# Universal Health Services (UHS) Financial Model Free Excel 3-statement financial model and company analysis for Universal Health Services. - Canonical: https://finamodel.com/companies/universal-health-services - Industry: Healthcare Services - Downloadable model: Yes - Excel download: https://finamodel.com/company-models/UHS.xlsx ## Model Purpose This model forecasts the consolidated revenue, EBITDA, and free cash flow of Universal Health Services (UHS) to determine its equity valuation and assess its capacity for continued share repurchases and facility expansion. ## Company Overview Universal Health Services is one of the largest providers of hospital and healthcare services in the United States and the United Kingdom. The company operates through two primary segments: Acute Care Services (approximately 55% of revenue) and Behavioural Health Care Services (approximately 45% of revenue). The business model is highly asset-heavy, requiring significant capital investment in physical hospital infrastructure, medical equipment, and clinical staff. UHS holds a strong competitive position as a leading operator of freestanding psychiatric facilities and regional acute care networks, competing with peers like HCA Healthcare, Tenet Healthcare, and Acadia Healthcare. Recent major events include targeted expansions in outpatient behavioural health centres, ongoing share repurchase programmes, and navigating post-pandemic labour supply constraints. ## Revenue Deep Dive ### Acute Care Services - **Segment name:** Acute Care Hospital Services - **Revenue driver formula:** Acute Care Adjusted Admissions x Net Revenue per Adjusted Admission - **Historical growth rate:** 6% to 9% CAGR over the last 3 years - **Key growth levers and headwinds:** Growth is driven by population expansion in key markets (like Nevada and Texas), higher acuity procedures, and negotiated commercial rate increases. Headwinds include shifts from inpatient to outpatient care and reductions in Medicaid supplemental payments. - **Pricing dynamics:** Highly regulated and contractual. Pricing depends on Medicare/Medicaid reimbursement rates and negotiations with commercial managed care organisations. - **Revenue recognition notes:** Recognised over time as services are provided, subject to estimated implicit price concessions for uninsured or underinsured patients. - **Seasonality:** The first and fourth quarters are typically stronger due to higher winter illness volumes, while the summer months tend to see lower elective procedure volumes. ### Behavioural Health Care Services - **Segment name:** Behavioural Health Care Services - **Revenue driver formula:** Behavioural Health Adjusted Patient Days x Net Revenue per Adjusted Patient Day - **Historical growth rate:** 5% to 8% CAGR over the last 3 years - **Key growth levers and headwinds:** Levers include rising societal demand for mental health and substance abuse treatment, alongside the opening of new outpatient facilities. Headwinds include severe clinical staffing shortages that cap facility utilisation rates. - **Pricing dynamics:** A mix of government (Medicaid/Medicare) and commercial payers. Pricing growth has historically tracked around 4% to 6% annually. - **Revenue recognition notes:** Similar to acute care, recognised as patient days are incurred, net of contractual allowances. - **Seasonality:** Less seasonal than acute care, though school holidays can impact child and adolescent psychiatric admission volumes. ## Cost Structure ### Variable Costs / COGS UHS does not report a traditional "Cost of Goods Sold" line. Instead, operating expenses are broken down by functional category. - **Salaries, Wages, and Benefits:** The largest expense, typically 48% to 50% of revenue. This includes clinical staff, physicians, and contract labour. - **Supplies:** Typically 14% to 16% of revenue. This includes pharmaceuticals, medical devices, and surgical implants. - **Other Operating Expenses:** Typically 20% to 22% of revenue. This covers utilities, insurance, purchased services, and facility maintenance. - **Gross margin range:** Not applicable in standard hospital accounting. Operating leverage is achieved by spreading fixed facility costs over higher patient volumes. ### Operating Expenses - **Lease and Rental Expense:** Typically 1% to 2% of revenue, covering medical office buildings and equipment. - **Depreciation & Amortisation:** Typically 5% to 6% of revenue, reflecting the asset-heavy nature of hospital buildings and heavy medical equipment. - **Stock-Based Compensation:** Relatively small, typically under 0.5% of revenue. - **Restructuring / one-time charges:** Infrequent, though the company occasionally records legal settlements or impairment charges on underperforming facilities. ### Margin Profile - **EBITDA Margin:** 14% to 16% historically. - **Operating Margin:** 9% to 11%. - **Net Margin:** 6% to 8%. - **Margin trend:** Margins compressed during the pandemic due to exorbitant contract labour costs but have steadily expanded back toward historical averages as premium labour usage declined and commercial pricing improved. ## Balance Sheet Structure - **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. ## Capital Expenditure & Investment - **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. ## Debt & Capital Structure - **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. ## Cash Flow Characteristics - **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. ## Sheet Structure 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. ## Key Financial Relationships 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) ## Cross-Sheet Dependencies 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**. ## Sign Convention - 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. ## Things Most Likely to Go Wrong 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). ## Validation Checks 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. ## Key Assumptions (Default Values) | Assumption | Default Value | Unit | Rationale | |---|---|---|---| | Acute Care Adjusted Admissions Growth | 2.5 | % | Reflects recent same-facility volume recovery and demographic tailwinds in key markets. | | Acute Care Pricing Growth | 5.0 | % | Based on recent commercial rate negotiations and higher acuity patient mix. | | Behavioural Health Patient Days Growth | 1.5 | % | Constrained by clinical staffing shortages but supported by strong underlying demand. | | Behavioural Health Pricing Growth | 6.0 | % | Reflects recent Medicaid rate updates and commercial pricing strength. | | Salaries, Wages and Benefits Margin | 49.0 | % | Aligns with recent historical averages as contract labour usage normalises. | | Supplies Margin | 15.5 | % | Consistent with historical trends; medical supply inflation is generally passed through. | | Other Operating Expenses Margin | 21.0 | % | Covers utilities, insurance, and purchased services based on recent 10-K data. | | Depreciation & Amortisation Margin | 5.5 | % | Reflects the heavy capital intensity of the hospital portfolio. | | Days Sales Outstanding (DSO) | 50 | Days | Standard collection cycle for commercial and government healthcare payers. | | Days Payable Outstanding (DPO) | 45 | Days | Typical payment terms with medical suppliers and pharmaceutical distributors. | | Capital Expenditures % of Revenue | 6.0 | % | Matches management's 2026 guidance of approximately $950M to $1.1B. | | Effective Tax Rate | 23.5 | % | Blended rate of US federal and state corporate income taxes. | | Weighted Average Interest Rate | 5.5 | % | Reflects the current mix of fixed-rate bonds and floating-rate credit facilities. | | Annual Share Repurchase Spend | 900 | $ Millions | Consistent with the aggressive buyback activity seen in 2024 and 2025. | | WACC | 8.0 | % | Standard discount rate for an investment-grade healthcare facility operator. | | Terminal Growth Rate | 2.0 | % | Aligns with long-term inflation and population growth expectations. | ## Data Sources & Benchmarks - **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. ## Sources - 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) --- ## Frequently asked questions ### What services does Universal Health Services (UHS) provide? Universal Health Services operates as one of the largest providers of hospital and healthcare services across the United States and the United Kingdom. The company primarily offers Acute Care Services, accounting for approximately 55% of revenue, and Behavioural Health Care Services, which makes up about 45% of revenue. ### What are the main revenue drivers for Universal Health Services? The main revenue drivers for Universal Health Services stem from its two primary segments: Acute Care Services and Behavioural Health Care Services. Growth is also driven by significant capital investment in new hospital construction, bed additions, and the expansion of outpatient behavioural health centers. ### What is the assumed capital expenditure as a percentage of revenue in the Universal Health Services financial model? The Universal Health Services financial model assumes a Capital Expenditure (Capex) as a percentage of revenue at approximately 5.87%. This capex is roughly 60% growth-oriented, funding new facilities and expansions, while the remaining 40% covers maintenance. ### What are the key revenue growth and margin assumptions used in the Universal Health Services financial model? The financial model for Universal Health Services incorporates a revenue growth assumption of approximately 5.85%. Key margin assumptions include Cost of Goods Sold at 55% of revenue and Selling, General & Administrative expenses at 15% of revenue. ### What is the primary purpose of the financial model for Universal Health Services? The primary purpose of the Universal Health Services financial model is to forecast the company's consolidated revenue, EBITDA, and free cash flow. This analysis helps determine its equity valuation and assesses its capacity for continued share repurchases and facility expansion. ### What forecast horizon does the Universal Health Services financial model cover? The downloadable Excel financial model for Universal Health Services covers a forecast horizon from Fiscal Year 2026 through Fiscal Year 2030. This model provides detailed projections for key financial metrics over this five-year period. [Interactive forecast calculator](https://finamodel.com/companies/universal-health-services/forecast)