Universal Health Services, Inc. Class B

Core operations · Capacity utilization and efficiency

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... 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.

Human capital and workforce · Talent acquisition and retention

Our performance depends on our ability to recruit and retain quality 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.

Human capital and workforce · Labor relations and union negotiations

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.

Human capital and workforce · Key personnel dependence and succession

In connection with the operations at our George Washington University Hospital and Cedar Hill Regional Medical Center located in Washington, D.C., we recently agreed to the framework of an agreement... With this transaction, there is a risk that some physicians who have traditionally treated their patients at the District Hospitals may choose to not join or remain with the new physician group or treat their patients at the District Hospitals.

Corporate governance · Shareholder rights and activism

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... 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, there are potential conflicts of interest in overseeing the management of our company.

Organizational and management · Leadership and management changes

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.

Customer and revenue · Changing customer preferences and behavior

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... If any of our hospitals achieve poor 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.

Market position and competition · Pricing pressure and margin compression

Controls designed to reduce inpatient services and increasing rates of 'denials' may reduce our revenues... In addition, we have been experiencing increasing rates of denied claims ('denials') from managed care payers, including managed Medicare, which have reduced our net revenues and increased our operating costs.

Customer and revenue · Revenue concentration in specific products or segments

A significant portion of our revenue is produced by facilities located in Texas, Nevada and California... On a combined basis, these facilities contributed 16%, 17%, and 11% of our consolidated net revenues during 2025 and 2024, respectively. This geographic concentration makes us particularly sensitive to regulatory, economic, public health, environmental and competitive conditions in those states.

Market position and competition · Competitive pressure and market share loss

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... 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.

Market and investment · Interest rate and yield curve risk

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... Our $700 million, 1.65% senior notes mature on September 1, 2026. Market interest rates have increased significantly since the 2026 Notes were issued in 2021.

Credit and liquidity · Access to capital and financing

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.

Credit and liquidity · Credit risk and customer defaults

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... 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.

International and currency · International operations and emerging markets

We also operate health care facilities in the United Kingdom where the National Health Service (the 'NHS') is the principal provider of healthcare services... 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, data protection as well as other areas.

Cybersecurity and data protection · Third party data security and vendors

Our systems, in turn, interface with and rely on third-party systems that we do not control, including medical devices and other processes supporting the interoperability of healthcare infrastructures. Third parties to whom we outsource certain of our functions, or with whom our systems interface and who may, in some instances, store our sensitive and confidential data, are also subject to the risks outlined above.

Cybersecurity and data protection · Data breaches and cyber attacks

A cyber security incident could cause a violation of HIPAA, breach of patient or other persons privacy, or other negative impacts. We rely extensively on our information technology ('IT') systems to manage clinical and financial data... Our IT systems, and the networks and information systems of third parties that we rely on, 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.

Economic and market conditions · Inflation and deflation pressures

As inflationary pressures increase our operating costs, we may be unable to pass on the increased costs associated with providing healthcare services to our patients. We are experiencing inflationary pressures, primarily in personnel costs, and we anticipate continuing impacts on other cost areas within the next twelve months.

Geopolitical and trade · Government funding and budget changes

Beginning in federal fiscal year 2028, the Medicaid disproportionate share hospital ('DSH') allotment to the states from federal funds will be reduced. During the reduction period, state Medicaid DSH allotments from federal funds will be reduced by $8 billion.

Economic and market conditions · Economic recession and downturns

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.

Data and privacy · Data protection and privacy laws

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.