KING OF PRUSSIA, PA — Universal Health Services Inc. (NYSE: UHS) reported a 17.2% decline in third-quarter profit despite higher patient volumes and revenue, as weaker earnings and increased liability reserves weighed on the hospital operator’s results for the three months ended September 30, 2026.
Net income attributable to UHS fell to $308.7 million, or $5.22 per diluted share, from $373 million, or $5.86 per share, a year earlier. Revenue increased 5.3% to $4.73 billion from $4.50 billion, the company reported October 27.
Adjusted earnings before interest, taxes, depreciation and amortization, excluding noncontrolling interests, declined 6.9% to $624.6 million from $670.6 million.
The results included a net favorable pretax impact of approximately $21 million from two items outside the company’s previous operating forecast.
UHS recorded a $47 million benefit from increased Medicaid supplemental payments, primarily involving Washington, D.C., and California. That was partially offset by a $26 million increase in reserves for professional and general liability claims, primarily related to a tentative settlement involving its Cumberland Hospital subsidiary.
The prior-year quarter included a larger net favorable pretax impact of $55 million, consisting of $90 million in Medicaid reimbursements partially offset by $35 million in additional liability reserves.
After adjustments for investment gains and tax-related items in the prior-year period, third-quarter 2025 net income was $362.3 million, or $5.69 per diluted share. No comparable non-GAAP adjustments applied to the third quarter of 2026.
Operating results showed continued patient demand across the company’s acute care and behavioral health businesses, although revenue growth differed between the segments.
At acute care hospitals owned during both periods, adjusted admissions and adjusted patient days each increased 4.9% from a year earlier.
However, net revenue per adjusted admission and per adjusted patient day each declined 1.7%, limiting same-facility acute care revenue growth to 4.7%.
The behavioral health business recorded a 2.5% increase in adjusted admissions and a 2.1% increase in adjusted patient days.
Revenue per adjusted admission increased 1.7%, while revenue per adjusted patient day rose 2.1%. Same-facility behavioral health revenue increased 4%.
For the first nine months of 2026, UHS generated $13.87 billion in revenue, up 7.7% from $12.88 billion a year earlier.
Nine-month net income attributable to UHS declined to $1.016 billion from $1.043 billion, although diluted earnings per share increased to $16.86 from $16.07.
Adjusted net income was $1.014 billion, or $16.83 per diluted share, compared with $1.030 billion, or $15.87 per share, in the prior-year period.
Adjusted EBITDA excluding noncontrolling interests increased to $1.951 billion from $1.912 billion.
For the nine-month period, same-facility acute care revenue increased 7%, supported by a 2.6% rise in adjusted admissions and a 2.4% increase in revenue per adjusted admission.
Behavioral health revenue increased 6.2% on a same-facility basis, reflecting a 1.4% increase in adjusted admissions and a 4.9% increase in revenue per adjusted admission.
Cash generation strengthened despite the decline in reported net income.
Net cash provided by operating activities increased 14.9% to $1.481 billion during the first nine months, compared with $1.290 billion a year earlier.
The improvement included favorable changes in accounts receivable, accrued insurance expenses and income taxes, partially offset by changes in other working capital accounts.
UHS also continued returning capital to shareholders through stock repurchases.
During the third quarter, the company repurchased approximately 1.35 million Class B common shares for $242.1 million, at an average price of about $179 per share.
Repurchases during the first nine months totaled 3.915 million shares for approximately $689.6 million, averaging $176 per share.
As of September 30, UHS had approximately $735.4 million remaining under its share repurchase authorization.
The company also reported $1.187 billion in available borrowing capacity under its $1.5 billion revolving credit facility, after accounting for $310 million in outstanding borrowings and $3 million in letters of credit.
Separately, UHS provided an update on litigation involving Cumberland Hospital for Children and Adolescents in Virginia, an indirect subsidiary facing lawsuits alleging inappropriate sexual contact during medical examinations by former medical director Dr. Daniel Davidow, an independent contractor.
In September 2024, a jury found Davidow and Cumberland liable in a trial involving three plaintiffs, awarding $60 million in compensatory damages, $180 million in trebled damages under the Virginia Consumer Protection Act and $120 million in punitive damages.
The court subsequently reduced the punitive damages to $1.05 million under Virginia law.
Approximately 53 additional claimants have similar allegations pending in the litigation.
UHS disclosed that it reached a tentative settlement in August 2026 to resolve outstanding claims involving the current claimants, subject to final release agreements and required court approvals.
The aggregate settlement terms are confidential. UHS expects commercial excess insurance to cover a substantial portion of the settlement and related expenses, with the remainder covered by existing litigation reserves.
The $26 million reserve increase recorded during the third quarter was primarily attributable to that tentative agreement.
The company’s latest results show revenue and patient volumes continuing to expand, while quarterly earnings declined amid changes in reimbursement, revenue per patient and liability-related expenses.
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