Universal Health Services reported a second quarter of 2026 with adjusted EPS of $5.98 (up 12%) and adjusted EBITDA less NCI of $678 million (up 5%), featuring a welcome rebound in acute-care volumes (same-facility adjusted admissions up 2.9%) and behavioral trends consistent with recent quarters, alongside strong expense management. Results were flattered by a ~$100 million out-of-period Florida DPP benefit; excluding it, EBITDA fell about $63 million short of internal expectations owing to ~$28 million of higher malpractice reserves, ~$20 million from the San Antonio behavioral facility (which lost reimbursement at end-April pending 2027 recertification) and ~$15 million from a slower Cedar Hill (Washington, D.C.) de novo ramp. Management trimmed full-year adjusted EBITDA-less-NCI guidance by ~$50 million to a $2.66 billion midpoint, as ~$150 million of additional Medicaid supplemental benefit (lifting the full-year total to ~$1.5 billion) was more than offset by ~$200 million of adverse items, and lowered same-facility volume ranges modestly for both segments. Exchange volumes fell ~15%, converting almost entirely to self-pay and lifting the full-year exchange impact estimate to ~$85 million. Strategically, UHS is leaning into outpatient growth, awaiting the mid-August Talkspace close to build the first end-to-end behavioral continuum (adding 6,000+ virtual therapists), adding acute capacity (177 new beds and the newly opened Palm Beach Gardens hospital), expanding freestanding EDs and ASCs, and preparing for 2028 OBBBA Medicaid reductions via cost discipline, revenue-cycle technology and a shift toward less Medicaid-centric services, while aggressively repurchasing shares ($320 million in the quarter) amid a share-price dislocation.
Thank you. Good morning. Welcome to Universal Health Services Q2 2026 Earnings Conference Call. I'm Darren Lehrich, Vice President of Investor Relations. With me this morning are our President and CEO, Marc Miller, and our Chief Financial Officer, Steve Filton. Marc and Steve will provide some prepared remarks. Then we will open it up for Q&A. During today's conference call, we will be using words such as believes, expects, anticipates, estimates, and similar words that represent forecasts, projections, and forward-looking statements. For anyone not familiar with the risks and uncertainties inherent in these forward-looking statements, we recommend a careful reading of the section on risk factors and forward-looking statements and risk factors Form 10-K for the year ended December 31st, 2025, and our Form 10-Q for the quarter ended March 31st, 2026.
In addition, we may reference during today's call measures such as EBITDA, adjusted EBITDA, adjusted EBITDA net of NCI, and adjusted net income attributable to UHS, which are non-GAAP financial measures. Information and reconciliations of these non-GAAP financial measures to net income attributable to UHS can be found in yesterday's press release and our supplemental materials on our website. With that, let me now turn it over to Marc for some introductory remarks.
Thanks, Darren. Good morning. Thank you for joining today's call. I'm pleased to share some operational and strategic highlights from the Q2 before Steve discusses financial highlights. Overall, our Q2 of 2026 featured a rebound in acute care volumes, behavioral health volumes that were consistent with recent trends, continued expense management, and exchange trends that progressed in line with our expectations. During the quarter, we also benefit from the approval of the Florida DPP program for 2025, which was not contemplated in our original outlook. From an operational perspective, I want to highlight the investments we are making to expand capacity in the communities that we serve.
We continue to see favorable demand trends across our markets, supporting confidence in the long-term need for capacity in both inpatient and outpatient service lines in our acute care and behavioral health segments, allowing us to extend our footprint with access points that are convenient to our patients and help further align us with physician stakeholders. In acute care, we added 177 licensed beds in three hospitals during the Q2. These new beds represent a 2.5% increase to our same facility bed capacity and position us to respond to strong demand in these communities. In May, we officially opened the Alan B. Miller Medical Center in Palm Beach Gardens, Florida, and we are very pleased to have achieved Joint Commission accreditation for this de novo hospital in July, reflecting sound execution by our local team.
We've experienced a strong reception from the Palm Beach Gardens community and are excited to serve this fast-growing area of Florida with the newest and one of the most advanced medical campuses in the region. Within our behavioral health segments, we continue to make strong progress in our integration planning for the pending Talkspace acquisition, which we expect to close in mid-August of this year. Talkspace represents not only a unique opportunity for us to accelerate our presence in the outpatient market, but also creates the nation's first end-to-end continuum of behavioral healthcare services from acute inpatient and residential services, inpatient, in-person outpatient care, and soon with Talkspace, virtual services nationally.
As Steve will detail shortly, we've increased our professional and general liability reserves and now assume higher anticipated operating losses at our de novo hospital in Washington, D.C., as well as San Antonio, Texas Behavioral Hospital that we are in the process of recertifying in order to reestablish much needed mental health services capacity in that region of Texas. Accountability and delivery of high quality care are at the core of our purpose. We are deeply committed to excellence and to addressing any instances that fall short. Overall, the broad portfolio continues to perform well operationally and clinically. We have a 46-year track record of strong quality and safety performance across both our behavioral health and acute care divisions.
Before passing it over to Steve, I want to make a brief comment about our share repurchase activity during the Q2, which accelerated to $320 million as compared to $127 million in the Q1 of 2026. The recent dislocation in our share price represents a compelling opportunity to deploy capital and retire UHS shares at heavily discounted levels. Given the strength of our balance sheet and the confidence we have in our ability to generate cash flow, we intend to remain highly active with our share repurchase program at these levels. In closing, I want to thank the UHS team for their focus on quality patient care and for their ability to adapt in such a dynamic 2026 operating environment.
I want to emphasize that our strategy remains steadfast: to invest in high-growth markets, expand access to care, operate efficiently, and create long-term value for patients, employees, and shareholders. I remain very optimistic about our long-term outlook, given the quality and strength of our portfolio, the experience of our management team, and the underlying demand characteristics of the markets that we serve. With that, I'll now turn the call over to Steve G. Filton for more details on the quarter.
Thanks, Marc. I will highlight a few financial and operational trends before opening the call up to questions. The company reported adjusted EPS of $5.98 for the Q2 of 2026, representing growth of 12% on a year-over-year basis. Q2 adjusted EBITDA less NCI was $678 million, representing growth of 5% on a year-over-year basis. When excluding the $100 million out of period Florida DPP benefit not contemplated in our guidance, our Q2 adjusted EBITDA less NCI fell short of our internal expectations, primarily attributable to three items approximating $63 million, including $28 million attributable to higher professional and general liability reserves, approximately $20 million attributable to the San Antonio Behavioral Facility, and approximately $15 million attributable to a continued slower ramp-up of our Cedar Hill Regional Medical Center GW Health de novo facility in Washington, D.C.
At the segment level, on a same-facility basis, adjusted admissions at our acute care hospitals increased 2.9% as compared to the Q2 of 2025. Volume performance improved sequentially from the Q1 of 2026 and was broad-based geographically. Same-facility acute care emergency department visits increased 4%, while same-facility surgeries decreased 0.8% as compared to the Q2 of 2025. Although surgical volumes continue to be somewhat muted, the trend in the Q2 improved slightly compared to the past several quarters. From a service line perspective, we experienced positive trends in certain higher acuity inpatient service lines, notably urology, neurology, and cardiology as compared to last year's Q2. Payer mix trends remain consistent with recent quarters, with stronger growth in Medicare and Managed Medicare, modest growth in managed care volumes, excluding the exchanges, and slightly lower Medicaid volumes.
Year-to-date, same-store facility acute care adjusted admissions growth through the Q2 of 2026 was 1.4%, and we believe it's appropriate to fine-tune our volume guidance for the full year to a range of 1.5%-2.5%, or 50 basis points lower at the midpoint of our prior range to reflect the year-to-date trends. On a same-facility basis, net revenue in our acute care segment during the Q2 of 2026 increased 8.2% and increased 5.9%, excluding the impact of our health plan. Acute care same-facility revenue per adjusted admission increased by 3.0% during the Q2 of 2026 on a reported basis and increased 2.7% after excluding net out-of-period Medicaid supplemental benefits from both periods. Acute care rate growth continues to track in line with our expectations overall. Operating expenses were well managed across labor, supply, and other expense categories.
Same-facility acute care salaries, wages, and benefits expense per adjusted admission increased 2.7%, and supply expense per adjusted admission decreased 2.5% over last year's Q2. Contract labor was 2.5% of acute care segment revenue, or 20 basis points lower year-over-year. Other operating expenses increased primarily due to our health plan, which experienced revenue growth of approximately 35%. For the Q2 of 2026, our acute care performance resulted in 8.2% same-facility segment EBITDA growth. Excluding the out-of-period supplemental program benefit from both periods, Q2 2026 same-facility acute care segment EBITDA increased 6.3% on a year-over-year basis.
In our acute care segment, the net out-of-period benefit related to supplemental payments was approximately $7 million, comprised of approximately $23 million in the Q2 of 2026 from the Florida program, as compared to approximately $16 million of out-of-period amounts in the Q2 of 2025 related to other state programs. With respect to health insurance exchange trends during the Q2 of 2026, we estimate an impact of approximately $20 million, which was in line with our expectations. Exchange volumes declined approximately 15% as compared to the Q2 of 2025. The reduction in the number of exchange volumes corresponds to the increase in self-pay volumes during the Q2. Based on the trends during the first half of 2026, we expect the full year pre-tax impact to be within the upper half of our originally contemplated guidance range, or approximately $85 million.
While the first half decline in exchange volumes was below the 25%+ range in our original forecast, we believe our impact estimate is supported by the trends we have observed year-to-date in our business and other dynamics, such as shifts in the metal tier that are playing out within the exchange market. As it relates to our acute care de novo hospitals, our Palm Beach Gardens facility opened in May, and Q2 start-up losses at this facility were in line with our expectations. In Washington, D.C., Cedar Hill Regional Medical Center entered the same facility hospital group in the Q2 and continued to ramp at a slower than expected pace. Q2 performance at Cedar Hill represented an improvement of approximately $15 million year-over-year, although results there were similar to our Q1.
Turning to our behavioral health segment results during the Q2 of 2026, same facility net revenue increased 7.4%, supported by a 6.1% increase in same facility revenue per adjusted patient day and a 1.4% increase in same facility adjusted patient days as compared to the Q2 of 2025. Year-to-date, same facility adjusted patient day growth through the Q2 of 2026 was 1.5%, and we believe it's appropriate to fine-tune our volume guidance for the full year to a range of 1.0%-2.0%, or 100 basis points lower than the prior range at the midpoint to reflect year-to-date trends and an outlook for second half volumes to be similar to Q2 performance. Same facility behavioral health segment EBITDA increased 9.0% in the Q2 of 2026.
Excluding the net benefit from out-of-period supplemental payments, same facility revenue per adjusted patient day increased 5.3%, and same facility segment EBITDA increased 5.7% on a year-over-year basis. In our behavioral health segment, the net out-of-period benefit related to supplemental payments was approximately $18 million, comprised of approximately $77 million in the Q2 of 2026 from the Florida program, as compared to approximately $59 million of out-of-period amount in the Q2 of 2025, related primarily to the Tennessee program. For the Q2 of 2026, behavioral health segment facilities, salaries, wages, and benefits per adjusted patient day increased 4.8% on a year-over-year basis, showing improvement on a sequential basis as headcount moderated further to 2% growth.
In California, based on our success in hiring and training, we remain on track with the $35 million impact that we contemplated in our original 2026 outlook with respect to the state's nurse staffing ratio requirements that went into effect June 1. As it relates to our behavioral health hospital in Texas that is in the process of getting recertified, we stopped receiving reimbursement at the end of April and do not expect to receive reimbursement from government or managed care sources until we regain certification, which we anticipate in 2027. The facility will operate in the meantime with limited patient census, and therefore, we will incur operating losses and the facility will be excluded from our same facility performance. During the Q2 of 2026, pre-tax losses at this facility totaled approximately $10 million, including staff severance costs.
We expect operating losses to run between $5 million and $10 million per quarter for the balance of 2026. During calendar year 2025, this facility's EBITDA was approximately $25 million. Moving on to cash flow and balance sheet highlights. Q2 cash generated from operating activities was $44.3 million, as compared to $549 million during the same period last year. During the Q2 of 2026, we spent $228 million on capital expenditures, reflecting the de novo hospital opening and bed capacity expansions Marc referred to earlier. During the Q2 of 2026, we acquired 1.89 million of our shares at a total cost of $320 million. As of June 30, 2026, we had $978 million of repurchase authorization available pursuant to our stock buyback program, and we expect to remain active with share repurchase throughout 2026.
From a balance sheet perspective, we end the quarter with cash of $139 million, total debt of $4.85 billion, and net leverage of 1.8 times. As of June 30, 2026, we had $1.27 billion of additional borrowing capacity available pursuant to our revolving credit facility. Turning to our outlook for 2026, we are updating our financial operating forecast to reflect year-to-date performance and recent developments. The components of our updated 2026 guidance compared to our previous forecast can be found in our Q2 earnings press release and our supplemental earnings material. Our updated guidance represents approximately 7% revenue growth, 3% EBITDA less NCI growth, and 6% EPS growth at the midpoint.
Focusing my remarks specifically on adjusted EBITDA less NCI, our updated 2026 forecast is in a range of $2.61 billion-$2.72 billion, representing a decrease of approximately $50 million from our prior outlook at the $2.66 billion midpoint. At a high level, we include approximately $150 million of additional Medicaid supplemental net benefit for the full year that is offset by approximately $200 million of adverse items not originally contemplated in our outlook. The primary drivers of these factors are as follows. First, we now expect the net benefit for Medicaid supplemental funding to be approximately $1.5 billion for the year, or an increase of approximately $150 million from our prior outlook.