Universal Health Services Financial Model

• Total assets: Approximately $14 billion to $15 billion.
• Key asset categories: Property and Equipment (PP&E) is the largest asset class, representing the physical hospitals.
• Goodwill & intangibles: Approximately 30% of total assets, stemming from decades of hospital acquisitions.
• Working capital profile:
• Days Sales Outstanding (DSO): Typically 45 to 55 days. Accounts receivable are significant due to the delayed billing and collection cycles with insurance companies and Medicare.
• Days Inventory Outstanding (DIO): Typically 10 to 15 days (mostly medical supplies and pharmaceuticals).
• Days Payable Outstanding (DPO): Typically 40 to 50 days.
• Net working capital as % of revenue: Generally low single digits.
• Working capital funding: The company generally operates with positive working capital but relies on strong operating cash flow rather than working capital advantages to fund growth.
• PP&E: Consists of land, buildings, and medical equipment. Useful lives range from 20 to 40 years for buildings and 3 to 10 years for equipment.
• Right-of-use assets: Operating leases are material but manageable, representing approximately $300 million to $400 million.

• Capex as % of revenue: Typically 5.5% to 6.5% (approximately $950 million to $1.1 billion annually).
• Maintenance capex vs. growth capex: Roughly 40% maintenance and 60% growth. Growth capex funds new hospital construction, bed additions, and freestanding emergency departments.
• Major capex programmes underway: Expansion of the outpatient behavioural health footprint and new acute care hospitals in high-growth Sunbelt markets.
• M&A pattern: Historically a bolt-on acquirer of regional hospitals and behavioural facilities, though recent growth has skewed toward organic facility expansion and joint ventures.

• Total debt: Approximately $4.5 billion to $5.5 billion.
• Debt/EBITDA ratio: Currently operates between 1.8x and 2.2x, which is at the lower end of their historical target range.
• Credit rating: Investment grade (typically BBB- or Baa3).
• Key debt instruments: A mix of revolving credit facilities, term loans, and senior unsecured notes.
• Interest rate profile: A mix of fixed bonds and floating-rate bank debt. The weighted average cost of debt is typically 5% to 6%.
• Share repurchase programme: Highly active. The company repurchased approximately $900 million in shares during 2025 and maintains a large ongoing authorisation.
• Dividend policy: The company pays a modest dividend with a yield typically under 0.5% and a payout ratio below 5%. Capital return is heavily skewed toward buybacks.

• Operating cash flow conversion: OCF to Net Income is typically 1.1x to 1.3x, driven by high depreciation add-backs.
• Free cash flow margin: Typically 4% to 6% of revenue.
• Major non-cash items: Depreciation and amortisation, stock-based compensation, and deferred income taxes.
• Working capital cash flow impact: Accounts receivable growth often consumes cash as revenues grow, offsetting some of the cash generation.
• Capex intensity: High. The physical nature of hospitals requires constant reinvestment, making free cash flow significantly lower than operating cash flow.
• Cash tax rate: Generally tracks close to the statutory rate, though accelerated depreciation on capital expenditures can defer cash tax payments.

1. Assumptions: Hardcoded inputs for macroeconomic drivers, segment volume growth, pricing growth, cost ratios, and capital allocation.
2. Summary: A dashboard showing a 5-year historical and 5-year forecast view of the income statement, key margins, EPS, and valuation outputs.
3. Revenue_Build: Detailed volume and pricing schedules for Acute Care Services and Behavioural Health Care Services.
4. Operating_Costs: Line-by-line forecasts for Salaries, Wages and Benefits, Supplies, Other Operating Expenses, and Lease Expense.
5. Working_Capital: Schedules for Accounts Receivable, Inventory, Other Current Assets, Accounts Payable, and Accrued Liabilities based on days outstanding metrics.
6. PPE_and_Intangibles: Roll-forward schedules for gross PP&E, accumulated depreciation, capital expenditures, and goodwill.
7. Debt_Schedule: Tranche-by-tranche debt roll-forward, interest expense calculation, and mandatory principal repayment schedules.
8. Income_Statement: Consolidated P&L from Net Revenues down to Net Income Attributable to UHS.
9. Balance_Sheet: Standard asset, liability, and equity line items ensuring total assets equal total liabilities plus equity.
10. Cash_Flow_Statement: Indirect method starting from Net Income, adding back non-cash items, adjusting for working capital, and detailing investing and financing cash flows.
11. DCF_Valuation: Unlevered free cash flow calculation, WACC build-up, terminal value calculation, and implied share price.

1. Acute Care Revenue = Acute Care Adjusted Admissions * Net Revenue per Acute Care Adjusted Admission
2. Behavioural Health Revenue = Behavioural Health Adjusted Patient Days * Net Revenue per Behavioural Health Adjusted Patient Day
3. Total Net Revenues = Acute Care Revenue + Behavioural Health Revenue + Other Revenue
4. Salaries, Wages and Benefits = Total Net Revenues * Salaries and Wages Margin Assumption
5. Supplies Expense = Total Net Revenues * Supplies Margin Assumption
6. Other Operating Expenses = Total Net Revenues * Other Operating Expense Margin Assumption
7. Total Operating Expenses = Salaries, Wages and Benefits + Supplies Expense + Other Operating Expenses + Lease Expense + Depreciation and Amortisation
8. EBITDA = Net Income + Income Tax Provision + Interest Expense + Depreciation and Amortisation
9. Adjusted EBITDA net of NCI = EBITDA - Net Income Attributable to Noncontrolling Interests
10. Accounts Receivable = (Total Net Revenues / 365) * Days Sales Outstanding
11. Accounts Payable = (Supplies Expense + Other Operating Expenses) / 365 * Days Payable Outstanding
12. Interest Expense = Average Total Debt Balance * Weighted Average Interest Rate
13. Free Cash Flow = Cash Flow from Operations - Capital Expenditures
14. Ending Shares Outstanding = Beginning Shares Outstanding - (Share Repurchase Spend / Average Share Price)

The Assumptions sheet dictates the volume and pricing growth rates feeding the Revenue_Build. The Revenue_Build outputs total revenue, which feeds into the Operating_Costs sheet to calculate percentage-based expenses. Both revenue and operating costs flow into the Income_Statement to calculate operating income. The Income_Statement feeds Net Income to the Cash_Flow_Statement and Retained Earnings on the Balance_Sheet. The Working_Capital sheet uses revenue and expense lines to project current assets and liabilities, feeding the changes in working capital to the Cash_Flow_Statement. The PPE_and_Intangibles sheet calculates depreciation, which flows to the Income_Statement and Cash_Flow_Statement. The Debt_Schedule calculates interest expense for the Income_Statement and ending debt balances for the Balance_Sheet. A circularity exists between the Debt_Schedule (interest expense), the Income_Statement (net income), the Cash_Flow_Statement (cash available for debt paydown), and back to the Debt_Schedule.

• Revenues and volume metrics are entered and displayed as positive numbers.
• Expenses on the Income Statement build (Salaries, Supplies, etc.) are calculated as positive numbers and subtracted in the subtotal formulas (e.g., Revenue - Expenses = Operating Income).
• On the Cash Flow Statement, cash inflows are positive and cash outflows (including Capital Expenditures and Share Repurchases) are negative.
• Balance Sheet asset, liability, and equity balances are positive.

1. Failing to deduct Net Income Attributable to Noncontrolling Interests (NCI) when calculating Adjusted EBITDA. UHS has significant joint ventures, and ignoring NCI overstates the earnings available to UHS shareholders.
2. Mismodelling the split between admissions and patient days. Acute care is driven by admissions, whereas behavioural health is driven by patient days. Applying the wrong volume metric to a segment will break the revenue logic.
3. Ignoring the impact of Medicaid supplemental payments. States like Texas and California frequently adjust these payments, which can artificially inflate or deflate year-over-year revenue growth comparisons.
4. Underestimating the operating leverage inherent in the business. Because facility costs are largely fixed, a 1% miss in volume assumptions can lead to a disproportionately large miss in EBITDA margins.
5. Overlooking the severity of contract labour costs. If the model assumes a rapid return to pre-2020 salary margins without accounting for structural wage inflation, margins will be overly optimistic.
6. Miscalculating share repurchases. UHS uses almost all of its free cash flow for buybacks. If the model does not dynamically reduce the share count, EPS forecasts will be far too low.
7. Forgetting to model the cash flow impact of accounts receivable. Hospital billing is notoriously slow, and rapid revenue growth will trap significant cash in working capital.
8. Treating all capex as maintenance. The model must separate maintenance capex (which limits free cash flow) from growth capex (which drives future bed capacity and volume growth).

1. Total Net Revenues must equal the sum of Acute Care, Behavioural Health, and Other revenues.
2. Adjusted EBITDA Margin should remain between 14.0% and 16.5% based on historical performance; flag if outside this band.
3. Salaries, Wages and Benefits as a percentage of revenue should not drop below 47%; flag if the model assumes unrealistic labour efficiencies.
4. Capital Expenditures as a percentage of revenue should run between 5.5% and 6.5%.
5. Debt to Adjusted EBITDA net of NCI should remain below 2.5x per management's stated leverage targets.
6. The Balance Sheet must balance exactly: Total Assets = Total Liabilities + Total Equity in every forecasted period.
7. The Cash Flow Statement must reconcile to the change in cash on the Balance Sheet.
8. Operating Cash Flow to Net Income conversion should consistently remain above 1.0x due to heavy depreciation add-backs.

• Filings: SEC EDGAR database for Universal Health Services (UHS) 10-K and 10-Q filings. The investor relations page at ir.uhs.com provides supplemental earnings presentations.
• Key Peers: HCA Healthcare (HCA), Tenet Healthcare (THC), Acadia Healthcare (ACHC), and Encompass Health (EHC).
• Industry Data: Centers for Medicare & Medicaid Services (CMS) for annual rate updates, and the American Hospital Association (AHA) for national admission trends.
• Consensus Estimates: Bloomberg or FactSet for forward-looking revenue and EBITDA consensus to validate model outputs.

• Universal Health Services Investor Relations (https://ir.uhs.com)
• Universal Health Services 2024 and 2025 Earnings Releases and Supplemental Schedules
• SEC EDGAR Database (Form 10-K and 10-Q filings for UHS)
• Seeking Alpha Earnings Call Transcripts (Q3 2025 and Q4 2025)