King of Prussia, Pa.-based Universal Health Services’ EBITDA margin is expected to recover to the 15% to 16% range in 2027 after a modest contraction in 2026, according to an Aug. 11 report from Fitch Ratings.
Fitch affirmed UHS’ long-term issuer default rating at “BB+” with a stable outlook and its senior secured debt at “BBB-.” The ratings agency also assigned a “BBB-” rating to about $1 billion of proposed senior secured notes.
Six things to know:
1. Fitch expects UHS’ EBITDA margin to recover to the 15% to 16% range in 2027. The company averaged an EBITDA margin of just over 15% in 2024 and 2025, and Fitch projects a 15.2% margin in 2026. Faster growth in UHS’ higher-margin behavioral health business relative to acute care, along with easing wage pressures, could support margins in 2027.
2. ACA exchange coverage losses are creating a larger-than-expected financial headwind. UHS CFO Steve Filton said during the company’s July 28 earnings call that declines in ACA exchange volumes during the second quarter were offset almost one-for-one by increases in self-pay volumes, meaning patients losing exchange coverage largely became uninsured rather than moving to other commercial plans. UHS increased its projected 2026 financial impact from exchange-related changes to $85 million from $75 million. Exchange volumes fell about 15% year over year during the second quarter, though the decline was less than the more than 25% decrease UHS had initially forecast.
3. Medicaid changes pose an additional reimbursement risk beginning in 2027. Fitch said tighter eligibility verification and new work requirements could increase the uninsured population, adding to uncompensated care pressures. The phase-down of Medicaid state directed payments could also reduce UHS’ EBITDA by a cumulative $430 million to $480 million from 2028 through 2032.
4. UHS is expected to maintain strong free cash flow despite elevated capital spending. Fitch projects free cash flow to improve to about 5% of revenue over its forecast period, up from 4.5% in 2025, even as annual capital expenditures are expected to total $1 billion to $1.3 billion, or 5.5% to 6% of revenue. Fitch projects free cash flow of slightly more than $900 million in 2026 and 2027, rising to $1 billion to $1.1 billion in 2028 and 2029.
5. UHS’ $835 million acquisition of Talkspace is expected to push leverage modestly higher while expanding its behavioral health strategy. Fitch projects EBITDA leverage of 2.1x by the end of 2026, compared with 1.7x at the end of 2025. The debt-funded acquisition is expected to be slightly accretive to earnings in its first year and increasingly accretive thereafter. Fitch also sees potential for Talkspace to complement UHS’ behavioral health outpatient and telehealth operations.
6. UHS continues to invest heavily in capacity while maintaining substantial liquidity. In 2025, the system advanced two de novo behavioral health projects totaling 264 beds and added 178 acute care inpatient beds. It also opened the 142-bed Cedar Hills Hospital after opening the 150-bed West Henderson Hospital in late 2024 and recently added 156 beds through the $430 million Alan Miller Medical Center in Palm Beach Gardens, Fla. UHS had $1.4 billion of liquidity at the end of June, including $139 million in cash and about $1.3 billion available through its revolving credit facility.
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