2Q26 Hospital Preview: Vols, ACA and Bad Debt in View; Question is Whether Negative Sentiment Has Gone Too Far

Research evidence excerpt

2Q26 Hospital Preview: Vols, ACA and Bad Debt in View; Question is Whether Negative Sentiment Has Gone Too Far

Healthcare Facilities & Managed Care UBS Research

Hospital Industry: Second Quarter

Areas of Focus

Acute Volumes

Winter Weather and Lighter Flu Season Drove Volume Softness in 1Q

Unusually bad winter weather and a meaningfully lighter flu season compared to last

year both weighed on first quarter volumes and earnings. 1Q same store volumes were

up just 0.7% on average across the hospital operators, with each company (other than

ARDT) coming in below full year guidance ranges. HCA cited a 70 bps drag on

admissions growth from the milder flu season and another 30 bps of drag from the

winter weather. HCA estimated a $180 mln EBITDA headwind in 1Q from flu/weather,

while UHS estimated a ~$30 mln headwind (both around 4.5% of total EBITDA)

Given the noisy 1Q results and the significant interest from many investors in

determining "core growth" in the quarter, investors have been particularly focused on

deciphering volume trends during the second quarter. Results from our UBS Hospital

Volume Survey and our UBS Evidence Lab Databank have suggested relatively soft

inpatient numbers through the first two months of the quarter, though outpatient

volumes appear to have remained strong.

2Q Concerns over Softer Surgical Volumes, Uncompensated Care Uptick

After the market close on June 2nd, ARDT issued a press release announcing a new

CEO. In the release, the company also noted that it has experienced volume softness in

the second quarter "across [its] portfolio". In 1Q, ARDT reported same facility adj.

admissions growth of 2.0%, higher than the 0.4% average reported by the rest of the

public hospital operators and 70 bps higher than the second highest volume growth