THC 10-K & 10-Q changes, risk factors and insider trading

Our business is subject to a number of risks and uncertainties, many of which are beyond our control, that may cause our actual operating results or financial performance to be materially different from our expectations and make an investment in our securities risky. The disclosures in this section reflect our beliefs and opinions as to factors that could materially and adversely affect us in the future. References to past events are provided by way of example only and are not intended to be a complete listing or a representation as to whether or not such factors have occurred in the past. If one or more of the events discussed in this report were to occur, actual outcomes could differ materially from those expressed in or implied by any forward‑looking statements we make in this report or our other filings with the SEC, and our business, financial condition, results of operations or liquidity could be materially adversely affected; furthermore, the trading price of our common stock could decline and our shareholders could lose all or part of their investment. Additional risks and uncertainties not presently known, or currently deemed immaterial, may also constrain our business and operations.

Our ability to enter into, maintain and renew favorable contracts with HMOs, insurers offering preferred provider arrangements and other managed care plans, as well as add new facilities to our existing agreements at contracted rates, significantly affects our revenues and operating results. For the year ended December 31, 2024,2025, approximately 70%, or $9.809$9.696 billion, of our net patient service revenues for the hospitals and related outpatient facilities in our Hospital Operations segment was attributable to managed care payers, including Medicare and Medicaid managed care programs. Moreover, in 2024, our commercial managed care net inpatient revenue per admission from the hospitals in our Hospital Operations segment was approximately 67% higher than our aggregate yield on a per‑admission basis from government payers, including Medicare and Medicaid managed care programs.

The ongoing trend toward consolidation among non‑government payers tends to increase their bargaining power over contract terms. Generally, we compete for these contracts on the basis of price, market reputation, geographic location, quality and range of services, caliber of the medical staff and convenience. Our contracts with managed care payers require us to comply with a number of terms related to the provision of and billing for services. If we are unable to negotiate increased reimbursement rates, maintain existing rates or other favorable contract terms, effectively respond to managed care payer cost controls and reimbursement policies, or comply with the terms of our contracts, the payments we receive for our services may be reduced. Also, in recent years, we arehave increasingly experiencingexperienced payment denials from and other administrative challenges with managed care payers, both prospectively and retroactively.

In addition, managed care payers continue to seek to control healthcare costs by encouraging patients to use certain facilities in exchange for discounts from the facilities’ established charges, and through increased utilization reviews and greater enrollment in HMOs and PPOs. Any agreed-upon negotiated discount programs we agree to generally limit our ability to increase reimbursement rates to offset increasing costs. In addition, enrollment of individuals in high-deductible health plans has increased over the last decade. In comparison to traditional health plans, these plans have higher co-pays and deductibles due from patients, which subjects us to increased collection risk.

ChangesRecent inand potential future changes to healthcare laws, regulations and policies could have an adverse effect on our business.

We are unable to predict the effect of future government healthcare funding policy changes on our business. If the rates paid by governmental payers are materially reduced, if the scope of services covered by governmental payers is significantly limited, if eligibility or enrollment is further restricted, if there are changes to align payment rates for certain procedures across various care settings,settings in a site neutral manner, or if 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 couldmay 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.

Several states in which we operate continue to face budgetary challenges that have resulted in reduced Medicaid funding levels to hospitals and other providers. 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 adopt or consider adopting future legislation designed to reduce or not increasereevaluate their Medicaidfinancial expenditures.plans Infor addition, some states delay issuing Medicaid payments to providers to manage state expenditures. As an alternative means of funding provider payments, many of the states where we operate have adopted supplemental payment programs authorized under the Social Security Act. Continuing pressure on state budgets2026 and otherbeyond. factors,The includingOBBBA’s legislative and forthcoming regulatory changes,changes couldmay result in futurematerial reductions to Medicaid payments, paymentchanges delaysand or changesreductions to Medicaid supplemental payment programsprograms, thatand couldpayment negatively impact our financial condition, results of operations or cash flows.delays. Federal government denials or delayed approvals of state waiver applications or extension requests by the states where we operate could also materially impact our Medicaid funding levels.levels, most significantly in those states that have expanded Medicaid.

Our operations are dependent on the availability, efforts, abilities and experience of management and medical support personnel, including nurses, therapists, pharmacists and lab technicians, among others. We compete with other healthcare providers in recruiting and retaining qualified personnel responsible for the operation of our facilities. There is limited availability of experienced medical support personnel nationwide, which drives up the wages and benefits required to recruit and retain employees. In particular, like others in the healthcare industry, we continue to experience shortages of advanced practice providersclinicians and critical‑care nurses in certain disciplines and geographic areas. At times, we have to pay premiums above standard compensation for essential workers and rely on higher-cost contract labor, which we compete with other healthcare providers to secure.

We also depend on the general labor pool of available workers in the areas where we operate. In some of our communities, employers across various industries have increased their minimum wage, which has created more competition and, in some cases, higher labor costs for this sector of employees. Furthermore, state-mandated minimum wage increases in California became effective for healthcare workers in October 2024, with further annual increases anticipated through 2028. The current and expected future increases will result in higher compensation costs for certain of our employees and vendors.

Some competing healthcare facilities are owned by tax‑supported government agencies, and many others are owned by not‑for‑profit organizations that may have financial advantages not available to our facilities, including (1) support through endowments, charitable contributions and tax revenues, (2) access to tax‑exempt financing, (3) exemptions from sales, property and income taxes,taxes and (4) discounted prescription drug pricing. In addition, in certain areas where we operate, large teaching hospitals provide highly specialized facilities, equipment and services that may not be available at most of our hospitals. The existence or absence of state laws that require findings of need for construction and expansion of healthcare facilities or services may also impact competition. In recent years, the number of freestanding specialty hospitals, surgery centers, EDs, imaging centers and UCCs in the geographic areas where we operate has increased significantly. Some of these facilities are physician‑owned.

TheIn marketaddition, forwe ourface competition from existing participants and new entrants to the revenue cycle management servicesmarket, isas alsowell competitive.as from the internal revenue cycle management staff of hospitals and other healthcare providers. To be successful, we must respond more quickly and effectively than our competitors to new or changing opportunities, technologies, standards, regulations and client requirements. There can be no assurance that we will be successful in generating new client relationships orrelationships, maintaining existingcurrent relationships on favorable terms.terms, growing service revenues from existing clients, or replacing contracts when they expire or are terminated, which could have a material adverse impact on our results of operations and financial condition.

We cannot predict the potential emergence and effects of a future pandemic, epidemic or outbreak of an infectious disease,disease on our operations, financial condition and liquidity.

New variants or future surges of COVID-19 or theThe emergence or outbreak of anotheran infectious disease could adversely impact our patient volumes, service mix, revenue mix, operating expenses and net operating revenues in some markets or broadly across our enterprise, depending on how widespread the illness becomes. As with the COVID-19 pandemic, we could experience spikes in admissions at our hospitals, which may put a strain on our resources and personnel, and increased case cancellations in our Ambulatory Care segment. We have been required, and we may in the future be required, to temporarily reduce overall operating capacity or suspend certain services at individual facilities due to staffing constraints and other infectious disease-related factors.

In general, the future course and impacts of COVID-19 or the potential emergence and effects of a future pandemic, epidemic or outbreak of an infectious disease on our operational and financial performance is uncertain and will depend on many factors outside of our control, including, among others: the duration, severity and trajectory of the illness, including the possible spread of potentially more contagious and/or virulent forms of the infection; future economic conditions, as well as the impact of government actions and administrative regulations on the hospital industry and broader economy, including through stimulus efforts; the development, availability and widespread use of effective medical treatments and vaccines; the imposition of public safety measures; the volume of canceled or rescheduled procedures at our facilities; and the volume of affected patients across our care network.

Our information technology systems are critical to the day‑to‑day operation of our business.business and enable patient care. We rely on our information technology to process, transmit and store clinical, financial and operational data that includes PHI, PII, and proprietary and other confidential business data. We utilize electronic health records (“EHRs”) and other information technology in connection with all of our operations, including our billing and other financial systems, as well as our supply chainchain, scheduling and labor management tools. Our systems, in turn, interface with and rely on third‑party systems that store and transmit information integral to patient care and that we do not control, including medical devices and other processes supporting the interoperability of healthcare infrastructures. We rely on these third‑party providers to have appropriate controls to protect our systems, confidential informationinformation, and other sensitive or regulated data. While we seek to obtain assurances that third parties will protect our information and business operations, there is a risk the security of data held by such third parties could be breached or that systems are rendered unavailable, causing direct impacts to our business operations.

The information technology and infrastructure we use, the third‑party systems we interact with and the suppliers we use,use have been,been and continue to be,be subject to cyber-attacks, malware, computer viruses orand breachesbreaches, including due to malfeasance or employee error. In April 2022, we experienced a cybersecurity incident that disrupted a subset of our hospital operations and involved the exfiltration of certain confidential company and patient information. Threat actors continue to proliferate, adapt and devote significant effort to attacking the information systems and electronically transmitted and stored data of healthcare providers and related entities. TheCyber‑attacks against us and our suppliers and vendors have occurred in the past, including the April 2022 incident noted above, and will continue to occur in the future. As such, the risk of cyber-attack (including ransomware attack), breach or other disruption to healthcare systems, including ours, remains elevated in the current environment.environment, and the frequency and sophistication of efforts to access or disrupt our systems could continue to increase.

Attacks on, or breaches or other disruptions to, our information technology assets or those of third parties that we rely upon could impact the integrity, security or availability of data (including PHI and PII) we process, transmit or store and could impact our operations, as well as PHI and PII, and resultresulting in potential harm to our patients and clients. The preventive actions we take to reduce the risk of suchattacks, breaches and other incidents and protect our information technology systems and data may not be sufficient. As cybersecurity threats continue to evolve, we may not be able to anticipate certain attack methodsmethods, including those involving the integration of new or emerging technologies, such as artificial intelligence (“AI”) and Generative AI, in order to implement effective protective measures. We continue to be required to expend significant additional resources to modify and strengthen our security measures, investigateinvestigate, detect and respond to cybersecurity incidents, remediate any vulnerabilities in our information systems and infrastructure, and invest in new technology designed to mitigate security risks. Our efforts at incident detection, prevention and mitigation may not be successful, and insurance againstintended to reduce our exposure to losses related to cybersecurity risks and cyber-attacks may not providebe thesufficient coverageor weavailable anticipateto limit or offset the financial impact of a material loss event.caused by such risks or events. Moreover, certain expenses may not be covered by such insurance. In addition, the occurrence of cybersecurity incidents and the continued and elevated risk of attacks (including ransomware), system and data breaches, and other disruptions to information technology systems in the current environment hashave caused increases in our cyber insurance premiums and lowerreductions coveragein limits.coverage.

Third parties to whom we outsource certain of our functions, with whom we share data for interoperability purposes or from whom we obtain or to whom we provide products and related services, including those that are part of our revenue cycle processes or supply chain, or other third parties with whom our systems interface (such as clients and their vendors, among others), in some instances, store our sensitive and confidential data; these third parties are also subject to the risks outlined above and may not have or use controls effective to protect such information. An attack, breach or other system disruption affecting any of these third parties could similarly harm our business,business or reputation, impact payment of claims, and potentially harm our patients and clients. Further, successful cyber-attacks at other healthcare services companies, whether or not we are impacted, could lead to a general loss of consumer confidence in our industry that could negatively affect us, including harming the market perception of the effectiveness of our security measures or of the healthcare industry in general, which could result in reduced use of our services.

Our networks and technology systems have also experienced disruption due to planned events, such as system implementations,implementations and upgrades, andas well as other maintenance and improvements, and they are subject to disruption in the future for similar events, as well as catastrophic events, including a major earthquake, fire, hurricane, telecommunications failure, other technology systems interruption or outage, terrorist attack or the like.

Any ransomware attack, breach, system interruption or unavailability of our information systems or of third-party systems with access to our data could result in: the unauthorized disclosure, misuse, loss or corruption of such data; interruptions and delays in our normal business operations (including the collection of revenues); patient or client harm; potential liability under privacy, security, consumer protection or other applicable laws; regulatory penalties; ransomwarelegal damages and other payments; and negative publicity and damageharm to our reputation. Any of these could have a material adverse effect on our business, financial condition, results of operations or cash flows. Furthermore, because we have experienced cybersecurity incidents in the past, additional cybersecurity incidents, or the failure to detect or respond appropriately to additional cybersecurity incidents, could magnify the severity of adverse effects on our business.

Because we operate an expansive, nationwide healthcare delivery network, changes to our information systems often take months or years to implement, are costly and, in some circumstances, are not compatible with other applications and devices in use. In addition, when we acquire facilities, physician practices and other operations, it takes time and resources to assess the security in place, and then implement and integrate our security practices at the acquired businesses. As a result, we operate these businesses for a period of time with their existing security programs, which may include deficiencies or vulnerabilities. We must prioritize changes and improvements to be made, and we may not be successful in identifying gaps or developing alternative methods to secure our systems and data. If we are not successful, we may be more vulnerable to cybersecurity incidents that could impact patient and client information, result in patient harmharm, or have a material adverse impact on our results of operations and financial condition. Moreover, not all standard cybersecurity tools and solutions we use are employed at all locations, as expansionour ofdecisions toolas to where to implement tools and solutionsolutions use isare based on numerous factors. There is no guarantee that we will employ the right tools and solutions at each location or that the expansion of certain tools and solutions that are implemented will be successful.

There are risks associated with our current and potential future use of artificial intelligence.AI.

Recent advancements in technology and applications in healthcare,healthcare includinghave Generativeallowed AI, are enabling our operationsus to accelerate the adoption of artificialAI intelligenceand (“AI”)Generative enabledAI-enabled tools in areas such as clinical care coordination, medical documentation, revenue cycle management and administrative services. When used responsibility,responsibly, we believe AI has the potential to enhance our business processes and support efficient delivery of high-quality care. However, AI may not always operate as intended, and datasets may be insufficient or contain illegal,biased biased,or harmful or offensive information, which could lead to inaccurate diagnoses and treatments.information. Moreover, Generative AI systems,systems whichthat require the collection and processing of sensitive patient data,data could present potential security and privacy risks.risks, as well as risks related to output quality. If our current or future technologies or applications fail to operate as anticipated or do not perform as specified, including due to potential design defects and defects in the development of algorithms or other technologies, human error or otherwise, we may be subject to liability and reputational harm. Moreover, we could be subject to private claims and enforcement actions, even if AI systems we utilize operate as intended, relating to false advertising, unfair competition, privacy, anti-discrimination, intellectual property infringement or prohibitions on the corporate practice of medicine, among others. Conversely, if we are unable to successfully maintain, enhance or operate our information systems, including through the implementation of AI‑enabled technologies or applications in our operations, we may be, among other things, unable to efficiently adapt to evolving laws and requirements,requirements unable toor remain competitive with others who successfully implement and advance this technology,current and ouremerging patients’ safety may be adversely impacted, any oftechnologies, which could have a material adverse impact on our overall business, financial condition, results of operations or cash flows.

The Affordable Care Act also created the CMS Innovation Center to develop and test alternative payment models, including bundled payment models, designed to reduce certain government program expenditures while maintaining or improving quality of care. Bundled payment models hold hospitals financially accountable for the quality and cost of an entire episode of care for a specific diagnosis or procedure, from the date of the hospital admission or inpatient procedure through 90 days post‑discharge, and include services not provided by the hospital, such as physician services, inpatient rehabilitation, skilled nursing and home health care. Participation in certain bundled payment models is voluntary; however, other bundled payment models are mandatory for providers in randomly selected geographic areas. Under the mandatory models, hospitals are eligible to receive incentive payments or will be subject to payment reductions within certain corridors based on their performance against quality and spending criteria. It is difficult to predict what impact, if any, these demonstration programs will have on our inpatient volumes, net revenues or cash flows.

As described in Item 1, Business – Healthcare Regulation and Licensing, in Part I of this report, our hospitals, outpatient centers and related healthcare businesses are subject to an extensive and complex framework of government regulation at the federal, state and local levels. The policies and procedures we have in place to facilitate compliance with applicable laws, rules and regulations cannot ensure compliance in every case. Moreover, government regulations often change, and we may have to make adjustments to our facilities, equipment, personnel and services to remain in compliance. The potential consequences for failing to comply with applicable laws, rules and regulations include (1) required refunds of previously received government program payments, (2) the assessment of civil monetary penalties, including treble damages, (3) fines, which could be significant, (4) the imposition of operational restrictions, (5) exclusion from participation in federal healthcare programs and (56) criminal sanctions, including sanctions against current or former employees. Our Medicare and Medicaid payments may be suspended pending even an investigation of what the government determines to be a credible allegation of fraud. Any of the aforementioned consequences could have a material adverse effect on our business, financial condition, results of operations or cash flows. Furthermore, even a public announcement that we are being investigated for possible violations of law could have a material adverse effect on the valuetrading price of our common stock and our business reputation could suffer.

We operate in a highly regulated and litigious industry; as such, we are regularly named in various legal actions in the ordinary course of our business. We have been and expect to continue to be subject to regulatory proceedings and private litigation (including class action lawsuits) related to, among other things, the care and treatment provided at our hospitals and outpatient facilities; the application of various federal and state labor and privacy laws, rules and regulations; antitrust claims; tax audits; contract disputes (including disagreements with joint venture partners); and other matters. Some of these actions involve large demands, as well as substantial defense costs. Even in states that have imposed caps on damages, litigants are seeking recoveries under theories of liability that might not be subject to such caps. Our commercial insurance does not cover all claims against us and may not offset the financial impact of a material loss event. Moreover, the healthcare industry has seen significant increases in the cost of professional and general liability insurance and required amounts of self-insured retention due to high numbers of claims and lawsuits and large verdicts in certain jurisdictions. As such, commercial insurance may not continue to be available at a reasonable cost for us to maintain at adequate levels. We cannot predict the outcome of current or future legal actions against us or the effect that judgments or settlements in such matters may have on us or on our insurance costs. Additionally, professional and general liability insurance we purchase is subject to per-claim and policy period aggregate limits. If the policy period aggregate limit of any of these policies is exhausted, in whole or in part, it could deplete or reduce the limits available to pay other material claims applicable to that policy period. Any losses not covered by or in excess of the amounts maintained under insurance policies will be funded from our working capital or other sources of liquidity. Furthermore, one or more of our insurance carriers could become insolvent and unable to fulfill its or their obligations to defend, pay or reimburse us when those obligations become due. In that case or if payments of claims exceed our estimates or are not covered by insurance, it could have a material adverse effect on our business, financial condition, results of operations or cash flows.

We have completed a number ofnumerous acquisitions in recent years, and we expect to pursue additional transactions in the future. A key business strategy for USPI, in particular, is the acquisition and development of facilities, primarily through the formation of joint ventures with physicians and/or health system partners. With respect to future transactions, we cannot provide any assurances that we will be able to identify suitable candidates, consummate transactions on terms that are favorable to us, or achieve synergies or other benefits in a timely manner or at all. Furthermore, companies or operations we acquire may not be profitable or may not achieve the profitability that justifies the investments made. Businesses we acquire may also have pre‑existing unknown or contingent liabilities, including liabilities for failure to comply with applicable healthcare regulations. These liabilities could be significant, and, if we are unable to exclude them from the acquisition transaction or successfully obtain and pursue indemnification from a third party or insurance proceeds, they could harm our business and financial condition. In addition, we may be unable to timely and effectively integrate ASCs, physician practices and other businesses that we acquire with our ongoing operations, or we may experience delays implementing operating procedures, personnel and systems, which could impact the financial performance of the acquired business. Significant acquisitions have required, and may in the future require, a substantial investment of time and resources across our enterprise; these efforts may affect management focus and impact our ability to properly prioritize and successfully execute on our other strategic initiatives. Moreover, future acquisitions could result in the incurrence of additional debt and contingent liabilities, potentially dilutive issuances of equity securities, and increased operating expenses, any of which could adversely affect our results of operations and financial condition.

From time to time, we pursuecapitalize on opportunities to refine our portfolio of hospitals and other healthcare facilities or operations when we believe such refinements will help us improve profitability, allocate capital more effectively in areas where we have a stronger presence, deploy proceeds toward higher-return investments across our business, enhance cash flow generation or reduce our debt, among other things. We also periodically exit service lines and businesses that are no longer a core part of our long‑term growth and synergy strategies. In addition, in certain transactions, we may acquire underperforming facilities located in areas where we do not operate, which may cause us to seek to close or sell such facilities – potentially at a price lower than what we effectively paid to acquire them. We cannot provide any assurances that we will be successful in divesting assets we wish to sell or that divestitures or other strategic transactions will achieve their business goals or the benefits we expect.

We have in the past, and may in the future, fail to obtain applicable regulatory approvals, including state approvals or FTC clearances, with respect to potential divestitures of assets or businesses. Even in cases where such approvals are obtained, the process of obtaining them could delay the anticipated closing timelinetimeline, cause us to incur higher than expected out-of-pocket expenses, and potentially result in significant out‑of‑pocketconditions expenses.or restrictions imposed by applicable authorities. Moreover, we may encounter difficulties in finding acquirers or alternative exit strategies on terms that are favorable to us, which could delay the receipt of anticipated proceeds necessary for us to complete our planned strategic objectives. In addition, our divestiture activities have required, and may in the future require, us to retain significant pre‑closing liabilities, recognize impairment charges (as discussed above) or agree to contractual restrictions that limit our ability to reenter a particular market, which may be material.market. Many of our hospital divestitures also necessitate us entering into a transition services agreement with the buyer for information technology and other related services. As a consequence, we may be exposed to the financial status of the buyer for any payments under such transition services agreements or for transferred contractual liabilities, which could be significant. Our divestitures also include the assignment of contracts, such as leases, to the buyers; in many cases, we continue to be exposed toto, and have in the past been responsible for, post‑transaction liabilities under such arrangements if the buyers do not timely pay the obligations.

USPI and our hospital-basedhospital-related joint ventures depend on existing relationships with key health system partners. If we are unable to maintain synergistic relationships with these systems, or enter into new relationships, we may be unable to implement our business strategies successfully.

USPI and our hospital‑basedrelated joint ventures depend in part on the efforts, reputations and success of health system partners and the strength of our relationships with those systems. Our joint ventures could be adversely affected by any damage to those health systems’ reputations or to our relationships with them.them, including contractual disputes over the terms of the governing documents of such joint ventures. In addition, damage to our business reputation could negatively impact the willingness of health systems to enter into relationships with us or USPI. If we are unable to maintain existing arrangements on favorable terms or enter into relationships with additional health system partners, we may be unable to implement our business strategies for our joint ventures successfully.

Our joint venture arrangements are subject to a number of operational risks that could have a material adverse effect on our business, results of operations and financial condition.

We have invested in a number of joint ventures with other entities when circumstances warranted the use of these structures, and we may form additional joint ventures in the future. These joint ventures may not be profitable or may not achieve the profitability that justifies the investments made. Furthermore, the nature of a joint venture requires us to consult with and share certain decision‑making powers with unaffiliated third parties, some of which may be not‑for‑profit health systems. If our joint venture partners do not fulfill their obligations, the affected joint venture may not be able to operate according to its business or strategic plans. In that case, our results of operations could be adversely affected, or we may be required to increase our level of financial commitment to the joint venture. Moreover, differences in economic or business interests or goals among joint venture participants could result in delayed decisions, failures to agree on major issuesissues, which could lead to a dissolution of such arrangement, and even litigation, including claims for breach and attempts to terminate underlying contracts. If these differences cause the joint ventures to deviate from their business or strategic plans, or if our joint venture partners take actions contrary to our policies, objectives or the best interests of the joint venture, our results of operations could be adversely affected. In addition, our relationships with not‑for‑profit health systems and the joint venture agreements that govern these relationships are intended to be structured to comply with current revenue rulings published by the Internal Revenue Service, as well as case law relevant to joint ventures between for‑profit and not‑for‑profit healthcare entities. Material changes in these authorities could adversely affect our relationships with not‑for‑profit health systems and related joint venture arrangements.

•Put/call arrangements and other joint venture exit rights could require us to utilize our cash flow or incur additional indebtedness to satisfy the payment obligations in respect of such arrangements.

At December 31, 2024,2025, we had approximately $13.173$13.171 billion of total long‑term debt, as well as $106$104 million in standby letters of credit outstanding in the aggregate under our senior secured revolving credit facility (as amended, “Credit Agreement”) and our letter of credit facility agreement (as amended, “LC Facility”). During 2024,2025, our interest expense was $826$821 million and represented 14%23% of our $5.956$3.508 billion of operating income. Our Credit Agreement is collateralized by eligible inventory and patient accounts receivable, including receivables for Medicaid supplemental payments, of substantially all of our wholly owned acute care and specialty hospitals, and obligations under our LC Facility isare guaranteed and secured by a first ‑priority pledge of the capital stock and other ownership interests of certain of our wholly owned domestic hospital subsidiaries on an equal‑ranking basis with our existing senior secured first lien notes. From time to time, we expect to engage in additional capital market, bank credit and other financing activities, depending on our needs and financing alternatives available at that time.

•Our debt service obligations reduce the amount of funds available for our operations, capital expenditures and corporate development activities, and may make it more difficult for us to satisfy our other financial obligations.

In addition, our ability to meet our debt service obligations is primarily dependent upon the operating results of our subsidiaries and their ability to pay dividends or make other payments or advances to us. We hold most of our assets at, and conduct substantially all of our operations through,through direct and indirect subsidiaries. Moreover, we principally rely on dividends or other intercompany transfers of funds from our subsidiaries to meet our debt service and other obligations, including payment on our outstanding debt. The ability of our subsidiaries to pay dividends or make other payments or advances to us will depend on their operating results and will be subject to applicable laws and restrictions contained in agreements governing the debt of such subsidiaries. Subsidiaries that are not wholly owned may also be subject to restrictions on their ability to distribute cash to us in their financing or other agreements and, as a result, we may not be able to access their cash flows to service their respective debt obligations.

InWe yearsperiodically past, we regularly issuedissue new notes to refinance our outstanding notes prior to their maturity,maturity. andAny wefuture may continue this practiceincreases in the future. Current capital market and macro-economic conditions have increased borrowing rates and can be expected to increase our cost of capital as compared to prior periods should we seek additional funding. Moreover, global capital markets have experienced significant volatility and uncertainty in the past, and there can be no assurance that such financing alternatives will be available to us on favorable terms, or at all, should we determine it necessary or advisable to seek additional capital. In addition, our ability to incur secured indebtedness (which would generally enable us to achieve better pricing than the incurrence of unsecured indebtedness) depends in part on the value of our assets, which depends, in turn, on the strength of our cash flows and results of operations, as well as on economic and market conditions and other factors.

If our cash flows and capital resources are insufficient to fund our debt service obligations and we are unable to refinance our indebtedness on acceptable terms, we may be forced to reduce or delay investments and capital expenditures, including those required for physical plant maintenance or operation of our existing facilities, for integrating our historical acquisitions or for future corporate development activities, and such reduction or delay could continue for years. We also may be forced to sell assets or operations, seek additional capital,capital or restructure our indebtedness. WeThere cannotcan assurebe youno assurance that we would be able to take any of these actions, that these actions would be successful and permit us to meet our scheduled debt service obligations, or that these actions would be permitted under the terms of our existing or future debt agreements, including our Credit Agreement, our LC Facility and the indentures governing our outstanding notes.

These restrictions are subject to a number of important exceptions and qualifications. In addition, under certain circumstances, the terms of our Credit Agreement require us to maintain a financial ratio relating to our ability to satisfy certain fixed expenses, including interest payments. Our ability to meet this financial ratio and the aforementioned restrictive covenants may be affected by events beyond our control, and there can be no assurance that we will meet those tests. These restrictions could limit our ability to obtain future financing, make acquisitions or needed capital expenditures, withstand economic downturns in our business or the economy in general, conduct operations or otherwise take advantage of business opportunities that may arise. In addition, a breach of any of these covenants could cause an event of default, which, if not cured or waived, could require us to repay the indebtedness immediately. Under these conditions, we are not certain whether we would have, or be able to obtain, sufficient funds to make accelerated payments.

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 December 31, 2024,2025, our subsidiaries operated 4950 hospitals serving primarily urban and suburban communities in eight states. Our Hospital Operations segment also included 135132 outpatient facilitiesfacilities, at December 31, 2024, includingnamely urgent care centers (each, a “UCC”),centers, imaging centers, off-campus hospital emergency departments and micro‑hospitals.hospitals, at December 31, 2025. In addition, our Hospital Operations segment provides revenue cycle management and value‑based care services to hospitals, health systems, physician practices, employers and other clients through our Conifer Health Solutions, LLC joint venture.LLC.

Our Ambulatory Care segment, through our USPI Holding Company, Inc. subsidiary(together (with its subsidiaries, “USPI”), held ownership interests in 518533 ambulatory surgery centers (each, an “ASC”), 375401 of which are consolidated, and 2526 surgical hospitals, seveneight of which are consolidated, in 37 states at December 31, 2024.2025. 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.

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 years ended December 31, 20242025 and 2023,2024, information presented on a same-hospital basis includes the results of our same 47 hospitals and those outpatient centers we operated throughout 2024both and 2023,years, and excludes the results of: (1) our Westover Hills Baptist Hospital, the new acute care hospital we opened in Texas in July 2024; (2) three hospitals located in South Carolina and certain related operations (the “SC Hospitals”) we sold in January 2024; (32) four hospitals and certain related operations located in Orange County and Los Angeles County, California (the “OCLA CA Hospitals”) we sold in March 2024; (43) two hospitals and certain related operations located in San Luis Obispo County, California (the “Central CA Hospitals”), which we also sold in March 2024; (54) Westover Hills Baptist Hospital, the fiveacute hospitalscare andhospital certainwe related operations locatedopened in Alabama we divestedTexas in SeptemberJuly 2024 (the “AL Hospitals”); (65) a rehabilitation hospital in El Paso, Texas, in which we acquired a majority ownership interest in September 2024; (6) five hospitals and certain related operations located in Alabama we divested in September 2024 (the “AL Hospitals” and, together with the SC Hospitals, OCLA CA Hospitals and Central CA Hospitals, the “Divested Hospitals”); (7) 56Florida UCCsCoast Medical Center, the acute care hospital we acquired ownership interestsopened in through the formation of a joint venture with NextCare, Inc.Florida in DecemberSeptember 20232025; and (8) businesses classified as discontinued operations for accounting purposes during those periods, along with 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.

We also 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 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.

Industry Trends and Healthcare Policy Changes—We believe that several key trends are continuing to shape the demand for healthcare services: (1) consumers, employers and insurers are actively seeking lower‑cost solutions and better value with respect to healthcare spending; (2) patient volumes are shifting from inpatient to outpatient settings due to technological advances and demand for care that is more convenient, affordable and accessible; (3) the growing aging population requires greater chronic disease management and higher‑acuity treatment; and (4) consolidation continues across the entire healthcare sector. Furthermore, the healthcare industry, in general, and the acute care hospital business, in particular, continue to be subject to significant legislative and regulatory uncertainty. Changes in federal or state healthcare laws, regulations, funding policies or reimbursement practices, especially those involving reductions to government payment rates or access to insurance coverage, could have a significant impact on our future revenues and expenses.

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. During the year ended December 31, 2024,2025, we acquired controlling ownership interests in 5427 ASCs and one surgical hospitalhospital, and a noncontrolling ownership interest in whichone additional ASC; prior to these acquisitions, we did not havehold aan previousinvestment investment,in any of these facilities. During the same period, we also increased our ownership interestinterests in sevennine ASCs sufficient to consolidate them and opened 14six de novo ASCs.

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 and higher‑acuity clinical service lines (including outpatient lines),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) creatingoffering health and benefit programs, patient educationprograms and health literacyeducational materials that are customizedtailored to meet the needs of the communities we serve.

Recent advancements in technology and applications in healthcare,healthcare includinghave Generativeallowed AI, are enabling our operationsus 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 responsibility,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 (including outpatient services),lines, focus on expanding our ambulatory care business, cultivation of our culture of service, participation in Medicare Advantage health plans that have been experiencing higher growth rates than traditional Medicare,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, supply chain management, and reducing clinical and vendor contract variation.

Managing Our Capital Structure—All of our long‑term debt has a fixed rate of interest, except for outstanding borrowings under our senior2025 secured revolving credit facility (as amended to date, the “Credit Agreement”),Agreement, of which we had none at December 31, 2024.2025. In addition, the maturity dates of our notes are staggered from 2027 through 2031.2033. We believe that our capital structure helps to minimize the near‑term impact of increased interest rates, and the staggered maturities of our debt allow us to retire or refinance our debt over time. During the three months ended March 31, 2024, we redeemed all $2.100 billion aggregate principal amount outstanding of our 4.875% senior secured first lien notes due 2026 (the “2026 Senior Secured First Lien Notes”) in advance of their maturity date.

In July 2024, our board of directors authorized the repurchaseyear ofended upDecember to31, $1.5002025, we repurchased $1.386 billion of our common stock throughpursuant ato newour share repurchase program. Our program that has no expiration date.date, Repurchases will be made in accordance with applicable securities laws and may be made at management’s discretion from time to time in open-market or privately negotiated transactions, subject to market conditions and other factors. This programit 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 December 31, 2024,2025, there was $1.376$1.490 billion available under this program for future repurchases.

Total admissions decreasedincreased by 18,872,488, or 13.8%,0.4%, total surgeries decreasedincreased by 18,015,610, or 20.7%,0.9%, and total emergency department visits decreasedincreased by 116,434,1,986, or 17.5%,0.4%, in the three months ended December 31, 20242025 compared to the three months ended December 31, 2023. The decreases in our volumes were primarily related to the sales of the Divested Hospitals. Excluding the impact of these divestitures, total admissions increased by 6,415, or 5.7%, total surgeries increased by 432, or 0.6%, and total emergency department visits decreased by 12,082, or 2.6%, during the three months ended December 31, 2024 compared to the same period in 2023.2024.

The 7.7% increase in our Ambulatory Care segment’s total consolidated cases of 14.3% induring the three months ended December 31, 2024,2025, as compared to the same period in 2023,2024, was primarily attributable to incremental case volume from our newly acquired ASCs,and developed ASCs and same‑facility case volume growth, net of the impact of the sale or closure and deconsolidation of certain facilities, as well as same‑facility case growth.facilities.

Consolidated net operating revenues decreasedincreased by $307$454 million, or 5.7%,8.9%, in the three months ended December 31, 20242025 compared to the same period in 2023.2024. The decreaseincrease of $489$280 million, or 11.4%,7.3%, in our Hospital Operations segment’s net operating revenues for the three‑month period in 20242025 compared to the same period in 20232024 was primarily due to the sales of the Divested Hospitals. Excluding the effect of these sales, net operating revenues during the three months ended December 31, 2024 increased by $232 million, or 6.5%, compared to the three months ended December 31, 2023. This increase was attributable to the positive impact of a more favorable payer mix, increases in our same-hospital admissions, higher patient admissions and acuity, growth in our Medicaid supplemental revenue,revenue and negotiated commercial rate increases.increases in the 2025 period.

Net operating revenues in our Ambulatory Care segment increased by $182$174 million, or 16.9%,13.8%, in the three months ended December 31, 20242025 compared to the same period in 2023.2024. This change was primarily driven by our newly acquired and developed ASCs, net of the impact of the sale or closure and deconsolidation of certain facilities, asnegotiated wellcommercial asrate anincreases, increasehigher patient acuity and increases in same-facility case volume and higher net revenue per case in the 20242025 period.

The following table providespresents information about selected operating expenses by segment on a continuing operations basis:

The following table providespresents information about our Hospital Operations segment’s selected operating expenses per adjusted admission on a continuing operations basis:

OtherSalaries, operatingwages expensesand benefits expense for our Hospital Operations segment decreasedincreased by $141$94 million, or 13.4%,5.3%, in the three months ended December 31, 20242025 compared to the same period in 2023,2024. This increase was primarily dueattributable to thehigher salesincentive ofcompensation expense, annual merit increases and an increase in employee benefit costs during the Divested2025 Hospitals.period. ExcludingOn thea effectper ofadjusted theseadmission divestitures,basis, othersalaries, operatingwages expensesand benefits expense in our Hospital Operations segment increased by $48 million, or 5.5%, during the three‑month period4.3% in 2024. The changes in other operating expenses during the three months ended December 31, 20242025 included:compared to the three months ended December 31, 2024.

•Net cash provided by operating activities before interest, taxes, discontinued operations, impairment and restructuring charges, and acquisition‑related costs, and litigation costs and settlements of $962$1.255 millionbillion;

•Interest payments oftotaling $296$366 million;

•Sources of Revenue for Our Hospital Operations and Services Segment

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 MarchJune 31,30, 2026, our subsidiaries operated 50 hospitals serving primarily urban and suburban communities in eight states. Our Hospital Operations segment also included 132135 outpatient facilities, namelyincluding urgent care centers, imaging centers, off‑campusoff-campus hospital emergency departments and micro‑hospitals, at MarchJune 31,30, 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 541538 ambulatory surgery centers (each, an “ASC”), 407405 of which are consolidated, and 26 surgical hospitals, eight of which are consolidated, in 37 states at MarchJune 31,30, 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.

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-monthsix-month periods ended MarchJune 31,30, 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.

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 describedescribed 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,practices. We continue to monitor developments affecting Medicaid funding, health insurance marketplace enrollment and payer mix, 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.

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 utilizingutilization of 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 MarchJune 31,30, 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 threesix months ended MarchJune 31,30, 2026, we repurchased 1.3467.021 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 MarchJune 31,30, 2026, there was $1.172$2.130 billion available under the program for future repurchases.

Total admissions increased by 809,3,327, or 0.7%,2.8%, total emergency department visits decreasedincreased by 15,475,13,986, or 2.7%,2.6%, and totalcharity surgeriesand decreaseduninsured admissions increased by 236,1,007, or 0.4%,19.2%, in the three months ended MarchJune 31,30, 2026 compared to the three months ended MarchJune 31,30, 2025.

The 5.3% increase in our Ambulatory Care segment’s total consolidated cases in the three months ended MarchJune 31,30, 2026, as compared to the same period in 2025, was primarily attributable to incremental case volume from newlyour acquired2025 and developed2026 ASCsacquisitions and de novo development, partially offset by a decrease in same-facility case volume growth, net ofand the impact of the closure and sale of certain facilities.

Consolidated net operating revenues increased by $145$357 million, or 2.8%,6.8%, in the three months ended MarchJune 31,30, 2026 compared to the same period in 2025. The increase of $19$239 million, or 0.5%,6.0%, 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 mixmix, during the 2026 period.

Net operating revenues in our Ambulatory Care segment increased by $126$118 million, or 10.6%,9.3%, in the three months ended MarchJune 31,30, 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 netSame-facility revenue per case during the 2026 period,growth, driven by incremental revenue from negotiated commercial rate increases, higher patient acuity and the addition of new service lines, also contributed to this increase.

Salaries, wages and benefits expense for our Hospital Operations segment increased by $20$47 million, or 1.1%,2.5%, in the three months ended MarchJune 31,30, 2026 compared to the same period in 2025. This increase was primarily attributable to annual merit increases for certain of our employees and higher employeeincentive benefitscompensation costs,expense, partially offset by lowera incentivedecrease compensationin expense,health contractbenefits labor costs and premium paycost as compared to the 2025 period. On a per adjusted admission basis, salaries, wages and benefits expense decreased by 0.6% in our Hospital Operations segment during the three months ended MarchJune 31,30, 2026 wascompared consistent withto the three months ended MarchJune 31,30, 2025.

Supplies expense for our Hospital Operations segment increased by $15 million, or 2.5%, during the three months ended MarchJune 31,30, 2026 compared to the three months ended MarchJune 31,30, 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 increaseddecreased by 1.6%0.7% in the three months ended MarchJune 31,30, 2026 compared to the three months ended MarchJune 31,30, 2025.

Other operating expenses for our Hospital Operations segment increased by $11$37 million, or 1.2%,4.0%, in the three months ended MarchJune 31,30, 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 decreaseincreases in malpractice expense and medical fees during the 2026 period. On a per adjusted admission basis, other operating expenses duringincreased by 0.8% in the three months ended MarchJune 31,30, 2026 werecompared consistent withto the three months ended MarchJune 31,30, 2025.

Cash and cash equivalents were $2.170 billion at June 30, 2026 compared to $2.967 billion at March 31, 2026 compared to $2.883 billion at December 31, 2025.2026. Significant cash flow items in the three months ended MarchJune 31,30, 2026 included:

•$318$1.042 millionbillion of payments to purchase approximately 1.3465.675 million shares of our common stock;

Net cash provided by operating activities was $1.641$2.226 billion in the threesix months ended MarchJune 31,30, 2026 compared to $815$1.751 millionbillion in the threesix months ended MarchJune 31,30, 2025. Key factors contributing to the change between the 2026 and 2025 periods included the following:

•Interest payments that were $75$34 million lower in the 2026 period; and

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 forover 2026the andcoming beyond.years. 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,operations; however, we may experience decreased payments (including supplemental payments) from Medicare, Medicaid and other government programs, as well as delays in the timing of payments to our facilities.

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 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 and six months ended MarchJune 31,30, 2026 and 2025, revenue from Medicaid programs included $304$447 million and $326$351 million, respectively, and $751 million and $677 million, respectively, of revenue attributable to DSH and other supplemental programs. Revenues from Medicaid programs constituted approximately 10%12% and 11% of the total net patient service revenues of our hospitals and related outpatient facilities for the three-monthsix-month periods ended MarchJune 31,30, 2026 and 2025, respectively.

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%66% of our managed care net patient service revenues for the threesix months ended MarchJune 31,30, 2026. During the same period, national payers generated 47%50% 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 MarchJune 31,30, 2026 and 2025 was $2.394$2.470 billion and $2.400$2.423 billion, respectively, and $4.864 billion and $4.823 billion during the six months ended June 30, 2026 and 2025, respectively. All Medicaid managed care patient service revenue is presented net of provider taxes or assessments paid by our hospitals.

During the three and six months ended MarchJune 31,30, 2026, we recognized $413 million and $826 million, respectively, of revenue related to the termination of the revenue cycle management agreement between Catholic Health Initiatives,Initiatives (“CHI”), now known as CommonSpirit Health, and Conifer. See Note 1 to the accompanying Condensed Consolidated Financial Statements for additional information regarding this transaction.

Same‑hospital net operating revenues increased by $6$241 million, or 0.1%,6.1%, during the three months ended MarchJune 31,30, 2026 compared to the three months ended MarchJune 31,30, 2025. This increase was primarily attributable to higher patient volumes, partially offset by a less favorable payer mixmix, during the 2026 period.

Same‑hospital salaries, wages and benefits expense increased by $11$39 million, or 0.6%,2.1%, in the three months ended MarchJune 31,30, 2026 compared to the same period in 2025. This change was primarily attributabledriven to higher employee benefits costs andby annual merit increases for certain of our employees.employees Theseand factorshigher wereincentive compensation expense, partially offset by lowera incentivedecrease compensationin expense,health contractbenefits labor costs and premium paycost, during the 2026 period. Same‑hospital salaries, wages and benefits expense as a percentage of net operating revenues increaseddecreased by 20170 basis points to 45.6%44.7% in the three months ended MarchJune 31,30, 2026 compared to the three months ended MarchJune 31,30, 2025.

Same‑hospital supplies expense increased by $14$12 million, or 2.4%,2.0%, in the three months ended MarchJune 31,30, 2026 compared to the same period in 2025. This increase was driven by higher patient volumes during the 2026 period, partially offset by our cost‑efficiency measures. Same‑hospital supplies expense as a percentage of net operating revenues increaseddecreased from 14.6%15.1% for the three months ended MarchJune 31,30, 2025 to 15.0%14.5% for the three months ended MarchJune 31,30, 2026.

Same‑hospital other operating expenses increased by $24$51 million, or 2.7%,5.6%, in the three months ended MarchJune 31,30, 2026 compared to the same period in 2025. This increase was primarily attributable to an increaseincreases in medical fees, as well as higher professionalfees and consulting costs, partially offset by a decrease in malpractice expense during the 2026 period. Same‑hospital other operating expenses as a percentage of net operating revenues increased by 50 basis points to 22.6% forin the three months ended MarchJune 31,30, 2026 comparedwas togenerally 22.1%consistent forwith the threesame monthsperiod endedin March2025 31,at 2025.22.8%.

Our Ambulatory Care segment’s net operating revenues increased by $126$118 million, or 10.6%,9.3%, during the three months ended MarchJune 31,30, 2026 compared to the same period in 2025. The change was driven by (1) a $77$71 million increase from 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, and (2) a $49$47 million increase in same‑facility net operating revenues, which was primarily attributable to incremental revenue from negotiated commercial rate increases, higher patient acuity and the addition of new service lines.

Salaries, wages and benefits expense increased by $35$24 million, or 11.9%,7.6%, during the three months ended MarchJune 31,30, 2026 compared to the same period in 2025. This change was driven by (1) ana $18$11 million increase from 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, and (2) ana $13 million increase of $17 million in same‑facility salaries, wages and benefits expense. As a percentage of net operating revenues, salaries, wages and benefits expense increaseddecreased to 25.0%24.4% for the three months ended MarchJune 31,30, 2026 from 24.7% for the same period in 2025.

Supplies expense increased by $39$37 million, or 12.3%,11.1%, during the three months ended MarchJune 31,30, 2026 compared to the same period in 2025. The change was driven by (1) aan $27$15 million increase related to 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, and (2) a $12$22 million increase in same‑facility supplies expense, due primarily to higher patient acuity and the addition of new service lines. Supplies expense as a percentage of net operating revenues increased to 27.1%26.6% for the three months ended MarchJune 31,30, 2026 from 26.6%26.1% for the same period in 2025.

Other operating expenses increased by $21$18 million, or 11.7%,9.7%, during the three months ended MarchJune 31,30, 2026 compared to the same period in 2025. The change was driven by (1) a $15$10 million increase from 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, and (2) aan $6$8 million increase in same‑facility other operating expenses. Other operating expenses as a percentage of net operating revenues increased to 15.2% forin the three months ended MarchJune 31,30, 2026 fromwas 15.0%generally forconsistent with the same period in 2025.2025 at 14.6%.

The table below presents the aggregate cash activityinvestments and related tocash adjustments associated with our acquisition ofof, variousand investment in, ownership interests in ambulatory care facilities:

During the threesix months ended MarchJune 31,30, 2026, our Ambulatory Care segment paid an aggregate of $120$128 million to acquire controlling ownership interests in seveneight ASCs.ASCs and a noncontrolling ownership interest in an additional ASC. In the same period, this segment also commenced operations at threefour de novo ASCs and ceased operations at twoeight ASCs.

We recorded net gains from the sale, consolidation and deconsolidation of facilities totaling $1$34 million during the threesix months ended MarchJune 31,30, 2026. WeThe recordedactivity gainsduring fromthis theperiod sale,primarily consolidationincluded andan deconsolidation of facilities totaling $22$18 million during the three months ended March 31, 2025, primarily comprised of gains related to post-closing adjustmentsgain from the 2024 divestiture of five hospitals and certain related operations located in Alabama and the consolidation of an ASC and net gains of $11 million related to the sale of certain facilities, both in our Ambulatory Care segment facilities.segment.

Income before income taxes for the threesix months ended MarchJune 31,30, 2026 and 2025 was $1.132$2.472 billion and $765$1.407 million,billion, respectively. The change in our valuation allowance during each of the threesix-month monthsperiods ended March 31,in 2026 and 2025 was attributable to a decrease related to state interest expense limitations and changes in the realizability of deferred tax assets.assets, Thepartially decreaseoffset inby ouran valuation allowance during the three months ended March 31, 2025 wasincrease related to interest expense limitations and changes in the realizability of deferred tax assets.carryforwards.

Interest payments, net of capitalized interest, were $24$365 million and $99$399 million in the threesix months ended MarchJune 31,30, 2026 and 2025, respectively.

Our capital expenditures primarily relate to the expansion and renovation of existing facilities (including amounts to comply with applicable laws and regulations); surgical hospital expansion focused on higher‑acuity services; equipment and information systems additions and replacements; introduction of new medical technologies (including robotics); design and construction of new facilities; and various other capital improvements. Capital expenditures were $180$348 million and $173$366 million in the threesix months ended MarchJune 31,30, 2026 and 2025, respectively. We anticipate that our capital expenditures for the year ending December 31, 2026 will total approximately $700 million to $800 million, including $111 million that was accrued as a liability at December 31, 2025.