Top executives at Universal Health Services (NYSE: UHS) laid out a guarded but optimistic outlook for the future of the company as it stares down changes to Medicaid and other safety-net programs.

On Tuesday, UHS CEO Marc Miller and CFO Steve Filton said the company has demonstrated the ability to pivot in the face of monumental challenges, citing its work during the COVID pandemic. They also point out that the company has clear timelines for the changes as set by the One Big Beautiful Bill Act, legislation that acts as the Trump administration’s economic agenda.

Still, there is some degree of likelihood, they said, that both state and federal officials will seek to alter what Congress passed earlier in the month. There may even be members of Congress who look to reverse course.

“In talking with all of the folks down in D.C., representatives from many of the states that we cover are starting to recognize, even right now, what they passed simply can’t be left as is because the effect on some of the health care programs in their state — and not just at a place like UHS, but these not-for-profit hospitals in their state — could be detrimental,” Miller said during the company’s second-quarter earnings call. “They’re already talking about what needs to be done to make sure that programs aren’t closing, shifts aren’t taken, things like that.

“So, I fully expect that this is a floor. It is what it is today. But I expect this will get better. We anticipate that there will be changes made because we think there has to be.”

Miller further described figures illustrating the potential negative financial impact discussed during the call as “a worst-case scenario.” Based on potential impacts to supplemental payment from state Medicaid programs, Filton said that UHS could see its net benefit reduced in the range of $360 million to $400 million by 2032.

“We cannot predict, among other things, that this legislation will ultimately be implemented as enacted, or certain states may attempt to implement countermeasures to mitigate its impact,” Filton said.

The One Big Beautiful Bill Act will have a more immediate impact, Filton said. The looming work requirements and elimination of premium subsidies for ACA exchange health plans are expected to impact the company’s performance in 2026. The Congressional Budget Office predicts that 16 million Americans could become uninsured following the implementation of the act. 

While most of the uninsured business comes through emergency rooms through UHS’ acute care division, Filton said the behavioral health division has more “optionality in the patients [it is] able to take.”

“If patients generally don’t have insurance, they usually find their way to other settings,” Filton said. “You can just tell that from our uncompensated care load in the behavioral segment, which is dramatically less than it is in the acute segment.”

The company is contemplating mitigation strategies and will have much more time to prepare for the changes compared to the crisis of the COVID pandemic. Filton said the company has “great confidence in our ability to shift and be flexible, especially with several years of notice and preparation that we will have this time around.”

Recent performance and de novo growth

UHS operates 29 inpatient acute care hospitals, 338 inpatient behavioral health facilities, and 61 outpatient facilities and ambulatory care access points across 39 states, the District of Columbia, and the United Kingdom.

On the behavioral health side, UHS reported progress on several de novo projects in the first half of the year. In May, UHS and Trinity Health Michigan celebrated the opening of a new joint venture, 96-bed behavioral health hospital in Grand Rapids, Michigan. It also opened a 41-bed substance use/dual diagnosis treatment center in Mount Pleasant, South Carolina.

Filton also said that the $61 million joint venture facility with Allentown, Pennsylvania-based Lehigh Valley Health Network will wrap later in the year, bringing 144 new beds online in Bethlehem, Pennsylvania.

The company is also expanding internationally, one of the few American companies in the industry to do so. In the U.K., UHS’ Cygnet Behavioral Health Network has added six new facilities and 137 beds in the year so far.

UHS is based in King of Prussia, Pennsylvania.

Overall, UHS’ revenue increased 9.6% in the second quarter, year over year, to $4.28 billion. Net revenue on the behavioral health side increased by 5.4% to $1.83 billion. Those figures were driven by a 4.2% increase in revenue per adjusted patient day. Overall, patient days increased 1.2% year over year.

Over several quarterly calls, Filton has said that UHS has been able to leverage its market-leading positions across the U.S. and the massive demand increase into disproportionately higher annual rate increases with payers. This trend was largely ignited by COVID. The trend has continued, but it recently decreased to normalized levels, while still remaining historically high for rate increases.

Filton said that a 7% increase in revenue rate would be “reasonably expected” in the long term. About 4% to 5% would be driven by rate increases, and between 2.5% and 3% would come from volume increases.

“We’ve generally been hitting those price targets, and frankly, in most periods, exceeding the price target,” Filton said. “It’s the volume that has been the bugaboo for us.”

Improving patient revenues dovetails with UHS’ continued focus on growing its outpatient behavioral health segment. Filton said the company could “do a better job” of retaining patients that step down from inpatient stays to intensive outpatient programs (IOPs) or partial hospitalization programs (PHPs).

“In terms of the step-down patients, the patients who we discharge, we do capture a good share of those, but there are still a good number of those patients who go elsewhere,” Filton said. “We probably can be more effective in the control of those patients, in large part, because I think we believe that the care they’ll receive and the continuity of care that they’ll receive at our facility is greater than they will elsewhere.”

Filton noted that there is a lot of competition in the outpatient behavioral health space. And it’s a space where UHS has not historically competed in, he added. As the company continues to invest in outpatient, it will leverage what Filton said are key advantages that UHS has against other smaller or new competitors: long-standing relationships with payers and referral sources.

UHS intends to open between 10 and 15 freestanding outpatient facilities a year over the next several years, Filton said. However, the company continues to grapple with finding and retaining behavioral health staff, especially therapists, to work in these and other behavioral health settings.