Basis of Presentation and Significant Accounting Policies

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all the information and footnotes required by generally accepted accounting principles for complete consolidated financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation have been included and are of a normal and recurring nature.

The majority of our expenses are “costs of revenues” items. Costs that could be classified as general and administrative would include our corporate office costs, which were $148 million and $130 million for the quarters ended June 30, 2026 and 2025, respectively, and $281 million and $256 million for the six months ended June 30, 2026 and 2025, respectively. Operating results for the quarter and six months ended June 30, 2026 are not necessarily indicative of the results that may be expected for the year ending December 31, 2026. For further information, refer to the consolidated financial statements and footnotes thereto included in our annual report on Form 10-K for the year ended December 31, 2025.

Revenues

Our revenues generally relate to contracts with patients in which our performance obligations are to provide health care services to the patients. Revenues are recorded during the period our obligations to provide health care services are satisfied. Our performance obligations for inpatient services are generally satisfied over periods that average approximately five days, and revenues are recognized based on charges incurred in relation to total expected charges. Our performance obligations for outpatient services are generally satisfied over a period of less than one day. The contractual relationships with patients, in most cases, also involve a third-party payer (Medicare, Medicaid, managed care health plans and commercial insurance companies, including plans offered through the federal and state-based health insurance exchanges (the “Exchanges”)), and the transaction prices for the services provided are dependent upon the terms provided by (Medicare and Medicaid) or negotiated with (managed care health plans and commercial insurance companies) the third-party payers. The payment arrangements with third-party payers for the services we provide to the related patients typically specify payments at amounts less than our standard charges. Medicare generally pays for inpatient and outpatient services at prospectively determined rates based on clinical, diagnostic and other factors. Services provided to patients having Medicaid coverage are generally paid at prospectively determined rates per discharge, per identified service or per covered member. Agreements with commercial insurance carriers, managed care and preferred provider organizations generally provide for payments based upon predetermined rates per diagnosis, per diem rates or discounted fee-for-service rates. Management continually reviews the contractual estimation process to consider and incorporate updates to laws and regulations and the frequent changes in managed care contractual terms resulting from contract renegotiations and renewals.

Our revenues are based upon the estimated amounts we expect to be entitled to receive from patients and third-party payers. Estimates of contractual adjustments under managed care and commercial insurance plans are based upon the payment terms specified in the related contractual agreements. Revenues related to uninsured patients and uninsured copayment and deductible amounts for patients who have health care coverage may have discounts applied (uninsured and other discounts). We also record estimated implicit price concessions (based primarily on historical collection experience) related to uninsured accounts to record these revenues at the estimated amounts we expect to collect. Patients treated at our hospitals for non-elective care who have income at or below 400% of the federal poverty level are eligible for charity care. Because we do not pursue collection of amounts determined to qualify as charity care, they are not reported in revenues. Our revenues by primary third-party payer classification and other (including uninsured patients) for the quarters and six months ended June 30, 2026 and 2025 are summarized in the following table (dollars in millions):


	Quarter
	2026		Ratio			2025		Ratio
Medicare	$	2,927		14.5	%	$	2,803		15.1	%
Managed Medicare		3,424		16.9			3,352		18.0
Medicaid		2,789		13.8			1,440		7.7
Managed Medicaid		997		4.9			899		4.8
Managed care and insurers		9,013		44.6			9,124		49.1
International (managed care and insurers)		491		2.4			461		2.5
Other		589		2.9			526		2.8
Revenues	$	20,230		100.0	%	$	18,605		100.0	%

	Six Months
	2026		Ratio			2025		Ratio
Medicare	$	5,985		15.2	%	$	5,698		15.4	%
Managed Medicare		6,932		17.6			6,651		18.0
Medicaid		4,233		10.8			2,630		7.1
Managed Medicaid		1,936		4.9			1,778		4.8
Managed care and insurers		18,097		46.0			18,165		49.2
International (managed care and insurers)		990		2.5			906		2.5
Other		1,166		3.0			1,098		3.0
Revenues	$	39,339		100.0	%	$	36,926		100.0	%

As expected, during the quarter and six months ended June 30, 2026, our revenues from managed care and insurers were unfavorably impacted by the expiration of the enhanced premium tax credits at the end of 2025 and administrative reforms, both related to insurance purchased through the Exchanges. In addition, we recognized revenues for the quarter and six months ended June 30, 2026 related to Medicaid state directed and supplemental payment programs, primarily from the Florida directed payment program approved by the Centers for Medicare & Medicaid Services during the second quarter of 2026 for the program year beginning October 1, 2024 through September 30, 2025.

To quantify the total impact of the trends related to uninsured patient accounts, we believe it is beneficial to consider total uncompensated care, which is comprised of charity care, uninsured discounts and implicit price concessions. Total uncompensated care was $15.076 billion and $11.625 billion, respectively, for the quarters ended June 30, 2026 and 2025, and the estimated cost of total uncompensated care was $1.445 billion and $1.116 billion, respectively, for the quarters ended June 30, 2026 and 2025. Total uncompensated care was $28.688 billion and $22.618 billion, respectively, for the six months ended June 30, 2026 and 2025, and the estimated cost of total uncompensated care was $2.697 billion and $2.171 billion, respectively, for the six months ended June 30, 2026 and 2025. The estimated cost of uncompensated care was based on a ratio of patient care costs (salaries and benefits, supplies, other operating expense and depreciation and amortization) to gross charges.

NOTE 1 — BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES (continued)

Revenues (continued)

The total uncompensated care amounts include charity care of $5.318 billion and $4.112 billion, respectively, for the quarters ended June 30, 2026 and 2025, and the related estimated costs of charity care were $511 million and $395 million, respectively, for the quarters ended June 30, 2026 and 2025. The total uncompensated care amounts include charity care of $10.831 billion and $7.756 billion, respectively, and the related estimated costs of charity care were $1.018 billion and $745 million, respectively, for the six months ended June 30, 2026 and 2025.