estimate of the
net accounts receivable balance.
/s/ PricewaterhouseCoopers LLP
Philadelphia, Pennsylvania
February 27, 2023
We have served as the Company’s auditor since 2007.
90
UNIVERSAL HEALTH SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
Net revenues
Operating charges:
Salaries, wages and benefits
Other operating expenses
Supplies expense
Depreciation and amortization
Lease and rental expense
Income from operations
Interest expense, net
Other (income) expense, net
Income before income taxes
Provision for income taxes
Net income
Less: Net (loss) income attributable to noncontrolling interests
Net income attributable to UHS
Basic earnings per share attributable to UHS
Diluted earnings per share attributable to UHS
Weighted average number of common shares—basic
Add: Other share equivalents
Weighted average number of common shares and equivalents—diluted
2022
Year Ended December 31,
2021
(in thousands, except per share data)
2020
$
13,399,370 $ 12,642,117
$
11,558,897
6,762,256
3,445,733
1,474,339
581,861
131,626
12,395,815
1,003,555
126,889
10,406
866,260
209,278
656,982
(18,627)
675,609 $
9.23 $
9.14 $
73,118
714
73,832
6,163,944
3,035,869
1,427,134
533,213
118,863
11,279,023
1,363,094
83,672
(13,891)
1,293,313
305,681
987,632
(3,958)
991,590
11.99
11.82
82,519
1,173
83,692
$
$
$
5,613,097
2,672,762
1,288,132
510,493
116,059
10,200,543
1,358,354
106,285
(14)
1,252,083
299,293
952,790
8,837
943,953
11.06
10.99
85,061
526
85,587
$
$
$
The accompanying notes are an integral part of these consolidated financial statements.
91
UNIVERSAL HEALTH SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Net income
Other comprehensive income (loss):
Minimum pension liability
Foreign currency translation adjustment
Other comprehensive income before tax
Income tax expense related to items of other
comprehensive income
Total other comprehensive income (loss), net of tax
Comprehensive income
Less: Comprehensive income attributable to noncontrolling
interests
Comprehensive income attributable to UHS
2022
Year Ended December 31,
2021
(Dollar amounts in thousands)
$
987,632
$
656,982 $
(2,869)
(37,310)
(40,179)
(220)
(39,959)
617,023
1,427
(20,743)
(19,316)
(1,487)
(17,829)
969,803
(18,627)
635,650 $
(3,958)
973,761
$
$
2020
952,790
4,428
13,619
18,047
1,820
16,227
969,017
8,837
960,180
The accompanying notes are an integral part of these consolidated financial statements.
92
UNIVERSAL HEALTH SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
Assets
December 31,
2022
2021
(Dollar amounts in thousands)
Current assets:
Cash and cash equivalents
Accounts receivable, net
Supplies
Other current assets
Total current assets
Property and Equipment
Land
Buildings and improvements
Equipment
Property under finance lease
Accumulated depreciation
Construction-in-progress
Other assets:
Goodwill
Deferred income taxes
Right of use assets-operating leases
Deferred charges
Other
Total Assets
Liabilities and Stockholders’ Equity
Current liabilities:
Current maturities of long-term debt
Accounts payable
Accrued liabilities
Compensation and related benefits
Interest
Taxes other than income
Operating lease liabilities
Medicare accelerated payments and deferred CARES Act and other grants
Other
Current federal and state income taxes
Total current liabilities
Other noncurrent liabilities
Operating lease liabilities noncurrent
Long-term debt
Commitments and contingencies (Note 8)
Redeemable noncontrolling interest
Equity:
Class A Common Stock, voting, $.01 par value; authorized 12,000,000 shares: issued
and outstanding 6,577,100 shares in 2022 and 6,577,100 shares in 2021
Class B Common Stock, limited voting, $.01 par value; authorized 150,000,000
shares: issued and outstanding 63,375,992 shares in 2022 and 69,694,091 shares in 2021
Class C Common Stock, voting, $.01 par value; authorized 1,200,000 shares: issued
and outstanding 661,688 shares in 2022 and 661,688 shares in 2021
Class D Common Stock, limited voting, $.01 par value; authorized 5,000,000 shares:
issued and outstanding 14,170 shares in 2022 and 17,956 shares in 2021
Cumulative dividends
Retained earnings
Accumulated other comprehensive income
Universal Health Services, Inc. common stockholders’ equity
Noncontrolling interest
Total Equity
Total Liabilities and Stockholders’ Equity
$
$
$
$
$
102,818
2,017,722
218,517
198,283
2,537,340
$
$
727,313
6,756,228
2,936,992
102,494
10,523,027
(5,167,394)
5,355,633
562,825
5,918,458
3,909,456
68,397
454,650
6,264
599,623
5,038,390
13,494,188
81,447
636,601
470,858
16,243
110,889
67,776
2,397
523,600
4,608
1,914,419
487,669
395,522
4,726,533
4,695
66
637
7
0
(604,127)
6,533,667
(9,668)
5,920,582
44,768
5,965,350
13,494,188
$
115,301
1,746,635
206,839
194,781
2,263,556
732,717
6,509,629
2,759,934
102,940
10,105,220
(4,896,427)
5,208,793
665,482
5,874,275
3,962,624
45,707
367,477
6,525
573,379
4,955,712
13,093,543
48,409
658,900
466,353
14,408
160,793
64,484
6
560,036
10,720
1,984,109
464,759
304,624
4,141,879
5,119
66
698
7
0
(545,487)
6,604,089
30,291
6,089,664
103,389
6,193,053
13,093,543
The accompanying notes are an integral part of these consolidated financial statements.
93
Balance, January 1, 2020
Common Stock
Issued/(converted) including tax benefits from
exercise of stock options
Repurchased
Restricted share-based compensation expense
Dividends paid
Stock option expense
Distributions to noncontrolling interests
Purchase of ownership interests by minority members
Other
Comprehensive income:
Net income to UHS / noncontrolling interests
Foreign currency translation adjustments (net of
income tax effect of $749)
Minimum pension liability (net of income tax effect
of $1,071)
Subtotal - comprehensive income
Balance, December 31, 2020
9
4
UNIVERSAL HEALTH SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
For the Years Ended December 31, 2022, 2021 and 2020
(in thousands)
Redeemable
Noncontrolling
Interest
Class A
Common
Class B
Common
Class C
Common
Class D
Common
Cumulative
Dividends
Retained
Earnings
$
4,333
$
66
$
794
$
7
$
0
$
(462,159)
$
5,933,504
Accumulated
Other
Comprehensive
Income (Loss)
31,893
$
UHS
Common
Stockholders'
Equity
Noncontrolling
Interest
$
5,504,105
$
74,766
$
—
—
—
—
—
(500)
—
—
736
—
—
736
4,569
$
$
—
—
—
—
—
—
—
—
—
—
—
—
66
$
4
(20)
—
—
—
—
—
—
—
—
—
—
778
$
—
—
—
—
—
—
—
—
—
—
—
—
7
$
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(17,344)
—
—
—
—
—
—
12,754
(206,699)
9,505
—
54,661
—
—
—
943,953
—
—
—
(479,503)
—
943,953
6,747,678
$
$
$
—
—
—
—
—
—
—
—
—
12,870
3,357
16,227
48,120
12,758
(206,719)
9,505
(17,344)
54,661
—
—
—
943,953
12,870
3,357
960,180
6,317,146
$
$
—
—
—
—
—
(19,305)
17,959
3,300
8,101
—
—
8,101
84,821
The accompanying notes are an integral part of these consolidated financial statements.
94
Total
5,578,871
12,758
(206,719)
9,505
(17,344)
54,661
(19,305)
17,959
3,300
—
952,054
12,870
3,357
968,281
6,401,967
$
UNIVERSAL HEALTH SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY—(Continued)
For the Years Ended December 31, 2022, 2021 and 2020
(in thousands)
Redeemable
Noncontrolling
Interest
Class A
Common
Class B
Common
Class C
Common
Class D
Common
Cumulative
Dividends
Retained
Earnings
Accumulated
Other
Comprehensive
Income (Loss)
UHS
Common
Stockholders'
Equity
Noncontrolling
Interest
Total
Common Stock
Issued/(converted) including tax benefits from
exercise of stock options
Repurchased
Restricted share-based compensation expense
Dividends paid
Stock option expense
Distributions to noncontrolling interests
Purchase of ownership interests by minority members
Other
Comprehensive income:
Net income to UHS / noncontrolling interests
Foreign currency translation adjustments (net of
income tax effect of $1,829)
Minimum pension liability (net of income tax effect
of $342)
Subtotal - comprehensive income
Balance, December 31, 2021
9
5
—
—
—
—
—
(202)
—
—
752
—
—
752
5,119
$
$
—
—
—
—
—
—
—
—
—
—
—
—
66
$
5
(85)
—
—
—
—
—
—
—
—
—
—
698
$
—
—
—
—
—
—
—
—
—
—
—
—
7
$
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(65,984)
—
—
—
—
—
—
13,369
(1,220,790)
12,936
—
59,306
—
—
—
991,590
—
—
—
(545,487)
—
991,590
6,604,089
$
$
$
—
—
—
—
—
—
—
—
—
(18,914)
1,085
(17,829)
30,291
13,374
(1,220,875)
12,936
(65,984)
59,306
—
—
—
991,590
(18,914)
—
—
—
—
—
(6,878)
13,909
16,247
(4,710)
—
13,374
(1,220,875)
12,936
(65,984)
59,306
(6,878)
13,909
16,247
986,880
(18,914)
1,085
973,761
6,089,664
$
$
—
(4,710)
103,389
1,085
969,051
6,193,053
$
The accompanying notes are an integral part of these consolidated financial statements.
95
UNIVERSAL HEALTH SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY—(Continued)
For the Years Ended December 31, 2022, 2021 and 2020
(in thousands)
Redeemable
Noncontrolling
Interest
Class A
Common
Class B
Common
Class C
Common
Class D
Common
Cumulative
Dividends
Retained
Earnings
Accumulated
Other
Comprehensive
Income (Loss)
UHS
Common
Stockholders'
Equity
Noncontrolling
Interest
Total
9
6
Common Stock
Issued/(converted) including tax benefits from
exercise of stock options
Repurchased
Restricted share-based compensation expense
Dividends paid
Stock option expense
Acquisition of noncontrolling interest in majority owned
business
Distributions to noncontrolling interests
Purchase of ownership interests by minority members
Other
Comprehensive income:
Net income to UHS / noncontrolling interests
Foreign currency translation adjustments (net of
income tax effect of $469)
Minimum pension liability (net of income tax effect
of $689)
Subtotal - comprehensive income
Balance, December 31, 2022
$
—
—
—
—
—
—
(650)
—
—
226
—
—
226
4,695
$
—
—
—
—
—
—
—
—
—
—
—
—
—
66
$
11
(72)
—
—
—
—
—
—
—
—
—
—
—
637
$
—
—
—
—
—
—
—
—
—
—
—
—
—
7
$
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(58,640)
—
—
—
—
—
—
—
14,196
(832,846)
17,649
—
66,244
(11,274)
—
—
—
675,609
—
—
—
(604,127)
—
675,609
6,533,667
$
$
$
—
—
—
—
—
—
—
—
—
—
(37,779)
(2,180)
(39,959)
(9,668)
14,207
(832,918)
17,649
(58,640)
66,244
(11,274)
—
—
—
675,609
(37,779)
(2,180)
635,650
5,920,582
$
$
—
—
—
—
—
(37,608)
(4,741)
2,581
—
(18,853)
—
—
(18,853)
44,768
14,207
(832,918)
17,649
(58,640)
66,244
(48,882)
(4,741)
2,581
—
656,756
(37,779)
(2,180)
616,797
5,965,350
$
The accompanying notes are an integral part of these consolidated financial statements.
96
UNIVERSAL HEALTH SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Cash Flows from Operating Activities:
Net income
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation & amortization
Loss (gain) on sales of assets and businesses
Stock-based compensation expense
Costs related to extinguishment of debt
Provision for asset impairment
Changes in assets & liabilities, net of effects from acquisitions and
dispositions:
Accounts receivable
Accrued interest
Accrued and deferred income taxes
Other working capital accounts
Medicare accelerated payments and deferred CARES Act and other grants
Other assets and deferred charges
Other
Accrued insurance expense, net of commercial premiums paid
Payments made in settlement of self-insurance claims
Net cash provided by operating activities
Cash Flows from Investing Activities:
Property and equipment additions
Acquisition of businesses and property
Inflows (outflows) from foreign exchange contracts that hedge our net U.K.
investment
Proceeds received from sales of assets and businesses
Costs incurred for purchase and implementation of information technology
applications
Decrease (increase) in capital reserves of commercial insurance subsidiary
Investment in, and advances to, joint ventures and other
Net cash used in investing activities
Cash Flows from Financing Activities:
Repayments of long-term debt
Additional borrowings
Financing costs
Repurchase of common shares
Dividends paid
Issuance of common stock
Profit distributions to noncontrolling interests
Purchase (sale) of ownership interests by (from) minority member
Net cash used in financing activities
Effect of exchange rate changes on cash and cash equivalents
Increase (decrease) in cash, cash equivalents and restricted cash
Cash, cash equivalents and restricted cash, beginning of period
Cash, cash equivalents and restricted cash, end of period
Supplemental Disclosures of Cash Flow Information:
Interest paid
Income taxes paid, net of refunds
Noncash purchases of property and equipment
2022
Year Ended December 31,
2021
(Amounts in thousands)
2020
$
656,982
$
987,632
$
952,790
581,861
584
85,378
0
57,550
(258,338)
1,835
(29,510)
(146,692)
2,391
19,918
(8,676)
174,723
(141,983)
996,023
(734,001)
(20,309)
94,913
12,001
0
100
0
(647,296)
(89,367)
705,321
(3,164)
(832,918)
(58,449)
14,068
(5,391)
(48,500)
(318,400)
(8,424)
21,903
178,934
200,837
120,136
250,759
72,064
533,213
(5,170)
73,686
16,831
14,391
(8,873)
4,950
(54,030)
46,526
(698,762)
(39,337)
(82,075)
186,215
(91,502)
883,695
(855,659)
(105,415)
1,357
25,425
19,726
100
0
(914,466)
(3,037,868)
3,254,974
(18,770)
(1,220,875)
(65,896)
13,372
(7,080)
13,193
(1,068,950)
(499)
(1,100,220)
1,279,154
178,934
75,607
362,978
167,234
$
$
$
$
$
$
$
$
510,493
1,957
65,837
1,365
0
(145,901)
(10,028)
9,593
124,545
698,768
(4,555)
109,167
159,223
(113,085)
2,360,169
(731,307)
(52,009)
(21,740)
8,168
(2,902)
(100)
(2,672)
(802,562)
(962,567)
801,599
(10,300)
(206,719)
(17,344)
12,318
(19,805)
17,959
(384,859)
739
1,173,487
105,667
1,279,154
112,598
286,247
74,854
$
$
$
$
The accompanying notes are an integral part of these consolidated financial statements.
97
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1) BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Services provided by our hospitals, all of which are operated by subsidiaries of ours, include general and specialty surgery,
internal medicine, obstetrics, emergency room care, radiology, oncology, diagnostic care, coronary care, pediatric services, pharmacy
services and/or behavioral health services. We, through our subsidiaries, provide capital resources as well as a variety of management
services to our facilities, including central purchasing, information services, finance and control systems, facilities planning, physician
recruitment services, administrative personnel management, marketing and public relations.
The more significant accounting policies follow:
Principles of Consolidation: The consolidated financial statements include the accounts of our majority-owned subsidiaries
and partnerships controlled by us or our subsidiaries as the managing general partner. All intercompany accounts and transactions
have been eliminated.
Revenue Recognition: We report net patient service revenue at the estimated net realizable amounts from patients and third-
party payers and others for services rendered. We have agreements with third-party payers that provide for payments to us at amounts
different from our established rates. Payment arrangements include rates per discharge, reimbursed costs, discounted charges and per
diem payments. Estimates of contractual allowances under managed care plans, which represent explicit price concessions, are based
upon the payment terms specified in the related contractual agreements. We closely monitor our historical collection rates, as well as
changes in applicable laws, rules and regulations and contract terms, to assure that provisions are made using the most accurate
information available. However, due to the complexities involved in these estimations, actual payments from payers may be different
from the amounts we estimate and record.
See Note 10-Revenue Recognition, for additional disclosure related to our revenues including a disaggregation of our
consolidated net revenues by major source for each of the periods presented herein.
We estimate our Medicare and Medicaid revenues using the latest available financial information, patient utilization data,
government provided data and in accordance with applicable Medicare and Medicaid payment rules and regulations. The laws and
regulations governing the Medicare and Medicaid programs are extremely complex and subject to interpretation and as a result, there
is at least a reasonable possibility that recorded estimates will change by material amounts in the near term. Certain types of payments
by the Medicare program and state Medicaid programs (e.g. Medicare Disproportionate Share Hospital, Medicare Allowable Bad
Debts and Inpatient Psychiatric Services) are subject to retroactive adjustment in future periods as a result of administrative review
and audit and our estimates may vary from the final settlements. Such amounts are included in accounts receivable, net, on our
Consolidated Balance Sheets. The funding of both federal Medicare and state Medicaid programs are subject to legislative and
regulatory changes. As such, we cannot provide any assurance that future legislation and regulations, if enacted, will not have a
material impact on our future Medicare and Medicaid reimbursements. Adjustments related to the final settlement of these
retrospectively determined amounts did not materially impact our results in 2022, 2021 or 2020. If it were to occur, each 1%
adjustment to our estimated net Medicare revenues that are subject to retrospective review and settlement as of December 31, 2022,
would change our after-tax net income by approximately $1 million.
Charity Care, Uninsured Discounts and Other Adjustments to Revenue: Collection of receivables from third-party payers
and patients is our primary source of cash and is critical to our operating performance. Our primary collection risks relate to uninsured
patients and the portion of the bill which is the patient’s responsibility, primarily co-payments and deductibles. We estimate our
revenue adjustments for implicit price concessions based on general factors such as payer mix, the aging of the receivables and
historical collection experience. We routinely review accounts receivable balances in conjunction with these factors and other
economic conditions which might ultimately affect the collectability of the patient accounts and make adjustments to our allowances
as warranted. At our acute care hospitals, third party liability accounts are pursued until all payment and adjustments are posted to the
patient account. For those accounts with a patient balance after third party liability is finalized or accounts for uninsured patients, the
patient receives statements and collection letters.
Historically, a significant portion of the patients treated throughout our portfolio of acute care hospitals are uninsured patients
which, in part, has resulted from patients who are employed but do not have health insurance or who have policies with relatively high
deductibles. Patients treated at our hospitals for non-elective services, who have gross income of various amounts, dependent upon the
state, ranging from 200% to 400% of the federal poverty guidelines, are deemed eligible for charity care. The federal poverty
guidelines are established by the federal government and are based on income and family size. Because we do not pursue collection of
amounts that qualify as charity care, the transaction price is fully adjusted and there is no impact in our net revenues or in our accounts
receivable, net.
A portion of the accounts receivable at our acute care facilities are comprised of Medicaid accounts that are pending approval
from third-party payers but we also have smaller amounts due from other miscellaneous payers such as county indigent programs in
certain states. Our patient registration process includes an interview of the patient or the patient’s responsible party at the time of
98
registration. At that time, an insurance eligibility determination is made and an insurance plan code is assigned. There are various pre-
established insurance profiles in our patient accounting system which determine the expected insurance reimbursement for each
patient based on the insurance plan code assigned and the services rendered. Certain patients may be classified as Medicaid pending at
registration based upon a screening evaluation if we are unable to definitively determine if they are currently Medicaid eligible. When
a patient is registered as Medicaid eligible or Medicaid pending, our patient accounting system records net revenues for services
provided to that patient based upon the established Medicaid reimbursement rates, subject to the ultimate disposition of the patient’s
Medicaid eligibility. When the patient’s ultimate eligibility is determined, reclassifications may occur which impacts net revenues in
future periods. Although the patient’s ultimate eligibility determination may result in adjustments to net revenues, these adjustments
do not have a material impact on our results of operations in 2022, 2021 or 2020 since our facilities make estimates at each financial
reporting period to adjust revenue based on historical collections.
We also provide discounts to uninsured patients (included in “uninsured discounts” amounts below) who do not qualify for
Medicaid or charity care. Because we do not pursue collection of amounts classified as uninsured discounts, the transaction price is
fully adjusted and there is no impact in our net revenues or in our net accounts receivable. In implementing the discount policy, we
first attempt to qualify uninsured patients for governmental programs, charity care or any other discount program. If an uninsured
patient does not qualify for these programs, the uninsured discount is applied.
Uncompensated care (charity care and uninsured discounts):
The following table shows the amounts recorded at our acute care hospitals for charity care and uninsured discounts, based on
charges at established rates, for the years ended December 31, 2022, 2021 and 2020:
Charity care
Uninsured discounts
Total uncompensated care
2022
Amount
$ 786,962
1,474,933
$ 2,261,895
(dollar amounts in thousands)
2021
Amount
%
%
2020
Amount
%
35% $
661,965
65% 1,336,319
100% $ 1,998,284
33% $ 622,668
67% 1,578,470
100% $ 2,201,138
28%
72%
100%
The estimated cost of providing uncompensated care:
The estimated cost of providing uncompensated care, as reflected below, were based on a calculation which multiplied the
percentage of operating expenses for our acute care hospitals to gross charges for those hospitals by the above-mentioned total
uncompensated care amounts. The percentage of cost to gross charges is calculated based on the total operating expenses for our acute
care facilities divided by gross patient service revenue for those facilities. An increase in the level of uninsured patients to our
facilities and the resulting adverse trends in the adjustments to net revenues and uncompensated care provided could have a material
unfavorable impact on our future operating results.
Estimated cost of providing charity care
Estimated cost of providing uninsured discounts related care
Estimated cost of providing uncompensated care
2022
(amounts in thousands)
2021
$
$
85,434 $
160,122
245,556 $
72,095 $
145,538
217,633 $
2020
73,690
186,804
260,494
Concentration of Revenues: Our eight acute care hospitals and four free-standing emergency departments in the Las Vegas,
Nevada, market contributed, on a combined basis, 15% in 2022, 16% in 2021 and 16% in 2020 of our consolidated net revenues.
Cash, Cash Equivalents and Restricted Cash: We consider all highly liquid investments purchased with maturities of three
months or less to be cash equivalents.
Cash, cash equivalents, and restricted cash as reported in the consolidated statements of cash flows are presented separately on
our consolidated balance sheets as follow:
Cash and cash equivalents
Restricted cash (a)
Total cash, cash equivalents and restricted cash
$
$
(amounts in thousands)
2021
115,301 $ 1,224,490
54,664
63,633
178,934 $ 1,279,154
2022
102,818 $
98,019
200,837 $
2020
(a) Restricted cash is included in other assets on the accompanying consolidated balance sheet and consists of statutorily
required capital reserves related to our commercial insurance subsidiary.
99
The fair value of our restricted cash was computed based upon quotes received from financial institutions. We consider these
to be “level 1” in the fair value hierarchy as outlined in the authoritative guidance for disclosures in connection with financial
securities.
Property and Equipment: Property and equipment are stated at cost. Expenditures for renewals and improvements are charged
to the property accounts. Replacements, maintenance and repairs which do not improve or extend the life of the respective asset are
expensed as incurred. We remove the cost and the related accumulated depreciation from the accounts for assets sold or retired and the
resulting gains or losses are included in the results of operations. Construction-in-progress includes both construction projects and
equipment not yet placed into service.
Our financial statements for the year ended December 31, 2022, include a pre-tax provision for asset impairment of
approximately $58 million, which is included in other operating expenses on the accompanying consolidated statements of income, to
write-down the asset value of Desert Springs Hospital Medical Center, a 282-bed acute care hospital located in Las Vegas, Nevada. In
early 2023, as a result of various competitive pressures and operational challenges experienced in the market, which had a significant
unfavorable impact on the hospital's results of operations during the past year, as well as physical plant constraints and limitations
resulting from the advanced age of the facility (which opened in 1971), we announced plans to discontinue all inpatient operations by
March of 2023. During the next two years, we plan to continue providing emergency department services within a portion of the
existing facility while we construct a new free-standing emergency department on the hospital's campus. The provision for asset
impairment reduced the asset values of the facility's real estate and equipment to their estimated fair values.
We capitalized interest during the construction period of major construction projects and during the development and
implementation of information technology applications amounting to $8.6 million during 2022, $4.4 million during 2021 and $4.3
million during 2020.
Depreciation is provided on the straight-line method over the estimated useful lives of buildings and improvements (twenty to
forty years) and equipment (three to fifteen years). Depreciation expense was $544.0 million during 2022 $501.6 million during 2021
and $478.8 million during 2020.
Long-Lived Assets: We review our long-lived assets, including intangible assets, for impairment whenever events or
circumstances indicate that the carrying value of these assets may not be recoverable. The assessment of possible impairment is based
on our ability to recover the carrying value of our asset based on our estimate of its undiscounted future cash flows. If the analysis
indicates that the carrying value is not recoverable from future cash flows, the asset is written down to its estimated fair value and an
impairment loss is recognized. Fair values are determined based on estimated future cash flows using appropriate discount rates.
Goodwill: Goodwill is reviewed for impairment at the reporting unit level on an annual basis or sooner if the indicators of
impairment arise. Our judgments regarding the existence of impairment indicators are based on market conditions and operational
performance of each reporting unit. We have designated October 1st as our annual impairment assessment date and performed
quantitative impairment assessments as of October 1, 2022 which indicated no impairment of goodwill. There were also no goodwill
impairments during 2021 or 2020. Future changes in the estimates used to conduct the impairment reviews, including profitability and
market value projections, could indicate impairment in future periods potentially resulting in a write-off of a portion or all of our
goodwill.
Changes in the carrying amount of goodwill for the two years ended December 31, 2022 were as follows (in thousands):
Balance, January 1, 2021
Goodwill acquired during the period
Goodwill divested during the period
Adjustments to goodwill (a)
Balance, December 31, 2021
Goodwill acquired during the period
Goodwill divested during the period
Adjustments to goodwill (b)
Balance, December 31, 2022
$
$
Acute Care
Services
Behavioral
Health
Services
Total
Consolidated
447,021 $ 3,435,694 $ 3,882,715
55,406
0
24,503
3,962,624
0
0
(53,168)
(53,858)
516,626 $ 3,392,830 $ 3,909,456
0
0
10,994
3,446,688
0
0
55,406
0
13,509
515,936
0
0
690
(a)
(b)
Adjustments to goodwill during 2021 consist of the following: $13.5 million in Acute Care Services consists primarily of
a measurement period adjustment to the preliminary purchase price allocation related to a 2020 acquisition; and the
$11.0 million in Behavioral Health Services consists of $16.3 million recorded in connection with a third party minority
ownership interest in a majority owned joint venture that constructed and owns a recently opened behavioral health
facility, partially offset by a $5.3 million decrease related to foreign currency translation adjustments.
The changes in the Behavioral Health Services’ goodwill consists primarily of foreign currency translation adjustments.
100
Other Assets and Intangible Assets: Other assets consist primarily of amounts related to: (i) intangible assets acquired in
connection with our acquisitions of Cambian Group, PLC’s adult services’ division during 2015, Ascend Health Corporation during
2012 and Psychiatric Solutions, Inc. during 2010; (ii) prepaid fees for various software and other applications used by our hospitals;
(iii) costs incurred in connection with the purchase and implementation of an electronic health records application for each of our
acute care facilities; (iv) statutorily required capital reserves related to our commercial insurance subsidiary ($116 million and $82
million as of December 31, 2022 and 2021, respectively); (v) deposits; (vi) investments in various businesses, including Universal
Health Realty Income Trust ($8 million and $9 million as of as of December 31, 2022 and 2021, respectively) and Premier, Inc. ($78
million and $92 million as of December 31, 2022 and 2021, respectively); (vii) the invested assets related to a deferred compensation
plan that is held by an independent trustee in a rabbi-trust and that has a related payable included in other noncurrent liabilities, and;
(viii) other miscellaneous assets.
Intangible assets are reviewed for impairment on an annual basis or more often if indicators of impairment arise. Our judgments
regarding the existence of impairment indicators are based on market conditions and operational performance of each asset. We have
designated October 1st as our annual impairment assessment date and performed impairment assessments as of October 1, 2022. In
connection with the discontinuation of a certain module of a new clinical/financial information technology application under
development, our financial results for the year ended December 31, 2021 include a pre-tax provision for asset impairment of
approximately $14 million to write-off the applicable portion of the capitalized costs incurred and is included in other operating
expenses on the accompanying consolidated statement of income.
The following table shows the amounts recorded as net intangible assets for the years ended December 31, 2022 and 2021:
Medicare licenses
Certificates of need
Contract relationships and other (net of $55,353 and $54,134
of accumulated amortization for 2022 and 2021, respectively)
Net Intangible Assets
$
$
57,226 $
7,989
12,887
78,102 $
57,226
8,239
15,576
81,041
(amounts in thousands)
2022
2021
Supplies: Supplies, which consist primarily of medical supplies, are stated at the lower of cost (first-in, first-out basis) or
market.
Self-Insured/Other Insurance Risks: We provide for self-insured risks, primarily general and professional liability claims,
workers’ compensation claims and healthcare and dental claims. Our estimated liability for self-insured professional and general
liability claims is based on a number of factors including, among other things, the number of asserted claims and reported incidents,
estimates of losses for these claims based on recent and historical settlement amounts, estimate of incurred but not reported claims
based on historical experience, and estimates of amounts recoverable under our commercial insurance policies. All relevant
information, including our own historical experience is used in estimating the expected amount of claims. While we continuously
monitor these factors, our ultimate liability for professional and general liability claims could change materially from our current
estimates due to inherent uncertainties involved in making this estimate. Our estimated self-insured reserves are reviewed and
changed, if necessary, at each reporting date and changes are recognized currently as additional expense or as a reduction of expense.
In addition, we also: (i) own commercial health insurers headquartered in Nevada and Puerto Rico, and; (ii) maintain self-
insured employee benefits programs for employee healthcare and dental claims. The ultimate costs related to these
programs/operations include expenses for claims incurred and paid in addition to an accrual for the estimated expenses incurred in
connection with claims incurred but not yet reported. Given our significant insurance-related exposure, there can be no assurance that
a sharp increase in the number and/or severity of claims asserted against us will not have a material adverse effect on our future results
of operations.
See Note 8 - Commitments and Contingencies for additional disclosure related to our self-insured general and professional
liability and workers’ compensation liability.
Income Taxes: Deferred tax assets and liabilities are recognized for the amount of taxes payable or deductible in future years
as a result of differences between the tax bases of assets and liabilities and their reported amounts in the financial statements. We
believe that future income will enable us to realize our deferred tax assets net of recorded valuation allowances relating to state and
foreign net operating loss carry-forwards, tax credits, and interest deduction limitations.
We operate in multiple jurisdictions with varying tax laws. We are subject to audits by any of these taxing authorities. Our tax
returns have been examined by the Internal Revenue Service (“IRS”) through the year ended December 31, 2006. We believe that
adequate accruals have been provided for federal, foreign and state taxes.
See Note 6-Income Taxes for additional disclosure.
101
Other Noncurrent Liabilities: Other noncurrent liabilities include the long-term portion of our professional and general
liability, workers’ compensation reserves, pension and deferred compensation liabilities, and liabilities incurred in connection with
split-dollar life insurance agreements on the lives of our executive chairman of the board and his wife.
Redeemable Noncontrolling Interests and Noncontrolling Interest: As of December 31, 2022, outside owners held
noncontrolling, minority ownership interests of: (i) approximately 7% in an acute care facility located in Texas; (ii) 49%, 20%, 30%,
20%, 25%, 48% and 26% in seven behavioral health care facilities located in Arizona, Pennsylvania, Ohio, Washington, Missouri,
Iowa and Michigan, respectively, and; (iii) approximately 5% in an acute care facility located in Nevada. The noncontrolling interest
and redeemable noncontrolling interest balances of $45 million and $5 million, respectively, as of December 31, 2022, consist
primarily of the third-party ownership interests in these hospitals.
In August, 2022, we purchased the 20% noncontrolling ownership interest in a hospital majority owned by us, located in
Washington D.C. for $51 million. We now have 100% ownership interest in the hospital. The noncontrolling interest balance was
reclassified to retained earnings and is included in common stockholders’ equity in the accompanying consolidated balance sheet and
in retained earnings in the accompanying consolidated statements of changes in equity.
In connection with the two behavioral health care facilities located in Pennsylvania and Ohio, the minority ownership interests
of which are reflected as redeemable noncontrolling interests on our consolidated balance sheet, the outside owners have “put options”
to put their entire ownership interest to us at any time. If exercised, the put option requires us to purchase the minority member’s
interest at fair market value. Accordingly, the amounts recorded as redeemable noncontrolling interests on our consolidated balance
sheet reflects the estimated fair market value of these ownership interests.
Accumulated Other Comprehensive Income: The accumulated other comprehensive income (“AOCI”) component of
stockholders’ equity includes: net unrealized gains and losses on effective cash flow hedges, foreign currency translation adjustments
and the net minimum pension liability of a non-contributory defined benefit pension plan which covers employees at one of our
subsidiaries. See Note 11 - Pension Plan for additional disclosure regarding the defined benefit pension plan.
The amounts recognized in AOCI for the two years ended December 31, 2022 were as follows (in thousands):
Balance, January 1, 2021, net of income tax
2021 activity:
Pretax amount
Income tax effect
Change, net of income tax
Balance, January 1, 2022, net of income tax
2022 activity:
Pretax amount
Income tax effect
Change, net of income tax
Balance, December 31, 2022, net of income tax
Net Unrealized
Gains (Losses) on
Effective Cash
Flow Hedges
$
(17) $
Foreign
Currency
Translation
Adjustment
52,438
Minimum
Pension
Liability
Total
AOCI
$
(4,301) $
48,120
0
0
0
(17)
0
0
0
(17) $
(20,743)
1,829
(18,914)
33,524
(37,310)
(469)
(37,779)
(4,255) $
1,427
(342)
1,085
(3,216)
(2,869)
689
(2,180)
(5,396) $
(19,316)
1,487
(17,829)
30,291
(40,179)
220
(39,959)
(9,668)
$
Accounting for Derivative Financial Investments and Hedging Activities and Foreign Currency Forward Exchange
Contracts: We manage our ratio of fixed and floating rate debt with the objective of achieving a mix that management believes is
appropriate. To manage this risk in a cost-effective manner, we, from time to time, enter into interest rate swap agreements in which
we agree to exchange various combinations of fixed and/or variable interest rates based on agreed upon notional amounts. We account
for our derivative and hedging activities using the Financial Accounting Standard Board’s (“FASB”) guidance which requires all
derivative instruments, including certain derivative instruments embedded in other contracts, to be carried at fair value on the balance
sheet. For derivative transactions designated as hedges, we formally document all relationships between the hedging instrument and
the related hedged item, as well as its risk-management objective and strategy for undertaking each hedge transaction.
Derivative instruments designated in a hedge relationship to mitigate exposure to variability in expected future cash flows, or
other types of forecasted transactions, are considered cash flow hedges. Cash flow hedges are accounted for by recording the fair value
of the derivative instrument on the balance sheet as either an asset or liability, with a corresponding amount recorded in accumulated
other comprehensive income (“AOCI”) within shareholders’ equity. Amounts are reclassified from AOCI to the income statement in
the period or periods the hedged transaction affects earnings. From time to time, we use interest rate derivatives in our cash flow
hedge transactions. Such derivatives are designed to be highly effective in offsetting changes in the cash flows related to the hedged
liability.
102
For hedge transactions that do not qualify for the short-cut method, at the hedge’s inception and on a regular basis thereafter, a
formal assessment is performed to determine whether changes in the fair values or cash flows of the derivative instruments have been
highly effective in offsetting changes in cash flows of the hedged items and whether they are expected to be highly effective in the
future.
In August, 2017, the FASB issued new guidance on hedge accounting (ASU 2017-12) that is intended to more closely align
hedge accounting with companies’ risk management strategies, simplify the application of hedge accounting, and increase
transparency as to the scope and results of hedging programs. The new guidance amends the presentation and disclosure requirements,
and changes how companies assess effectiveness. We adopted this guidance as of January 1, 2019 and applied to all existing hedges as
of the adoption date. As of December 31, 2022 we have no cash flow hedges.
We use forward exchange contracts to hedge our net investment in foreign operations against movements in exchange rates. The
effective portion of the unrealized gains or losses on these contracts is recorded in foreign currency translation adjustment within
accumulated other comprehensive income and remains there until either the sale or liquidation of the subsidiary. In conjunction with
the January 1, 2019 adoption of ASU 2017-12, “Targeted Improvements to Accounting for Hedging Activities”, we reclassified our
presentation of the net cash inflows or outflows, which were received or paid in connection with foreign exchange contracts that hedge
our net investment in foreign operations against movements in exchange rates, to investing cash flows on the consolidated statements
of cash flows.
Stock-Based Compensation: We have a number of stock-based employee compensation plans. Pursuant to the FASB’s
guidance, we expense the grant-date fair value of stock options and other equity-based compensation pursuant to the straight-line
method over the stated vesting period of the award using the Black-Scholes option-pricing model. The expense associated with share-
based compensation arrangements is a non-cash charge. In the Consolidated Statements of Cash Flows, share-based compensation
expense is an adjustment to reconcile net income to cash provided by operating activities.
Earnings per Share: Basic earnings per share are based on the weighted average number of common shares outstanding
during the year. Diluted earnings per share are based on the weighted average number of common shares outstanding during the year
adjusted to give effect to common stock equivalents.
The following table sets forth the computation of basic and diluted earnings per share, for the periods indicated:
Basic and diluted:
Net Income
Less: Net (income) loss attributable to noncontrolling
interest ("NCI")
Less: Net income attributable to unvested restricted share
grants
Net income attributable to UHS—basic and diluted
Basic earnings per share attributable to UHS:
Weighted average number of common shares—basic
Total basic earnings per share
Diluted earnings per share attributable to UHS:
Weighted average number of common shares
Net effect of dilutive stock options and grants based
on the treasury stock method
Weighted average number of common shares and
equivalents—diluted
Total diluted earnings per share
Twelve Months Ended December 31,
2020
2021
2022
$
656,982 $
987,632 $
952,790
$
$
18,627
3,958
(8,837)
(748)
674,861 $
(2,059)
989,531 $
(2,981)
940,972
73,118
82,519
9.23 $
11.99 $
85,061
11.06
73,118
82,519
85,061
714
1,173
526
73,832
$
9.14 $
83,692
11.82 $
85,587
10.99
The “Net effect of dilutive stock options and grants based on the treasury stock method”, for all years presented above, excludes
certain outstanding stock options applicable to each year since the effect would have been anti-dilutive. The excluded weighted-
average stock options totaled approximately 6.0 million during 2022, 4.2 million during 2021 and 6.4 million during 2020.
Fair Value of Financial Instruments: The fair values of our debt and investments are based on quoted market prices. The fair
values of other long-term debt, including capital lease obligations, are estimated by discounting cash flows using period-end interest
rates and market conditions for instruments with similar maturities and credit quality. The carrying amounts reported in the balance
sheet for cash, accounts receivable, accounts payable, and short-term borrowings approximates their fair values due to the short-term
nature of these instruments. Accordingly, these items have been excluded from the fair value disclosures included elsewhere in these
notes to consolidated financial statements.
103
Use of Estimates: The preparation of financial statements in conformity with U.S. generally accepted accounting principles
requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
Mergers and Acquisitions: The acquisition method of accounting for business combinations requires that the assets acquired
and liabilities assumed be recorded at the date of acquisition at their respective fair values with limited exceptions. Fair value is
defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most
advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Any
excess of the purchase price (consideration transferred) over the estimated fair values of net assets acquired is recorded as goodwill.
Transaction costs and costs to restructure the acquired company are expensed as incurred. The fair value of intangible assets, including
Medicare licenses, certificates of need, tradenames and certain contracts, is based on significant judgments made by our management,
and accordingly, for significant items we typically obtain assistance from third party valuation specialists.
GPO Agreement/Minority Ownership Interest: During 2013, we entered into a new group purchasing organization
agreement (“GPO”) with Premier, Inc. (“Premier), a healthcare performance improvement alliance, and acquired a minority interest in
the GPO for a nominal amount. During the fourth quarter of 2013, in connection with the completion of an initial public offering of
the stock of Premier, we received cash proceeds for the sale of a portion of our ownership interest in the GPO, which were recorded as
deferred income, on a pro rata basis, as a reduction to our supplies expense over the initial expected life of the GPO agreement. Also
in connection with this GPO agreement, we received shares of restricted stock in Premier which vest ratably over a seven-year period
(2014 through 2020), contingent upon our continued participation and minority ownership interest in the GPO. We recognized the fair
value of this restricted stock, as a reduction to our supplies expense, in our consolidated statements of income, on a pro rata basis, over
the vesting period. During the third quarter of 2020, we entered into an agreement with Premier pursuant to the terms of which, among
other things, our ownership interest in Premier was converted into shares of Class A Common Stock of Premier. We have elected to
retain a portion of the previously vested shares of Premier, the value of which is included in other assets on our consolidated balance
sheet. Based upon the closing price of Premier’s stock on each respective date, the market value of our shares of Premier was $78
million and $92 million as of December 31, 2022 and 2021, respectively. The change in market value of these shares is recorded as an
unrealized gain and included in “Other (income) expense, net” on our consolidated statements of income. Additionally, Premier paid
cash dividends of $1.8 million and $1.7 million as of December 31, 2022 and 2021, respectively, which are included in “Other
(income) expense, net” in our condensed consolidated statements of income.
Provider Taxes: We incur health-care related taxes (“Provider Taxes”) imposed by states in the form of a licensing fee,
assessment or other mandatory payment which are related to: (i) healthcare items or services; (ii) the provision of, or the authority to
provide, the health care items or services, or; (iii) the payment for the health care items or services. Such Provider Taxes are subject to
various federal regulations that limit the scope and amount of the taxes that can be levied by states in order to secure federal matching
funds as part of their respective state Medicaid programs. We derive a related Medicaid reimbursement benefit from assessed Provider
Taxes in the form of Medicaid claims based payment increases and/or lump sum Medicaid supplemental payments.
Under these programs, including the impact of the Texas Uncompensated Care and Upper Payment Limit program, the Texas
Delivery System Reform Incentive program, and various other state programs, we earned revenues (before Provider Taxes) of
approximately $784 million during 2022, $641 million during 2021 and $488 million during 2020. These revenues were offset by
Provider Taxes of approximately $287 million during 2022, $211 million during 2021 and $185 million during 2020, which are
recorded in other operating expenses on the Consolidated Statements of Income as included herein. The aggregate net benefit from
these programs was $497 million during 2022, $430 million during 2021 and $303 million during 2020. The aggregate net benefit
pursuant to these programs is earned from multiple states and therefore no particular state’s portion is individually material to our
consolidated financial statements. In addition, under various disproportionate share hospital payment programs and the Nevada state
plan amendment program, we earned revenues of $75 million in 2022, $74 million in 2021 and $73 million in 2020.
104
CARES Act and Other Governmental Grants and Medicare Accelerated Payments: During 2021, we received
approximately $189 million of additional funds from the federal government in connection with the CARES Act, which we returned
during the year utilizing a portion of our cash and cash equivalents held on deposit. Therefore, there was no impact on our earnings
during 2021 in connection with receipt of those funds.
Also during 2021, we made an early repayment of $695 million of funds received during 2020 pursuant to the Medicare
Accelerated and Advance Payment Program (“MAAPP”). These funds, which were required to be repaid to the government beginning
in the second quarter of 2021 through the third quarter of 2022, were returned to the government utilizing a portion of our cash and
cash equivalents held on deposit.
As of December 31, 2020, we received an aggregate of $1.112 billion of funds consisting of: (i) $417 million received pursuant
to various governmental stimulus programs, most notably the Public Health and Social Services Emergency Fund (the “PHSSEF”) as
provided for by the CARES Act, of which approximately $413 million were recorded as net revenues during 2020 and approximately
$4 million remained in the Medicare accelerated payments and deferred CARES Act and other grants liability account in our
consolidated balance sheet, and; (ii) $695 million of MAAPP funds, which as discussed above, were repaid early to the government
during 2021. There was no impact on our earnings during 2021 or 2020 in connection with receipt of the MAAPP funds.
Recent Accounting Standards: From time to time, new accounting guidance is issued by the FASB or other standard setting
bodies that is adopted by us as of the effective date or, in some cases where early adoption is permitted, in advance of the effective
date. We have assessed the recently issued guidance that is not yet effective and, unless otherwise indicated above, we believe the new
guidance will not have a material impact on our results of operations, cash flows or financial position.
Foreign Currency Translation: Assets and liabilities of our U.K. subsidiaries are denominated in pound sterling and translated
into U.S. dollars at: (i) the rates of exchange at the balance sheet date, and; (ii) average rates of exchange prevailing during the year
for revenues and expenses. The currency translation adjustments are reported as a component of accumulated other comprehensive
income. See Note 3 - Financial Instruments, Foreign Currency Forward Exchange Contracts for additional disclosure.
2) ACQUISITIONS AND DIVESTITURES
Year ended December 31, 2022:
2022 Acquisitions of Assets and Businesses:
During 2022, we spent $20 million to acquire various businesses and properties.
2022 Divestiture of Assets:
During 2022, we received $12 million from the sales of various assets.
Year ended December 31, 2021:
2021 Acquisitions of Assets and Businesses:
During 2021, we spent $105 million on the acquisition of businesses and property, consisting primarily of a micro acute care
hospital located in Las Vegas, Nevada, and a physician practice management company located in California.
2021 Divestiture of Assets and Businesses:
During 2021, we received $25 million from the sale of assets and businesses.
Year ended December 31, 2020:
2020 Acquisitions of Assets and Businesses:
During 2020, we spent $52 million on the acquisition of businesses and property, consisting primarily of the real estate assets of an
acute care hospital located in Las Vegas, Nevada.
2020 Divestiture of Assets and Businesses:
During 2020, we received $8 million from the sale of assets and businesses.
3) FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENT
Cash Flow Hedges:
When applicable, we measure our interest rate swaps at fair value on a recurring basis. The fair value of our interest rate swaps
is based on quotes from our counterparties. We consider those inputs to be “level 2” in the fair value hierarchy as outlined in the
authoritative guidance for disclosures in connection with derivative instruments and hedging activities. During the years ended
December 31, 2022, 2021 and 2020, we had no cash flow hedges outstanding.
105
Foreign Currency Forward Exchange Contracts:
We use forward exchange contracts to hedge our net investment in foreign operations against movements in exchange rates. The
effective portion of the unrealized gains or losses on these contracts is recorded in foreign currency translation adjustment within
accumulated other comprehensive income and remains there until either the sale or liquidation of the subsidiary. In connection with
these forward exchange contracts, we recorded net cash inflows of approximately $95 million during 2022 and $1 million during
2021, and net cash outflows of approximately $22 million during 2020.
Derivatives Hedging Relationships:
The following table presents the effects of our foreign currency foreign exchange contracts on our results of operations for the
three years ended December 31 (in thousands):
Gain/(Loss) recognized in AOCI
December 31,
2022
December 31,
2021
December 31,
2020
Net Investment Hedge relationships
Foreign currency foreign exchange contracts
$
96,698
$
(7,272)
$
(22,097)
No other gains or losses were recognized in income related to derivatives in Subtopic 815-20.
Fair Value Measurement
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in the
principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the
measurement date. The following fair value hierarchy classifies the inputs to valuation techniques used to measure fair value into one
of three levels:
Level 1: Unadjusted quoted prices in active markets for identical assets or liabilities.
Level 2: Inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly. These
included quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or
liabilities in markets that are not active.
Level 3: Unobservable inputs that reflect the reporting entity’s own assumptions.
106
The following tables present the assets and liabilities recorded at fair value on a recurring basis:
(in thousands)
Assets:
Money market mutual funds
Certificates of deposit
Equity securities
Deferred compensation assets
Foreign currency exchange contracts
Liabilities:
Deferred compensation liability
(in thousands)
Assets:
Money market mutual funds
Certificates of deposit
Equity securities
Deferred compensation assets
Foreign currency exchange contracts
Liabilities:
Deferred compensation liability
$
$
$
$
$
Balance at
December 31,
2022
Balance Sheet
Basis of Fair Value Measurement
Location
Level 1
Level 2
Level 3
113,649 Other assets
2,200 Other assets
78,099 Other assets
38,032 Other assets
3,142 Other current assets
235,122
$ 113,649
78,099
38,032
229,780 $
2,200
3,142
5,342
38,032 Other noncurrent liabilities $
$
38,032
38,032
38,032
-
Balance at
December 31,
2021
Balance Sheet
Basis of Fair Value Measurement
Location
Level 1
Level 2
Level 3
79,900 Other assets
2,300 Other assets
91,919 Other assets
45,759 Other assets
1,357 Other current assets
221,235
$
79,900
91,919
45,759
$ 217,578 $
2,300
1,357
3,657
45,759 Other noncurrent liabilities $
$
45,759
45,759
45,759
-
-
-
-
-
The fair value of our money market mutual funds, certificates of deposit and equity securities with a readily determinable fair
value are computed based upon quoted market prices in an active market. The fair value of deferred compensation assets and the
offsetting liability are computed based on market prices in an active market held in a rabbi trust. The fair value of our interest rate
swaps are based on quotes from our counter parties. The fair value of our foreign currency exchange contracts is valued using quoted
forward exchange rates and spot rates at the reporting date.
4) LONG-TERM DEBT
A summary of long-term debt follows:
Long-term debt:
Notes and Mortgages payable (including obligations under finance leases of $75,595 in
2022 and $79,331 in 2021) and term loans with varying maturities through 2099;
weighted average interest rates of 3.6% in 2022 and 5.6% in 2021 (see Note 7 regarding
finance leases)
Tranche A term loan
Revolving credit facility
2.65% Senior Secured Notes due 2030, net of unamortized discount of $1,742 in 2022 and
$1,968 in 2021
1.65% Senior Secured Notes due 2026, net of unamortized discount of $638 in 2022 and
$813 in 2021
2.65% Senior Secured Notes due 2032, net of unamortized discount of $1,124 in 2022 and
$1,254 in 2021
Total debt before unamortized financing costs
Less-Unamortized financing costs
Total debt after unamortized financing costs
Less-Amounts due within one year
Long-term debt
$
107
December 31,
2022
2021
(amounts in thousands)
$
184,800 $
2,338,125
310,400
798,258
699,362
498,876
4,829,821
(21,841)
4,807,980
(81,447)
4,726,533 $
185,027
1,689,375
342,600
798,032
699,187
498,746
4,212,967
(22,679)
4,190,288
(48,409)
4,141,879
Credit Facilities and Outstanding Debt Securities
In June, 2022 we entered into a ninth amendment to our credit agreement dated as of November 15, 2010, as amended and
restated as of September, 2012, August, 2014, October, 2018, August, 2021, and September, 2021, among UHS, as borrower, the
several banks and other financial institutions from time to time parties thereto, as lenders, and JPMorgan Chase Bank, N.A., as
administrative agent, (the “Credit Agreement”). The ninth amendment provided for, among other things, the following: (i) a new
incremental tranche A term loan facility in the aggregate principal amount of $700 million which is scheduled to mature on August 24,
2026, and; (ii) replaces the option to make Eurodollar borrowings (which bear interest by reference to the LIBO Rate) with Term
Benchmark Loans, which will bear interest by reference to the Secured Overnight Financing Rate (“SOFR”). The net proceeds
generated from the incremental tranche A term loan facility were used to repay a portion of the borrowings that were previously
outstanding under our revolving credit facility.
In September, 2021 we entered into an eighth amendment to our Credit Agreement which modified the definition of “Adjusted
LIBO Rate”.
In August, 2021 we entered into a seventh amendment to our Credit Agreement which, among other things, provided for the
following:
a $1.2 billion aggregate amount revolving credit facility, which is scheduled to mature on August 24, 2026,
representing an increase of $200 million over the $1.0 billion previous commitment. As of December 31, 2022, this
facility had $310 million of borrowings outstanding and $886 million of available borrowing capacity, net of $4
million of outstanding letters of credit;
a $1.7 billion initial tranche A term loan facility which was subsequently increased by $700 million in June, 2022
by the above-mentioned ninth amendment. The seventh amendment also provided for repayment of $150 million of
borrowings outstanding pursuant to the previous tranche A term loan facility, and;
repayment of approximately $488 million of outstanding borrowings and termination of the previous tranche B term
loan facility.
The terms of the tranche A term loan facility, as amended, which had $2.338 billion of outstanding borrowings as of December
31, 2022, provides for installment payments of $15.0 million per quarter during the period of September, 2022 through September,
2023, and $30.0 million per quarter during the period of December, 2023 through June, 2026. The unpaid principal balance at June 30,
2026 is payable on the August 24, 2026 scheduled maturity date of the Credit Agreement.
Revolving credit and tranche A term loan borrowings under the Credit Agreement bear interest at our election at either (1) the
ABR rate which is defined as the rate per annum equal to the greatest of (a) the lender’s prime rate, (b) the weighted average of the
federal funds rate, plus 0.5% and (c) one month SOFR rate plus 1%, in each case, plus an applicable margin based upon our
consolidated leverage ratio at the end of each quarter ranging from 0.25% to 0.625%, or (2) the one, three or six month SOFR rate plus
0.1% (at our election), plus an applicable margin based upon our consolidated leverage ratio at the end of each quarter ranging from
1.25% to 1.625%. As of December 31, 2022, the applicable margins were 0.50% for ABR-based loans and 1.50% for SOFR-based
loans under the revolving credit and term loan A facilities. The revolving credit facility includes a $125 million sub-limit for letters of
credit. The Credit Agreement is secured by certain assets of the Company and our material subsidiaries (which generally excludes
asset classes such as substantially all of the patient-related accounts receivable of our acute care hospitals, and certain real estate assets
and assets held in joint-ventures with third parties) and is guaranteed by our material subsidiaries.
The Credit Agreement includes a material adverse change clause that must be represented at each draw. The Credit Agreement
also contains covenants that include a limitation on sales of assets, mergers, change of ownership, liens, indebtedness, transactions
with affiliates, dividends and stock repurchases; and requires compliance with financial covenants including maximum leverage. We
were in compliance with all required covenants as of December 31, 2022 and December 31, 2021.
On August 24, 2021, we completed the following via private offerings to qualified institutional buyers under Rule 144A and to
non-U.S. persons outside the United States in reliance on Regulation S under the Securities Act of 1933, as amended:
Issued $700 million of aggregate principal amount of 1.65% senior secured notes due on September 1, 2026, and;
Issued $500 million of aggregate principal amount of 2.65% senior secured notes due on January 15, 2032.
In April, 2021 our accounts receivable securitization program (“Securitization”) was amended (the eighth amendment) to: (i)
reduce the aggregate borrowing commitments to $20 million (from $450 million previously); (ii) slightly reduce the borrowing rates
and commitment fee, and; (iii) extend the maturity date to April 25, 2022. At various times from April, 2022 to September, 2022, the
Securitization was amended to extend the maturity date to various dates including, most recently, December 20, 2022. As of the
December 20, 2022 maturity date, the Securitization expired and was not renewed or replaced.
On September 13, 2021, we redeemed $400 million of aggregate principal amount of 5.00% senior secured notes, that were
scheduled to mature on June 1, 2026, at 102.50% of the aggregate principal, or $410 million.
108
As of December 31, 2022, we had combined aggregate principal of $2.0 billion from the following senior secured notes:
o
o
o
$700 million aggregate principal amount of 1.65% senior secured notes due in September, 2026 (“2026 Notes”) which were
issued on August 24, 2021.
$800 million aggregate principal amount of 2.65% senior secured notes due in October, 2030 (“2030 Notes”) which were
issued on September 21, 2020.
$500 million of aggregate principal amount of 2.65% senior secured notes due in January, 2032 (“2032 Notes”) which were
issued on August 24, 2021.
Interest on the 2026 Notes is payable on March 1st and September 1st until the maturity date of September 1, 2026. Interest on
the 2030 Notes payable on April 15th and October 15th, until the maturity date of October 15, 2030. Interest on the 2032 Notes is
payable on January 15thand July 15th until the maturity date of January 15, 2032.
The 2026 Notes, 2030 Notes and 2032 Notes (collectively “The Notes”) were initially issued only to qualified institutional
buyers under Rule 144A and to non-U.S. persons outside the United States in reliance on Regulation S under the Securities Act of
1933, as amended (the “Securities Act”). In December, 2022, we completed a registered exchange offer in which virtually all
previously outstanding Notes were exchanged for identical Notes that were registered under the Securities Act, and thereby became
freely transferable (subject to certain restrictions applicable to affiliates and broker dealers). Notes originally issued under Rule 144A
or Regulation S that were not exchanged in the exchange offer remain outstanding and may not be offered or sold in the United States
absent registration under the Securities Act or an applicable exemption from registration requirements thereunder.
The Notes are guaranteed (the “Guarantees”) on a senior secured basis by all of our existing and future direct and indirect
subsidiaries (the “Subsidiary Guarantors”) that guarantee our Credit Agreement, or other first lien obligations or any junior lien
obligations. The Notes and the Guarantees are secured by first-priority liens, subject to permitted liens, on certain of the Company’s
and the Subsidiary Guarantors’ assets now owned or acquired in the future by the Company or the Subsidiary Guarantors (other than
real property, accounts receivable sold pursuant to the Company’s Existing Receivables Facility (as defined in the Indenture pursuant
to which The Notes were issued (the “Indenture”)), and certain other excluded assets). The Company’s obligations with respect to The
Notes, the obligations of the Subsidiary Guarantors under the Guarantees, and the performance of all of the Company’s and the
Subsidiary Guarantors’ other obligations under the Indenture, are secured equally and ratably with the Company’s and the Subsidiary
Guarantors’ obligations under the Credit Agreement and The Notes by a perfected first-priority security interest, subject to permitted
liens, in the collateral owned by the Company and its Subsidiary Guarantors, whether now owned or hereafter acquired. However, the
liens on the collateral securing The Notes and the Guarantees will be released if: (i) The Notes have investment grade ratings; (ii) no
default has occurred and is continuing, and; (iii) the liens on the collateral securing all first lien obligations (including the Credit
Agreement and The Notes) and any junior lien obligations are released or the collateral under the Credit Agreement, any other first
lien obligations and any junior lien obligations is released or no longer required to be pledged. The liens on any collateral securing
The Notes and the Guarantees will also be released if the liens on that collateral securing the Credit Agreement, other first lien
obligations and any junior lien obligations are released.
As discussed in Note 9 to the Consolidated Financial Statements-Relationship with Universal Health Realty Income Trust and
Other Related Party Transactions, on December 31, 2021, we (through wholly-owned subsidiaries of ours) entered into an asset
purchase and sale agreement with Universal Health Realty Income Trust (the “Trust”). Pursuant to the terms of the agreement, which
was amended during the first quarter of 2022, we, among other things, transferred to the Trust, the real estate assets of Aiken Regional
Medical Center (“Aiken”) and Canyon Creek Behavioral Health (“Canyon Creek”). In connection with this transaction, Aiken and
Canyon Creek (as lessees), entered into a master lease and individual property leases, as amended, (with the Trust as lessor), for initial
lease terms on each property of approximately twelve years, ending on December 31, 2033. As a result of our purchase option within
the Aiken and Canyon Creek lease agreements, this asset purchase and sale transaction is accounted for as a failed sale leaseback in
accordance with U.S. GAAP and we have accounted for the transaction as a financing arrangement. Our lease payments payable to the
Trust are recorded to interest expense and as a reduction of the outstanding financial liability, and the amount allocated to interest
expense is determined based upon our incremental borrowing rate and the outstanding financial liability. In connection with this
transaction, our Consolidated Balance Sheets at December 31, 2022 and December 31, 2021 reflect financial liabilities, which are
included in debt, of approximately $81 million and $82 million, respectively.
At December 31, 2022, the carrying value and fair value of our debt were approximately $4.8 billion and $4.4 billion,
respectively. At December 31, 2021, the carrying value and fair value of our debt were each approximately $4.2 billion. The fair
value of our debt was computed based upon quotes received from financial institutions. We consider these to be “level 2” in the fair
value hierarchy as outlined in the authoritative guidance for disclosures in connection with debt instruments.
109
The aggregate scheduled maturities of our total debt outstanding as of December 31, 2022 are as follows:
2023
2024
2025
2026
2027
Later
Total maturities before unamortized financing costs
Less-Unamortized financing costs
Total
5) COMMON STOCK
Dividends
$
$
(000s)
81,447
127,008
126,255
3,039,496
7,136
1,448,479
4,829,821
(21,841)
4,807,980
We declared and paid cash dividends of $.80 per share ($58.4 million in the aggregate) during 2022. We declared and paid cash
dividends of $.80 per share ($65.9 million in the aggregate) during 2021. We declared and paid cash dividends of $17.3 million, or
$.20 per share, during the first quarter of 2020 (in April, 2020, as part of various COVID-19 initiatives, we suspended declaration and
payment of quarterly dividends for the remainder of the 2020 year). All classes of our common stock have similar economic rights.
Stock Repurchase Programs
As of December 31, 2021, we had an aggregate available purchase authorization of $358.2 million. In February, 2022, our
Board of Directors authorized a $1.4 billion increase to the program. As of December 31, 2022, we had an aggregate available
repurchase authorization of $947.37 million. Pursuant to this program, shares of our Class B Common Stock may be repurchased,
from time to time as conditions allow, on the open market or in negotiated private transactions. There is no expiration date for our
stock repurchase programs.
The following schedule provides information related to our stock repurchase program for each of the three years ended
December 31, 2022. During 2022, 6,666,547 shares ($810.9 million in the aggregate) were repurchased pursuant to the terms of the
stock repurchase program and 153,305 shares ($22.0 million in the aggregate) were repurchased in connection with the income tax
withholding obligations resulting from stock-based compensation programs. During 2021, 8,409,721 shares ($1.20 billion in the
aggregate) were repurchased pursuant to the terms of the stock repurchase program and 134,464 shares ($19.5 million in the
aggregate) were repurchased in connection with the income tax withholding obligations resulting from stock-based compensation
programs. During 2020, 1,951,899 shares ($196.6 million in the aggregate) were repurchased pursuant to the terms of the stock
repurchase program and 81,057 shares ($10.2 million in the aggregate) were repurchased in connection with the income tax
withholding obligations resulting from stock-based compensation programs.
Additional
dollars
authorized
for
repurchase
(in
thousands)
Total
number of
shares
purchased
(a.)
Total
number
of shares
cancelled
Average
price
paid per
share for
forfeited
restricted
shares
Total
number of
shares
purchased
as part of
publicly
announced
programs
Average
price paid
per share
for shares
purchased
as part of
publicly
announced
program
Aggregate
purchase
price paid
for shares
purchased
as part of
publicly
announced
program
Aggregate
purchase
price paid
(in
thousands)
$
— 2,050,735
$ 1,000,000 8,559,946
$ 1,400,000 6,828,319
17,779
15,756
8,467
$ 2,400,000 17,439,000
42,002
$
$
$
$
0.01
0.01
0.01
1,951,899
8,409,721
6,666,547
0.01
17,028,167
$
$
$
$
100.70
142.85
121.63
$ 206,719 $ 196,560
$ 1,220,876 $ 1,201,330
$ 832,915 $ 810,865
129.71
$ 2,260,510 $ 2,208,755
Maximum
number of
dollars
that may
yet be
purchased
under the
program
(in
thousands)
$
$
$
$
756,123
559,563
358,233
947,368
Balance as of
January 1, 2020
2020
2021
2022
Total for three year
period ended
December 31, 2022
(a.)
Includes 8,467, 15,761 and 17,779 of restricted shares that were forfeited by former employees pursuant to the terms of our restricted stock purchase plan
during 2022, 2021 and 2020, respectively.
Stock-based Compensation Plans
At December 31, 2022, we have a number of stock-based employee compensation plans. Pursuant to the FASB’s guidance, we
expense the grant-date fair value of stock options (computed utilizing the Black-Scholes option-pricing model) and other equity-based
compensation pursuant to the straight-line method over the stated vesting period of the awards.
110
Pre-tax share-based compensation costs of $66.2 million during 2022, $59.3 million during 2021 and $54.7 million during 2020
were recognized related to outstanding stock options. In addition, pre-tax compensation costs of $19.1 million during 2022, $14.4
million during 2021 and $11.2 million during 2020 were recognized related to amortization of restricted stock and units as well as
discounts provided in connection with shares purchased pursuant to our 2005 Employee Stock Purchase Plan. As of December 31,
2022, there was approximately $147.3 million of unrecognized compensation cost related to unvested stock options and restricted
stock which is expected to be recognized over the remaining average vesting period of 2.6 years.
The expense associated with stock-based compensation arrangements is a non-cash charge. In the Consolidated Statements of
Cash Flows, stock-based compensation expense is an adjustment to reconcile net income to cash provided by operating activities and
aggregated to $85.4 million in 2022, $73.7 million in 2021 and $65.8 million in 2020. In connection with our January 1, 2017
adoption of ASU 2016-09, “Compensation-Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment
Accounting”, our provision for income taxes and our net income attributable to UHS were unfavorably impacted by $636,000 during
2022, favorably impacted by $2.4 million in 2021 and unfavorably impacted by $7.4 million during 2020.
In 2005, we adopted the 2005 Stock Incentive Plan (the “Stock Incentive Plan”) which was amended in 2008, 2010, 2015 and
2017 and was canceled in 2020, as discussed below. An aggregate of 35.6 million shares of Class B Common Stock had been reserved
under the Stock Incentive Plan, the remaining balance of which was canceled in 2020. During 2020 stock options, net of cancellations,
of approximately 2.3 million were granted under the Stock Incentive Plan. Stock options to purchase Class B Common Stock have
been granted to our officers, key employees and members of our Board of Directors. Commencing in 2018, our key employees and
non-executive officers began receiving a portion of their stock-based compensation in the form of restricted stock (as discussed below)
in addition to receiving options to purchase Class B Common Stock.
In 2020, we adopted the 2020 Omnibus Stock and Incentive Plan (the “2020 Stock Incentive Plan”) which was amended in
2022. An aggregate of 12.1 million shares of Class B Common Stock has been reserved for issuance under the 2020 Stock Incentive
Plan. Under the 2020 Stock Incentive Plan, shares that are subject to stock options shall be counted as one share per stock option, and
every share that is subject to restricted stock awards or restricted stock units shall be counted as four shares. Various other types of
equity awards are also permitted under the 2020 Stock Incentive Plan. During 2022, approximately 1.7 million stock options, net of
cancellations, and 228,160 restricted stock units (including 65,768 performance based restricted stock units, net of cancellations) were
granted under the 2020 Stock Incentive Plan. During 2021, approximately 2.1 million stock options, net of cancellations, and 126,015
of restricted stock units, net of cancellations, were granted under the 2020 Stock Incentive Plan. During 2020, 42,500 stock options,
net of cancellations and 3,000 restricted stock units (there were no cancellations) were granted under the 2020 Stock Incentive Plan.
Restricted stock and restricted stock units issued under the 2020 Stock Incentive Plan do not have rights to receive dividends on
unvested restricted awards, however, the accrual of dividend equivalents on unvested restricted awards may be permitted. Upon
adoption of the 2020 Stock Incentive Plan, no additional awards were granted under the 2005 Stock Incentive Plan or the 2010
Employees’ Restricted Stock Purchase Plan (discussed below), and reserves for future issuance pursuant to each plan were canceled.
The per option weighted-average grant-date fair value of options granted during 2022 under the 2020 Stock Incentive Plan was
$45.63. The per option weighted-average grant-date fair value of options granted during 2021 under the 2020 Stock Incentive Plan
was $39.66. The per option weighted-average grant-date fair value of options granted during 2020 (including the 2005 and 2020
Stock Incentive Plans) was $14.60. All stock options issued in 2022 were granted with an exercise price equal to the fair market value
on the date of the grant. Stock options granted during 2021 and 2020 were either granted with an exercise price equal to the fair
market value on the date of grant, or for our named executive officers, half of their total option award value was issued with a
premium exercise price of 10% above the grant date fair market value. The majority of options are exercisable ratably over a four-
year period beginning one year after the date of the grant. All outstanding options expire five years after the date of the grant. As of
December 31, 2022, approximately 6.85 million shares of Class B Common Stock remain available for issuance pursuant to the 2020
Stock Incentive Plan.
The fair value of each option grant was estimated on the date of grant using the Black-Scholes option-pricing model. The
following weighted average assumptions were derived from averaging the number of options granted during the most recent five-year
period. The weighted-average assumptions reflected below were based upon twenty-nine option grants for the five-year period ending
December 31, 2022, twenty-eight option grants for the five-year period ending December 31, 2021 and twenty-nine option grants for
the five-year period ending December 31, 2020.
Year Ended December 31,
Expected volatility
Risk free Interest rate
Expected life (years)
Forfeiture rate
Dividend yield
2022
2021
2020
33%
2%
3.6
7%
0.6%
31%
2%
3.5
8%
0.5%
28%
2%
3.5
8%
0.5%
The risk-free rate is based on the U.S. Treasury zero coupon four year yield curve in effect at the time of grant. The expected
life of the stock options granted was estimated using the historical behavior of employees. Expected volatility was based on historical
111
volatility for a period equal to the stock option’s expected life. Expected dividend yield is based on our dividend yield at the time of
grant. The forfeiture rate is based upon the actual historical forfeitures utilizing the 5-year term of the option.
The table below summarizes our stock option activity during the year ended December 31, 2022:
Outstanding Options
Balance, January 1, 2022
Granted
Exercised
Cancelled
Balance, December 31, 2022
Outstanding options vested and exercisable as of
December 31, 2022
Number
of Shares
8,556,115 $
1,833,573 $
(2,022,891) $
(491,130) $
7,875,667 $
Weighted
Average
Exercise
Price
116.80
143.47
118.21
126.67
122.04
3,073,714 $
116.89
The following table provides information about unvested options for the year ended December 31, 2022:
Unvested options as of January 1, 2022
Granted
Vested
Cancelled
Unvested options as of December 31, 2022
Weighted
Average
Grant Date
Fair Value
28.93
45.63
27.99
35.81
35.09
Shares
5,558,819 $
1,833,573 $
(2,141,518) $
(448,921) $
4,801,953 $
The following table provides information regarding all options outstanding at December 31, 2022:
Number of options outstanding
Weighted average exercise price
Aggregate intrinsic value as of December 31, 2022
Weighted average remaining contractual life
Options
Outstanding
Options
Exercisable
122.04 $
7,875,667 3,073,714
$
116.89
$158,552,816 $ 75,389,444
1.5
2.5
The total in-the-money value of all stock options exercised during the years ended December 31, 2022, 2021 and 2020 were
$49.4 million, $52.0 million and $22.2 million, respectively.
The weighted average remaining contractual life for options outstanding and weighted average exercise price per share for
exercisable options at December 31, 2020, 2021 and 2022 were as follows:
Year Ended:
2020
2021
2022
Weighted
Average
Exercise Price
Per Share
Weighted
Average
Remaining
Contractual Life
(in Years)
Options
Outstanding
Shares
Exercisable
Options
Shares
Weighted
Average
Exercise Price
Per Share
Expected to
Vest
Options
Shares
Weighted
Average
Exercise Price
Per Share
$
8,238,966
8,556,115
7,875,667
109.47
116.80
122.04
2.9
2.6
2.5
$
2,522,906
2,997,296
3,073,714
124.62
119.00
116.89
$
5,099,823
5,005,113
4,508,480
110.47
116.94
121.89
Under our Amended and Restated 2010 Employees’ Restricted Stock Purchase Plan (the “Restricted Stock Plan”), which was
canceled during 2020 upon the approval of the 2020 Stock Incentive Plan, as mentioned above, eligible participants were allowed to
purchase shares of Class B Common Stock at par value, subject to certain restrictions and had 600,000 shares of Class B Common
Stock reserved. The reserve balance in the Restricted Stock Plan was canceled during 2020 and no shares were issued under the
Restricted Stock Plan during 2021. During 2020 restricted shares, net of cancellations, of approximately 106,310 were granted and
issued under the Restricted Stock Plan, with various ratable vesting periods ranging up to five years from the date of grant. The
weighted-average grant-date fair value of the restricted shares granted during 2020 under the Restricted Stock Plan was $68.06. As
mentioned above, in 2020, we adopted the 2020 Stock Incentive Plan. During 2022, 2021 and 2020 restricted stock units, net of
cancellations, of approximately 228,160 (including 65,768 performance based restricted stock units, net of cancellations), 126,015 and
3,000, respectively, were granted under the 2020 Stock Incentive Plan with four-year vesting periods from the date of grant. The
weighted average grant-date fair value of the restricted stock units issued during 2022, 2021 and 2020 under the 2020 Stock Incentive
112
Plan was $142.70, $138.80 and $109.72, respectively. The fair value of each restricted stock grant or restricted stock unit was
determined as the closing UHS market price on the date of grant. Restricted shares and/or units of Class B Common Stock have been
granted to our officers, key employees and members of our Board of Directors.
In addition to the 2020 Stock Incentive Plan, we have our 2005 Employee Stock Purchase Plan (the “Employee Stock Plan”)
which allows eligible employees to purchase shares of Class B Common Stock at a ten percent discount. There were 127,538, 96,179
and 115,008 shares issued pursuant to the Employee Stock Purchase Plan during 2022, 2021 and 2020, respectively. In connection
with the Employee Stock Plan, we have reserved 2.0 million shares of Class B Common Stock for issuance and have issued
approximately 1.7 million shares as of December 31, 2022. As of December 31, 2022, approximately 300,000 shares of Class B
Common Stock remain available for issuance pursuant to this plan.
At December 31, 2022, 23,581,951 shares of Class B Common Stock were reserved for issuance upon conversion of shares of
Class A, C and D Common Stock outstanding, for issuance upon exercise of options to purchase Class B Common Stock and for
issuance of stock under other incentive plans. Class A, C and D Common Stock are convertible on a share for share basis into Class B
Common Stock.
6) INCOME TAXES
Components of income tax expense/(benefit) are as follows (amounts in thousands):
Current
Federal
Foreign
State
Deferred
Federal
Foreign
State
Total
2022
Year Ended December 31,
2021
2020
$
$
178,666 $
14,740
33,423
226,829
(9,935)
(1,509)
(6,107)
(17,551)
209,278 $
276,471
13,754
44,993
335,218
(26,638)
1,521
(4,420)
(29,537)
305,681
$
$
268,974
13,978
43,333
326,285
(20,382)
(2,496)
(4,114)
(26,992)
299,293
Our provision for income taxes for the years ended December 31, 2022, 2021 and 2020 included tax expenses of $1 million, tax
benefits of $2 million and tax expenses of $7 million, respectively, related to employee share-based payments. Excess tax benefits
(when the deductible amount related to the settlement of employee equity awards for tax purposes exceeds the cumulative
compensation cost recognized for financial reporting purposes) and deficiencies, if applicable, are recorded as a component of our tax
provision.
The foreign provision for income taxes is based on foreign pre-tax earnings of $76 million in 2022, $79 million in 2021 and $72
million in 2020. In the future, we anticipate repatriating only previously taxed foreign earnings subjected as well as any future
earnings that would qualify for a full dividend received deduction for distributions post-December 31, 2017. As of December 31,
2022, the amount of previously taxed earnings and earnings that would qualify for a full dividend received deduction total $109
million. At this time, there are no material tax effects related to future cash repatriation of undistributed foreign earnings. As such, we
have not recognized a deferred tax liability related to existing undistributed earnings
On August 16, 2022, the U.S. federal government enacted the Inflation Reduction Act of 2022 (“the Act”). The Act includes tax
provisions, among other things, which implements (i) a 15 percent minimum tax on book income of certain large corporations; (ii) a
one percent excise tax on net stock repurchases; and (iii) several tax incentives to promote clean energy. We do not expect the Act to
have a material impact on our income tax provision.
A reconciliation between the federal statutory rate and the effective tax rate is as follows:
Federal statutory rate
State taxes, net of federal income tax benefit
Tax effects of foreign operations
Tax benefit from settlement of employee equity awards
Other items
Impact of income attributable to noncontrolling interests
Effective tax rate
113
2022
Year Ended December 31,
2021
2020
21.0%
2.4%
-0.3%
0.1%
0.5%
0.5%
24.2%
21.0%
2.5%
-0.1%
-0.2%
0.3%
0.1%
23.6%
21.0%
2.5%
-0.3%
0.5%
0.4%
-0.2%
23.9%
Our effective tax rates were 24.2%, 23.6% and 23.9% for the years ended December 31, 2022, 2021 and 2020, respectively. The
increase in our effective tax rate for the year ended December 31, 2022, as compared to 2021, is due primarily to the decrease in net
income attributable to noncontrolling interests during 2022, as compared to 2021. The decrease in our effective tax rate for the year
ended December 31, 2021, as compared to 2020, is due primarily to the tax benefit of $2 million recorded during 2021, and the tax
expense of $7 million recorded during 2020, resulting from employee share-based payments.
Included in “Other current assets” on our Consolidated Balance Sheet are prepaid federal, state and foreign income taxes
amounting to approximately $17 million and $6 million as of December 31, 2022 and 2021, respectively.
The components of deferred taxes are as follows (amounts in thousands):
Self-insurance reserves
Compensation accruals
Doubtful accounts and other reserves
Other currently non-deductible accrued liabilities
Depreciable and amortizable assets
Operating lease liabilities
Right of use assets-operating leases
State and foreign net operating loss carryforwards and
other state and foreign deferred tax assets
Net pension liabilities – OCI only
Other liabilities
Valuation Allowance
Total deferred income taxes
2022
$
$
Assets
103,528
77,269
141,511
12,520
108,704
80,823
1,702
$
$
526,057
(63,325)
462,732
$
$
Year Ended December 31,
2021
Liabilities
Assets
Liabilities
$
$
97,024
77,917
127,876
31,240
86,652
79,499
1,014
$
$
501,222
(62,356)
438,866
$
$
281,203
106,675
6,457
394,335
0
394,335
303,079
86,269
3,811
393,159
0
393,159
At December 31, 2022, state net operating loss carryforwards (losses originating in tax years beginning prior to January 1, 2022,
expiring in years 2023 through 2040), and credit carryforwards available to offset future taxable income approximated $890 million
representing approximately $58 million in deferred state tax benefit (net of the federal benefit); and state related interest expense
carryforwards approximated $170 million representing approximately $8 million in deferred state tax benefit (net of the federal
benefit). At December 31, 2022, there were foreign net operating losses and interest expense carryforwards of approximately $49
million, most of which are carried forward indefinitely, representing approximately $12 million in deferred foreign tax benefit. At
December 31, 2022, related to the acquisition of Riverside Medical Clinic Patient Services, LLC, there were federal net operating
losses of approximately $10 million carried forward indefinitely for federal purposes representing approximately $2 million in
deferred federal tax benefits.
A valuation allowance is required when it is more likely than not that some portion of the deferred tax assets will not be
realized. Based on available evidence, it is more likely than not that certain of our state tax benefits will not be realized. Therefore,
valuation allowances of approximately $59 million and $57 million have been reflected as of December 31, 2022 and 2021,
respectively. During 2022, the valuation allowance on these state tax benefits increased by $2 million primarily due to additional state
related interest expense carryforwards. In addition, valuation allowances of approximately $4 million and $5 million have been
reflected as of December 31, 2022 and 2021, respectively, related to foreign net operating losses and credit carryforwards.
During 2022 and 2021, the estimated liabilities for uncertain tax positions (including accrued interest and penalties) were
increased less than $1 million due to tax positions taken in the current and prior years. The balance at each of the years ended
December 31, 2022 and 2021, if subsequently recognized, that would favorably affect the effective tax rate and the provision for
income taxes is approximately $2 million as of each date.
We recognize accrued interest and penalties associated with uncertain tax positions as part of the tax provision. As of December
31, 2022 and 2021, we have accrued interest and penalties of less than $1 million as of each date. The U.S. federal statute of
limitations remains open for the 2019 and subsequent years. Foreign and U.S. state and local jurisdictions have statutes of limitations
generally ranging for 3 to 4 years. The statute of limitations on certain jurisdictions could expire within the next twelve months. It is
reasonably possible that the amount of unrecognized tax benefits will change during the next 12 months, however, it is anticipated that
any such change, if it were to occur, would not have a material impact on our results of operations.
The tabular reconciliation of unrecognized tax benefits for the years ended December 31, 2022, 2021 and 2020 is as follows
(amounts in thousands):
114
Balance at January 1,
Additions based on tax positions related to the current year
Additions for tax positions of prior years
Reductions for tax positions of prior years
Settlements
Balance at December 31,
7) LEASE COMMITMENTS
2022
As of December 31,
2021
2020
2,544 $
500
159
(461)
(15)
2,727 $
2,806
500
213
(261)
(714)
2,544
$
$
2,164
500
142
0
0
2,806
$
$
We follow FASB ASU 2016-02 ("Topic 842") "Leases." Under Topic 842, lessees are required to recognize assets and
liabilities on the balance sheet for most leases and provide enhanced disclosures. Leases will be classified as either finance or
operating.
We have elected the policy exemption that allows lessees to choose to not separate lease and non-lease components by class of
underlying asset and are applying this expedient to all relevant asset classes.
We determine if an arrangement is or contains a lease at inception of the contract. Our right-of-use assets represent our right to
use the underlying assets for the lease term and our lease liabilities represent our obligation to make lease payments arising from the
leases. Right-of-use assets and lease liabilities are recognized at commencement date based on the present value of lease payments
over the lease term. We use the implicit rate noted within the contract if known or determinable. If the implicit rate is not readily
available, we use our estimated incremental borrowing rate, which is derived using a collateralized borrowing rate for the same
currency and term as the associated lease. A right-of-use asset and lease liability is not recognized for leases with an initial term of 12
months or less and we recognize lease expense for these leases on a straight-line basis over the lease term within lease and rental
expense.
Our operating leases are primarily for real estate, including certain acute care facilities, off-campus outpatient facilities, medical
office buildings, and corporate and other administrative offices. Our real estate lease agreements typically have initial terms of five to
10 years. These real estate leases may include one or more options to renew, with renewals that can extend the lease term from five to
10 years. The exercise of lease renewal options is at our sole discretion. When determining the lease term, we included options to
extend or terminate the lease when it is reasonably certain that we will exercise that option.
Five of our hospital facilities are held under operating leases with Universal Health Realty Income Trust with two hospital terms
expiring in 2026, two expiring in 2033, and one expiring in 2040 (see Note 9 for additional disclosure). We also lease the real property
of certain facilities (see Item 2. Properties for additional disclosure).
The components of lease expense for the years ended December 31, 2022, 2021 and 2020 are as follows (in thousands):
Operating lease cost
Variable and short term lease cost (a)
Total lease and rental expense
Finance lease cost:
Amortization of property under capital lease
Interest on debt of property under capital lease
Total finance lease cost
Twelve months ended
December 31,
2022
2021
2020
$
$
$
$
90,326
41,300
131,626
5,110
3,903
9,013
$
$
$
$
77,420
41,443
118,863
3,626
4,124
7,750
$
$
$
$
73,841
42,218
116,059
1,985
1,763
3,748
(a) Includes equipment, month-to-month and leases with a maturity of less than 12 months.
115
Supplemental cash flow information related to leases for the years ended December 31, 2022, 2021 and 2020 are as follows (in
thousands):
Twelve months ended
December 31,
2022
2021
2020
Cash paid for amounts included in the measurement of lease
liabilities:
Operating cash flows from operating leases
Operating cash flows from finance leases
Financing cash flows from finance leases
Right-of-use assets obtained in exchange for lease obligations:
Operating leases
Finance leases
$
$
$
$
$
124,704
3,963
3,454
163,679
1,066
$
$
$
$
$
118,433 $ 115,270
1,885
2,586
4,612 $
2,849 $
95,805 $
28,600 $
69,678
37,029
Supplemental balance sheet information related to leases as of December 31, 2022 and 2021 are as follows (in thousands):
Operating Leases
Right of use assets-operating leases
Operating lease liabilities
Operating lease liabilities noncurrent
Total operating lease liabilities
Finance Leases
Property and equipment
Accumulated depreciation
Property and equipment, net
Current maturities of long-term debt
Long-term debt
Total finance lease liabilities
Weighted Average remaining lease term, years
Operating leases
Finance leases
Weighted Average discount rate
Operating leases
Finance leases
December 31,
2022
December 31,
2021
$
$
$
$
$
$
$
454,650
67,776
395,522
463,298
102,494
(34,455)
68,039
3,046
72,549
75,595
$
$
$
$
$
$
$
16.1
20.7
5.0%
5.4%
367,477
64,484
304,624
369,108
102,940
(30,949)
71,991
2,740
76,591
79,331
9.1
20.8
3.8%
7.1%
116
Future maturities of lease liabilities as of December 31, 2022 are as follows (in thousands):
Year ending December 31,
2023
2024
2025
2026
2027
Later years
Total lease payments
less imputed interest
Total
Operating Leases
Finance Leases
$
$
83,573
75,223
68,411
58,742
40,068
595,736
921,753
(458,455)
463,298
$
$
6,826
6,990
5,871
5,876
6,032
101,102
132,697
(57,102)
75,595
We assumed $1 million, $29 million and $37 million in finance lease obligations during 2022, 2021 and 2020, respectively. In
the ordinary course of business, our facilities routinely lease equipment pursuant to new lease arrangements that will likely result in
future lease and rental expense in excess of amounts indicated above.
8) COMMITMENTS AND CONTINGENCIES
Professional and General Liability, Workers’ Compensation Liability
The vast majority of our subsidiaries are self-insured for professional and general liability exposure up to: (i) $20 million for
professional liability and $3 million for general liability per occurrence in 2022 and 2021; (ii) $10 million and $3 million per
occurrence in 2020 (professional liability claims are also subject to an additional annual aggregate self-insured retention of $2.5
million for claims in excess of $10 million for 2020); (iii) $5 million and $3 million per occurrence, respectively, during 2019, 2018
and 2017, and; (iv) $10 million and $3 million per occurrence, respectively, prior to 2017.
These subsidiaries are provided with several excess policies through commercial insurance carriers which provide for coverage
in excess of the applicable per occurrence and aggregate self-insured retention or underlying policy limits up to $162.5 million in
2022; $155 million in 2021 and $250 million during each of2014 through 2020. In addition, from time to time based upon marketplace
conditions, we may elect to purchase additional commercial coverage for certain of our facilities or businesses. Our behavioral health
care facilities located in the U.K. have policies through a commercial insurance carrier located in the U.K. that provides for £16
million of professional liability coverage, and £25 million of general liability coverage.
As of December 31, 2022, the total net accrual for our professional and general liability claims was $372 million, of which $74
million was included in current liabilities. As of December 31, 2021, the total net accrual for our professional and general liability
claims was $349 million, of which $74 million was included in current liabilities.
As a result of unfavorable trends experienced during the last three years, our results of operations included pre-tax increases to
our reserves for self-insured professional and general liability claims amounting to approximately $16 million during 2022, $52
million during 2021 and $25 million during 2020. Our estimated liability for self-insured professional and general liability claims is
based on a number of factors including, among other things, the number of asserted claims and reported incidents, estimates of losses
for these claims based on recent and historical settlement amounts, estimates of incurred but not reported claims based on historical
experience, and estimates of amounts recoverable under our commercial insurance policies. While we continuously monitor these
factors, our ultimate liability for professional and general liability claims could change materially from our current estimates due to
inherent uncertainties involved in making this estimate. Given our significant self-insured exposure for professional and general
liability claims, there can be no assurance that a sharp increase in the number and/or severity of claims asserted against us will not
have a material adverse effect on our future results of operations.
As of December 31, 2022, the total accrual for our workers’ compensation liability claims was $125 million, $55 million of
which was included in current liabilities. As of December 31, 2021, the total accrual for our workers’ compensation liability claims
was $115 million, $55 million of which was included in current liabilities.
Although we are unable to predict whether or not our future financial statements will require updates to estimates for our prior
year reserves for self-insured general and professional and workers’ compensation claims, given the relatively unpredictable nature of
these potential liabilities and the factors impacting these reserves, as discussed above, it is reasonably likely that our future financial
results may include material adjustments to prior period reserves.
Below is a schedule showing the changes in our general and professional liability and workers’ compensation reserves during
the three years ended December 31, 2022 (amount in thousands):
117
Balance at January 1, 2020
Plus: Accrued insurance expense, net of commercial
premiums paid
Less: Payments made in settlement of self-insured claims
Balance at January 1, 2021
Plus: Accrued insurance expense, net of commercial
premiums paid
Less: Payments made in settlement of self-insured claims
Balance at January 1, 2022
Plus: Accrued insurance expense, net of commercial
premiums paid
Less: Payments made in settlement of self-insured claims
Balance at December 31, 2022
General and
Professional
Liability
Workers’
Compensation
$
241,820 $
81,004 $
Total
322,824
91,518
(69,559)
263,779
129,690
(44,776)
348,693
67,705
(43,524)
105,185
159,223
(113,083)
368,964
56,525
(46,725)
114,985
186,215
(91,501)
463,678
111,763
(88,556)
371,900 $
62,960
(53,429)
124,516 $
174,723
(141,985)
496,416
$
Property Insurance
We have commercial property insurance policies for our properties covering catastrophic losses, including windstorm damage,
up to a $1 billion policy limit, subject to a per occurrence/per location deductible of $2.5 million as of June 1, 2020. Losses resulting
from named windstorms are subject to deductibles between 3% and 5% of the total insurable value of the property. In addition, we
have commercial property insurance policies covering catastrophic losses resulting from earthquake and flood damage, each subject to
aggregated loss limits (as opposed to per occurrence losses). Commercially insured earthquake coverage for our facilities is subject to
various deductibles and limitations including: (i) $150 million limitation for our facilities located in California; (ii) $100 million
limitation for our facilities located in fault zones within the United States; (iii) $40 million limitation for our facilities located in
Puerto Rico, and; (iv) $250 million limitation for many of our facilities located in other states. Our commercially insured flood
coverage has a limit of $100 million annually. There is also a $10 million sublimit for one of our facilities located in Houston, Texas,
and a $1 million sublimit for our facilities located in Puerto Rico. Property insurance for our behavioral health facilities located in the
U.K. are provided on an all risk basis up to a £1.5 billion policy limit, with coverage caps per location, that includes coverage for real
and personal property as well as business interruption losses.
Information Technology Incident
We experienced an information technology security incident in late September, 2020. As a result of this cyberattack, we
suspended user access to our information technology applications related to operations located in the United States. While our
information technology applications were offline, patient care was delivered safely and effectively at our facilities across the country
utilizing established back-up processes, including offline documentation methods. Our information technology applications were
substantially restored at our acute care and behavioral health hospitals at various times in October, 2020, on a rolling/staggered basis,
and our facilities generally resumed standard operating procedures at that time.
In connection with this incident, our results of operations for the years ended December 31, 2022 and 2021 were favorably
impacted by an aggregate of approximately $13 million and $45 million, respectively, resulting from receipt of commercial cyber
insurance proceeds (approximately $41 million in the aggregate during 2022 and 2021), and; (ii) collection of revenues previously
reserved during 2020 (approximately $17 million during 2021).
Other Contractual Commitments:
In addition to our long-term debt obligations as discussed in Note 4 - Long-Term Debt and our operating lease obligations as
discussed in Note 7 - Lease Commitments, we have various other contractual commitments outstanding as of December 31, 2022 as
follows: (i) other combined estimated future purchase obligations of $369 million related to a long-term contract with third-parties
consisting primarily of certain revenue cycle data processing services for our acute care facilities ($54 million), expected future costs
to be paid to a third-party vendor in connection with the ongoing operation of an electronic health records application and purchase
implementation of a revenue cycle and other applications for our acute care facilities ($224 million), healthcare infrastructure in
Washington D.C. in connection with various agreements with the District of Columbia ($75 million), and other software applications
($16 million); (ii) estimated construction commitment of $24 million representing our share of the construction cost of a behavioral
health care facility scheduled to be completed in 2025 that, subject to approval of certain regulatory conditions, we are required to
build pursuant to a joint-venture agreement with a third-party; (iii) combined estimated future payments of $169 million related to our
non-contributory, defined benefit pension plan ($146 million consisting of estimated payments through 2080) and other retirement
plan liabilities ($23 million), and; (iv) accrued and unpaid estimated claims expense incurred in connection with our commercial
health insurers and self-insured employee benefit plans ($135 million).
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Legal Proceedings
We operate in a highly regulated and litigious industry which subjects us to various claims and lawsuits in the ordinary course of
business as well as regulatory proceedings and government investigations. These claims or suits include claims for damages for
personal injuries, medical malpractice, commercial/contractual disputes, wrongful restriction of, or interference with, physicians’ staff
privileges, and employment related claims. In addition, health care companies are subject to investigations and/or actions by various
state and federal governmental agencies or those bringing claims on their behalf. Government action has increased with respect to
investigations and/or allegations against healthcare providers concerning possible violations of fraud and abuse and false claims
statutes as well as compliance with clinical and operational regulations. Currently, and from time to time, we and some of our facilities
are subjected to inquiries in the form of subpoenas, Civil Investigative Demands, audits and other document requests from various
federal and state agencies. These inquiries can lead to notices and/or actions including repayment obligations from state and federal
government agencies associated with potential non-compliance with laws and regulations. Further, the federal False Claims Act allows
private individuals to bring lawsuits (qui tam actions) against healthcare providers that submit claims for payments to the government.
Various states have also adopted similar statutes. When such a claim is filed, the government will investigate the matter and decide if
they are going to intervene in the pending case. These qui tam lawsuits are placed under seal by the court to comply with the False
Claims Act’s requirements. If the government chooses not to intervene, the private individual(s) can proceed independently on behalf
of the government. Health care providers that are found to violate the False Claims Act may be subject to substantial monetary
fines/penalties as well as face potential exclusion from participating in government health care programs or be required to comply
with Corporate Integrity Agreements as a condition of a settlement of a False Claims Act matter. In September 2014, the Criminal
Division of the Department of Justice (“DOJ”) announced that all qui tam cases will be shared with their Division to determine if a
parallel criminal investigation should be opened. The DOJ has also announced an intention to pursue civil and criminal actions against
individuals within a company as well as the corporate entity or entities. In addition, health care facilities are subject to monitoring by
state and federal surveyors to ensure compliance with program Conditions of Participation. In the event a facility is found to be out of
compliance with a Condition of Participation and unable to remedy the alleged deficiency(s), the facility faces termination from the
Medicare and Medicaid programs or compliance with a System Improvement Agreement to remedy deficiencies and ensure
compliance.
The laws and regulations governing the healthcare industry are complex covering, among other things, government healthcare
participation requirements, licensure, certification and accreditation, privacy of patient information, reimbursement for patient services
as well as fraud and abuse compliance. These laws and regulations are constantly evolving and expanding. Further, the Legislation has
added additional obligations on healthcare providers to report and refund overpayments by government healthcare programs and
authorizes the suspension of Medicare and Medicaid payments “pending an investigation of a credible allegation of fraud.” We
monitor our business and have developed an ethics and compliance program with respect to these complex laws, rules and regulations.
Although we believe our policies, procedures and practices comply with government regulations, there is no assurance that we will not
be faced with the sanctions referenced above which include fines, penalties and/or substantial damages, repayment obligations,
payment suspensions, licensure revocation, and expulsion from government healthcare programs. Even if we were to ultimately
prevail in any action brought against us or our facilities or in responding to any inquiry, such action or inquiry could have a material
adverse effect on us.
Certain legal matters are described below:
Litigation:
Knight v. Miller, et. al.
In July 2021, a shareholder derivative lawsuit was filed by plaintiff, Robin Knight, in the Chancery Court in Delaware against
the members of the Board of Directors of the Company as well as certain officers (C.A. No.: 2021-0581-SG). The Company was
named as a nominal defendant. The lawsuit alleges that in March 2020 stock options were awarded with exercise prices that did not
reflect the Company’s fundamentals and business prospects, and in anticipation of future market rebound resulting in excessive gains.
The lawsuit makes claims of breaches of fiduciary duties, waste of corporate assets, and unjust enrichment. The lawsuit seeks
monetary damages allegedly incurred by the Company, disgorgement of the March 2020 stock awards as well as any proceeds derived
therefrom and unspecified equitable relief. Defendants deny the allegations. We filed a motion to dismiss the complaint and the court
granted part and denied part of our motion. During the third quarter of 2022, we have reached a preliminary settlement, which will not
have a material impact on our consolidated financial statements. The settlement is currently pending final court approval. We are
uncertain as to potential liability or financial exposure, if any, which may be associated with this matter in the event the settlement is
not finalized and approved by the court.
Disproportionate Share Hospital Payment Matter:
In late September, 2015, many hospitals in Pennsylvania, including certain of our behavioral health care hospitals located in the
state, received letters from the Pennsylvania Department of Human Services (the “Department”) demanding repayment of allegedly
excess Medicaid Disproportionate Share Hospital payments (“DSH”), primarily consisting of managed care payments characterized as
DSH payments, for the federal fiscal year (“FFY”) 2011 amounting to approximately $4 million in the aggregate. Since that time,
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certain of our behavioral health care hospitals in Pennsylvania have received similar requests for repayment for alleged DSH
overpayments for FFYs 2012 through 2015. For FFY 2012, the claimed overpayment amounts to approximately $4 million. For FY
2013, FY 2014 and FY 2015 the initial claimed overpayments and attempted recoupment by the Department were approximately $7
million, $8 million and $7 million, respectively. The Department has agreed to a change in methodology which, upon confirmation of
the underlying data being accepted by the Department, could reduce the initial claimed overpayments for FY 2013, FY 2014 and FY
2015 to approximately $2 million, $2 million and $3 million, respectively. We filed administrative appeals for all of our facilities
contesting the recoupment efforts for FFYs 2011 through 2015 as we believe the Department’s calculation methodology is inaccurate
and conflicts with applicable federal and state laws and regulations. The Department has agreed to postpone the recoupment of the
state’s share for FY 2011 to 2013 until all hospital appeals are resolved but started recoupment of the federal share. For FY 2014 and
FY 2015, the Department has initiated the recoupment of the alleged overpayments. Starting in FY 2016, the first full fiscal year after
the January 1, 2015 effective date of Medicaid expansion in Pennsylvania, the Department no longer characterized managed care
payments received by the hospitals as DSH payments. We can provide no assurance that we will ultimately be successful in our legal
and administrative appeals related to the Department’s repayment demands. If our legal and administrative appeals are unsuccessful,
our future consolidated results of operations and financial condition could be adversely impacted by these repayments.
Boley, et al. v. UHS, et al.
Former UHS subsidiary facility employees Mary K. Boley, Kandie Sutter, and Phyllis Johnson, individually and on behalf of a
putative class of participants in the UHS Retirement Savings Plan (the “Plan”), filed a complaint in the U.S. District Court for the
Eastern District of Pennsylvania against UHS, the Board of Directors of UHS, and the “Plan Committee” of UHS (Case No. 2:20-cv-
02644). In subsequent amended complaints, Plaintiffs have dropped the Board of Directors and the “Plan Committee” as defendants
and added the UHS Retirement Plans Investment Committee as a new defendant. Plaintiffs allege that UHS breached its fiduciary
duties under the Employee Retirement Income Security Act (“ERISA”) by offering to participants in the Plan overly expensive
investment options when less expensive investment options were available in the marketplace; caused participants to pay excessive
recordkeeping fees associated with the Plan; breached its duty to monitor appointed fiduciaries and: in the alternative, engaged in a
“knowing breach of trust” separate from the alleged violations under ERISA. UHS disputes Plaintiffs’ allegations and is actively
defending against Plaintiffs’ claims. UHS’s motion for partial dismissal of Plaintiffs’ claims was denied by the Court. In March
2021, the Court granted Plaintiffs’ motion for class certification. Although the Third Circuit Court of Appeal agreed to hear an appeal
of the trial court’s order granting class certification, the appeal was denied and the class certification was affirmed. As a result, the
stay of the case in the trial court pending conclusion of the appellate proceedings has been lifted. We maintain commercial insurance
coverage for claims of this nature, subject to specified deductibles and limitations. During the third quarter of 2022, the parties have
reached a preliminary settlement, within the policy limitations of our commercial insurance coverage after satisfaction of specified
deductibles, for which the court has granted preliminary approval. A final settlement approval hearing is scheduled for March 30,
2023. We are uncertain as to potential liability or financial exposure, if any, which may be associated with this matter in the event the
settlement is not approved by the court.
Other Matters:
Various other suits, claims and investigations, including government subpoenas, arising against, or issued to, us are pending and
additional such matters may arise in the future. Management will consider additional disclosure from time to time to the extent it
believes such matters may be or become material. The outcome of any current or future litigation or governmental or internal
investigations, including the matters described above, cannot be accurately predicted, nor can we predict any resulting penalties, fines
or other sanctions that may be imposed at the discretion of federal or state regulatory authorities. We record accruals for such
contingencies to the extent that we conclude it is probable that a liability has been incurred and the amount of the loss can be
reasonably estimated. No estimate of the possible loss or range of loss in excess of amounts accrued, if any, can be made at this time
regarding the matters described above or that are otherwise pending because the inherently unpredictable nature of legal proceedings
may be exacerbated by various factors, including, but not limited to: (i) the damages sought in the proceedings are unsubstantiated or
indeterminate; (ii) discovery is not complete; (iii) the matter is in its early stages; (iv) the matters present legal uncertainties; (v) there
are significant facts in dispute; (vi) there are a large number of parties, or; (vii) there is a wide range of potential outcomes. It is
possible that the outcome of these matters could have a material adverse impact on our future results of operations, financial position,
cash flows and, potentially, our reputation.
9) RELATIONSHIP WITH UNIVERSAL HEALTH REALTY INCOME TRUST AND OTHER RELATED PARTY
TRANSACTIONS
Relationship with Universal Health Realty Income Trust:
At December 31, 2022, we held approximately 5.7% of the outstanding shares of Universal Health Realty Income Trust (the
“Trust”). We serve as Advisor to the Trust under an annually renewable advisory agreement, which is scheduled to expire on
December 31st of each year, pursuant to the terms of which we conduct the Trust’s day-to-day affairs, provide administrative services
and present investment opportunities. The advisory agreement was renewed by the Trust for 2023 at the same rate in place for 2022,
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2021 and 2020, providing for an advisory computation at 0.70% of the Trust’s average invested real estate assets. We earned an
advisory fee from the Trust, which is included in net revenues in the accompanying consolidated statements of income, of
approximately $5.1 million during 2022, $4.4 million during 2021 and $4.1 million during 2020.
In addition, certain of our officers and directors are also officers and/or directors of the Trust. Management believes that it has
the ability to exercise significant influence over the Trust, therefore we account for our investment in the Trust using the equity
method of accounting.
Our pre-tax share of income from the Trust was $1.2 million during 2022, $6.2 million during 2021 and $1.1 million during
2020, which are included in other income, net, on the accompanying consolidated statements of income for each year. We received
dividends from the Trust amounting to $2.2 million during each of 2022, 2021 and 2020. Included in our share of the Trust’s income
during 2021 was approximately $5.0 million related to our share of gains on various transactions recorded by the Trust, including an
asset purchase and sale transaction between the Trust and UHS, as discussed below.
The carrying value of our investment in the Trust was $8.4 million and $9.4 million at December 31, 2022 and 2021,
respectively, and is included in other assets in the accompanying consolidated balance sheets. The market value of our investment in
the Trust was $37.6 million at December 31, 2022 and $46.8 million at December 31, 2021, based on the closing price of the Trust’s
stock on the respective dates.
The Trust commenced operations in 1986 by purchasing certain hospital properties from us and immediately leasing the
properties back to our respective subsidiaries. The base rents are paid monthly and the bonus rents, which as of January 1, 2022 are
applicable only to McAllen Medical Center, are computed and paid on a quarterly basis, based upon a computation that compares
current quarter revenue to a corresponding quarter in the base year. The leases with those subsidiaries are unconditionally guaranteed
by us and are cross-defaulted with one another.
On December 31, 2021, we entered into an asset purchase and sale agreement with the Trust, which was amended during the
first quarter of 2022, pursuant to the terms of which:
a wholly-owned subsidiary of ours purchased from the Trust, the real estate assets of the Inland Valley Campus of Southwest
Healthcare System located in Wildomar, California, at its fair market value of $79.6 million.
two wholly-owned subsidiaries of ours transferred to the Trust, the real estate assets of the following properties:
o Aiken Regional Medical Center (“Aiken”), located in Aiken, South Carolina (which includes a 211-bed acute care
hospital and a 62-bed behavioral health facility), at its fair-market value of approximately $57.7 million, and;
o Canyon Creek Behavioral Health (“Canyon Creek”), located in Temple, Texas, at its fair-market value of
approximately $26.0 million.
in connection with this transaction, since the fair-market value of Aiken and Canyon Creek, which totaled approximately
$83.7 million in the aggregate, exceeded the $79.6 million fair-market value of the Inland Valley Campus of Southwest
Healthcare System, we received approximately $4.1 million in cash from the Trust. This transaction generated a gain of
approximately $68.4 million for the Trust, our share of which (approximately $4.0 million) is included in our consolidated
statement of income for the year ended December 31, 2021.
Also on December 31, 2021, Aiken and Canyon Creek (as lessees), entered into a master lease and individual property leases
(with the Trust as lessor), as amended, for initial lease terms on each property of approximately twelve years, ending on December 31,
2033. Subject to the terms of the master lease, Aiken and Canyon Creek have the right to renew their leases, at the then current fair
market rent (as defined in the master lease), for seven, five-year optional renewal terms. The aggregate annual rental during 2022
pursuant to the leases for these two facilities, amounted to approximately $5.7 million ($3.9 million related to Aiken and $1.8 million
related to Canyon Creek). There is no bonus rental component applicable to either of these leases. On each January 1st through 2033,
the annual rental will increase by 2.25% on a cumulative and compounded basis.
As a result of the purchase options within the lease agreements for Aiken and Canyon Creek, the asset purchase and sale
transaction is accounted for as a failed sale leaseback in accordance with U.S. GAAP. We have accounted for the asset exchange and
substitution transaction with the Trust as a financing arrangement and, since we did not derecognize the real property related to Aiken
and Canyon Creek, we will continue to depreciate the assets. Our Consolidated Balance Sheet as of December 31, 2022 and 2021
reflects a financial liability of $80.9 million and $82.4 million, respectively, which is included in debt, for the fair value of real estate
assets that we exchanged as part of the transaction. Our monthly lease payments payable to the Trust will be recorded to interest
expense and as a reduction to the outstanding financial liability. The amount allocated to interest expense is determined using our
incremental borrowing rate and is based on the outstanding financial liability.
The total aggregate rental for leases on the four wholly-owned hospital facilities with the Trust (excluding Clive Behavioral
Health Hospital which is discussed below) was approximately $20.2 million during 2022. Total aggregate rent expense under the
operating leases on three hospital facilities with the Trust (McAllen Medical Center, Wellington Regional Medical Center and Inland
Valley Campus of Southwest Healthcare System) was $17.7 million and $17.1 million during 2021 and 2020, respectively.
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Pursuant to the Master Leases by certain subsidiaries of ours and the Trust as described in the table below, dated 1986 and 2021
(“the Master Leases”) which govern the leases of McAllen Medical Center and Wellington Regional Medical Center (each of which is
governed by the Master Lease dated 1986), and Aiken Regional Medical Center and Canyon Creek Behavioral Health (each of which
is governed by the Master Lease dated 2021), we have the option to renew the leases at the lease terms described above and below by
providing notice to the Trust at least 90 days prior to the termination of the then current term. We also have the right to purchase the
respective leased hospitals at their appraised fair market value upon any of the following: (i) at the end of the lease terms or any
renewal terms; (ii) upon one month’s notice should a change of control of the Trust occur, or; (iii) within the time period as specified
in the lease in the event that we provide notice to the Trust of our intent to offer a substitution property/properties in exchange for one
(or more) of the hospital properties leased from the Trust should we be unable to reach an agreement with the Trust on the properties
to be substituted. In addition, we have rights of first refusal to: (i) purchase the respective leased facilities during and for 180 days
after the lease terms at the same price, terms and conditions of any third-party offer, or; (ii) renew the lease on the respective leased
facility at the end of, and for 180 days after, the lease term at the same terms and conditions pursuant to any third-party offer.
In addition, we are the managing, majority member in a joint venture with an unrelated third-party that operates Clive
Behavioral Health, a 100-bed behavioral health care facility located in Clive, Iowa. The real property of this facility, which was
completed and opened in late, 2020, is also leased from the Trust (annual rental of approximately $2.6 million and $2.5 million during
2022 and 2021, respectively) pursuant to the lease terms as provided in the table below. In connection with the lease on this facility,
the joint venture has the right to purchase the leased facility from the Trust at its appraised fair market value upon either of the
following: (i) by providing notice at least 270 days prior to the end of the lease terms or any renewal terms, or; (ii) upon 30 days'
notice anytime within 12 months of a change of control of the Trust (UHS also has this right should the joint venture decline to
exercise its purchase right). Additionally, the joint venture has rights of first offer to purchase the facility prior to any third-party sale.
The table below provides certain details for each of the hospitals leased from the Trust as of January 1, 2023:
Hospital Name
McAllen Medical Center
Wellington Regional Medical Center
Aiken Regional Medical Center/Aurora Pavilion Behavioral
Health Services
Canyon Creek Behavioral Health
Clive Behavioral Health Hospital
Annual
Minimum
Rent
$ 5,485,000
$ 6,477,000
End of Lease Term
December, 2026
December, 2026
Renewal
Term
(years)
$ 3,982,000 December, 2033
$ 1,800,000 December, 2033
December, 2040
$ 2,701,000
5 (a)
5 (b)
35 (c)
35 (c)
50 (d)
(a) We have one 5-year renewal option at existing lease rates (through 2031).
(b) We have one 5-year renewal option at fair market value lease rates (through 2031). Upon the December 31, 2021 expiration of
the lease on Wellington Regional Medical Center, a wholly-owned subsidiary of ours exercised its fair market value renewal
option and renewed the lease for a 5-year term scheduled to expire on December 31, 2026. Effective January 1, 2022, the
annual fair market value lease rate for this hospital is $6.3 million (there is no longer a bonus rental component of the lease
payment). On each January 1st through 2026, the annual rent will increase by 2.50% on a cumulative and compounded basis.
(c) We have seven 5-year renewal options at fair market value lease rates (2034 through 2068). On each January 1st through 2033,
the annual rent will increase by 2.25% on a cumulative and compounded basis.
(d) This facility is operated by a joint venture in which we are the managing, majority member and an unrelated third-party holds a
minority ownership interest. The joint venture has three, 10-year renewal options at computed lease rates as stipulated in the
lease (2041 through 2070) and two additional, 10-year renewal options at fair market values lease rates (2071 through 2090). In
each January through 2040 (and potentially through 2070 if three, 10-year renewal options are exercised), the annual rental will
increase by 2.75% on a cumulative and compounded basis.
In addition, certain of our subsidiaries are tenants in several medical office buildings (“MOBs”) and two free-standing
emergency departments owned by the Trust or by limited liability companies in which the Trust holds 95% to 100% of the ownership
interest.
In January, 2022, the Trust commenced construction on a new 86,000 rentable square feet multi-tenant MOB that is located on
the campus of Northern Nevada Sierra Medical Center in Reno, Nevada. Northern Nevada Sierra Medical Center, a 158-bed newly
constructed acute care hospital owned and operated by a wholly-owned subsidiary of ours, was completed and opened in April, 2022.
In connection with this MOB, which is expected to be completed and opened during the first quarter of 2023, a ground lease and a
master flex lease was executed between a wholly-owned subsidiary of ours and the Trust, pursuant to the terms of which our
subsidiary will master lease approximately 68% of the rentable square feet of the MOB at an initial minimum rent of $1.3 million
annually. The master flex lease could be reduced during the term if certain conditions are met.
Other Related Party Transactions:
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In December, 2010, our Board of Directors approved the Company’s entering into supplemental life insurance plans and
agreements on the lives of our chief executive officer (“CEO”) and his wife. As a result of these agreements, as amended in October,
2016, based on actuarial tables and other assumptions, during the life expectancies of the insureds, we would pay approximately $28
million in premiums, and certain trusts owned by our CEO, would pay approximately $9 million in premiums. Based on the projected
premiums mentioned above, and assuming the policies remain in effect until the death of the insureds, we will be entitled to receive
death benefit proceeds of no less than approximately $37 million representing the $28 million of aggregate premiums paid by us as
well as the $9 million of aggregate premiums paid by the trusts. In connection with these policies, we paid approximately $1.0 million,
net, in premium payments during 2022 and 2021 and approximately $1.1 million, net, in premium payments during 2020.
In August, 2015, Marc D. Miller, our President and Chief Executive Officer and member of our Board of Directors, was
appointed to the Board of Directors of Premier, Inc. (“Premier”), a healthcare performance improvement alliance. During 2013, we
entered into a new group purchasing organization agreement (“GPO”) with Premier. In conjunction with the GPO agreement, we
acquired a minority interest in Premier for a nominal amount. During the fourth quarter of 2013, in connection with the completion of
an initial public offering of the stock of Premier, we received cash proceeds for the sale of a portion of our ownership interest in the
GPO. Also in connection with this GPO agreement, we received shares of restricted stock of Premier which vested ratably over a
seven-year period (2014 through 2020), contingent upon our continued participation and minority ownership interest in the GPO.
During the third quarter of 2020, we entered into an agreement with Premier pursuant to the terms of which, among other things, our
ownership interest in Premier was converted into shares of Class A Common Stock of Premier. We have elected to retain a portion of
the previously vested shares of Premier, the market value of which is included in other assets on our consolidated balance sheet.
Based upon the closing price of Premier’s stock on each respective date, the market value of our shares of Premier was $78 million as
of December 31, 2022 and $92 million as of December 31, 2021. The $14 million decrease in market value of our vested Premier
shares since December 31, 2021 was recorded as an unrealized loss and included in “Other (income) expense, net” in our consolidated
statements of income for the year ended December 31, 2022. A $14 million increase in the market value of our vested Premier shares
during 2021 was recorded as an unrealized gain and included in “Other (income) expense, net” in our consolidated statements of
income for the year ended December 31, 2021. During 2022, Premier declared annual cash dividends of $.82 per share paid on a
quarterly basis. Additionally, during 2021, Premier declared annual cash dividends of $.78 per share paid on a quarterly basis. Our
share of the dividends for the years ended December 31, 2022 and 2021 are approximately $1.8 million and $1.7 million, respectively,
and are included in “Other (income) expense, net” in our condensed consolidated statements of income for the years ended December
31, 2022 and 2021.
A member of our Board of Directors and member of the Executive Committee and Finance Committee is a partner in Norton
Rose Fulbright US LLP, a law firm engaged by us for a variety of legal services. The Board member and his law firm also provide
personal legal services to our Executive Chairman and he acts as trustee of certain trusts for the benefit of our Executive Chairman and
his family.
10) REVENUE RECOGNITION
We recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to
which we expect to be entitled in exchange for those goods or services. Our estimate for amounts not expected to be collected based
on historical experience will continue to be recognized as a reduction to net revenue. However, subsequent changes in estimate of
collectability due to a change in the financial status of a payer, for example a bankruptcy, will be recognized as bad debt expense in
operating charges.
The performance obligation is separately identifiable from other promises in the customer contract. As the performance
obligations are met (i.e.: room, board, ancillary services, level of care), revenue is recognized based upon allocated transaction price.
The transaction price is allocated to separate performance obligations based upon the relative standalone selling price. In instances
where we determine there are multiple performance obligations across multiple months, the transaction price will be allocated by
applying an estimated implicit and explicit rate to gross charges based on the separate performance obligations.
In assessing collectability, we have elected the portfolio approach. This portfolio approach is being used as we have large
volume of similar contracts with similar classes of customers. We reasonably expect that the effect of applying a portfolio approach to
a group of contracts would not differ materially from considering each contract separately. Management’s judgment to group the
contracts by portfolio is based on the payment behavior expected in each portfolio category. As a result, aggregating all of the
contracts (which are at the patient level) by the particular payer or group of payers, will result in the recognition of the same amount of
revenue as applying the analysis at the individual patient level.
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We group our revenues into categories based on payment behaviors. Each component has its own reimbursement structure
which allows us to disaggregate the revenue into categories that share the nature and timing of payments. The other patient revenue
consists primarily of self-pay, government-funded non-Medicaid, and other.
The following table disaggregates our revenue by major source for the years ended December 31, 2022, 2021 and 2020 (in
thousands):
For the year ended December 31, 2022
Acute Care
Behavioral Health
Other
Medicare
Managed Medicare
Medicaid
Managed Medicaid
Managed Care (HMO and PPOs)
UK Revenue
Other patient revenue and adjustments, net
Other non-patient revenue
Total Net Revenue
$ 1,289,425
1,274,719
719,870
757,488
2,536,818
0
261,879
806,550
$ 7,646,749
17% $
17%
9%
10%
33%
0%
3%
11%
100% $
326,337
285,870
792,526
1,449,367
1,476,136
684,594
483,763
231,165
5,729,758
6%
5%
14%
25%
26%
12%
8%
4%
100% $
Acute Care
Behavioral Health
Other
For the year ended December 31, 2021
Medicare
Managed Medicare
Medicaid
Managed Medicaid
Managed Care (HMO and PPOs)
UK Revenue
Other patient revenue and adjustments, net
Other non-patient revenue
Total Net Revenue
$ 1,292,205
1,118,901
539,741
618,727
2,521,089
0
358,458
659,133
$ 7,108,254
18% $
16%
8%
9%
35%
0%
5%
9%
100% $
361,914
244,061
751,951
1,328,536
1,435,938
687,725
484,742
208,777
5,503,644
7%
4%
14%
24%
26%
12%
9%
4%
100% $
Acute Care
Behavioral Health
Other
For the year ended December 31, 2020
Medicare
Managed Medicare
Medicaid
Managed Medicaid
Managed Care (HMO and PPOs)
UK Revenue
Other patient revenue and adjustments, net
Other non-patient revenue (a)
Total Net Revenue
$ 1,242,268
869,488
551,551
491,234
2,146,018
0
248,047
788,698
$ 6,337,304
20% $
14%
9%
8%
34%
0%
4%
12%
100% $
448,323
235,442
651,081
1,224,205
1,280,919
584,000
497,297
287,455
5,208,722
9%
5%
12%
24%
25%
11%
10%
6%
100% $
Total
$ 1,615,762
1,560,589
1,512,396
2,206,855
4,012,954
684,594
745,642
1,060,578
13,399,370
Total
$ 1,654,119
1,362,962
1,291,692
1,947,263
3,957,027
687,725
843,200
898,129
12,642,117
Total
$ 1,690,591
1,104,930
1,202,632
1,715,439
3,426,937
584,000
745,344
1,089,024
11,558,897
22,863
22,863
30,219
30,219
12,871
12,871
12%
12%
11%
16%
30%
5%
6%
8%
100%
13%
11%
10%
15%
31%
5%
7%
7%
100%
15%
10%
10%
15%
30%
5%
6%
9%
100%
(a) The 2020 other non-patient revenue includes Acute Care CARES Act and other grant revenue of $316 million and Behavioral
Health CARES Act and other grant revenue of $97 million. As an accounting policy election, we have utilized ASC 958 by analogy
to recognize funds received under the CARES Act from the Provider Relief Fund as revenue, given no direct authoritative guidance
available to for-profit organizations to recognize revenue for government contributions and grants. CARES Act revenues may be
subject to future adjustments based on future changes to statutes.
11) PENSION PLAN
We maintain contributory and non-contributory retirement plans for eligible employees. Our contributions to the contributory
plan amounted to $72.0 million, $69.8 million and $67.1 million in 2022, 2021 and 2020, respectively. The non-contributory plan is a
defined benefit pension plan which covers employees of one of our subsidiaries. The benefits are based on years of service and the
employee’s highest compensation for any five years of employment. Our funding policy is to contribute annually at least the minimum
amount that should be funded in accordance with the provisions of ERISA.
For defined benefit pension plans, the benefit obligation is the “projected benefit obligation”, the actuarial present value, as of
December 31 measurement date, of all benefits attributed by the pension benefit formula to employee service rendered to that date.
The amount of benefit to be paid depends on a number of future events incorporated into the pension benefit formula, including
estimates of the average life of employees/survivors and average years of service rendered. It is measured based on assumptions
124
concerning future interest rates and future compensation levels. The following table shows the reconciliation of the defined benefit
pension plan as of December 31, 2022 and 2021:
Change in plan assets:
Fair value of plan assets at beginning of year
Actual return (loss) on plan assets
Benefits paid
Administrative expenses
Fair value of plan assets at end of year
Change in benefit obligation:
Benefit obligation at beginning of year
Service cost
Interest cost
Benefits paid
Actuarial (gain) loss
Benefit obligation at end of year
Amounts recognized in the Consolidated Balance Sheet:
Other non-current assets
Total amounts recognized at end of year
2022
2021
(000s)
127,360 $
(23,674 )
(6,448 )
(611 )
96,627 $
116,034 $
607 $
2,836 $
(6,448 ) $
(25,752 ) $
87,277 $
131,685
2,771
(6,389)
(707)
127,360
123,237
546
2,493
(6,389)
(3,853)
116,034
9,350 $
9,350 $
11,327
11,327
$
$
$
$
$
$
$
$
$
$
Components of net periodic cost (benefit)
Service cost
Interest cost
Expected return on plan assets
Net periodic cost
Measurement Dates
Benefit obligations
Fair value of plan assets
Weighted average assumptions as of December 31
Discount rate
Rate of compensation increase
2022
2021
(000s)
2020
$
$
607 $
2,836
(4,335)
(892) $
546 $
2,493
(4,490)
(1,451) $
615
3,357
(5,261)
(1,289)
2022
2021
12/31/2022
12/31/2022
12/31/2021
12/31/2021
2022
2021
4.91%
4.00%
2.52%
4.00%
Weighted-average assumptions for net periodic benefit
cost calculations
Discount rate
Expected long-term rate of return on plan assets
Rate of compensation increase
2022
2021
2020
2.52%
3.50%
4.00%
2.08%
3.50%
4.00%
2.94%
4.50%
4.00%
The “accumulated benefit obligation” for our pension plan represents the actuarial present value of benefits based on employee
service and compensation as of a certain date and does not include an assumption about future compensation levels. The accumulated
benefit obligation for our plan was $87.3 million and $116.0 million as of December 31, 2022 and 2021, respectively. The fair value
of plan assets exceeded the accumulated benefit obligation by $9.4 million and $11.3 million as of December 31, 2022 and 2021,
respectively.
We estimate that there will be no net loss or prior service cost amortized from accumulated other comprehensive income during
2023.
The market values of our pension plan assets at December 31, 2022 and December 31, 2021, reported using net asset value as a
practical expedient, by asset category are as follows:
125
Equities:
U.S. Large Cap
U.S. Mid Cap
U.S. Small Cap
International Developed
Emerging Markets
Fixed income:
Core Fixed Income
Long Duration Fixed Income
Cash/Currency:
Cash Equivalents
Total market value
2022
2021
5,301
1,451
1,452
3,867
2,426
17,074
64,277
779
96,627
$
$
$
$
$
$
$
$
$
7,306
2,014
1,913
5,062
3,152
22,904
84,277
732
127,360
$
$
$
$
$
$
$
$
$
To develop the expected long-term rate of return on plan assets assumption, we considered the historical returns and the future
expectations for returns for each asset class, as well as the target asset allocation of the pension portfolio.
The following table shows expected benefit payments for the years 2023 through 2032 for our defined pension plan. There will
be benefit payments under this plan beyond 2032.
Estimated Future Benefit Payments (000s)
2023
2024
2025
2026
2027
2028-2032
Total
Plan Assets
Asset Category
Equity securities
Fixed income securities
Other
Total
$
$
6,804
6,831
6,819
6,781
6,732
32,152
66,119
2022
2021
15%
84%
1%
100%
15%
84%
1%
100%
Investment Policy, Guidelines and Objectives have been established for the defined benefit pension plan. The investment policy
is in keeping with the fiduciary requirements under existing federal laws and managed in accordance with the Prudent Investor Rule.
Total portfolio risk is regularly evaluated and compared to that of the plan’s policy target allocation and judged on a relative basis over
a market cycle. The following asset allocation policy and ranges have been established in accordance with the overall risk and return
objectives of the portfolio:
Total Equity
Total Fixed Income
Other
As of
12/31/2022
Permitted
Range
15%
84%
1%
10-30%
70-90%
0-10%
In accordance with the investment policy, the portfolio will invest in high quality, large and small capitalization companies
traded on national exchanges, and investment grade securities. The investment managers will not write or buy options for speculative
purposes; securities may not be margined or sold short. The manager may employ futures or options for the purpose of hedging
exposure, and will not purchase unregistered sectors, private placements, partnerships or commodities.
12) SEGMENT REPORTING
Our reportable operating segments consist of acute care hospital services and behavioral health care services. The “Other”
segment column below includes centralized services including, but not limited to, information technology, purchasing, reimbursement,
accounting and finance, taxation, legal, advertising and design and construction. The chief operating decision making group for our
acute care services and behavioral health care services is comprised of our Chief Executive Officer and the Presidents of each
operating segment. The Presidents for each operating segment also manage the profitability of each respective segment’s various
126
facilities. The operating segments are managed separately because each operating segment represents a business unit that offers
different types of healthcare services or operates in different healthcare environments. The accounting policies of the operating
segments are the same as those described in the summary of significant accounting policies included in Note 1-Business and Summary
of Significant Accounting Policies. The corporate overhead allocations, as reflected below, are utilized for internal reporting purposes
and are comprised of each period’s projected corporate-level operating expenses (excluding interest expense). The overhead expenses
are captured and allocated directly to each segment, to the extent possible, based upon each segment’s respective percentage of total
operating expenses.
2022
Gross inpatient revenues
Gross outpatient revenues
Total net revenues
Income (loss) before allocation of corporate
overhead and income taxes
Allocation of corporate overhead
Income (loss) after allocation of corporate overhead
and before income taxes
Total assets
2021
Gross inpatient revenues
Gross outpatient revenues
Total net revenues
Income (loss) before allocation of corporate
overhead and income taxes
Allocation of corporate overhead
Income (loss) after allocation of corporate overhead
and before income taxes
Total assets
2020
Gross inpatient revenues
Gross outpatient revenues
Total net revenues
Income (loss) before allocation of corporate
overhead and income taxes
Allocation of corporate overhead
Income (loss) after allocation of corporate overhead
and before income taxes
Total assets
Acute Care
Hospital
Services (b.)
Behavioral
Health
Services (a.)
(Dollar amounts in thousands)
Other
Total
Consolidated
$ 40,004,670
$ 24,813,718
7,646,749
$
$ 10,116,566
1,031,370
$
5,729,758
$
$
$
$
— $ 50,121,236
— $ 25,845,088
22,863 $ 13,399,370
$
$
$
$
429,664
$
(252,034) $
980,290
$
(179,936) $
(543,694) $
431,970 $
866,260
0
177,630
5,993,887
$
$
800,354
7,277,293
$
$
(111,724) $
866,260
223,008 $ 13,494,188
Acute Care
Hospital
Services
Behavioral
Health
Services (a.)
(Dollar amounts in thousands)
Other
Total
Consolidated
$ 36,522,155
$ 20,633,921
7,108,254
$
$
$
$
9,927,401
1,013,547
5,503,644
$
$
$
— $ 46,449,556
— $ 21,647,468
30,219 $ 12,642,117
$
$
$
$
734,666
$
(233,298) $
1,025,557
$
(172,512) $
(466,910) $
405,810 $
1,293,313
0
501,368
5,534,912
$
$
853,045
7,250,427
$
$
(61,100) $
1,293,313
308,204 $ 13,093,543
Acute Care
Hospital
Services
Behavioral
Health
Services (a.)
(Dollar amounts in thousands)
Other
Total
Consolidated
$ 30,562,093
$ 16,272,520
6,337,304
$
$
$
$
9,718,934
963,799
5,208,722
$
$
$
— $ 40,281,027
— $ 17,236,319
12,871 $ 11,558,897
$
$
$
$
693,427
$
(223,921) $
1,023,257
$
(170,849) $
(464,601) $
394,770 $
1,252,083
0
469,506
4,927,456
$
$
852,408
7,044,617
$
$
(69,831) $
1,252,083
1,504,806 $ 13,476,879
(a) Includes net revenues generated from our behavioral health care facilities located in the U.K. amounting to approximately $685
million in 2022, $688 million in 2021 and $584 million in 2020. Total assets at our U.K. behavioral health care facilities were
approximately $1.235 billion as of December 31, 2022, $1.351 billion as of December 31, 2021 and $1.334 billion as of December 31,
2020.
(b) Included in our 2022 acute care hospital services operating segment income (loss) before allocation of corporate overhead and income
taxes is a pre-tax $58 million provision for asset impairment charge to reduce the carrying value of real property assets.
127
SCHEDULE II—VALUATION AND QUALIFYING ACCOUNTS
(amounts in thousands)
Valuation Allowance for Deferred Tax Assets:
Year ended December 31, 2022
Year ended December 31, 2021
Year ended December 31, 2020
Balance at
beginning
of period
Charges to
costs and
expenses
Balance
at end
of period
$
$
$
62,356 $
68,003 $
75,277 $
969 $
(5,647) $
(7,274) $
63,325
62,356
68,003
128
O U R I M PA C T
2022 BY THE NUMBERS
3.4 MILLION
PATIENTS SERVED
$13.4 BILLION
REVENUES
1,700+
PROVIDERS
OF PHYSICIAN
SERVICES
$734
MILLION
INVESTMENT IN
EQUIPMENT, FACILITY
EXPANSIONS AND
RENOVATIONS
94,000
EMPLOYEES, GLOBALLY
21,000
NURSES
ACUTE
CARE
BEHAVIORAL
HEALTH
312,000 inpatient
admissions
Over 730,000 total
patients served
1.6 million
patient days
6.2 million
patient days
1.1 million
outpatient visits
(excluding ER)
19 facilities
offering Patriot
Support Programs
33,750 deliveries
7 Accountable
Care Organizations
(ACOs)
391 inpatient beds
added in new and
existing facilities
in the U.S.
UHS is a registered trademark of UHS of Delaware, Inc., a subsidiary of Universal Health Services. Universal Health Services, Inc. is a holding company that operates through its subsidiaries.
All healthcare and management operations are conducted by subsidiaries of Universal Health Services, Inc. Any reference to “UHS” or “UHS facilities” including any statements, articles or other
publications contained herein which relates to healthcare or management operations is referring to Universal Health Services’ subsidiaries. Further, the terms “we,” “us,” “our” or “the company”
in such context similarly refer to the operations of the subsidiaries of Universal Health Services, Inc. Any reference to employment at UHS or employees of UHS refers to employment with one
of the subsidiaries of Universal Health Services, Inc.
2 U N I V E R S A L H E A LT H S E R V I C E S , I N C .
2 U N I V E R S A L H E A LT H S E R V I C E S , I N C .
CORPORATE INFORMATION
EXECUTIVE OFFICES
Universal Corporate Center
367 South Gulph Road
King of Prussia, PA 19406
(610) 768-3300
ANNUAL MEETING
May 17, 2023, 10:00 a.m.
COMPANY COUNSEL
Norton Rose Fulbright
New York, New York
AUDITORS
PricewaterhouseCoopers LLP
Philadelphia, Pennsylvania
TRANSFER AGENT AND REGISTRAR
First Class, Certified or Registered Mail:
Computershare Investor Services
P.O. Box 43078
Providence, RI 02940-3078
Overnight Mail:
Computershare Investor Services
150 Royall St., Suite 101
Canton, MA 02021
1-800-851-9677
Shareholder website:
www.computershare.com/investor
Shareholder online inquiries:
https://www-us.computershare.com/
investor/Contact
TDD: Hearing Impaired # 1-800-231-5469
Please contact Computershare for prompt
assistance on address changes, lost
certificates, consolidation of duplicate
accounts or related matters.
INTERNET ADDRESS
The Company can be accessed online
at uhs.com.
LISTING
Class B Common Stock: New York Stock
Exchange under the symbol UHS
PUBLICATIONS
For copies of the Company’s Annual Report,
Form 10-K, Form 10-Q, quarterly earnings
releases, and proxy statements, please call
1-800-874-5819, or write
Investor Relations
Universal Health Services, Inc.
Universal Corporate Center
367 South Gulph Road
King of Prussia, PA 19406
FINANCIAL COMMUNITY INQUIRIES
The Company welcomes inquiries from
members of the financial community seeking
information on the Company. These should be
directed to Steve Filton, Chief Financial Officer.
DISCLOSURE UNDER 303A.12(a)
In accordance with Section 303A.12(a) of The
New York Stock Exchange Listed Company
Manual, we submitted our CEO’s Certification
to the New York Stock Exchange in 2022.
Additionally, contained in Exhibits 31.1 and 31.2
of our Annual Report on Form 10-K filed with
the Securities and Exchange Commission on
February 27, 2023, are our CEO’s and CFO’s
Certifications regarding the quality of our public
disclosure under Section 302 of the Sarbanes-
Oxley Act of 2002.
F A C I L I T Y L O C A T I O N S
U N I T E D S T A T E S
Alabama | Alaska | Arizona
Arkansas | California
Colorado | Connecticut
U N I T E D K I N G D O M
England
Bristol | Cheshire
County Durham | Derbyshire
Delaware | District of Columbia
Dorset | Essex
Florida | Georgia | Idaho
Illinois | Indiana | Iowa
Kentucky | Louisiana
Massachusetts | Michigan
Minnesota | Mississippi
Missouri | Nevada
Gloucestershire | Hampshire
Hertfordshire | Kent
Lancashire | Leicestershire
Lincolnshire | London
Greater Manchester | North Yorkshire
Northumberland | Nottinghamshire
New Jersey | New Mexico
Somerset | South Yorkshire
North Carolina | North Dakota
Staffordshire | Suffolk | Surrey
Ohio | Oklahoma | Oregon
Teesside | West Midlands | West Yorkshire
Pennsylvania | South Carolina
Scotland
Tennessee | Texas
Utah | Virginia | Washington
West Virginia | Wisconsin
Wyoming
P U E R T O R I C O
Angus | Dumfries and Galloway
Stirling
Wales
Flintshire | Gwent
U N I V E R S A L H E A LT H S E R V I C E S , I N C .
Corporate Center
367 South Gulph Road
King of Prussia, PA 19406
uhs.com
Cygnet Health Care
Third Floor - 4 Millbank
SW1P 3JA London
United Kingdom
cygnethealth.co.uk
2022
ANNUAL REPORT AND ESG PROFILE
AN EXPANDING NETWORK OF CARE
U N I V E R S A L H E A LT H S E R V I C E S , I N C .