UHSUniversal Health Services

We note the amounts of your salaries, wages, benefits, other operating expenses, and supplies expense materially increased from the prior year for your acute care hospital services on a same facility basis and for all your acute care operations.

Rest of the question

You also disclose elsewhere that the healthcare industry is very labor intensive and salaries and benefits are subject to inflationary pressures, as are supply costs, construction costs, medical equipment, and other costs. Please revise your future filings to address the following, providing us with your proposed disclosure in your response: • Expand your disclosure to provide a qualitative and quantitative discussion of the reasons for the changes in each line item in accordance with Item 303(a) of Regulation S-K. • As part of response, revise your future filings to quantify the impact of inflation where possible, and discuss the steps you are taking to mitigate the effects of inflation on your business.

In response to the Staff’s comments, and if acceptable to the Staff, we will plan to include additional disclosure in the Management’s Discussion and Analysis of Financial Condition and Results of Operations-Acute Care Hospital Services-Same Facility Basis; and All Acute Care Hospital Services, as included in future filings, commencing with our Form 10-Q for the period ended September 30, 2022.

Our proposed disclosure is included below and is comprised of the disclosure that was previously included in our Form 10-K (which has been included below to provide the Staff with the context for the

Rest of the answer

proposed additional disclosure), as well as the proposed additional disclosure which is marked as italicized and underlined. However, while the future disclosures will be substantially in line with the proposed disclosure, they will be modified based on facts and circumstances at the time.

In addition, in future filings, we will include additional disclosure in the Behavioral Health Care Services’ section of the Management’s Discussion and Analysis of Financial Condition and Results of Operations, that quantifies the dollar amount and percentage change in salaries, wages and benefits, other operating expenses and supplies expense, as incurred at our behavioral health care facilities. To the degree warranted, based upon the magnitude of increase in these operating costs, we will also include additional qualitative disclosure related to this segment that discusses the factors contributing to the increases in these operating costs, as well as the initiatives we have implemented to mitigate the increases to the extent possible.

As part of response, revise your future filings to quantify the impact of inflation where possible, and discuss the steps you are taking to mitigate the effects of inflation on your business.

Response:

As indicated in the additional proposed disclosure below, we believe that the costs of providing care to our patients have exceeded the increase in the comparable net revenues due, in substantial part, to the impacts of the healthcare labor shortage, the acuity of the patient population (most particularly those being treated for COVID-19 who generally require more intensive medical resources), as well as general inflationary pressures. Since we believe that the impact that these various factors have on our operating costs are interrelated, and therefore not separable, we do not believe we can accurately quantify the specific impact of each, including the specific effect related to general inflationary pressures.

Given the more recent increase in general economic inflationary pressures, to the degree possible, we will provide additional qualitative disclosure in future periods relating to the effects of general inflationary pressures on our operating expenses and other expenditures such as the cost of equipment and construction costs.

Proposed disclosure draft to be included in future filings:

Below is the previously disclosed, and proposed additional disclosure, to our Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Acute Care Hospital Services-Same Facility Basis

We believe that providing our results on a “Same Facility” basis (which is a non-GAAP measure), which includes the operating results for facilities and businesses operated in both the current year and prior year periods, is helpful to our investors as a measure of our operating performance. Our Same Facility results also neutralize (if applicable) the effect of items that are non-operational in nature including items such as, but not limited to, gains/losses on sales of assets and businesses, impacts of settlements, legal judgments and lawsuits, impairments of long-lived and intangible assets and other amounts that may be reflected in the current or prior year financial statements that relate to prior periods.

Our Same Facility basis results reflected on the tables below also exclude from net revenues and other operating expenses, provider tax assessments incurred in each period as discussed below Sources of Revenue-Various State Medicaid Supplemental Payment Programs. However, these provider tax assessments are included in net revenues and other operating expenses as reflected in the table below under All Acute Care Hospital Services. The provider tax assessments had no impact on the income before income taxes as reflected on the tables below since the amounts offset between net revenues and other operating expenses. To obtain a complete understanding of our financial performance, the Same Facility results should be examined in connection with our net income as determined in accordance with U.S. GAAP and as presented in the condensed consolidated financial statements and notes thereto as contained in this Annual Report on Form 10-K.

The following table summarizes the results of operations for our acute care hospital services on a same facility basis and is used in the discussions below for the years ended December 31, 2021 and 2020 (dollar amounts in thousands):

Year Ended

December 31, 2021

December 31, 2020

% of Net

Amount

Revenues

Net revenues

$

6,963,627

100.0

%

6,238,236

Operating charges:

Salaries, wages and benefits

2,947,853

42.3

2,611,143

41.9

Other operating expenses

1,656,848

23.8

1,462,627

23.4

Supplies expense

1,218,969

17.5

1,081,154

17.3

Depreciation and amortization

327,774

4.7

318,077

5.1

Lease and rental expense

73,421

1.1

69,638

Subtotal-operating expenses

6,224,865

89.4

5,542,639

88.8

Income from operations

738,762

10.6

695,597

11.2

Interest expense, net

1,006

0.0

1,567

Other (income) expense, net

567

Income before income taxes

737,189

694,030

11.1

On a same facility basis during 2021, as compared to 2020, net revenues from our acute care hospital services increased $725 million or 11.6%. Income before income taxes (and before income attributable to noncontrolling interests) increased by $43 million, or 6%, to $737 million or 10.6% of net revenues during 2021 as compared to $694 million or 11.1% of net revenues during 2020.

As mentioned above, included in our acute care hospital services’ revenues during 2020 was approximately $316 million of revenues recorded in connection with funds received from various governmental stimulus programs, most notably the CARES Act. Excluding these governmental stimulus program revenues from 2020, net revenues from our acute care hospital services, on a same facility basis, increased $1.04 billion or 17.6% during 2021, as compared to 2020, and income before income taxes increased $359 million or 95% during 2021, as compared to 2020.

During 2021, excluding the impact of the $316 million of governmental stimulus program revenues recorded during 2020, net revenue per adjusted admission increased by 8.6% while net revenue per adjusted patient day increased by 7.7%, as compared to 2020. During 2021, as compared to 2020, inpatient admissions to our acute care hospitals increased by 6.4% and adjusted admissions increased by 7.7%. Patient days at these facilities increased by 7.3% and adjusted patient days increased by 8.6% during 2021 as compared to 2020. The average length of inpatient stay at these facilities remained unchanged at 5.1 days during each of 2021 and 2020. The occupancy rate, based on the average available beds at these facilities, was 67% and 63% during 2021 and 2020, respectively.

On a same facility basis during 2021, as compared to 2020, salaries, wages and benefits increased $337 million or 12.9%; other operating expenses increased $194 million, or 13.3%, and; supplies expense increased $138 million, or 12.7%. On a percentage basis, the increase in these operating costs have exceeded the increase in the comparable net revenues due, in large part, to the impacts of the healthcare labor shortage, the acuity of the patient population (most particularly those being treated for COVID-19 who generally require more intensive medical resources), as well as general inflationary pressures.

The healthcare industry is labor intensive and salaries, wages and benefits are subject to inflationary pressures, as are supplies expense and other operating expenses. The nationwide shortage of clinical and support personnel has been a significant operating issue facing us and other healthcare providers. In particular, like others in the healthcare industry, we continue to experience a shortage of nurses and other clinical staff and support personnel in certain geographic areas, which has been exacerbated by the COVID‑19 pandemic. We are treating patients with COVID‑19 in our facilities and the increased demand for care is putting a strain on our resources and staff, which has required us to utilize higher‑cost temporary labor and pay premiums above standard compensation for essential workers. The length and extent of the disruptions caused by the COVID‑19 pandemic are currently unknown; however, we expect such disruptions to continue into 2022 and potentially throughout the duration of the pandemic and beyond. This staffing shortage may require us to further enhance wages and benefits to recruit and retain nurses and other clinical staff and support personnel or require us to hire expensive temporary personnel. We have also experienced cost increases related to the procurement of medical supplies as well as certain of our other operating expenses which we believe resulted from supply chain disruptions as well as general inflationary pressures.

Although our ability to pass on increased costs associated with providing healthcare to Medicare and Medicaid patients is limited due to various federal, state and local laws which, in certain circumstances, limit our ability to increase prices, we have begun negotiating increased rates from commercial insurers to defray our increased cost of providing patient care. In addition, we have implemented various productivity enhancement programs and cost reduction initiatives including, but not limited to, the following: team-based patient care initiatives designed to optimize the level of patient care services provided by our licensed nurses/clinicians; efforts to reduce utilization of, and rates paid for, premium pay labor; consolidation of medical supply vendors to increase purchasing discounts; review and reduction of clinical variation in connection with the utilization of medical supplies, and; various other efforts to increase productivity and/or reduce costs including investments in new information technology applications.

All Acute Care Hospital Services

The following table summarizes the results of operations for all our acute care operations during 2021 and 2020. These amounts include: (i) our acute care results on a same facility basis, as indicated above; (ii) the impact of provider tax assessments which increased net revenues and other operating expenses but had no impact on income before income taxes, and; (iii) certain other amounts including, if applicable, the results of recently acquired/opened ancillary businesses. Dollar amounts below are reflected in thousands.

7,108,254

6,337,304

2,968,140

41.8

2,611,514

41.2

1,772,312

24.9

1,561,875

24.6

1,224,664

17.2

1,081,159

17.1

331,508

318,124

5.0

75,391

6,372,015

89.6

5,642,310

89.0

736,239

10.4

694,994

11.0

734,666

10.3

693,427

10.9

During 2021, as compared to 2020, net revenues from our acute care hospital services increased $771 million or 12.2% to $7.11 billion as compared to $6.34 billion during 2020 due to: (i) the $725 million, or 11.6%, increase in same facility revenues, as discussed above, and; (ii) an aggregate increase of $46 million consisting of revenues generated from recently acquired facilities and businesses (as discussed in Note 2 to the Consolidated Financial Statements-Acquisitions and Divestitures) and an increase in provider tax assessments which had no impact on net income attributable to UHS since the amounts were offset between net revenues and other operating expenses.

Income before income taxes increased by $41 million, or 6%, to $735 million or 10.3% of net revenues during 2021 as compared to $693 million or 10.9% of net revenues during 2020. The $41 million increase in income before income taxes from our acute care hospital services resulted primarily from the above-mentioned $43 million increase in income before income taxes, on a same facility basis, as discussed above.

Excluding the above-mentioned $316 million of revenues recorded during 2020 in connection with various governmental stimulus programs, net revenues from our acute care hospital services increased by $1.09 billion or 18.0% during 2021, as compared to 2020, and income before income taxes increased by $357 million or 95% during 2021, as compared to 2020.

During 2021, as compared to 2020, salaries, wages and benefits increased $357 million or 13.7%; other operating expenses increased $210 million, or 13.5%, and; supplies expense increased $144 million, or 13.3%. The factors contributing to these increased operating costs, as well as the initiatives we have implemented to mitigate the increases to the extent possible, are discussed above.

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Please revise to discuss more fully the potential impact of the several government investigations and lawsuits alleging serious and extensive fraudulent practices on the part of the company and its subsidiaries on the company's reputation, brand, and stock price.

Rest of the question

In addition to the formal proceedings discussed in this annual report, we note extensive negative publicity resulting from allegations made in a journalistic investigation conducted in 2017 by BuzzFeed News.

This letter is being written in connection with the Staff’s examination of the filing referenced above. Set forth below are our responses to the comments included in the Staff’s letter to us dated July 11, 2018. We are subject to pending legal actions …. page 12 Please revise to discuss more fully the potential impact of the several government investigations and lawsuits alleging serious and extensive fraudulent practices on the part of the company and its subsidiaries on the company’s reputation, brand, and stock price.

Rest of the letter

In addition to the formal proceedings discussed in this annual report, we note extensive negative publicity resulting from allegations made in a journalistic investigation conducted in 2017 by BuzzFeed News. In response to the Staff’s comment related to the above-referenced Risk Factor contained in Item 1A. of our Form 10-K for the year ended December 31, 2017, we intend to make the revisions indicated and underlined below. We plan to include this updated Risk Factor, as revised below, in Item 1A. Risk Factors in our Form 10-Q for the quarterly period ended June 30, 2018, which we currently plan to file on August 8, 2018. We are subject to pending legal actions, purported stockholder class actions and derivative lawsuits, governmental investigations and regulatory actions. We, our subsidiaries, PSI, and its subsidiaries, are subject to pending legal actions, governmental investigations and regulatory actions (see Item 31-Legal Proceedings). Defending ourselves against the allegations in the lawsuits and governmental investigations, or similar matters and any related publicity, could potentially entail significant costs, and could require significant attention from our management and our reputation could suffer significantly. We are unable to predict the outcome of these matters or to reasonably estimate the amount or range of any such loss; however, these lawsuits and the related publicity and news articles that have been published concerning these matters could have a material adverse effect on our business, financial condition, results of operations and/or cash flows which in turn could cause a decline in our stock price. We are and may become subject to other loss contingencies, both known and unknown, which may relate to past, present and future facts, events, circumstances and occurrences. Should an unfavorable outcome occur in some or all of our legal proceedings or other loss contingencies, or if successful claims and other actions are brought against us in the future, there could be a material adverse impact on our financial position, results of operations and liquidity. In particular, government investigations, as well as qui tam and stockholder lawsuits, may lead to material fines, penalties, damages payments or other sanctions, including exclusion from government healthcare programs. Settlements of lawsuits involving Medicare and Medicaid issues routinely require both monetary payments and corporate integrity agreements, each of which could have a material adverse effect on our business, financial condition, results of operations and/or cash flows. Please revise this section throughout to provide more robust disclosure regarding the nature of each investigation discussed, to your best knowledge, and the factual bases underlying the allegations made in the various lawsuits, as well as the relief sought. We note, as an example only, that in the derivative case filed in Philadelphia County in March 2017, you state only that the suit “alleges breaches of fiduciary duty and other allegedly wrongful conduct”. In contrast, the compliant cites numerous specific allegations, including constructive fraud, corporate waste and unjust enrichment, and seeks several forms of relief, including disgorgement of all unjust profits, benefits, and other compensation obtained by the individual defendants. Refer to Item 103 of Regulation S-K. Staff’s comment regarding our disclosure of pending legal proceedings, and have reviewed our previous relevant disclosures. Our Exchange Act filings commencing with our Form 10-K for the year ended December 31, 2012, have disclosed OIG subpoenas directed at UHS concerning it and UHS of Delaware, Inc., and several UHS owned facilities (which were identified). As additional subpoenas and Civil Investigative Demands were received, these disclosures were updated on a timely basis. Starting with and subsequent to our Form 10-K for the year ended December 31, 2014, we have disclosed that the “DOJ has advised us that the civil aspect of the coordinated investigation in connection with the behavioral health facilities named above is a False Claim Act investigation focused on billings submitted to government payers in relation to services provided at those facilities.” We have also disclosed, since our Form 10-Q for the period ended March 31, 2014, a related investigation by DOJ’s Criminal Frauds Section based on a referral from the Civil Division. Recent disclosures also included information on reserves that have been recorded in connection with the civil aspect of these matters, even while accurately stating that we cannot predict the ultimate resolution of these matters. Our disclosures have been consistent with other disclosures on similar matters involving the Company or its subsidiaries. While we believe that those disclosures satisfy the requirements of the regulation, pursuant to the Staff’s comments, we will revise these disclosures to include the information requested by the Staff. We plan to include these updated disclosures, as revised and underlined below, in our Form 10-Q for the quarterly period ended June 30, 2018, which we currently plan to file on August 8, 2018. We likewise believe that our disclosures regarding pending litigation have complied with all applicable SEC requirements. Our disclosures describe the factual basis of the shareholder class action to be allegations “that defendants violated the federal securities laws relating to the disclosures made in public filings associated with practices at our behavioral health facilities.” Likewise, the first of the shareholder derivative cases is described as asserting “breaches of fiduciary duties and other allegedly wrongful conduct by the members of the Board of Directors and certain officers of Universal Health Services, Inc. relating to practices at our behavioral health facilities,” and others are described as making “substantially similar allegations and claims based upon alleged violations of federal securities laws as well common law causes of action against the individual defendants.” Investors thus have been informed that the factual basis underlying these proceedings are claims arising from practices at certain of our behavioral health facilities. Indeed, our “Legal Proceedings” disclosures about pending litigation in our 2017 Form 10-K are consistent with the disclosures we have made for many years. Nevertheless, in response to the Staff’s comments, we will revise these disclosures to include the information requested by the Staff. We plan to include these updated disclosures, as revised and underlined below, in our Form 10-Q for the quarterly period ended Below is the legal proceedings disclosure in its entirety, as revised, and intended to be included in our Form 10-Q for the quarterly period ended June 30, 2018. We operate in a highly regulated and litigious industry which subjects us to various claims and lawsuits in the ordinary course of business as well as regulatory proceedings and government investigations. These claims or suits include claims for damages for personal injuries, medical malpractice, commercial/contractual disputes, wrongful restriction of, or interference with, physicians’ staff privileges, and employment related claims. In addition, health care companies are subject to investigations and/or actions by various state and federal governmental agencies or those bringing claims on their behalf. Government action has increased with respect to investigations and/or allegations against healthcare providers concerning possible violations of fraud and abuse and false claims statutes as well as compliance with clinical and operational regulations. Currently, and from time to time, we and some of our facilities are subjected to inquiries in the form of subpoenas, Civil Investigative Demands, audits and other document requests from various federal and state agencies. These inquiries can lead to notices and/or actions including repayment obligations from state and federal government agencies associated with potential non-compliance with laws and regulations. Further, the federal False Claim Act allows private individuals to bring lawsuits (qui tam actions) against healthcare providers that submit claims for payments to the government. Various states have also adopted similar statutes. When such a claim is filed, the government will investigate the matter and decide if they are going to intervene in the pending case. These qui tam lawsuits are placed under seal by the court to comply with the False Claims Act’s requirements. If the government chooses not to intervene, the private individual(s) can proceed independently on behalf of the government. Health care providers that are found to violate the False Claims Act may be subject to substantial monetary fines/penalties as well as face potential exclusion from participating in government health care programs or be required to comply with Corporate Integrity Agreements as a condition of a settlement of a False Claim Act matter. In September 2014, the Criminal Division of the Department of Justice (“DOJ”) announced that all qui tam cases will be shared with their Division to determine if a parallel criminal investigation should be opened. The DOJ has also announced an intention to pursue civil and criminal actions against individuals within a company as well as the corporate entity or entities. In addition, health care facilities are subject to monitoring by state and federal surveyors to ensure compliance with program Conditions of Participation. In the event a facility is found to be out of compliance with a Condition of Participation and unable to remedy the alleged deficiency(s), the facility faces termination from the Medicare and Medicaid programs or compliance with a System Improvement Agreement to remedy deficiencies and ensure compliance. The laws and regulations governing the healthcare industry are complex covering, among other things, government healthcare participation requirements, licensure, certification and accreditation, privacy of patient information, reimbursement for patient services as well as fraud and abuse compliance. These laws and regulations are constantly evolving and expanding. Further, the Affordable Care Act has added additional obligations on healthcare providers to report and refund overpayments by government healthcare programs and authorizes the suspension of Medicare and Medicaid payments “pending an investigation of a credible allegation of fraud.” We monitor our business and have developed an ethics and compliance program with respect to these complex laws, rules and regulations. Although we believe our policies, procedures and practices comply with government regulations, there is no assurance that we will not be faced with the sanctions referenced above which include fines, penalties and/or substantial damages, repayment obligations, payment suspensions, licensure revocation, and expulsion from government healthcare programs. Even if we were to ultimately prevail in any action brought against us or our facilities or in responding to any inquiry, such action or inquiry could have a material adverse effect on us. Certain legal matters are described below: In February, 2013, the Office of Inspector General for the United States Department of Health and Human Services (“OIG”) served a subpoena requesting various documents from January, 2008 to the date of the subpoena directed at Universal Health Services, Inc. (“UHS”) concerning it and UHS of Delaware, Inc., and certain UHS owned behavioral health facilities including: Keys of Carolina, Old Vineyard Behavioral Health, The Meadows Psychiatric Center, Streamwood Behavioral Health, Hartgrove Hospital, Rock River Academy and Residential Treatment Center, Roxbury Treatment Center, Harbor Point Behavioral Health Center, f/k/a The Pines Residential Treatment Center, including the Crawford, Brighton and Kempsville campuses, Wekiva Springs Center and River Point Behavioral Health. Prior to receipt of this subpoena, some of these facilities had received independent subpoenas from state or federal agencies. Subsequent to the February 2013 subpoenas, some of the facilities above have received additional, specific subpoenas or other document and information requests. In addition to the OIG, the DOJ and various U.S. Attorneys’ and state Attorneys’ General Offices are also involved in this matter. Since February 2013, additional facilities have also received subpoenas and/or document and information requests or we have been notified are included in the omnibus investigation. Those facilities include: National Deaf Academy, Arbour-HRI Hospital, Behavioral Hospital of Bellaire, St. Simons By the Sea, Turning Point Care Center, Salt Lake Behavioral Health, Central Florida Behavioral Hospital, University Behavioral Center, Arbour Hospital, Arbour-Fuller Hospital, Pembroke Hospital, Westwood Lodge, Coastal Harbor Health System, Shadow Mountain Behavioral Health, Cedar Hills Hospital, Mayhill Hospital, Southern Crescent Behavioral Health (Anchor Hospital and Crescent Pines campuses), Valley Hospital (AZ), Peachford Behavioral Health System of Atlanta, University Behavioral Health of Denton, and El Paso Behavioral Health System. In October, 2013, we were advised that the DOJ’s Criminal Frauds Section had opened an investigation of River Point Behavioral Health and Wekiva Springs Center. Since that time, we have been notified that the Criminal Frauds section has opened investigations of National Deaf Academy, Hartgrove Hospital and UHS as a corporate entity. In April 2017, the DOJ’s Criminal Division issued a subpoena requesting documentation from Shadow Mountain Behavioral Health. In August 2017, Kempsville Center of Behavioral Health (a part of Harbor Point Behavioral Health previously identified above) received a subpoena requesting documentation. In April, 2014, the Centers for Medicare and Medicaid Services (“CMS”) instituted a Medicare payment suspension at River Point Behavioral Health in accordance with federal regulations regarding suspension of payments during certain investigations. The Florida Agency for Health Care Administration (“AHCA”) subsequently issued a Medicaid payment suspension for the facility. River Point Behavioral Health submitted a rebuttal statement disputing the basis of the suspension and requesting revocation of the suspension. Notwithstanding, CMS continued the payment suspension. River Point Behavioral Health provided additional information to CMS in an effort to obtain relief from the payment suspension but the Medicare suspension remains in effect. In June 2017, AHCA advised that while they were maintaining the suspension for dual eligible and cross-over Medicare beneficiaries, the Medicaid payment suspension was lifted effective June 27, 2017. We cannot predict if and/or when the facility’s remaining suspended payments will resume in total. From inception through June 30, 2018, the aggregate funds withheld from us in connection with the River Point Behavioral Health payment suspension amounted to approximately $9 million. Although the operating results of River Point Behavioral Health did not have a material impact on our consolidated results of operations during the three and six-month periods ended June 30, 2018, or the year ended December 31, 2017, the payment suspension has had a material adverse effect on the facility’s results of operations and financial condition. The DOJ has advised us that the civil aspect of the coordinated investigation referenced above is a False Claims Act investigation focused on billings submitted to government payors in relation to services provided at those facilities. While there have been various matters raised by DOJ during the pendency of this investigation, DOJ Civil has advised that the focus of their investigation is on medical necessity issues and billing for services not eligible for payment due to non-compliance with regulatory requirements relating to, among other things, admission eligibility, discharge decisions, length of stay and patient care issues. It is our understanding that the DOJ Criminal Fraud Section is investigating issues similar to those focused on by DOJ Civil and the other related agencies involved in this matter. UHS denies any fraudulent billings were submitted to government payors; however, we are involved in settlement discussions with the DOJ Civil Division in an attempt to resolve this matter. We recorded pre-tax increases to the to the reserve established in connection with the civil aspects of these matters amounting to $9 million during the second quarter of 2018, and $22 million during the first six months of 2018, increasing the aggregate pre-tax reserve to $43 million as of June 30, 2018. Changes in the reserve may be required in future periods as discussions with the DOJ continue and additional information becomes available. We cannot predict the ultimate resolution of these matters and therefore can provide no assurance that final amounts paid in settlement or otherwise, if any, or associated costs, will not differ materially from our established reserve. This is a False Claims Act case filed against Universal Health Services, Inc., UHS of Delaware, Inc. and HRI Clinics, Inc. d/b/a Arbour Counseling Services in U.S. District Court for the District of Massachusetts. This qui tam action primarily alleges that Arbour Counseling Services failed to appropriately supervise certain clinical providers in contravention of regulatory requirements and the submission of claims to Medicaid were subsequently improper. Relators make other claims of improper billing to Medicaid associated with alleged failures of Arbour Counseling to comply with state regulations. The U.S. Attorney’s Office and the Massachusetts Attorney General’s Office initially declined to intervene. UHS filed a motion to dismiss and the trial court originally granted the motion dismissing the case. The First Circuit Court of Appeals (“First Circuit”) reversed the trial court’s dismissal of the case. The United States Supreme Court subsequently vacated the First Circuit’s opinion and remanded the case for further consideration under the new legal standards established by the Supreme Court for False Claims Act cases. During the 4th quarter of 2016, the First Circuit issued a revised opinion upholding their reversal of the trial court’s dismissal. The case was then remanded to the trial court for further proceedings. In January 2017, the U.S. Attorney’s Office and Massachusetts Attorney General’s Office advised of the potential for intervention in the case. The Massachusetts Attorney General’s Office subsequently filed its motion to intervene which was granted and, in April 2017, filed their Complaint in Intervention. We are defending this case vigorously. At this time, we are uncertain as to potential liability or financial exposure, if any, which may be associated with this matter. In December 2016 a purported shareholder class action lawsuit was filed in U.S. District Court for the Central District of California against UHS, and certain UHS officers alleging violations of the federal securities laws. Plaintiff alleges that defendants violated federal securities laws relating to the disclosures made in public filings associated with practices at our behavioral health facilities. The case was originally filed as Heed v. Universal Health Services, Inc. et. al. (Case No. 2:16-CV-09499-PSG-JC). The court subsequently appointed Teamsters Local 456 Pension Fund and Teamsters Local 456 Annuity Fund to serve as lead plaintiffs. The case has been transferred to the U.S. District Court for the Eastern District of Pennsylvania and the style of the case has been changed to Teamsters Local 456 Pension Fund, et. al. v. Universal Health Services, Inc. et. al. (Case No. 2:17-CV-02817-LS). In September, 2017, Teamsters Local 456 Pension Fund filed an amended complaint. The amended class action complaint alleges violations of federal securities laws relating to disclosures made in public filings associated with alleged practices and operations at our behavioral health facilities. Plaintiffs seek monetary damages for shareholders during the defined class period as a result of the decrease in share price following various public disclosures or reports. In December 2017, we filed a motion to dismiss the amended complaint. We deny liability and intend to defend ourselves vigorously. At this time, we are uncertain as to potential liability or financial exposure, if any, which may be associated with this matter. In March 2017, a shareholder derivative suit was filed by plaintiff David Heed in the Court of Common Pleas of Philadelphia County. A notice of removal to the United States District Court for the Eastern District of Pennsylvania was filed (Case No. 2:17-cv-01476-LS). Plaintiff filed a motion to remand. In December 2017, the Court denied plaintiff’s motion to remand and has retained the case in federal court. The suit alleges breaches of fiduciary duties and other allegedly wrongful conduct by the members of the Board of Directors and certain officers of Universal Health Services, Inc. relating to practices at our behavioral health facilities. UHS has been named as a nominal defendant in the case. In May, June and July 2017, additional shareholder derivative suits were filed in the United States District Court for the Eastern District of Pennsylvania. The plaintiffs in those cases are: Central Laborers’ Pension Fund (Case No. 17-cv-02187-LS); Firemen’s Retirement System of St. Louis (Case No. 17—cv-02317-LS); Waterford Township Police & Fire Retirement System (Case No. 17-cv-02595-LS); and Amalgamated Bank Longview Funds (Case No. 17-cv-03404-LS). The Fireman’s Retirement System case has since been voluntarily dismissed. The federal court has consolidated all of the cases pending in the Eastern District of Pennsylvania and has appointed Amalgamated Bank Longview Funds as the lead plaintiff and their counsel as lead counsel. We are awaiting the filing of a consolidated complaint from designated lead counsel. In addition, a shareholder derivative case was filed in Chancery Court in Delaware by the Delaware County Employees’ Retirement Fund (Case No. 2017-0475-JTL). In December 2017, the Chancery Court stayed this case pending resolution of other contemporaneous matters. These additional Each of these cases have named certain current and former members of the Board of Directors individually and certain officers of Universal Health Services, Inc. as defendants. UHS has also been named as a nominal defendant in these cases. The derivative cases make substantially similar allegations and claims as the shareholder class action relating to practices at our behavioral health facilities and board and corporate oversight of these facilities as well as claims relating to the stock trading by the individual defendants and company repurchase of shares during the relevant time period. The cases make claims of breaches of fiduciary duties by the named board members and officers; based upon alleged violations of federal securities laws; as well as and common law causes of action against the individual defendants including unjust enrichment, corporate waste, abuse of control, constructive fraud and gross mismanagement. The cases seek monetary damages allegedly incurred by the company; restitution and disgorgement of profits, benefits and other compensation from the individual defendants and various forms of equitable relief relating to corporate governance matters. All of these additional cases have also named members of the UHS Board of Directors as well as certain officers of the Company. The defendants deny liability and intend to defend these cases vigorously. At this time, we are uncertain as to potential liability or financial exposure, if any, which may be associated with these matters. Chowdary v. Universal Health Services, Inc., et. al. This is a lawsuit filed in 1999 in state court in Hidalgo County, Texas by a physician and his professional associations alleging tortious interference with contractual relationships and retaliation against McAllen Medical Center in McAllen, Texas as well as Universal Health Services, Inc. The state court has entered a summary judgment order awarding plaintiff $3.85 million in damages. With prejudgment interest, the total amount of the order amounts to approximately $9 million, for which a reserve is included in our financial statements as of both June 30, 2018 and December 31, 2017. A trial on punitive damages, emotional distress and attorneys’ fees remains to be conducted if the summary judgment order is not vacated. The case has been removed to federal court. Plaintiffs filed a motion to remand. In February 2018, the federal court denied plaintiffs’ motion to remand and retained the case in federal court. Plaintiffs filed a writ of mandamus with the 5th Circuit Court of Appeals seeking to overturn the federal court’s decision denying remand. The 5th Circuit denied Plaintiffs’ writ of mandamus. We have filed a motion for reconsideration of state court’s summary judgment order in the federal court proceeding. Disproportionate Share Hospital Payment Matter: September, 2015, many hospitals in Pennsylvania, including seven of our behavioral health care hospitals located in the state, received letters from the Pennsylvania Department of Human Services (the “Department”) demanding repayment of allegedly excess Medicaid Disproportionate Share Hospital payments (“DSH”) for the federal fiscal year (“FFY”) 2011 amounting to approximately $4 million in the aggregate. Since that time, we have received similar requests for repayment for alleged DSH overpayments for FFYs 2012 and 2013. For FFY 2012, the claimed overpayment amounts to approximately $4 million. For FFY 2013, the claimed overpayments were initially approximately $7 million but have since been reduced to approximately $2 million due to a change in the Department’s calculations of the hospital specific DSH upper payment limit. We filed administrative appeals for all of our facilities contesting the recoupment efforts for FFYs 2011 through 2013 as we believe the Department’s calculation methodology is inaccurate and conflicts with applicable federal and state laws and regulations. The Department has agreed to postpone the recoupment of the state’s share of the DSH payments until all hospital appeals are resolved but started recoupment of the federal share. The Department will likely make similar repayment demand for FFY 2014. Due to a change in the Pennsylvania Medicaid State Plan and implementation of a CMS-approved Medicaid Section 1115 Waiver, we do not believe the methodology applied by the Department to FFYs 2011 through 2013 is applicable to reimbursements received for Medicaid services provided after January 1, 2015 by our behavioral health care facilities located in Pennsylvania. We can provide no assurance that we will ultimately be successful in our legal and administrative appeals related to the Department’s repayment demands. If our legal and administrative appeals are unsuccessful, our future consolidated results of operations and financial condition could be adversely impacted by these repayments. Matters Relating to Psychiatric Solutions, Inc. (“PSI”): The following matters pertain to PSI or former PSI facilities (owned by subsidiaries of PSI) which were in existence prior to the acquisition of PSI and for which we have assumed the defense as a result of our acquisition which was completed in November, 2010: In 2008, Riveredge Hospital in Chicago, Illinois received a subpoena from the DOJ requesting certain information from the facility. Additional requests for documents were also received from the DOJ in 2009 and 2010. The requested documents have been provided to the DOJ. All documents requested and produced pertained to the operations of the facility while under PSI’s ownership prior to our acquisition. At present, we are uncertain as to the focus, scope or extent of the investigation, liability of the facility and/or potential financial exposure, if any, in connection with this matter. Department of Justice Investigation of Friends Hospital In October, 2010, Friends Hospital in Philadelphia, Pennsylvania, received a subpoena from the DOJ requesting certain documents from the facility. The requested documents were collected and provided to the DOJ for review and examination. Another subpoena was issued to the facility in July, 2011 requesting additional documents, which have also been delivered to the DOJ. All documents requested and produced pertained to the operations of the facility while under PSI’s ownership prior to our acquisition. At present, we are uncertain as to the focus, scope or extent of the investigation, liability of the facility and/or potential financial exposure, if any, in connection with this matter. Various other suits, claims and investigations, including government subpoenas, arising against, or issued to, us are pending and additional such matters may arise in the future. Management will consider additional disclosure from time to time to the extent it believes such matters may be or become material. The outcome of any current or future litigation or governmental or internal investigations, including the matters described above, cannot be accurately predicted, nor can we predict any resulting penalties, fines or other sanctions that may be imposed at the discretion of federal or state regulatory authorities. We record accruals for such contingencies to the extent that we conclude it is probable that a liability has been incurred and the amount of the loss can be reasonably estimated. No estimate of the possible loss or range of loss in excess of amounts accrued, if any, can be made at this time regarding the matters described above or that are otherwise pending because the inherently unpredictable nature of legal proceedings may be exacerbated by various factors, including, but not limited to: (i) the damages sought in the proceedings are unsubstantiated or indeterminate; (ii) discovery is not complete; (iii) the matter is in its early stages; (iv) the matters present legal uncertainties; (v) there are significant facts in dispute; (vi) there are a large number of parties, or; (vii) there is a wide range of potential outcomes. It is possible that the outcome of these matters could have a material adverse impact on our future results of operations, financial position, cash flows and, potentially, our reputation.

One letter for all the questions, without numbered answers. Read the reply ↗

Please revise this section throughout to provide more robust disclosure regarding the nature of each investigation discussed, to your best knowledge, and the factual bases underlying the allegations made in the various lawsuits, as well as the relief sought.

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We note, as an example only, that in the derivative case filed in Philadelphia County in March 2017, you state only that the suit "alleges breaches of fiduciary duty and other allegedly wrongful conduct." In contrast, the complaint cites numerous specific allegations, including constructive fraud, corporate waste and unjust enrichment, and seeks several forms of relief, including disgorgement of all unjust profits, benefits, and other compensation obtained by the individual defendants. Refer to Item 103 of Regulation S-K.

See the reply above.

We note in your quarterly results on page 125, net income as a percentage of revenue declined significantly in the third quarters of 2016 and 2015 when compared to the other quarters of the respective years. Please explain to us why you have experienced higher expenses in the third quarter and tell us if this is indicative of a trend or a change in the relationship between costs and revenues in the third quarter.

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If so, please discuss in your future MD&A.

This letter is being written in connection with the Staff’s examination of the filings referenced above. Set forth below are our responses to the comments included in the Staff’s letter to us dated April 17, 2017, as well as an additional comment (#4) communicated to us verbally during our discussion with the Staff on April 20, 2017. Form 10-K for Fiscal Year Ended December 31, 2016 Management’s Discussion and Analysis of Financial Condition and Results of Operations, Results of Operations, pages 47 and 48 We note in your quarterly results on page 125, net income as a percentage of revenue declined significantly in the third quarters of 2016 and 2015 when compared to the other quarters of

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the respective years. Please explain to us why you have experienced higher expenses in the third quarter and tell us if this is indicative of a trend or a change in the relationship between costs and revenues in the third quarter. If so, please discuss in your future MD&A Historically, as a percentage of our annual net revenues, and excluding the impact of acquisitions that may occur from year-to-year, net revenues generated during the third quarter of each year (covering the period of July 1st through September 30th) typically represent the lowest percentage of the year since our acute care services business is relatively seasonal. Our behavioral health services’ business tends to experience less fluctuation as a result of seasonality. Net revenues generated from our acute care services accounted for 52% and 51% of our consolidated net revenues during 2016 and 2015, respectively. Given that a substantial portion of our acute care services’ operating expenses are relatively fixed in nature, and therefore do not fluctuate in direct correlation to changes in our patient volumes and net revenues, the comparatively lower revenues generated during the third quarters of each year typically result in that quarter’s net income also representing the lowest percentage of each year’s annual net income. The Seasonality disclosure reflected below was contained in our MD&A on page 68 of our 2016 Form 10-K. If acceptable to the Staff, in addition to continuing to include the Seasonality disclosure in the future MD&A’s in our Form 10-K, we will also plan to include in Note 12 to the Consolidated Financial Statements – Quarterly Results. Disclosure contained in our 2016 Form 10-K (page 68): Seasonality —Our acute care services business is typically seasonal, with higher patient volumes and net patient service revenue in the first and fourth quarters of the year. This seasonality occurs because, generally, more people become ill during the winter months, which results in significant increases in the number of patients treated in our hospitals during those months. Notes to Consolidated Audited Financial Statements Please tell us and disclose the amount of revenues and long-lived assets domestically and attributable to foreign countries. If assets in the United Kingdom are material, they should be disclosed separately. Please refer to ASC 280-10-50-41 and 50-42. The net revenues generated from our behavioral health care facilities located in the United Kingdom, which comprise our foreign operations, amounted to approximately $241 million in 2016, $203 million in 2015 and $45 million in 2014. This information was provided in footnote (a) on page 125 of our 2016 Form 10-K in Note 11 to the Consolidated Financial Statements – Segment Reporting. Our behavioral health care facilities located in the United Kingdom had total assets of approximately $965 million as of December 31, 2016 and In all future filings, this information will be included consistent with the presentation in our Form 10-Q for the quarterly period ended March 31, 2017, footnote (a), in Note 6 to the Consolidated Financial Statements – Segment Reporting. Note 6) Segment Data, as contained in our Form 10-Q for the quarterly period ended March 31, 2017 Income/(loss) before allocation of corporate overhead and income taxes Income/(loss) after allocation of corporate overhead and before income taxes Includes net revenues generated from our behavioral health care facilities located in the U.K. amounting to approximately $101 million and $61 million for the three-month periods ended March 31, 2017 and 2016, respectively, and total U.K. behavioral health care facilities assets of approximately $992 million and $515 million as of March 31, 2017 and 2016, respectively. Supplemental Consolidated Statements of Income Information For the three and twelve months ended December 31, 2016 and 2015 We note that you exclude lease and rental expense from Operating income/margin (“EBITDAR”). Please explain to us why lease and rental expense are not normal, recurring, cash operating expenses necessary to operate your business. See Question 100.01 of the updated Non-GAAP Compliance and Disclosure Interpretations issued on May 17, 2016. Supplemental Consolidated Statements of Income Information previously reflected a consolidated basis computation of EBITDAR/operating margin, we discontinued that EBITDAR computation on the schedule beginning in the first quarter of 2017. Since we have historically not referenced our consolidated EBITDAR and/or operating margin in our earnings release narrative, there are no implications to discontinuing the metric, on a consolidated basis, going forward. Should an investor require our consolidated EBITDAR and/or operating margin, the information contained on our Consolidated Statements of Income, included with our quarterly earnings releases and related Form 8-Ks, enables them to do so. Historically, our filings on Form 10-K and 10-Q have not computed or referenced EBITDAR and/or operating margin based upon EBITDAR. However, we have historically provided “operating margin” for our two operating segments, acute care services and behavioral health care services, in our quarterly earnings releases and related Form 8-Ks. In those filings, we define “operating margin” as net revenues less salaries, wages and benefits, other operating expenses and supplies expense, divided by net revenues. We believe this segment specific operating performance metric is helpful to our investors as a measure of each segment’s operating performance as compared to our prior period performance or the performance of our peers in each respective industry. We believe operating margin, which is calculated before deductions for interest, taxes, depreciation and amortization and lease and rental expense, is an operating metric that enables our investors to compare the operating performance of our two operating segments to other companies, including our peers, without being affected by the method in which companies finance their assets (lease vs. buy). For example, if operating margin is calculated based upon EBITDA, rather than EBITDAR, and company A buys their real property assets while company B enters into operating leases for their real property assets, on a relative basis, company A’s EBITDA operating margin would be more favorable than company B’s. Company A’s EBITDA operating margin would be reflected before capital costs (depreciation and amortization and interest expense) while company B’s would be reflected after capital costs (lease and rental expense). Our utilization of operating margin based upon EBITDAR, is provided in our quarterly earnings releases for each of our operating segments on the Supplemental Statistical Information schedule which provides, on a same facility basis, the Acute Care EBITDAR Margin and the Behavioral Health EBITDAR Margin for the current year and prior year periods. Those operating margins for each of our operating segments, which are also referenced in the earnings release narrative under Acute Care Services and Behavioral Health Care Services, provide our investors with an operating performance metric enabling them to compare the operating performance of each of our operating segments to their respective industry peers. Since we have two operating segments, while most of our industry peers have only one, our investors are not able to compute the operating margin for each segment until our quarterly report on Form 10-Q is filed. That document contains detailed operating results for each operating segment. Typically, our Form 10-Q is filed approximately 12 to 15 days after our quarterly earnings release and related Form 8-K. We believe that if we ceased providing the operating margin for our two operating segments in our earnings releases and related Form 8-Ks, our investors would likely request those metrics during our quarterly conference calls which are held the morning following our earnings release. We believe that continuing to provide those metrics in our quarterly earnings releases is a timely and efficient method of providing our investors with information that they find useful in analyzing and benchmarking the quarterly operating results for each of our operating segments. Comment communicated to us verbally during our discussion with the Staff on April 20, 2017. Schedules of Non-GAAP Supplemental Consolidated Statements of Income Information We note that the calculation of EBITDA, as reflected on the above-referenced schedule, begins with net revenue before provision for doubtful accounts and calculates down to EBITDA. Please change the schedule’s presentation to begin with Net Income Attributable to UHS and addback depreciation and amortization, interest expense and provision for income taxes to calculate EBITDA. In response to the Staff’s request, as included in Exhibit 99.1 to Form 8-K as filed on April 25, 2017, we have amended the presentation of the Schedule of Non-GAAP Supplemental Information for the three-month periods ended March 31, 2017 and 2016. We believe the amended presentation, which is reflected below and which we intend to utilize in future filings if acceptable to the Staff, satisfies the Staff’s request. Schedule of Non-GAAP Supplemental Information (“Supplemental Schedule”) For the three months ended March 31, 2017 and 2016 Earnings Before Interest, Taxes, Depreciation and Amortization (“EBITDA”) EHR-related net income attributable to noncontrolling interests, pre-tax

One letter for all the questions, without numbered answers. Read the reply ↗

Please tell us and disclose the amount of revenues and long-lived assets domestically and attributable to foreign countries. If assets in the United Kingdom are material, they should be disclosed separately. Please refer to ASC 280-10-50-41 and 50-42.

See the reply above.

We note that you exclude lease and rental expense from Operating income/margin (“EBITDAR”). Please explain to us why lease and rental expenses are not a normal, recurring, cash operating expenses necessary to operate your business. See Question 100.01 of the updated Non-GAAP Compliance and Disclosure Interpretations issued on May 17, 2016.

See the reply above.

We note your response to comment three. In your next earnings release, please discontinue the presentation of EBITDAR margin for your Acute Care and Behavioral Health reporting segments. The Staff believes the adjustment to remove lease and rental expense to determine Operating income/margin (“EBITDAR margin”) is inappropriate as such charges are normal, recurring cash operating expenses necessary to operate your

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business. Please refer to Question 100.01 of the updated Non-GAAP Compliance Disclosure and Interpretations issued on May 17, 2016.

Commencing with our earnings release for the three and six-month periods ended June 30, 2017, we will discontinue the presentation of EBITDAR margin for our Acute Care and Behavioral Health reporting segments on the Supplemental Statistical

Information schedule. Read in the reply ↗

Please provide us analysis explaining why your allowance for doubtful accounts decreased from $395 million at December 31, 2013 to $237 million at June 30, 2014. Include in your response a roll forward of activity within the allowance for the six months ended June 30, 2014 with explanation of how you determined that provision was reasonable and with the details of write-offs.

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Explain why your allowance which is 16.3% of accounts receivable at June 30, 2014 is adequate as compared to 26.1% as of December 31, 2013. Further, provide us proposed disclosure to be included in your future filings beginning with your September 30, 2014 Form 10-Q explaining and analyzing the adequacy of your allowance as a percentage of accounts receivable and discussing the effects of the decrease in your allowance on your 2014 results of operations.

First, we appreciate your time in discussing this matter with us in greater detail via telephone on November 4, 2014. As we discussed that day, the balances residing in allowance for doubtful accounts are generally impacted by amounts that are classified as provision for doubtful accounts on our Condensed Consolidated Statements of Income.

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Although the allowance of doubtful accounts represents a component of the various reserves applied against our gross accounts receivable in calculating our net accounts receivable balance, there are various deductions applied against our gross revenues in computing net revenues, and various allowances applied against our gross accounts receivable in computing net accounts receivable. Amounts classified among these accounts can vary routinely and relatively significantly from period to period based upon, among other things, factors such as, changes in payor mix of our patients, changes in composition of insured vs. uninsured patients, changes in our internal charity care and uninsured discount policies and changes in co-pays and deductibles of our insured patients.

Effective January 1, 2014, in response to market conditions and other considerations, we modified our uninsured discount policy and increased the discount to 60% of gross charges from 30% previously. The increase in the uninsured discount in 2014 had no material impact on our net revenues, net income attributable to UHS or net accounts receivable, as compared to prior year periods. However, since we expect to collect only a small portion of amounts due from our uninsured patients, this change resulted in an increase in uninsured discounts and a decrease in the provision for doubtful accounts, which we experienced during the six-month period ended June 30, 2014 and the nine-month period ended September 30, 2014, as compared to the comparable prior year periods.

In addition, our patient registration process includes an interview of the patient or the patient’s responsible party at the time of registration. At that time, an insurance eligibility determination is made and an insurance plan code is assigned. There are various pre-established insurance profiles in our patient accounting system which determine the expected insurance reimbursement for each patient based on the insurance plan code assigned and the services rendered. Certain patients may be classified as Medicaid pending at registration based upon a screening evaluation if we are unable to definitively determine if they are currently

Medicaid eligible. When a patient is registered as Medicaid eligible or Medicaid pending, our patient accounting system records net revenues for services provided to that patient based upon the established Medicaid reimbursement rates, subject to the ultimate disposition of the patient’s Medicaid eligibility. When the patient’s ultimate eligibility is determined, reclassifications may occur which impacts the reported amounts in future periods for the provision for doubtful accounts and other accounts such as Medicaid pending. Although the patient’s ultimate eligibility determination may result in amounts being reclassified among these accounts from period to period, these reclassifications do not have a material impact on our net revenues, net income attributable to UHS or net accounts receivable since our facilities make estimates at each financial reporting period to reserve for amounts that are deemed to be uncollectible.

The above-mentioned factors have an impact on amounts recorded as provision for doubtful accounts and allowance for doubtful accounts, from period to period, and were the primary cause of the reduction in our allowance for doubtful accounts as of June 30, 2014 as compared to December 31, 2013. However, the reduction caused by these factors did not materially impact our 2014 results of operations.

We compute and report net patient service revenues and net accounts receivable at the estimated net realizable amounts from patients and third-party payors and others when services are rendered. We have agreements with third-party payors that provide for payments to us at amounts different from our established rates. Payment arrangements include prospectively determined rates per discharge, reimbursed costs, discounted charges and per diem payments. Estimates of contractual allowances under managed care plans are based upon the payment terms specified in the related contractual agreements. We closely monitor our historical collection rates, as well as changes in applicable laws, rules and regulations and contract terms, to assure that provisions are made using the most accurate information available. We estimate our Medicare and Medicaid net revenues using the latest available financial information, patient utilization data, government provided data and in accordance with applicable Medicare and Medicaid payment rules and regulations.

In addition, we routinely analyze the adequacy of the aggregate deductions applied against gross revenues in computing our net revenues and net accounts receivable at the time of service. The analysis of our aggregate net accounts receivable includes, among other things, a hindsight liquidation analysis which is performed on a quarterly basis. This analysis is based upon the actual cash collection activity of our patient accounts to validate that our total deductions reserving methodology and assumptions were reasonable. Adjustments to our established reserves are recorded if and when the hindsight liquidation analysis or other more recent changes in collection patterns indicate that adjustments may be warranted. However, historically, these adjustments have not had a material impact on our consolidated financial statements indicating that our established aggregate reserves have been adequately stated at each reporting period.

The disclosure in Item 2,

Management’s Discussion and Analysis of Financial Condition and Results of Operation-Charity Care, uninsured discount and provision for doubtful accounts (page 38) in our Form 10-Q for the quarterly period ended September 30, 2014 (as filed on November 7, 2014) has been expanded to provide a more detailed description of the above-mentioned factors that resulted in changes in our provision for doubtful accounts, and in turn, the allowance for doubtful accounts. Should the

Staff have any additional questions, or require any additional information, my contact information is provided below.

Other:

Also pursuant to your request, we hereby acknowledge that:

• we are responsible for the adequacy and accuracy of the disclosure in the filing staff comments or changes to disclosure in response to staff comments do not foreclose the Commission from taking any action with respect to the filing; and we may not assert staff comments as a defense in any proceeding initiated by the Commission or any person under the federal securities laws of the United States.

Read in the reply ↗

Business and Summary of Significant Accounting Policies X) GPO Agreement/Minority Ownership Interest, page 115 1. You state that during 2013, you entered into a new group purchasing organization agreement (“GPO”) and acquired a minority interest in the GPO for a nominal amount.

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In connection with the IPO of the stock of the GPO, you received cash proceeds from the sale of a portion of that interest which were recorded as deferred income. The deferred income will be recognized, on a pro rata basis, as a reduction to your supplies expenses over the expensed life of the GPO agreement. Also you received restricted stock of the GPO which vested ratably over a seven year period and you will recognize the fair value of the stock as a reduction to your supplies expense on a pro rata basis over the vesting period. Please provide us an analysis with reference to authoritative accounting literature supporting your accounting treatment including measurement, recognition and classification. Further include in your response the amount of the cash proceeds and the fair value of the minority interests acquired upon entering into the agreement, and clarify what you mean by on a pro rata basis.

Background:

During the second quarter of 2013, with the expectation that Premier, Inc. would complete an initial public offering (“IPO”) in the near future

(completed in October, 2013), we entered into a series of agreements with Premier, Inc. and its subsidiaries (“Premier”) with the intent of, upon effectiveness, purchasing supplies through Premier (projected expenditures of approximately

$600 million annually) for a specified period of time as well as becoming a member and a limited partner in certain business of Premier’s Group Purchasing Organization (“GPO”).

In connection with this

Rest of the answer

arrangement, the following events occurred:

•

May, 2013 – We entered into a stock purchase and subscription agreement to pay $75,000 to acquire shares in a Premier subsidiary (representing a 0.1% ownership interest acquired in Premier Healthcare Solutions,

Inc.).

May, 2013 – We entered into a limited partnership subscription agreement with a Premier subsidiary to acquire a limited partnership interest (representing a 2.6% ownership interest in Premier Purchasing Partners,

L.P.). This interest was acquired with a $3.7 million loan advanced from Premier which is recorded as 3rd party debt on our consolidated balance sheet and is being repaid quarterly with a maturity scheduled to occur during the fourth quarter of 2018.

May, 2013 – We executed a GPO Participation Agreement with Premier (through Premier Purchasing Partners, L.P.). The GPO agreement was contingent on, and became effective with, Premier’s IPO completion (and therefore became effective in October, 2013). The GPO agreement, which may be terminated upon 12 months written notice given at any time after the second anniversary of the commencement date, provides for an initial 5-year term with automatic extension for successive 5-year periods subject to termination notices by either party prior to the fourth anniversary of the then current term. Pursuant to the terms of the agreement, which absent certain customary breach of contract conditions cannot be cancelled by us until at least September 30, 2016, we are obligated to participate in the GPO program utilizing Premier as our primary group purchasing organization to purchase products and services pursuant to Premier’s contracts with vendors.

October, 2013 – Closing date of Premier, Inc.’s IPO.

October, 2013 – In conjunction with Premier’s reorganization in connection with its IPO, our ownership interests in Premier Healthcare Solutions, Inc. and Premier Purchasing Partners, L.P. (which were acquired in May, 2013), converted into 3.1 million Class B units of a wholly-owned limited partnership of Premier, Inc., of which:

Upon closing of its IPO, Premier repurchased 496,000 Class B units from us for $12.6 million in cash (@ $25.38 per unit representing the net IPO price), and;

We retained 2,604,793 restricted Class B units which represent an economic ownership interest in a Premier subsidiary of approximately 2%. These units, which vest ratably over a 7-year period, subject to certain conditions, are exchangeable upon vesting on a 1-for-1 basis for shares of Premier, Inc.’s marketable Class A common stock. Should we elect to terminate the GPO agreement (after the initial, non-cancellable 3-year term), the unvested units are subject to repurchase by Premier for a nominal price.

November, 2013 – We received $2.0 million of cash representing a profit distribution covering the period of our initial investment in Premier and related entities through September 30, 2013 (the pre-IPO period).

Management analysis and accounting treatment:

Because the GPO arrangement involves the receipt of cash and equity instruments, we have evaluated whether the accounting model related to the Premier arrangement should be a supplier/customer arrangement or a financial instrument/investment model. Overall, we have concluded that the Premier arrangement should be accounted for as a supplier/customer arrangement because we paid a nominal amount to receive restricted stock (and cash) and entered into the arrangement specifically for the cost reduction benefits and not to acquire and/or hold investments for potential appreciation gains. Our accounting treatment is therefore consistent with the guidance in ASC 605-50-25 Customer’s Accounting for Certain Consideration

Received from a Vendor (EITF 02-16). Thus, any value received via either cash or equity (whether through the receipt of IPO proceeds, fair-value attained through vesting of Class B units, or receipt of pre-IPO, pre-GPO participation partnership distributions) will be recognized as a reduction of supply costs.

We believe the relationship with Premier is consistent with that of typical GPO arrangements and should be accounted for similarly. Specifically, although we have received certain Premier equity interests and IPO cash proceeds (as outlined above), our intent in entering into the Premier agreements was predicated on reducing our overall supply expenditures. Pursuant to the terms of our previous GPO arrangements, cost savings were shared with us via cash rebates which were recorded as reductions to our supplies expense. Pursuant to the Premier agreements, in addition to cash rebates we are entitled to receive, the cost savings are also remitted to us utilizing other forms of economic consideration such as the issuance and vesting of equity instruments and receipt of IPO proceeds.

As outlined below, we have concluded that the equity instruments, IPO proceeds and pre-IPO/GPO participation profit distributions should be accounted for as prepaid consideration for our future contractual commitment to purchase supplies through Premier and should be deferred and recognized ratably as a reduction of supplies expense over the applicable period of 7 years for the equity instruments

(representing the pro rata vesting period of the restricted units) and 3 years for the IPO proceeds and pre-IPO/GPO participation profit distributions (representing the non-cancellable term of the GPO participation agreement).

Accounting for IPO cash proceeds and pre-IPO/GPO participation profit distributions:

In connection with the completion of their IPO (in October, 2013), Premier distributed $12.6 million to us as outlined above. Upon receipt, we recorded the

$12.6 million as a deferred cost reduction representing prepaid payment to us for our future participation in the GPO agreement and we will recognize that amount ratably over the 3-year non-cancellable contractual term of the GPO agreement as a reduction to our supplies expense (amounting to $4.2 million annually with $1.1 million recorded during the fourth quarter of 2013).

In addition, we received $2.0 million of cash from Premier representing our share of profits through September 30, 2013 (the pre-IPO period). Since this distribution related to the overall Premier GPO arrangement and our future participation in the GPO, we will also recognize this amount ratably over the 3-year non-cancellable contractual term of the GPO agreement as a reduction to our supplies expense (amounting to $700,000 annually).

The accounting treatment regarding income statement geography, is consistent with the following excerpts: ASC 605-50-45-12 states that “Cash consideration received by a customer from a vendor is presumed to be a reduction of the prices of the vendor’s products or services and, therefore, shall be characterized as a reduction of cost of sales when recognized in the customer’s income statement.”

Accounting for restricted Class B units convertible into Class A common stock of Premier upon vesting:

We believe it is appropriate to account for the value of the restricted Class B units at their estimated fair-value upon vesting which is scheduled to occur at 1/7th per year (372,000 units/shares scheduled to vest annually), contingent upon our continued participation in the Premier GPO. Since we consider the estimated fair-value of the restricted units, which upon vesting are convertible on a share-for-share basis into marketable (publicly traded) shares of Premier, Inc.’s stock (class A common stock), to represent economic consideration due from Premier in connection with our continued participation in the GPO, we believe it is appropriate to amortize the estimated fair-value of the restricted units/stock as a reduction to our supplies expense on a pro rata basis at each financial reporting period pursuant to the

7-year scheduled vesting. At Premier’s current approximate stock price ($29 per share), upon vesting, the estimated annual fair-value of each year’s restricted units is approximately $11 million. The estimated fair-value of each year’s scheduled restricted stock unit vesting will be remarked at each financial reporting date, although given the magnitude of our annual income before income taxes ($869 million in 2013), we do not expect these adjustments to have a material impact on our consolidated financial results.

The following guidance was considered related to the above-mentioned accounting treatment:

ASC 605-50-20 states the following, “Cash consideration is cash payments and credits that the customer can apply against trade amounts owed to the vendor. In addition, as indicated in Section 505-50-25, consideration in the form of equity instruments is recognized in the same period or periods as in the same manner (that is, capitalize vs. expense) as if the entity had paid cash for the goods or service or used cash rebates as a sales discount instead of paying or using equity instruments. Accordingly, guidance with respect to cash consideration is applicable to consideration that consists of equity instruments (regardless of whether a measure date has been reached)”. Consideration includes items that the customer can apply against trade amounts owed to the vendor. Consideration may take a variety of different forms including cash payments by a vendor to a customer, credits that the customer can apply, equity instruments of the vendor (regardless of whether a measurement date has been reached), and free products or service given to a customer by the vendor. Consideration may be referred to by terms such as sales incentives, discounts, coupons, rebates and price reductions.

Further guidance regarding share-based transactions, which consist of providing goods or services in exchange for an equity instrument, is outlined in ASC

505-50 including determining the date at which the grantee shall measure the fair value of the equity received (measurement date), the accounting considerations prior to the measurement date, the determination of fair value on the measurement date and the accounting subsequent to the measurement date.

ASC 505-50-30-18 defines the measurement date as “the earlier of:

The date the parties come to a mutual understanding of the terms of the equity-based compensation arrangement and a commitment for performance by the grantee to earn the equity instrument (a performance commitment) is reached; or

The date at which the grantee’s performance necessary to earn the equity instruments is complete (the vesting date).”

The above outlined guidance is consistent with management’s accounting for the consideration which is to be received ratably over the life of the GPO agreement. Therefore, we believe it is appropriate and consistent with the guidance to recognize the 372,000 shares ratably over the year (93,000 shares quarterly) as vesting conditions are within our control and it is expected that they will be met. This is also consistent with the guidance in ASC 605 referenced above which requires equity consideration to be recognized in the same manner as if the cash had been received.

Accounting for stock subsequent to vesting:

Upon vesting of the restricted Class B units, we will likely elect to exchange the vested units/Class B shares into marketable Class A shares of Premier, Inc. and, at our discretion, may consider liquidating some or all of the shares. If upon vesting and exchange we elect to retain the common stock, we will account for the investment as a marketable security available for sale and adjust the carrying value through comprehensive income on an ongoing basis pursuant to ASC 505-50-35-15, which states that, “changes in the fair value of the equity instruments after the measurement date unrelated to the achievement of the performance conditions shall be accounted for in accordance with any relevant guidance on the accounting and reporting for investments in equity instruments, such as that in Topic 320, 323, 825 and 855”.

Specifically, management considered the guidance in ASC 320-10-25-1, which states that “At acquisition, an entity shall classify debt securities and equity securities into one of the following three categories:

Trading securities: If a security is acquired with the intent of selling it within hours or days, the security shall be classified as trading. However, at acquisition, an entity is not precluded from classifying as trading a security it plans to hold for a longer period. Classification of a security as trading shall not be precluded simply because the entity does not intend to sell it in the near term.

2)

Held-to-maturity securities: Investments in debt securities shall be classified as held-to-maturity only if the reporting entity has the positive intent and ability to hold those securities to maturity.

3)

Available-for-sale securities: Investments in debt and equity securities that have readily determinable fair-values that are not classified as trading securities or a held-to-maturity securities shall be classified as available for-sale-securities.

We considered the guidance in ASC 320-10-35-1 when determining how to account for the subsequent re-measurement of the securities, which states the following: “Available-for-sale securities. Investment in debt securities that are classified as available for sale and equity securities that have readily determinable fair value that are classified as available for sale shall be measured subsequently at fair values in the statement of financial position. Unrealized holding gains and losses for available-for-sale securities (including those classified as current assets) shall be excluded from earnings and reported in other comprehensive income until realized, pursuant to paragraphs 815-25-35-1 through 35-4”.

Accounting for minority interest ownership:

As mentioned above, prior to Premier’s IPO, we contributed nominal cash consideration of $75,000 and entered into loan agreements of $3.7 million with

Premier in exchange for a limited partnership ownership interest (of approximately 2%) as well as to fund our capital requirement. Pursuant to ASC 325-20 Cost Method Investments, since our minority ownership interest is less than 3%, and since we have virtually no influence over Premier (i.e. no representation on the board of directors, no participation in policy-making processes, or in other ways, such as technological or revenue dependence), we have recorded this aggregate investment of $3.8 million under the cost method and included in other assets on our consolidated balance sheet.

Other:

Also pursuant to your request, we hereby acknowledge that:

we are responsible for the adequacy and accuracy of the disclosure in the filing staff comments or changes to disclosure in response to staff comments do not foreclose the Commission from taking any action with respect to the filing; and we may not assert staff comments as a defense in any proceeding initiated by the Commission or any person under the federal securities laws of the United States.

Below is my contact information where I can be reached should the Staff have any questions or require any additional information. Thank you for your consideration and cooperation regarding this matter.

Read in the reply ↗

Beginning on page 53 you discuss the results of your acute care hospital services segment in 2011 versus 2010 and 2010 versus 2009. Please tell us why the net revenues in your discussion on a same facility basis are the same as on an all acute care hospitals basis, but your other operating expenses are different.

Rest of the question

It does not appear that you acquired or disposed any significant acute care facilities in either 2010 or 2011 supporting the same amount of net revenues on a same facility and all acute care hospitals bases, but it is unclear why your operating expense amounts are therefore also not the same.

The voting rights of some investors are not proportional to their obligations to absorb the expected losses of the entity, their rights to receive the expected residual returns of the entity, or both. Read in the reply ↗

On page 64 you disclose the receipt of $11 million in Medicaid program incentive payments associated with electronic health records, or EHR. You also disclose that you deferred these payments at December 31, 2011 and will record the amounts as revenue when the applicable hospitals are deemed to have met the meaningful use criteria.

Rest of the question

On page 41 of your June 30, 2012 Form 10-Q you disclose that you recognized the first $2 million of these payments as revenue in 2012. We do not believe that classification of these incentive payments as revenue is appropriate as they are not related to your ongoing central operating activities. Please address the following comments:  Please provide us propose revised policy disclosure to be included in future periodic reports that separately describes your accounting for Medicare and Medicaid EHR incentive payments.  Please explain to us how you will present the reclassification of your EHR incentive payments recorded in revenue during the second quarter of 2012 in your September 30, 2012 Form 10-Q and provide us proposed disclosure to be included in that filing that explains your reclassification and retroactive presentation.

Substantially all of the entity’s activities (for example, providing financing or buying assets) either involve or are conducted on behalf of an investor that has disproportionately few voting rights.

With respect to: 1) voting rights are proportional to each shareholder’s obligation to absorb losses and receive residual returns as each share of equity participates equally in the overall risks and rewards of the Trust.

Rest of the answer

Therefore, both conditions above are not present and it does not indicate that the equity investors as a group lack the characteristic in (b)(1).

Therefore, based on the criteria set forth in ASC 810-10-15 and the relevant circumstances outlined above, we concluded that the Trust was not a variable interest entity subject to the consolidation provisions therein.

Other:

Also pursuant to your request, we hereby acknowledge that:

we are responsible for the adequacy and accuracy of the disclosure in the filing staff comments or changes to disclosure in response to staff comments do not foreclose the Commission from taking any action with respect to the filing; and we may not assert staff comments as a defense in any proceeding initiated by the Commission or any person under the federal securities laws of the

United States.

Below is my contact information where I can be reached should the Staff have any questions or require any additional information. Thank you for your consideration and cooperation regarding this matter.

Read in the reply ↗

We acknowledge your disclosure regarding the adoption of ASU 2010-23. Please address the following comments:  Please provide us proposed revised charity care policy disclosure to be included in future periodic reports under ASC 954-605-50-3 that clarifies what “financial or economic criteria” must be met by a patient to qualify for charity care.

Rest of the question

 You disclose the estimated cost of providing “charity services” in the first full paragraph on page 106. It appears that you include the cost of services provided at a discount to uninsured patients in the cost of charity services. Please provide us proposed revised disclosure to be included in future periodic reports that: o Discloses the cost of charity care provided as required by ASC 954-605-50-3. In this regard, the glossary at ASC 954-60-20 defines charity care as health care services that are provided but are never expected to result in cash flows. It appears that your discounted services provided to uninsured patients included in “charity services” have some anticipated cash inflows and therefore do not qualify for charity care. o Revises throughout your filing the use of “charity services” as that term is confusingly similar to charity care.

No numbered answer found in the reply. Read the reply ↗

You disclose that you serve as Advisor to the Trust pursuant to an annual agreement whereby you conduct the day-to-day affairs of the Trust, provide it administrative services and present it with investment opportunities. Also, certain of your officers and directors are also officers and/or directors of the Trust.

Rest of the question

Please provide us your analysis supporting why consolidation of this trust is not appropriate and reference for us the authoritative literature you rely upon to support your position. In your response, demonstrate to us whether the Trust is a variable interest entity and, if so, whether you are the primary beneficiary.

No numbered answer found in the reply. Read the reply ↗

We acknowledge your response to our previous comment 2. As previously requested, please provide us proposed policy note disclosure to be included in future periodic reports that separately describes your accounting for Medicare and Medicaid EHR incentive payments.

In addition to the disclosure related to the Medicare and Medicaid electronic health records (“EHR”) incentive payments, as previously included in our response dated August 28, 2012 to comment 2 of the Staff’s letter to us dated

August 16, 2012 (which we will include in the Management’s Discussion and Analysis of Financial Condition and Results of Operations section of our future filings), we will also include the following as a separate caption under Note

1-Business and Summary of Significant Accounting Policies of the Notes to Consolidated Financial Statements of our future filings on

Rest of the answer

Form 10-K, and under Item 2: Management’s Discussion and Analysis of Financial Condition and Results of

Operations, Critical Accounting Policies and Estimates, in our future filings on Form 10-Q:

Accounting for Medicare and Medicaid

Electronic Health Records Incentive Payments: In July 2010, the Department of Health and Human Services published final regulations implementing the health information technology provisions of the American Recovery and Reinvestment Act. The regulation defines the “meaningful use” of Electronic Health Records (“EHR”) and established the requirements for the Medicare and Medicaid EHR payment incentive programs. The implementation period for these new Medicare and

Medicaid incentive payments started in federal fiscal year 2011 and can end as late as 2016 for Medicare and 2021 for the state Medicaid programs. We recognize income related to Medicare and Medicaid incentive payments using a gain contingency model that is based upon when our eligible hospitals have demonstrated “meaningful use” of certified EHR technology for the applicable period and the cost report information for the full cost report year that will determine the final calculation of the incentive payment is available.

Medicare EHR incentive payments: Federal regulations require that Medicare EHR incentive payments be computed based on the Medicare cost report that begins in the federal fiscal period in which a hospital meets the applicable “meaningful use” requirements. Since the annual Medicare cost report periods for each of our acute care hospitals ends on December 31st, we will recognize Medicare EHR incentive income for each hospital during the fourth quarter of the year in which the facility meets the “meaningful use” criteria and during the fourth quarter of each applicable subsequent year.

Medicaid EHR incentive payments: Medicaid EHR incentive payments are determined based upon prior period cost report information available at the time our hospitals meet the “meaningful use” criteria. Therefore, the majority of the Medicaid EHR incentive income recognition occurs in the period in which the applicable hospitals are deemed to have met initial “meaningful use” criteria. Upon meeting subsequent fiscal year “meaningful use” criteria, our hospitals may become entitled to additional Medicaid EHR incentive payments which will be recognized as incentive income in future periods.

Medicaid EHR incentive payments received prior to our hospitals meeting the “meaningful use” criteria are included in other current liabilities (as deferred EHR incentive income) in our consolidated balance sheet.

Read in the reply ↗

We acknowledge your response to our previous comment 3. Please revise your proposed disclosure to specifically disclose the cost of the charity care component of your total uncompensated care as required by ASC 954-60-50-3.

Rest of the question

In this regard, we do not object to your disclosure of the costs to provide total uncompensated care but believe that the costs to provide charity care should be specifically disclosed to comply with the referenced guidance.

In addition to the disclosure related to the uncompensated care (consisting of charity care and uninsured discounts), as previously included in our response dated August 28, 2012 to comment 3 of the

Staff’s letter to us dated August 16, 2012, future filings will also include the following table which provides, separately, the cost of the charity care component of our total uncompensated care:

Estimated Cost of Providing Uncompensated Care

2011

2010

Estimated cost of providing charity care

$

145,337

129,787

Estimated cost of providing uninsured discounts related

Rest of the answer

care

27,366

27,838

Estimated cost of providing uncompensated care

172,703

157,625

Below is my contact information where I can be reached should the Staff have any questions or require any additional information. Thank you for your consideration and cooperation regarding this matter.

Read in the reply ↗

Income Taxes, page 123 1. Tell us why you disclose a separate effective income tax rate (for example, 39.8% in 2010) representing the rate of the provision for income taxes to income from continuing operations before income taxes minus net income attributable to noncontrolling interests, and what this rate represents.

Rest of the question

If, presumably, the provision for income taxes includes tax on income from continuing operations before income taxes attributable to both UHS and noncontrolling interests, it is not clear what this rate represents. Further, if presumably, net income attributable to noncontrolling interests is net of income tax, it is not clear why it is being subtracted from income from continuing operations before income taxes to arrive at the rate. 2. Refer to the tabular reconciliation of unrecognized tax benefits, and tell us if the captions “Gross amount of increase and decrease” are reporting increases and decreases net. Provide us proposed disclosure to be included in future periodic reports to clarify that amounts are not net or, if the amounts are net, to disaggregate them to report gross amounts of increases and gross amounts of decreases in accordance with ASC 740-10-50- 15. See also the example at ASC 740-10-55-217. 8) Commitments and Contingencies Virginia Department of Medical Assistance Services Recoupment Claims, page 133 3. Please provide us proposed disclosure to be included in future periodic reports that quantifies the Medicaid repayment requested by Virginia Department of Medical Assistance and that provides the amount or range of reasonably possible loss as required by ASC 450-20-50-4.b. Also, tell us your accounting treatment for these claims and provide us an analysis supporting your treatment with reference to ASC 450-20. Compensation Discussion and Analysis, page 24 4. On page 30, you disclose that with respect to the cash bonus for Ms. Osteen, 75% is based on the achievement of divisional specified income targets, and for Mr. Wright, 75% is based on the achievement of specified operating income targets of designated acquired facilities and profitability of third-party hospital construction contracts. In a letter dated June 12, 2009, you state “we will plan to include disclosure of the divisional performance criteria and actual performance achieved in our Proxy Statement to be filed in April 2010.” However, you have not disclosed the divisional performance criteria and actual performance achieved in your 2010 or 2011 Proxy Statement. Please amend your annual report on Form 10-K to disclose the following:  For Ms. Osteen, the divisional specified income targets that were established and communicated, quantified to the extent applicable, the evaluation and level of achievement of the divisional specified income targets and any other factors that were considered that modified the actual cash bonus awarded; and  For Mr. Wright, the evaluation and level of achievement of the specified operating income targets of designated acquired facilities and profitability of third-party hospital construction contracts and any other factors that were considered that modified the actual cash bonus awarded.

Outside owners hold various noncontrolling, minority ownership interests in seven of our acute care facilities and one behavioral health care facility. Each of these facilities are owned and operated by limited liability companies (“LLC”) or limited partnerships (“LP”). As a result, since there is no income tax liability incurred at the LLC/LP level (since it passes through to the members/partners), the net income attributable to noncontrolling interests is reflected on a gross basis and does not include any income tax provision/benefit.

When computing the provision for income taxes as

Rest of the answer

reflected on our consolidated statements of income, the net income attributable to noncontrolling interests is deducted from income from continuing operations before income taxes since it represents the third-party members’/partners’ share of the income generated by the joint-venture entities. Since our provision for income taxes gives effect to the portion of our income from continuing operations that is attributable to the noncontrolling ownership interests, but our income from continuing operations before income taxes does not, the computed effective tax rate (of 35.6% for 2010) does not reflect the effective tax rate of the income from continuing operations attributable only to UHS.

In addition to providing the effective tax rate as discussed above as required by the accounting guidance (as calculated from dividing the provision for income taxes by the income from continuing operations before income taxes as reflected on the consolidated statements of income), we believe it is helpful to our investors that we also provide our effective tax rate as calculated after giving effect to the portion of our income from continuing operations that is attributable to the third party members/partners. As stated above, for the year ended December 31, 2010, the effective tax rate after giving effect to the portion of our income from continuing operations that is attributable to the noncontrolling interests was 39.8%. As disclosed in Note 6 on page 125 of our Form 10-K, that effective tax rate consists of 35.0% federal statutory rate, 3.1% state taxes (net of federal income tax benefit), 1.3% nondeductible transaction costs and 0.4% of other items. Each of our filings includes a schedule which reflects the computation of the effective tax rate that gives effect to the portion of our income from continuing operations that is attributable to noncontrolling interests. The schedule is included on page 124 of our Form 10-K for the year ended December 31, 2010.

2. Refer to the tabular reconciliation of unrecognized tax benefits, and tell us if the captions “Gross amount of increase and decrease” are reporting increases and decreases net. Provide us proposed disclosure to be included in future periodic reports to clarify that amounts are not net or, if the amounts are net, to disaggregate them to report gross amounts of increases and gross amounts of decreases in accordance with ASC 740-10-50-15. See also the example at ASC 740-10-55-217.

Response:

We note the Staff’s comment above and as a point of clarification, there were no items that were netted on the lines captioned as “Gross amount of increase and decrease”. We have reviewed the above-referenced example and our future filings on Form 10-K will include a table with the captions as indicated on the “As proposed revised in future filings on Form 10-K” table as included below (the as stated table is also included for reference):

As stated in the

Form 10-K for the year ended December 31, 2010:

The tabular reconciliation of unrecognized tax benefits for the years ended December 31, 2010, 2009 and 2008 is as follows (amounts in thousands).

As of December 31,

2010

2009

2008

Balance at January 1,

$

5,754

3,759

2,450

Gross amount of increase and decrease in unrecognized tax benefits as a result of tax positions taken in the prior years

2,076

1,245

1,641

Gross amount of increase and decrease in unrecognized tax benefits as a result of tax positions taken in the current year

1,219

750

Amount of decrease in unrecognized tax benefits as a result of settlement

(219

)

—

Amount of decrease in unrecognized tax benefits as a lapse in statute

(907

(1,082

Balance at December 31,

7,923

As proposed revised in future filings on Form 10-K:

The tabular reconciliation of unrecognized tax benefits for the years ended December 31, 2010, 2009 and 2008 is as follows (amounts in thousands).

Additions based on tax positions of prior years

Additions based on tax positions related to the current year

Settlements

Reductions for tax positions of prior years

In the event there are material gross increases and gross decreases in the future, those amounts will be disaggregated on separate lines.

3. 8) Commitments and Contingencies

Virginia Department of Medical Assistance Services Recoupment Claims, page 133.

Please provide us proposed disclosure to be included in future periodic reports that quantifies the Medicaid repayment requested by Virginia Department of Medical Assistance and that provides the amount or range of reasonably possible loss as required by ASC 450-20-50-4.b. Also, tell us your accounting treatment for these claims and provide us an analysis supporting your treatment with reference to ASC 450-20.

Response:

As a result of the audits at the seven former PSI Residential Treatment Centers operated in Virginia (which were acquired by us in November, 2010), the Virginia Department of Medical Assistance Services (“DMAS”) has requested an aggregate repayment of approximately $3.5 million, which has been fully reserved on our consolidated balance sheet as of December 31, 2010. We have been discussing this matter with DMAS in an effort to reach an agreed upon settlement. Our related disclosure in the

Form 10-K for the year ended December 31, 2010 did not include the amount of the repayment request, or the corresponding reserve, since the aggregate amount was not material to our 2010 consolidated financial position or results of operations.

Until this matter is resolved, our future filings will include the following at the end of the disclosure as included in our Form 10-K for the year ended December 31, 2010:

“The aggregate refund of Medicaid payments made to those facilities, as requested by DMAS, and the corresponding reserve established on our Consolidated Balance Sheet as of December 31, 2010, was not material to our 2010 consolidated financial position or results of operations.”

Definitive Proxy Statement on Schedule 14A

Compensation Discussion and Analysis, page 24

4. On page 30, you disclose that with respect to the cash bonus for Ms. Osteen, 75% is based on the achievement of divisional specified income targets, and for

Mr. Wright, 75% is based on the achievement of specified operating income targets of designated acquired facilities and profitability of third-party hospital construction contracts. In a letter dated June 12, 2009, you state “we will plan to include disclosure of the divisional performance criteria and actual performance achieved in our Proxy Statement to be filed in April 2010.” However, you have not disclosed the divisional performance criteria and actual performance achieved in your 2010 or 2011 Proxy Statement. Please amend your annual report on Form 10-K to disclose the following:

a.

For Ms. Osteen, the divisional specified income targets that were established and communicated, quantified to the extent applicable, the evaluation and level of achievement of the divisional specified income targets and any other factors that were considered that modified the actual cash bonus awarded; and b.

For Mr. Wright, the evaluation and level of achievement of the specified operating income targets of designated acquired facilities and profitability of third-party hospital construction contracts and any other factors that were considered that modified the actual cash bonus awarded.

Response:

We inadvertently omitted the above-referenced disclosure which the Staff had requested we provide in future filings for which we extend our apologies.

Ms. Osteen’s divisional income target is established annually and consists of the projected aggregate pre-tax income for our Behavioral Health Services segment, net of deductions for the allocation of corporate overhead expenses as well as a charge for the estimated cost of capital. The divisional income target generally excludes the impact of acquisitions or divestitures made during the year as well as other amounts that may be nonrecurring or non-operational in nature or amounts that may be reflected in the current year financial statements that relate to prior years.

To the extent that the actual divisional financial results exceed the target, Ms. Osteen is entitled to

75% of the following (as applied to her annual base salary) as the portion of her annual bonus that is based upon divisional income:

Actual results meet divisional target

%

Actual results exceed divisional target by 5%

Actual results exceed divisional target by 10%

Actual results exceed divisional target by 15%

100

For the year ended December 31, 2010, Ms. Osteen’s divisional income target was $130.4 million and the aggregate actual financial results were $156.5 million. Since the actual results exceeded the target by more than 15% (20% was the spread) Ms. Osteen was entitled to 100% of the 75% of her annual bonus (as applied to her annual base salary) that was based upon the achievement of the divisional income targets.

With regard to Mr. Wright, 25% of his bonus is based on the achievement of certain corporate performance criteria and 75% on the achievement of specified operating income of designated acquired acute care facilities (as measured during the year following acquisition) and profitability of third-party hospital construction contracts (as measured at the completion of the project/contract). Since during 2010 we had no active hospital construction contracts, and since we did not acquire any acute care hospitals during 2009, Mr. Wright’s bonus was based solely on the achievement of corporate performance criteria. As disclosed in our Proxy Statement, the actual bonuses awarded for 2010 (which were based upon corporate performance criteria) were based upon the achievement of 85% of the bonus target award. Since Mr. Wright’s target award for 2010 was 40%, he was entitled to a non-equity incentive plan compensation bonus of $26,139 which represented 8.5% of his 2010 base salary (85% achievement of 40% target of 25% of total bonus).

Stated below is the relevant disclosure as included in our above-referenced Definitive Proxy Statement on Schedule 14A and supplemental disclosure which we propose be included in future Proxy Statement filings.

Disclosure as previously included in Definitive

Proxy Statement:

The 2010 EPS Target, which represented our projected consolidated earnings per diluted share estimate for the year as publicly released by us during the first quarter of 2010, was $2.57 per diluted share. The 2010 Return on Capital Target was 7.9%. Pursuant to the terms of the Executive Incentive Plan and the formula approved by our Compensation Committee, for

2010, our named executive officers were eligible to receive the applicable portion of their bonuses (which were based on the corporate performance criteria) at various increments ranging from 0% of their bonus target award (based upon the achievement of an EPS Target of $2.33 or less and Return on Capital of 7.1% or less) up to 250% of their bonus target award (based upon the achievement of an EPS Target of $2.81 or greater and Return on Capital of 8.6% or greater).

The actual bonuses awarded for 2010 (which were based upon corporate performance criteria) were based upon the achievement of 85% of the bonus target award, as determined by the Compensation Committee in March of 2011. During 2010, our adjusted net income attributable to UHS, upon which the EPS Target is based, was $2.54 per diluted share. This adjusted net income attributable to UHS per diluted share was publicly disclosed and reconciled to our reported 2010 net income attributable to UHS of $2.34 per diluted share, on the Schedule of Non-GAAP Supplemental Consolidated Income Information, included with the our earnings for the year ended December 31, 2010, as filed on Form 8-K on February 28, 2011. For incentive compensation purposes for each of the named executive officers, the as publicly reported adjusted net income attributable to UHS of $2.54 per diluted was reduced by $.02 per diluted share (to $2.52 per diluted share) to neutralize the impact of the acquisition of PSI in November, 2010. The balance sheet impact of the PSI acquisition was also neutralized in calculating the Return on Capital. The as adjusted Return on Capital was 7.8% for 2010. The Return on Capital is calculated by dividing our adjusted net income attributable to UHS for the year by the consolidated average net capital giving effect to the above-mentioned adjustment.

Supplemental Disclosure to be included in future Definitive Proxy Statements:

For 2010, Ms. Osteen’s divisional income target was $130.4 million. The divisional income target consists of the projected aggregate pre-tax income for our Behavioral Health Services segment, net of deductions for the allocation of corporate overhead expenses and a charge for the estimated cost of capital. The divisional income target generally excludes the impact of acquisition or divestitures made during the year as well as other amounts that may be nonrecurring or non-operational in nature or amounts that may be reflected in the current year financial statements that relate to prior years. To the extent that the actual divisional results exceeded the target, Ms. Osteen is entitled to 75% of the following (as applied to her annual base salary) as the portion of her annual bonus that is based upon divisional income: (i) 25% if actual results meet divisional income target; (ii) 50% if actual results exceed divisional income target by 5%; (iii) 75% if actual results exceed divisional income target by 10%, and; (iv) 100% if actual results exceed divisional income target by 15%.

The 2010 actual divisional income was $156.5 million. Since the actual divisional income exceeded the target by more than 15% ($130.4 million target was exceeded by 20%), Ms. Osteen was entitled to 100% of the portion of her bonus

(75%) that was based upon the achievement of the divisional income target.

For Mr. Wright, although 75% of his annual bonus is based on the achievement of specified operating income of designated acquired acute care facilities (as measured during the year following acquisition) and profitability of third-party hospital construction contacts (as measured at the completion of the project/contract), for 2010, neither of these targets were applicable since there were no acute care hospital acquisitions during 2009 and there were no completed hospital construction contracts during 2010. Therefore, Mr. Wright’s actual bonus award for 2010 was based solely on the achievement of the corporate performance criteria as outlined above.

The Staff has requested that we amend our annual report on Form 10-K for the year ended December 31, 2010 to include the supplemental disclosure outlined above. However, given that we believe that the inadvertent omission of this information was not material to investors in 2010, we respectfully request permission to include the supplemental disclosure as outlined above in our future Definitive Proxy Statements and not be required to amend our Form 10-K for the year ended December 31, 2010.

Other:

Also pursuant to your request, we hereby acknowledge that:

• we are responsible for the adequacy and accuracy of the disclosure in the filing staff comments or changes to disclosure in response to staff comments do not foreclose the Commission from taking any action with respect to the filing; and we may not assert staff comments as a defense in any proceeding initiated by the Commission or any person under the federal securities laws of the

United States.

Below is my contact information where I can be reached should the Staff have any questions or require any additional information. Thank you for your consideration and cooperation regarding this matter.

Read in the reply ↗

Income Taxes, page 123 1. Refer to your response to prior comment one. Please clarify in proposed disclosure to be included in future periodic reports why net income attributable to non-controlling interests is reflected on a gross basis and does not include any income tax provision/benefit. Compensation Discussion and Analysis, page 24 2.

Rest of the question

We note your response to our prior comment 4 as well as your proposed supplemental disclosure to be included in future definitive proxy statements. Please amend your annual report on Form 10-K to disclose these additional material terms of your cash bonus for Ms. Osteen and Mr. Wright.

Below, please see our proposed disclosure to be included in future periodic reports.

Please also note that, in future periodic reports, we plan to omit the additional effective tax rate disclosure (representing the rate of the provision for income taxes to income from continuing operations before income taxes minus net income attributable to noncontrolling interests) from the Notes to Consolidated Financial Statements-Note 6 Income Taxes.

Rest of the answer

Although as indicated in our response letter dated July 15, 2011, “we believe it is helpful to our investors that we also provide our effective tax rate as calculated after giving effect to the portion of our income from continuing operations that is attributable to the third party members/partners”, we will provide this supplemental disclosure, including the proposed disclosure below, only in Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations-Provision for Income Taxes and Effective Tax Rates

(as reflected on pages 72 and 73 of our Form 10-K for the year ended December 31, 2010).

Proposed disclosure to be included in future filings (in

Management’s Discussion and Analysis of Financial Condition and Results of Operations-Provision for Income Taxes and Effective Tax Rates):

Proposed additional disclosure:

Outside owners hold various noncontrolling, minority ownership interests in seven of our acute care facilities and one behavioral health care facility. Each of these facilities are owned and operated by limited liability companies (“LLC”) or limited partnerships (“LP”). As a result, since there is no income tax liability incurred at the LLC/LP level (since it passes through to the members/partners), the net income attributable to noncontrolling interests does not include any income tax provision/benefit. When computing the provision for income taxes, as reflected on our consolidated statements of income, the net income attributable to noncontrolling interests is deducted from income from continuing operations before income taxes since it represents the third-party members’/partners’ share of the income generated by the joint-venture entities. In addition to providing the effective tax rate, as indicated above (as calculated from dividing the provision for income taxes by the income from continuing operations before income taxes as reflected on the consolidated statements of income), we believe it is helpful to our investors that we also provide our effective tax rate as calculated after giving effect to the portion of our income from continuing operations that is attributable to the third party members/partners.

Previously existing disclosure, for illustration purposes, as included on Page 73 of our Form 10-K for the year ended December 31, 2010:

The effective tax rates, as calculated by dividing the provision for income taxes by the difference in income from continuing operations before income taxes, minus income from continuing operations attributable to noncontrolling interests, were as follows for each of the years ended

December 31, 2010, 2009 and 2008 (dollar amounts in thousands):

2010

2009

2008

Provision for income taxes

$

152,302

170,475

123,378

Income from continuing operations before income taxes

428,097

474,722

357,012

Less: Net income attributable to noncontrolling interests

(45,612

)

(43,874

(40,693

Income from continuing operations before income taxes and after net income attributable to noncontrolling interests

382,485

430,848

316,319

Effective tax rate

39.8

%

39.6

39.0

Definitive Proxy Statement on Schedule 14A

Compensation Discussion and Analysis, page 24

2. We note your response to our prior comment 4 as well as your proposed supplemental disclosure to be included in future definitive proxy statements. Please amend your annual report on Form 10-K to disclose these additional material terms of your cash bonus for Ms. Osteen and Mr. Wright.

Response:

Pursuant to the Staff’s request, we will amend our annual report on Form 10-K for the year ended December 31, 2010 (Item 11-Executive Compensation). The amendment will be filed immediately following the Staff’s response to this letter.

Below is my contact information where I can be reached should the Staff have any questions or require any additional information. Thank you for your consideration and cooperation regarding this matter.

Read in the reply ↗

Please file a revised legal opinion which does not contain the assumption that “the Indenture has been duly authorized, executed and delivered by the Trustee and constitutes the legal, valid and binding obligation of the Trustee.” It is not appropriate to assume material facts that underlie the opinion.

In accordance with Rule 461 under the Securities Act of 1933, as amended, Universal Health Services, Inc. (the “Company”), and the subsidiary guarantors of the Company listed on the signature pages hereto (together with the Company, the “Registrants”), hereby request that the effective date of the above-referenced Registration Statement on Form S-4, as amended, filed by the Registrants with the U.S. Securities and Exchange Commission (the

“Commission”), be accelerated so that the same may become effective at 4:00 p.m. on Friday, April 8, 2011, or as soon thereafter as practicable.

Rest of the answer

In addition, the Registrants hereby acknowledge that:

• should the Commission or the staff, acting pursuant to delegated authority, declare the filing effective, it does not foreclose the Commission from taking any action with respect to the filing;

the action of the Commission or the staff, acting pursuant to delegated authority, in declaring the filing effective, does not relieve the Registrants from their full responsibility for the adequacy and accuracy of the disclosure in the filing; and the Registrants may not assert the declaration of effectiveness as a defense in any proceeding initiated by the Commission or any person under the federal securities laws of the United States.

If you require additional information, please call Warren Nimetz at (212) 318-3384 or

Manuel Rivera at (212) 318-3296.

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