Summary of Significant Accounting Policies

3 Months Ended

Mar. 31, 2026

Summary of Significant Accounting Policies

Summary of Significant Accounting PoliciesRecent Accounting Pronouncements Not Yet Adopted

In November 2024, the Financial Accounting Standards Board (the "FASB") issued Accounting Standards Update ("ASU")

2024-03, Disaggregation of Income Statement Expenses ("ASU 2024-03"), which requires the disclosure of certain

disaggregated expenses within the notes to the financial statements. ASU 2024-03 is effective for annual periods beginning

after December 15, 2026, and interim reporting periods within fiscal years beginning after December 15, 2027. Adoption of

ASU 2024-03 can either be applied prospectively to consolidated financial statements issued for reporting periods after the

effective date of this standard or retrospectively to any or all prior periods presented in the consolidated financial statements.

Early adoption is also permitted. The Company is currently evaluating the standard to determine its impact on the Company’s

disclosures.

In September 2025, the FASB issued ASU 2025-06, Intangibles - Goodwill and Other - Internal-Use Software (Topic 350):

Targeted Improvements to the Accounting for Internal-Use Software ("ASU 2025-06"), which modernizes the current

internal-use software accounting guidance by removing all references to software project development stages. Under ASU

2025-06, an entity begins capitalizing software costs when (i) management has implicitly or explicitly authorized and

committed to funding a computer software project and (ii) it is probable the project will be completed and the software will

be used to perform the function intended (referred to as the "probable-to-complete recognition threshold"). This ASU is

effective for annual reporting periods beginning after December 15, 2027, and interim periods within those annual reporting

periods, with early adoption permitted. The Company is currently evaluating the standard to determine its impact on the

Company's disclosures.

Variable Interest Entities

Variable interest entities ("VIEs") must be consolidated if an entity’s interest in the VIE is a controlling financial interest.

Under the variable interest model, a controlling financial interest is determined based on which entity, if any, has (i) the

power to direct the activities of the VIE that most significantly impact the VIE’s economic performance and (ii) the

obligation to absorb the losses, or the right to receive the benefits, from the VIE that could potentially be significant to the

VIE.

The Company performs ongoing reassessments of whether changes in the facts and circumstances regarding the Company's

involvement with a VIE could cause the Company’s consolidation conclusion to change. The consolidation status of the VIEs

with which the Company is involved may change as a result of such reassessments. Changes in consolidation status are

applied prospectively.

The Company, through its wholly-owned subsidiaries, owns majority interests in certain limited liability companies

("LLCs"), with each LLC owning and operating one or more hospitals. The noncontrolling interest is typically owned by a

not-for-profit medical system, university, academic medical center or foundation or combination thereof (individually or

collectively referred to as "minority member"). The employees that work for the LLC and the related hospital(s) are

employees of the Company, and the Company manages the day-to-day operations of the LLC and the hospital(s) pursuant to

a management services agreement ("MSA").

The LLCs are VIEs due to their structure as LLCs and the control that resides with the Company through the MSA. The

Company consolidates each of these LLCs as it is considered the primary beneficiary due to the MSA providing the

Company the right to direct the day-to-day operating and capital activities of the LLC and the respective hospital(s) that most

significantly impact the LLC’s economic performance. Additionally, the Company would absorb a majority of the entity's

expected losses, receive a majority of the entity's expected residual returns, or both, as a result of its majority ownership,

contractual or other financial interests in the entity. The MSAs are subject to termination only by mutual agreement of the

Company and minority member, except in the case of gross negligence, fraud or bankruptcy of the Company, in which case

the minority member can force termination of the MSA.

All of the Company's VIEs meet the definition of a business, and the Company holds a majority of their issued voting equity

interests. Their assets are not required to be used only for the settlement of VIE obligations as the Company has the ability to

direct the use of the VIE assets through its joint venture and cash management agreements.

The governance rights of the minority members are restricted to those that protect their financial interests and do not preclude

consolidation of the LLCs. The rights of minority members generally are limited to such items as the right to approve the

issuance of new ownership interests, calls for additional cash contributions, the acquisition or divestiture of significant assets

and the incurrence of debt in excess of levels not expected to be incurred in the normal course of business.

As of March 31, 2026 and December 31, 2025, nine of the Company's hospitals were owned and operated through LLCs that

have been determined to be VIEs and were consolidated by the Company. Consolidated assets at March 31, 2026 and

December 31, 2025 included total assets of VIEs equal to $1.3 billion. The Company's VIEs do not have creditors that have

recourse to the Company. As the structure and nature of business are very similar for each of the LLCs, they are discussed

and presented herein on a combined basis.

The total liabilities of VIEs included in the Company's unaudited condensed consolidated balance sheets are shown below (in

thousands):


	March 31, 2026	December 31, 2025
Current liabilities:
Current installments of long-term debt	$3,648	$3,635
Accounts payable	102,325	102,482
Accrued salaries and benefits	32,960	36,900
Other accrued expenses and liabilities	82,194	67,419
Total current liabilities	221,127	210,436
Long-term debt, less current installments	8,812	9,734
Long-term operating lease liability	98,273	101,153
Long-term operating lease liability, related party	9,283	9,313
Self-insured liabilities	677	677
Other long-term liabilities	3,604	3,826
Total liabilities	$341,776	$335,139

Income from operations before income taxes attributable to VIEs was $62.9 million and $62.6 million for the three months

ended March 31, 2026 and 2025, respectively.

Accounting Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and judgments

that affect the amounts reported in the unaudited condensed consolidated financial statements and accompanying notes. On

an ongoing basis, the Company evaluates its estimates. The Company bases its estimates on historical experience and on

various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for

making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual

results may differ from these estimates.

Revenue Recognition

Overview

The Company's revenue generally relates to contracts with patients in which its performance obligations are to provide

healthcare services to the patients. Revenue is recorded during the period the Company's obligations to provide healthcare

services are satisfied. Revenue for performance obligations satisfied over time is recognized based on charges incurred in

relation to total expected charges. The Company's performance obligations for inpatient services are generally satisfied over

periods that average approximately five days. The Company's performance obligations for outpatient services are generally

satisfied over a period of less than one day. As the Company's performance obligations relate to contracts with a duration of

one year or less, the Company elected the optional exemption and, therefore, is not required to disclose the transaction price

for the remaining performance obligations at the end of the reporting period or when the Company expects to recognize

revenue. Additionally, the Company is not required to adjust the consideration for the existence of a significant financing

component when the period between the transfer of the services and the payment for such services is one year or less.

Contractual Adjustments, Discounts and Cost Report Settlements

Contractual relationships with patients, in most cases, involve a third party payor (Medicare, Medicaid and managed care

health plans), and the transaction prices for services provided are dependent upon the terms provided by (Medicare and

Medicaid) or negotiated with (managed care health plans) the third party payors. The payment arrangements with third party

payors for the services provided to the related patients typically specify payments at amounts less than the Company's

standard charges.

The Company's revenue is based upon the estimated amounts the Company expects to be entitled to receive from patients and

third party payors. Estimates of contractual adjustments under managed care insurance plans are based upon the contractual

payment terms specified in the related contractual agreements and the historical collection experience of each payor. Revenue

related to uninsured patients and copayment and deductible amounts for patients who have healthcare coverage may have

discounts applied (uninsured discounts and other discounts). The Company also records estimated implicit price concessions

(based primarily on historical collection experience) related to uninsured accounts to record self-pay revenue at the estimated

amounts expected to be collected.

Medicare and Medicaid regulations and various managed care contracts, under which the discounts from the Company's

standard charges must be calculated, are complex and are subject to interpretation and adjustment. The Company estimates

contractual adjustments on a payor-specific basis based on its interpretation of the applicable regulations or contract terms

and the historical collection experience of each payor. However, the necessity of the services authorized and provided, and

resulting reimbursements, are often subject to interpretation. These interpretations may result in payments that differ from the

Company's estimates. Additionally, updated regulations and contract renegotiations occur frequently, necessitating continual

review and assessment of the estimates by management.

Due to the complexities involved in the classification and documentation of healthcare services under the laws and

regulations governing Medicare and Medicaid programs, the Company's estimates of revenue earned and related

reimbursement are often subject to interpretation that could result in payments that are different from its estimates. Final

determination of amounts earned under Medicare, Medicaid and other third party payor programs often occurs in subsequent

years because of audits by the programs, rights of appeal, and the application of technical provisions. Estimated

reimbursement amounts, which are recorded within net patient service revenue in the period in which the related services are

rendered, are adjusted in subsequent periods as determined (in relation to certain government programs, primarily Medicare,

this is generally referred to as the "cost report" filing and settlement process). Differences between original estimates and

subsequent revisions, including final settlements, are recorded as adjustments to net patient service revenue in the period in

which such revisions become known. These adjustments resulted in an increase to net patient service revenue of $7.5 million

and $8.9 million for the three months ended March 31, 2026 and 2025, respectively.

At March 31, 2026 and December 31, 2025, the Company's settlements under reimbursement agreements with third party

payors were a net receivable of $0.7 million and a net payable of $7.8 million, respectively, of which a receivable of $23.2

million and $21.1 million, respectively, was included in other current assets and a payable of $22.5 million and $28.9 million,

respectively, was included in other accrued expenses and liabilities in the unaudited condensed consolidated balance sheets.

Final determination of amounts earned under prospective payment and other reimbursement activities is subject to review by

appropriate governmental authorities or their agents. In the opinion of the Company's management, adequate provision has

been made for any adjustments that may result from such reviews.

Subsequent adjustments that are determined to be the result of an adverse change in the patient's or the payor's ability to pay

are recognized as bad debt expense. Bad debt expense for the three months ended March 31, 2026 and 2025 was not material

to the Company.

Currently, several states in which the Company operates utilize Medicaid supplemental payment programs for the purpose of

providing reimbursement to providers to offset a portion of the cost of providing care to Medicaid and indigent patients.

These programs, which are designed with input from and are subject to approval and periodic renewal by the Centers for

Medicare & Medicaid Services ("CMS"), are funded by a combination of state and federal resources, including, in certain

instances, fees or taxes levied on the providers. Under these supplemental programs, the Company recognizes revenue in the

period in which amounts are estimable and collection is reasonably assured such that a significant reversal of cumulative

revenue is not probable in the future. The Company recognizes supplemental program expenses in the period to which they

relate. Reimbursements under these programs are reflected in total revenue, and taxes or other program-related costs are

included in other operating expenses.

Payor Mix

The Company's total revenue is presented in the following table (dollars in thousands):


	Three Months Ended March 31,
	2026		2025
	Amount	% of Total Revenue	Amount	% of Total Revenue
Medicare	$669,168	41.8%	$595,637	39.8%
Medicaid	158,861	9.9%	149,343	10.0%
Other managed care	684,564	42.7%	645,152	43.1%
Self-pay and other	71,483	4.5%	80,979	5.4%
Net patient service revenue	$1,584,076	98.9%	$1,471,111	98.3%
Other revenue	17,794	1.1%	26,123	1.7%
Total revenue	$1,601,870	100.0%	$1,497,234	100.0%

Charity Care

The Company provides care without charge to certain patients who qualify under the local charity care policy of the hospital

where the patient receives services. The Company estimates that its costs of care provided under its charity care programs

approximated $7.8 million and $8.2 million for the three months ended March 31, 2026 and 2025, respectively. The

Company does not report a charity care patient's charges in revenue as it is the Company's policy not to pursue collection of

amounts related to these patients, and therefore contracts with these patients do not exist.

The Company's management estimates its costs of care provided under its charity care programs utilizing a calculated ratio of

costs to gross charges multiplied by the Company's gross charity care charges provided. The Company's gross charity care

charges include only services provided to patients who are unable to pay and qualify under the Company's local charity care

policies. To the extent the Company receives reimbursement through the various governmental assistance programs in which

it participates to subsidize its care of indigent patients, the Company does not include these patients' charges in its cost of care

provided under its charity care program.

Market Risks

The Company's revenue is subject to potential regulatory and economic changes in certain states where the Company

generates significant revenue. The following is an analysis by state of revenue as a percentage of the Company's total revenue

for those states in which the Company generates significant revenue:


	Three Months Ended March 31,
	2026	2025
Oklahoma	22.8%		24.6%
New Mexico	17.9%		14.0%
Texas	35.1%		37.6%
New Jersey	10.9%		10.7%
Other	13.3%		13.1%
Total	100.0%		100.0%

Acquisitions

Acquisitions are accounted for using the acquisition method of accounting and the results of operations are included in the

unaudited condensed consolidated income statement from the respective dates of acquisition. The purchase price of these

transactions is allocated to the assets acquired and liabilities assumed based upon their respective fair values at the date of

acquisition and can be subject to change up to 12 months subsequent to the acquisition date due to settling amounts related to

purchased working capital and final determination of fair value estimates.

The Company is required to allocate the purchase price of acquired businesses to assets acquired and liabilities assumed and,

if applicable, noncontrolling interests based on their fair values. The Company records the excess of the purchase price

allocation over those fair values as goodwill.

Investments in Equity Securities

The Company holds an option to acquire equity securities of a privately held company (the “Investment”), and the Investment

does not have a readily determinable fair value. The Company has elected to account for the Investment using the

measurement alternative. Under the measurement alternative, an investment is recorded at cost, less impairment, if any, and

adjusted for observable price changes in orderly transactions involving identical or similar equity securities of the same

issuer. The Investment is not measured at fair value on a recurring basis.

During the three months ended March 31, 2026, the Company recorded an upward adjustment to the carrying value of the

Investment based on observable price changes in the form of equity financings of the privately held company. The adjustment

increased the carrying value of the Investment by $10.9 million, and the corresponding gain was recorded in other operating

expenses in the condensed consolidated income statement.

As of March 31, 2026, the carrying value of the Investment was $18.8 million, which was recorded in other assets in the

condensed consolidated balance sheet. The Company noted no observable price changes or transactions, nor did it recognize

any impairment charges, related to the Investment between the date of initial investment and December 31, 2025.

Fair Value of Financial Instruments

Cash and cash equivalents, accounts receivable, inventories, prepaid expenses, other current assets, accounts payable, accrued

salaries and benefits, accrued interest and other accrued expenses and current liabilities (other than those pertaining to lease

liabilities) are reflected in the accompanying unaudited condensed consolidated financial statements at amounts that

approximate fair value because of the short-term nature of these instruments. The fair value of the Company’s revolving

credit facility also approximates its carrying value as it bears interest at current market rates. Refer to Note 5, Interest Rate

Swap Agreements, for discussion of the fair value measurement of the Company’s derivative instruments.

The carrying amounts and fair values of the Company’s senior secured term loan facility and its 5.75% Senior Notes due

2029 (the "5.75% Senior Notes") were as follows (in thousands):


	Carrying Amount		Fair Value
	March 31, 2026	December 31, 2025	March 31, 2026	December 31, 2025
Senior secured term loan facility	$768,743	$770,499	$768,743	$770,499
5.75% Senior Notes	$299,708	$299,686	$296,711	$295,191

The estimated fair values of the Company’s senior secured term loan facility and the 5.75% Senior Notes were based upon

quoted market prices at that date and are categorized as Level 2 within the fair value hierarchy.

Noncontrolling Interests

The financial statements include the financial position and results of operations of hospital and healthcare operations in which

the Company owned less than 100% of the equity interests, but maintained a controlling interest during the presented periods.

Earnings or losses attributable to the noncontrolling interests are presented separately in the consolidated income statements.

Holders of noncontrolling interests are considered to be equity holders in the consolidated company, pursuant to which

noncontrolling interests are classified as part of equity, unless the noncontrolling interests are redeemable. Certain redemptive

features associated with the noncontrolling interests for The University of Kansas Health System – St. Francis Campus ("St.

Francis") could require the Company to deliver cash if the redemptive features are exercised. These redemptive features could

be exercised upon, among other things, the Company’s exclusion or suspension from participation in any federal or state

government healthcare payor program. Therefore, the noncontrolling interests balance for St. Francis is classified outside the

permanent equity section of the Company’s unaudited condensed consolidated balance sheets.

The redeemable noncontrolling interests related to St. Francis at March 31, 2026 and December 31, 2025 have not been

subsequently measured at fair value since the acquisition date in 2017. The noncontrolling interests are not currently

redeemable and it is not probable that the noncontrolling interests will become redeemable as the possibility of the Company

being excluded or suspended from participation in any federal or state government healthcare payor program is remote.

Earnings Per Share

Basic net income per share is computed by dividing net income available to common stockholders by the weighted-average

common shares outstanding during the period. Diluted net income per share takes into account the potential dilution that

could occur if securities or other contracts to issue shares, such as unvested restricted stock units, were exercised and

converted into shares. Diluted net income per share is computed by dividing net income available to common stockholders by

the weighted-average common shares outstanding during the period, increased by the number of additional shares that would

have been outstanding if the potential shares had been issued and were dilutive.