Tenet Healthcare Corporation
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Financial statements
data from SEC XBRL filings. Values are as-reported; restatements supersede originals.
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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
INTRODUCTION TO MANAGEMENT’S DISCUSSION AND ANALYSIS
The purpose of this section, Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”), is to provide a narrative explanation of our financial statements that enables investors to better understand our business, to enhance our overall financial disclosures, to give context to the analysis of our financial information, and to provide information about the quality of, and potential variability of, our financial condition, results of operations and cash flows. MD&A, which should be read in conjunction with the accompanying Condensed Consolidated Financial Statements, includes the following sections:
•Management Overview
•Forward-Looking Statements
•Sources of Revenue for Our Hospital Operations and Services Segment
•Results of Operations
•Liquidity and Capital Resources
•Critical Accounting Estimates
Our business consists of our Hospital Operations and Services (“Hospital Operations”) segment and our Ambulatory Care segment. Our Hospital Operations segment is comprised of our acute care and specialty hospitals, a network of employed physicians and ancillary outpatient facilities. At March 31, 2026, our subsidiaries operated 50 hospitals serving primarily urban and suburban communities in eight states. Our Hospital Operations segment also included 132 outpatient facilities, namely urgent care centers, imaging centers, off‑campus hospital emergency departments and micro‑hospitals, at March 31, 2026. In addition, our Hospital Operations segment provides revenue cycle management and value-based care services to hospitals and other healthcare facilities, health systems, physician practices, employers and other clients through Conifer Health Solutions, LLC (“Conifer”).
Our Ambulatory Care segment, through USPI Holding Company, Inc. (together with its subsidiaries, “USPI”), held ownership interests in 541 ambulatory surgery centers (each, an “ASC”), 407 of which are consolidated, and 26 surgical hospitals, eight of which are consolidated, in 37 states at March 31, 2026. USPI’s facilities offer a range of procedures and service lines, including, among other specialties: orthopedics, total joint replacement, and spinal and other musculoskeletal procedures; gastroenterology; pain management; otolaryngology (ear, nose and throat); ophthalmology; and urology.
Unless otherwise indicated, all financial and statistical information included in MD&A relates to our continuing operations, with dollar amounts expressed in millions (except per adjusted admission and per adjusted patient day amounts). Continuing operations information includes the results of all facilities operated during any portion of the periods presented, and it reflects the performance of those facilities only for the time periods in which we operated them. Continuing operations information excludes the results of our hospitals and other businesses classified as discontinued operations for accounting purposes. We believe this presentation is useful to investors because continuing operations information reflects the impact of the addition or disposition of individual hospitals and other operations on our volumes, revenues and expenses.
In certain cases, information presented in MD&A for our Hospital Operations segment is described as presented on a same‑hospital basis, which includes facilities we operated for the entirety of the periods presented. For the three-month periods ended March 31, 2026 and 2025, information presented on a same‑hospital basis includes the results of our same 49 hospitals and those outpatient centers we operated throughout both periods, and excludes the results of: Florida Coast Medical Center, the acute care hospital we opened in Florida in September 2025; businesses classified as discontinued operations for accounting purposes during those periods; and other ancillary facilities acquired or divested during the reporting periods that have a limited financial or operational impact. We present same‑hospital data because we believe it provides investors with useful information regarding the performance of our current portfolio of hospitals and other operations that are comparable for the periods presented. Furthermore, same‑hospital data may more clearly reflect recent trends we are experiencing with respect to volumes, revenues and expenses exclusive of variations caused by the addition or disposition of individual hospitals and other operations.
Our Ambulatory Care segment reports growth data on a same-facility systemwide basis, which includes both consolidated and unconsolidated facilities held at the end of the period, as well as facilities acquired during the period on a pro forma basis as if owned for the full period. Divested facilities are generally excluded; however, management may include facilities sold near the end of the period when, in its judgment, their inclusion provides financial statement users with a better understanding of the segment’s performance. This approach offers insights into the performance of our current portfolio by
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excluding variations from facility acquisitions or dispositions. Although we do not record the revenues of unconsolidated facilities, this information is important for understanding the financial performance of our Ambulatory Care segment, as these revenues form the basis for calculating management services revenues and equity in earnings of unconsolidated affiliates. Additionally, this presentation enhances comparability across periods.
We present certain operational metrics and statistics in order to provide additional insight into our operational performance efficiency and to help investors better understand management’s view and strategic focus. We define these operational metrics and statistics as follows:
Adjusted admissions—represents actual admissions in the period adjusted to include outpatient services provided by facilities in our Hospital Operations segment by multiplying actual admissions by the sum of gross inpatient revenues and outpatient revenues and dividing the result by gross inpatient revenues;
Adjusted patient days—represents actual patient days in the period adjusted to include outpatient services provided by facilities in our Hospital Operations segment by multiplying actual patient days by the sum of gross inpatient revenues and outpatient revenues and dividing the result by gross inpatient revenues; and
Utilization of licensed beds—represents patient days divided by the number of days in the period divided by average licensed beds.
We also present certain metrics as a percentage of net operating revenues because a significant portion of our operating expenses are variable, and we present certain metrics on a per adjusted admission and per adjusted patient day basis to show trends other than volume.
MANAGEMENT OVERVIEW
OPERATING ENVIRONMENT AND TRENDS
In the Management Overview section of MD&A in our Annual Report on Form 10-K for the year ended December 31, 2025 (“Annual Report”), we describe several key trends that continue to impact the healthcare industry, along with other factors affecting our business environment and operations, including the potential impact of changes in federal and state healthcare laws, regulations, funding policies and reimbursement practices, as well as the influence of geopolitical dynamics, trade tensions, tariffs and export control rules on pricing and availability within global supply chains. These challenges underscore the importance of operational discipline and adaptive cost management as we navigate the evolving healthcare landscape.
STRATEGIES
Expanding Our Ambulatory Care Segment—We continue to focus on opportunities to expand our Ambulatory Care segment through acquisitions, organic growth in our physician relationships and service lines, construction of new outpatient centers and strategic partnerships. We believe USPI’s ASCs and surgical hospitals offer many advantages to patients and physicians, including greater affordability, predictability, flexibility and convenience. Moreover, due in part to advancements in surgical techniques, medical technology and anesthesia, as well as the lower cost structure and greater efficiencies that are attainable at a specialized outpatient site, we believe the volume and complexity of surgical cases performed in an outpatient setting will continue to increase over time. Historically, our outpatient services have generated significantly higher margins for us than inpatient services.
Driving Growth in Our Hospital Operations Segment—We remain committed to better positioning our hospitals and competing more effectively in the ever‑evolving healthcare environment by focusing on driving performance through operational effectiveness, investing in our physician enterprise, particularly our specialist network, enhancing patient and physician satisfaction, growing our higher‑demand clinical service lines, expanding patient and physician access, and optimizing our portfolio of assets. We believe our efforts in these areas improve the quality of care we deliver and enhance growth.
Improving the Customer Care Experience—As consumers continue to become more engaged in managing their health, we recognize that understanding what matters most to them and earning their loyalty is imperative to our success. As such, we have enhanced our focus on treating our patients as traditional customers by: (1) establishing networks of physicians and facilities that provide convenient access to services across the care continuum; (2) expanding service lines aligned with growing community demand, including a focus on aging and chronic disease patients; (3) offering greater affordability and predictability, including simplified registration and discharge procedures, particularly in our outpatient centers; (4) improving our culture of service; and (5) offering health programs and educational materials tailored to meet the needs of the communities we serve.
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Recent advancements in technology and applications in healthcare have allowed us to accelerate the adoption of artificial intelligence (“AI”) and Generative AI-enabled tools in areas such as clinical care coordination, medical documentation, revenue cycle management and administrative services. When used responsibly, we believe AI has the potential to enhance our business processes and support efficient delivery of high‑quality care.
Improving Profitability—We continue to focus on growing patient volumes and effective cost management as a means to improve profitability. We believe that emphasis on higher‑demand clinical service lines, focus on expanding our ambulatory care business, cultivation of our culture of service and utilizing contracting strategies that create shared value with payers should help us grow our patient volumes over time. We are also continuing to pursue new opportunities to enhance efficiency, including further integration of enterprise‑wide centralized support functions, outsourcing additional functions unrelated to direct patient care and reducing clinical contract variation.
Managing Our Capital Structure—All of our long‑term debt has a fixed rate of interest, except for outstanding borrowings under our senior secured revolving credit facility (the “Credit Agreement”), of which we had none at March 31, 2026. In addition, the maturity dates of our notes are staggered from 2027 through 2033. We believe that our capital structure helps to minimize the near‑term impact of increases in interest rates, and the staggered maturities of our debt allow us to retire or refinance our debt over time.
In the three months ended March 31, 2026, we repurchased 1.346 million shares of our common stock pursuant to our share repurchase program. This program has no expiration date, it does not obligate us to acquire any particular amount of common stock, and it may be suspended for periods or discontinued at any time. At March 31, 2026, there was $1.172 billion available under the program for future repurchases.
Our ability to execute on our strategies and respond to the aforementioned trends in the current operating environment is subject to numerous risks and uncertainties, all of which may cause actual results to be materially different from expectations. For information about risks and uncertainties that could affect our results of operations, see the Forward‑Looking Statements and Risk Factors sections in Part I of our Annual Report.
RECENT RESULTS OF OPERATIONS
The following table presents selected operating statistics for our Hospital Operations and Ambulatory Care segments on a continuing operations basis:
| Three Months Ended March 31, | Increase (Decrease) | ||||||||||||||||||||
| 2026 | 2025 | ||||||||||||||||||||
| Hospital Operations – hospitals and related outpatient facilities: | |||||||||||||||||||||
| Number of hospitals (at end of period) | 50 | 49 | 1 | (1) | |||||||||||||||||
| Total admissions | 120,899 | 120,090 | 0.7 | % | |||||||||||||||||
| Adjusted admissions | 215,353 | 213,039 | 1.1 | % | |||||||||||||||||
| Paying admissions (excludes charity and uninsured) | 115,610 | 115,285 | 0.3 | % | |||||||||||||||||
| Charity and uninsured admissions | 5,289 | 4,805 | 10.1 | % | |||||||||||||||||
| Admissions through emergency department | 92,179 | 91,387 | 0.9 | % | |||||||||||||||||
| Emergency department visits, outpatient | 458,352 | 474,619 | (3.4) | % | |||||||||||||||||
| Total emergency department visits | 550,531 | 566,006 | (2.7) | % | |||||||||||||||||
| Total surgeries | 66,019 | 66,255 | (0.4) | % | |||||||||||||||||
| Patient days — total | 599,452 | 605,786 | (1.0) | % | |||||||||||||||||
| Adjusted patient days | 1,024,706 | 1,036,716 | (1.2) | % | |||||||||||||||||
| Average length of stay (days) | 4.96 | 5.04 | (1.6) | % | |||||||||||||||||
| Average licensed beds | 12,499 | 12,435 | 0.5 | % | |||||||||||||||||
| Utilization of licensed beds | 53.3 | % | 54.1 | % | (0.8) | % | (1) | ||||||||||||||
| Total visits | 1,351,868 | 1,405,921 | (3.8) | % | |||||||||||||||||
| Paying visits (excludes charity and uninsured) | 1,250,348 | 1,310,928 | (4.6) | % | |||||||||||||||||
| Charity and uninsured visits | 101,520 | 94,993 | 6.9 | % | |||||||||||||||||
| Ambulatory Care: | |||||||||||||||||||||
| Total consolidated facilities (at end of period) | 415 | 387 | 28 | (1) | |||||||||||||||||
| Total consolidated cases | 478,211 | 454,288 | 5.3 | % | |||||||||||||||||
| (1) | The change is the difference between the 2026 and 2025 amounts or percentages presented. | |||||||
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Total admissions increased by 809, or 0.7%, total emergency department visits decreased by 15,475, or 2.7%, and total surgeries decreased by 236, or 0.4%, in the three months ended March 31, 2026 compared to the three months ended March 31, 2025.
The 5.3% increase in our Ambulatory Care segment’s total consolidated cases in the three months ended March 31, 2026, as compared to the same period in 2025, was primarily attributable to incremental case volume from newly acquired and developed ASCs and same-facility case volume growth, net of the impact of the closure and sale of certain facilities.
The following table presents net operating revenues by segment on a continuing operations basis:
| Three Months Ended March 31, | Increase (Decrease) | |||||||||||||||||||
| Revenues | 2026 | 2025 | ||||||||||||||||||
| Hospital Operations | $ | 4,048 | $ | 4,029 | 0.5 | % | ||||||||||||||
| Ambulatory Care | 1,320 | 1,194 | 10.6 | % | ||||||||||||||||
| Total | $ | 5,368 | $ | 5,223 | 2.8 | % | ||||||||||||||
Consolidated net operating revenues increased by $145 million, or 2.8%, in the three months ended March 31, 2026 compared to the same period in 2025. The increase of $19 million, or 0.5%, in our Hospital Operations segment’s net operating revenues for the three‑month period in 2026, as compared to the same period in 2025, was primarily attributable to higher patient volumes, partially offset by a less favorable payer mix during the 2026 period.
Net operating revenues in our Ambulatory Care segment increased by $126 million, or 10.6%, in the three months ended March 31, 2026 compared to the same period in 2025. This change was primarily driven by our 2025 and 2026 acquisitions, de novo development and purchases of controlling interests, partially offset by the impact of the closure and sale of certain facilities. Higher net revenue per case during the 2026 period, driven by incremental revenue from negotiated commercial rate increases, higher patient acuity and the addition of new service lines, also contributed to this increase.
The following table presents information about selected operating expenses by segment on a continuing operations basis:
| Three Months Ended March 31, | Increase (Decrease) | |||||||||||||||||
| 2026 | 2025 | |||||||||||||||||
| Hospital Operations: | ||||||||||||||||||
| Salaries, wages and benefits | $ | 1,844 | $ | 1,824 | 1.1 | % | ||||||||||||
| Supplies | 604 | 589 | 2.5 | % | ||||||||||||||
| Other operating expenses, net | 922 | 911 | 1.2 | % | ||||||||||||||
| Total | $ | 3,370 | $ | 3,324 | 1.4 | % | ||||||||||||
| Ambulatory Care: | ||||||||||||||||||
| Salaries, wages and benefits | $ | 330 | $ | 295 | 11.9 | % | ||||||||||||
| Supplies | 357 | 318 | 12.3 | % | ||||||||||||||
| Other operating expenses, net | 200 | 179 | 11.7 | % | ||||||||||||||
| Total | $ | 887 | $ | 792 | 12.0 | % | ||||||||||||
| Total: | ||||||||||||||||||
| Salaries, wages and benefits | $ | 2,174 | $ | 2,119 | 2.6 | % | ||||||||||||
| Supplies | 961 | 907 | 6.0 | % | ||||||||||||||
| Other operating expenses, net | 1,122 | 1,090 | 2.9 | % | ||||||||||||||
| Total | $ | 4,257 | $ | 4,116 | 3.4 | % | ||||||||||||
Rent/lease expense(1): | ||||||||||||||||||
| Hospital Operations | $ | 54 | $ | 53 | 1.9 | % | ||||||||||||
| Ambulatory Care | 48 | 43 | 11.6 | % | ||||||||||||||
| Total | $ | 102 | $ | 96 | 6.3 | % | ||||||||||||
| (1) | Included in other operating expenses, net. | |||||||
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The following table presents information about our Hospital Operations segment’s selected operating expenses per adjusted admission on a continuing operations basis:
| Three Months Ended March 31, | Increase (Decrease) | |||||||||||||||||
| 2026 | 2025 | |||||||||||||||||
| Salaries, wages and benefits per adjusted admission | $ | 8,565 | $ | 8,564 | — | % | ||||||||||||
| Supplies per adjusted admission | 2,808 | 2,763 | 1.6 | % | ||||||||||||||
| Other operating expenses, net per adjusted admission | 4,280 | 4,278 | — | % | ||||||||||||||
| Total per adjusted admission | $ | 15,653 | $ | 15,605 | 0.3 | % | ||||||||||||
Salaries, wages and benefits expense for our Hospital Operations segment increased by $20 million, or 1.1%, in the three months ended March 31, 2026 compared to the same period in 2025. This increase was primarily attributable to annual merit increases for certain of our employees and higher employee benefits costs, partially offset by lower incentive compensation expense, contract labor costs and premium pay as compared to the 2025 period. On a per adjusted admission basis, salaries, wages and benefits expense in our Hospital Operations segment during the three months ended March 31, 2026 was consistent with the three months ended March 31, 2025.
Supplies expense for our Hospital Operations segment increased by $15 million, or 2.5%, during the three months ended March 31, 2026 compared to the three months ended March 31, 2025. This change was primarily due to higher patient volumes during the 2026 period, partially offset by our continued focus on cost‑efficiency measures. These measures include product standardization, contract management, improved utilization, bulk purchases, focused spending and operational improvements, among others. On a per adjusted admission basis, supplies expense increased by 1.6% in the three months ended March 31, 2026 compared to the three months ended March 31, 2025.
Other operating expenses for our Hospital Operations segment increased by $11 million, or 1.2%, in the three months ended March 31, 2026 compared to the same period in 2025. This increase was primarily attributable to an increase in medical fees, as well as higher professional and consulting costs, partially offset by a decrease in malpractice expense during the 2026 period. On a per adjusted admission basis, other operating expenses during the three months ended March 31, 2026 were consistent with the three months ended March 31, 2025.
LIQUIDITY AND CAPITAL RESOURCES OVERVIEW
Cash and cash equivalents were $2.967 billion at March 31, 2026 compared to $2.883 billion at December 31, 2025. Significant cash flow items in the three months ended March 31, 2026 included:
•Net cash provided by operating activities before payments for interest, taxes, restructuring charges, acquisition‑related costs, and litigation costs and settlements of $1.730 billion;
•$180 million of capital expenditures;
•Purchases of businesses or joint venture interests, net of cash acquired, of $121 million;
•$318 million of payments to purchase approximately 1.346 million shares of our common stock;
•Distributions paid to noncontrolling interests totaling $197 million; and
•$549 million in purchases of noncontrolling interests.
Net cash provided by operating activities was $1.641 billion in the three months ended March 31, 2026 compared to $815 million in the three months ended March 31, 2025. Key factors contributing to the change between the 2026 and 2025 periods included the following:
•Contract termination payments received of $540 million in the 2026 period;
•Interest payments that were $75 million lower in the 2026 period; and
•The timing of working capital items.
FORWARD-LOOKING STATEMENTS
This report includes “forward‑looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, each as amended. All statements, other than statements of historical or present facts, that address activities, events, outcomes, business strategies and other matters that we plan, expect, intend, assume, believe, budget, predict, forecast, project, target, estimate or anticipate (and other similar expressions) will, should or may occur in the future are forward‑looking statements, including (but not limited to) disclosures regarding (1) our future
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earnings, financial position, and operational and strategic initiatives, (2) developments in the healthcare industry, and (3) the anticipated impacts of economic and public health conditions and government actions on our business. Forward‑looking statements represent management’s expectations, based on currently available information, as to the outcome and timing of future events, but, by their nature, address matters that are indeterminate. They involve known and unknown risks, uncertainties and other factors, many of which we are unable to predict or control, that may cause our actual results, performance or achievements to be materially different from those expressed or implied by forward‑looking statements. Such factors include, but are not limited to, the risks described in the Forward‑Looking Statements and Risk Factors sections in Part I of our Annual Report.
Readers should keep in mind the risk factors and other cautionary statements in our Annual Report and in this report and not place undue reliance on forward-looking statements. Should one or more of the risks and uncertainties described in these reports occur, or should underlying assumptions prove incorrect, our actual results and plans could differ materially from those expressed in any forward‑looking statement. We specifically disclaim any obligation to revise or update any information contained in a forward‑looking statement or any forward‑looking statement in its entirety except as required by law.
All forward‑looking statements attributable to us are expressly qualified in their entirety by this cautionary information.
SOURCES OF REVENUE FOR OUR HOSPITAL OPERATIONS SEGMENT
We earn revenues for patient services from a variety of sources, primarily managed care payers and the federal Medicare program, as well as state Medicaid programs, indemnity‑based health insurance companies and uninsured patients (that is, patients who do not have health insurance and are not covered by some other form of third‑party arrangement).
The following table presents the sources of net patient service revenues for our hospitals and related outpatient facilities, expressed as percentages of net patient service revenues from all sources on a continuing operations basis:
| Three Months Ended March 31, | Increase (Decrease)(1) | |||||||||||||||||||||||||||||||
| 2026 | 2025 | |||||||||||||||||||||||||||||||
| Medicare | 16.3 | % | 15.7 | % | 0.6 | % | ||||||||||||||||||||||||||
| Medicaid | 10.2 | % | 10.9 | % | (0.7) | % | ||||||||||||||||||||||||||
Managed care(2) | 68.9 | % | 69.0 | % | (0.1) | % | ||||||||||||||||||||||||||
| Uninsured | 0.3 | % | 1.0 | % | (0.7) | % | ||||||||||||||||||||||||||
| Indemnity and other | 4.3 | % | 3.4 | % | 0.9 | % | ||||||||||||||||||||||||||
| (1) | The change is the difference between the 2026 and 2025 percentages presented. | |||||||
| (2) | Includes Medicare and Medicaid managed care programs. | |||||||
Our payer mix on an admissions basis for our hospitals, expressed as a percentage of total admissions from all sources on a continuing operations basis, is presented below:
| Three Months Ended March 31, | Increase (Decrease)(1) | |||||||||||||||||||||||||||||
| Admissions from: | 2026 | 2025 | ||||||||||||||||||||||||||||
| Medicare | 19.4 | % | 19.5 | % | (0.1) | % | ||||||||||||||||||||||||
| Medicaid | 3.7 | % | 3.7 | % | — | % | ||||||||||||||||||||||||
Managed care(2) | 68.5 | % | 69.2 | % | (0.7) | % | ||||||||||||||||||||||||
| Charity and uninsured | 4.4 | % | 4.0 | % | 0.4 | % | ||||||||||||||||||||||||
| Indemnity and other | 4.0 | % | 3.6 | % | 0.4 | % | ||||||||||||||||||||||||
| (1) | The change is the difference between the 2026 and 2025 percentages presented. | |||||||
| (2) | Includes Medicare and Medicaid managed care programs. | |||||||
GOVERNMENT PROGRAMS
The Centers for Medicare & Medicaid Services (“CMS”) is an agency of the U.S. Department of Health and Human Services that administers a number of government programs authorized by federal law; it is the single largest payer of healthcare services in the United States. Medicare is a federally funded health insurance program primarily for individuals 65 years of age and older, as well as some younger people with certain disabilities and conditions, and is provided without regard to income or assets. Medicaid is co‑administered by the states and is jointly funded by the federal government and state governments. Medicaid is the nation’s main public health insurance program for people with low incomes and is the largest
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source of health coverage in the United States. The Children’s Health Insurance Program (“CHIP”), which is also co‑administered by the states and jointly funded, provides health coverage to children in families with incomes too high to qualify for Medicaid, but too low to afford private coverage. Unlike Medicaid, the CHIP is limited in duration and requires the enactment of reauthorizing legislation. Funding for the CHIP has been reauthorized through federal fiscal year (“FFY”) 2029.
Recent and Potential Future Changes to Healthcare Policy
The Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010 (the “Affordable Care Act”), extended health coverage to millions of uninsured legal U.S. residents through a combination of private sector health insurance reforms and public program expansion. The expansion of Medicaid in 40 states (including four of the eight states in which we operate acute care and specialty hospitals) and the District of Columbia is currently financed through:
•negative “productivity adjustments” to the annual market basket updates, which began in 2011 and do not expire under current law; and
•reductions to Medicare and Medicaid disproportionate share hospital (“DSH”) payments, which began for Medicare payments in FFY 2014 and, under current law, are scheduled to commence for Medicaid payments on October 1, 2027.
The expansion of health insurance coverage under the Affordable Care Act resulted in an increase in the number of patients using our facilities with either private or public program coverage and a decrease in uninsured and charity care admissions. Although a substantial portion of our patient volumes and, as a result, our revenues have historically been derived from government healthcare programs, reductions to our reimbursement under the Medicare and Medicaid programs due to the Affordable Care Act have been partially offset by increased revenues from providing care to previously uninsured individuals.
Over the past several years, various laws and regulations lengthened the enrollment period, expanded income eligibility, and provided enhanced premium tax credits to eligible individuals purchasing Affordable Care Act coverage through state and federal health insurance marketplaces – all of which led to higher enrollment numbers, particularly in states that have not expanded Medicaid. Certain of these provisions expired at the end of 2025, resulting in significant increases in health insurance premiums and decreases in enrollment and insurance coverage. These changes have contributed to a rise in the number of uninsured and shifts of individuals from commercial coverage to government program coverage or other more limited coverage alternatives. As a result, we expect an adverse impact on our patient volumes, payer mix and revenues. We continue to monitor the extent to which decreases in insurance coverage will adversely affect these metrics and our overall results of operations.
The impact of The One Big Beautiful Bill Act (“OBBBA”), which was enacted in July 2025, is expected to be far‑reaching, with significant implications for states, their healthcare programs and consumers. Key provisions, the most consequential of which are set to take effect beginning in 2027, include new Medicaid work requirements, caps on state‑directed payments, limits on provider taxes, stricter eligibility checks, financial incentives for accurate state administration and reforms to federal subsidies.
Once the OBBBA is implemented, the Congressional Budget Office anticipates that millions of individuals will lose health insurance by 2034. With respect to Medicaid, these coverage losses may primarily be attributable to policy changes, including the work requirements, more frequent eligibility reviews and limits on eligibility. With respect to individuals who purchase Affordable Care Act coverage through state and federal marketplaces, these losses may primarily be attributable to changes in pre-verification requirements and limits to tax credit eligibility. States are awaiting additional guidance from federal agencies on several provisions and are likely to have variation in the details of how they will implement the provisions of the law.
Because most states must operate with balanced budgets, and the Medicaid program is generally a significant portion of a state’s budget, states can be expected to reevaluate their financial plans for 2026 and beyond. The OBBBA’s legislative and forthcoming regulatory changes may result in material reductions to Medicaid payments, changes and reductions to Medicaid supplemental payment programs, and payment delays. Federal government denials or delayed approvals of state waiver applications or extension requests could also materially impact Medicaid funding levels, most significantly in those states that have expanded Medicaid.
At this time, we cannot estimate the OBBBA’s impact, nor can we predict the timing of that impact, on our future business, financial condition or results of operations, however, we may experience decreased payments (including supplemental
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payments) from Medicare, Medicaid and other government programs, as well as delays in the timing of payments to our facilities.
We also cannot predict whether or how Congress may further modify provisions of or relating to the Affordable Care Act, the OBBBA or other laws affecting the healthcare industry generally, nor can we predict how government agencies or the current administration might further influence, promulgate or implement rules, regulations or executive orders that affect the healthcare industry directly or indirectly.
To the extent the rates paid by governmental payers are materially reduced, the scope of services covered by governmental payers is significantly limited, eligibility or enrollment is further restricted, there are changes to align payment rates for certain procedures across various care settings in a site neutral manner, or we or one or more of our hospitals are excluded from participation in the Medicare or Medicaid program or any other government healthcare program, there may be a material adverse effect on our business, financial condition, results of operations or cash flows. Future federal and state healthcare funding policy changes, along with other initiatives and requirements, may, among other things, adversely affect our patient volumes, case mix and revenue mix, increase our operating costs, materially reduce the reimbursement we receive for our services, diminish our competitive position or require us to expend resources to modify certain aspects of our operations.
Medicare
Medicare offers its beneficiaries different ways to obtain their medical benefits. One option, the Original Medicare Plan (which includes “Part A” and “Part B”), is a fee‑for‑service (“FFS”) payment system. The other option, called Medicare Advantage (sometimes called “Part C” or “MA Plans”), includes health maintenance organizations (“HMOs”), preferred provider organizations (“PPOs”), private FFS Medicare special needs plans and Medicare medical savings account plans. Our total net patient service revenues from operation of the hospitals and related outpatient facilities in our Hospital Operations segment for services provided to patients enrolled in the Original Medicare Plan were $565 million and $548 million for the three months ended March 31, 2026 and 2025, respectively. A general description of the types of payments we receive for services provided to patients enrolled in the Original Medicare Plan is provided in our Annual Report. Recent regulatory and legislative updates to the terms of these payment systems and their estimated effect on our revenues can be found under “Regulatory and Legislative Updates” below.
Medicaid
Medicaid programs and the corresponding reimbursement methodologies vary from state‑to‑state and from year‑to‑year. In addition to traditional Medicaid programs, we also receive DSH and other supplemental revenues under various state Medicaid programs. All Medicaid patient service revenue is presented net of provider taxes or assessments paid by our hospitals. During the three months ended March 31, 2026 and 2025, revenue from Medicaid programs included $304 million and $326 million, respectively, of revenue attributable to DSH and other supplemental programs. Revenues from Medicaid programs constituted approximately 10% and 11% of the total net patient service revenues of our hospitals and related outpatient facilities for the three-month periods ended March 31, 2026 and 2025, respectively.
Because we cannot predict what actions the federal government or the states may take under existing or future legislation and/or regulatory changes to address budget gaps, deficits, Medicaid expansion, Medicaid eligibility redeterminations, provider fee programs, state‑directed payment programs or Medicaid Section 1115 waivers, we are unable to assess the effect that any such legislation or regulatory action might have on our business; however, the impact on our future financial position, results of operations or cash flows could be material.
Regulatory and Legislative Updates
Material updates to the information set forth in our Annual Report about the Medicare and Medicaid payment systems, as well as other government programs impacting our business, are provided below.
Proposed Payment and Policy Changes to the Medicare Inpatient Prospective Payment Systems—Section 1886(d) of the Social Security Act requires CMS to update Medicare inpatient FFS payment rates for hospitals reimbursed under the inpatient prospective payment systems (“IPPS”) annually. The updates generally become effective October 1, the beginning of the FFY. In April 2026, CMS issued proposed changes to the Hospital Inpatient Prospective Payment Systems for Acute Care Hospitals and Fiscal Year 2027 Rates (“Proposed IPPS Rule”). According to CMS, the combined impact of the proposed payment and policy changes in the Proposed IPPS Rule for operating costs will yield an average 1.0% increase in Medicare operating payments for proprietary hospitals in FFY 2027.
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MANAGED CARE
As described in detail in our Annual Report, in addition to payments from government programs, we receive revenue under contracts with commercial insurers, including both managed care arrangements with various HMOs and PPOs and indemnity‑based agreements. These contracts offer varying structures for patient access, utilization and reimbursement. Our top 10 managed care payers generated 67% of our managed care net patient service revenues for the three months ended March 31, 2026. During the same period, national payers generated 47% of our managed care net patient service revenues; the remainder came from regional or local payers.
The amount of our managed care net patient service revenues, including Medicare and Medicaid managed care programs, from our hospitals and related outpatient facilities during the three months ended March 31, 2026 and 2025 was $2.394 billion and $2.400 billion, respectively. All Medicaid managed care patient service revenue is presented net of provider taxes or assessments paid by our hospitals.
UNINSURED PATIENTS
Uninsured patients are patients who do not qualify for government programs payments, such as Medicare and Medicaid, do not have some form of private insurance and, therefore, are responsible for their own medical bills. We provide financial assistance through our Compact with Uninsured Patients, which is designed to offer discounts to certain uninsured patients, and our charity and uninsured discount programs for uninsured patients who are unable to pay for the healthcare services they receive. The following table presents our estimated costs (based on selected operating expenses, which include salaries, wages and benefits, supplies and other operating expenses) of caring for our uninsured and charity patients:
| Three Months Ended March 31, | ||||||||||||||||||||||
| 2026 | 2025 | |||||||||||||||||||||
| Estimated costs for: | ||||||||||||||||||||||
| Uninsured patients | $ | 108 | $ | 114 | ||||||||||||||||||
| Charity care patients | 34 | 17 | ||||||||||||||||||||
| Total | $ | 142 | $ | 131 | ||||||||||||||||||
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RESULTS OF OPERATIONS
The following table presents our consolidated net operating revenues, operating expenses and operating income, both in dollar amounts and as percentages of net operating revenues, on a continuing operations basis:
Next expected filings
- ~2026-07-30 10-Q expected by 2026-08-10 (in 90 days)
- ~2026-10-28 10-Q expected by 2026-11-08 (in 180 days)
- ~2027-02-16 10-K expected by 2027-02-24 (in 291 days)
- ~2027-04-30 10-Q expected by 2027-05-11 (in 364 days)
Predicted from historical filing cadence; not an SEC commitment.
Recent SEC filings
- 2026-04-30 8-K Earnings Release; Financial Statements and Exhibits
- 2026-04-30 10-Q Quarterly Report
- 2026-04-16 DEF 14A Proxy Statement
- 2026-04-10 8-K Officer/Director Change; Financial Statements and Exhibits
- 2026-03-30 8-K Officer/Director Change; Financial Statements and Exhibits
- 2026-02-17 10-K Annual Report
- 2026-02-11 8-K Earnings Release; Financial Statements and Exhibits
- 2026-02-02 8-K Earnings Release; Regulation FD Disclosure; Other Events; Financial Statements and Exhibits
- 2025-11-24 8-K Officer/Director Change
- 2025-11-18 8-K Material Agreement Entered; Material Financial Obligation; Financial Statements and Exhibits
- 2025-11-05 8-K Material Agreement Entered; Material Financial Obligation; Financial Statements and Exhibits
- 2025-11-03 8-K Regulation FD Disclosure; Other Events; Financial Statements and Exhibits
- 2025-10-28 10-Q Quarterly Report
- 2025-10-28 8-K Earnings Release; Financial Statements and Exhibits
- 2025-07-30 10-Q Quarterly Report