1Q26 preview for healthcare providers: guidance likely unchanged, but divergences are centered on THC, ACA, and SDP

Overview

This report is Morgan Stanley's preview of 1Q26 earnings for North American healthcare providers, covering HCA Healthcare, Tenet Healthcare, Universal Health Services, and Ardent Health Partners. The core conclusion is that, although companies are only entering the first quarter of the year, management is highly unlikely to adjust 2026 guidance, but actual 1Q performance will influence the market's view on full-year revenue, EBITDA, utilization, reimbursement, and policy risk. The report argues that the current backdrop is noisier than usual, with weather disruptions, changes in the ACA exchange market, and SDP approval status jointly affecting demand and earnings expectations.

Core views

The report is most constructive on THC's 1Q setup, citing its stronger historical 1Q EBITDA beat performance, the possibility that management accelerates share repurchases, attractive valuation, and unpriced potential upside from supplemental payments. HCA is expected to be broadly in line in 1Q, with the focus on the impact of ACA subsidy expiration, supplemental payment approvals, and buyback execution. Key debates for UHS center on behavioral health volume recovery, pressure in acute care, the Talkspace acquisition, and the impact of HIX subsidies. For ARDT, the focus is on whether margins can stabilize, whether IMPACT plan savings can be delivered, and whether reimbursement and professional fee pressures can ease.

Analysis framework

The analysis uses an earnings preview framework, cross-comparing company guidance, Morgan Stanley estimates, market consensus, historical beat records, volume tracking, policy variables, and valuation multiples. The report places particular emphasis on the impact of utilization data, ACA enrollment attrition, SDP approval progress, weather disruptions, and management commentary at conferences on short-term earnings and full-year sentiment.

Methodology notes

• Earnings previewCompany estimates versus Street consensus

  Compare revenue, adjusted EBITDA, margins, EPS, and operating metrics for 1Q26, 2026E, and 2027E.

  By assessing differences between Morgan Stanley estimates and consensus expectations, identify variables that could trigger earnings beats, misses, or guidance re-ratings.

• Operating dataPatient volume and utilization tracking

  Use the Strata National Patient Volume Tracker and company conference commentary to observe changes in inpatient, outpatient, specialty, and surgical volumes.

  Weak inpatient demand but continued outpatient growth indicate that hospital revenue mix and case complexity matter more than patient volume alone.

• Policy sensitivityACA and SDP scenario analysis

  Assess the impact of ACA subsidy expiration, unpaid initial premiums, exchange enrollment declines, and supplemental payment approvals on revenue and EBITDA.

  Policy variables are not yet fully reflected in company guidance, especially with pending SDP approvals potentially providing upside, while ACA disenrollment and a higher uninsured rate pose downside risks.

• Valuation methodsEV/EBITDA multiple method

  Apply different EV/EBITDA multiples to 2027E adjusted EBITDA or EBITDA-NCI.

  ARDT uses about 4x EV/EBITDA-NCI, HCA uses about 8.4x EV/EBITDA, and THC uses about 7.5x EV/EBITDA-NCI, reflecting differences in scale, margins, track record, and policy uncertainty.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Tenet Healthcare Corporation (THC.N)

  Core preferred name

  Strengths

  Strong historical ability to beat 1Q EBITDA expectations, possible acceleration in buyback pace, and ASC growth plus a high-acuity case strategy support revenue quality.

  Weaknesses

  Adjusted admissions are declining YoY after hospital divestitures, and the company still faces an approximately $250mn headwind from ACA subsidy expiration.

  Comparison

  Relative to HCA and UHS, THC stands out more in terms of 1Q EBITDA surprise history and capital returns.

  Risks

  Declines in ACA enrollment, hospital and ASC volumes below expectations, Conifer performance, M&A integration, and policy uncertainty.

• HCA Healthcare, Inc. (HCA.N)

  Large hospital operator, sensitive to policy and demand elasticity

  Strengths

  Stable long-term adjusted admission growth, strong scale and execution track record, and large buyback authorization.

  Weaknesses

  Valuation is at a premium relative to history and peers, with elevated uncertainty around ACA impact and supplemental payments.

  Comparison

  Scale and quality are superior to peers, but the report rates it UW, indicating that valuation and policy risk constrain risk-reward.

  Risks

  ACA subsidy expiration, delayed SDP approvals, wage pressure, payer-mix deterioration, and weather impacts.

• Universal Health Services Inc. (UHS.N)

  Mixed exposure to behavioral health and acute care

  Strengths

  Management expects staffing investments to support gradual recovery in behavioral health volumes, and Talkspace could strengthen long-term outpatient growth.

  Weaknesses

  The stock has underperformed year to date, behavioral health volumes and pricing have slowed, and acute care volumes are weak.

  Comparison

  Compared with THC, UHS's near-term narrative relies more on volume recovery and easing policy headwinds.

  Risks

  Greater impact from HIX subsidies, a high share of EBITDA tied to DPP payments, blocked California SDP approval, and behavioral health recovery below target.

• Ardent Health Partners Inc (ARDT.N)

  Margin recovery and small-scale hospital operator

  Strengths

  The IMPACT plan has raised the EBITDA run-rate benefit target, AI scribe tool penetration is high, and some weather impacts were recaptured in February.

  Weaknesses

  Scale and margins are below peers, its public-company track record remains to be proven, and professional fee and denial pressures still need monitoring.

  Comparison

  Its valuation multiple is below peers, reflecting a discount for scale, margins, and execution track record.

  Risks

  M&A execution, regulatory uncertainty around supplemental payments, wage and employee turnover pressure, and a relatively high private equity ownership stake.

Key data

• Industry viewNorth America Industry View: In-LineThe report maintains a neutral view on North American healthcare providers overall.
• THC historical 1Q EBITDA upsideMedian/average 14%/13%Meaningfully above HCA's 4%/3% and UHS's 5%/3%, supporting the report's preference for THC.
• February patient volumesInpatient YoY -0.8%; outpatient YoY +3.9%Inpatient demand is soft, but outpatient growth continues, with clear structural divergence.
• Unpaid first-premium ratio for ACAAbout 14%Above historical levels; the report expects ACA enrollment could decline 17%-26% in 2026.
• HCA 2026 operating targetsEquivalent admissions growth of 2%-3%; EBITDA margin slightly above 20%The company also expects to execute most of the new $10bn buyback authorization.
• Key 2026 impacts for UHSExchange/HIX impact of about $75mn; California staffing impact of about $30mnBehavioral health and acute care volume recovery are the main points to watch.
• THC buyback assumption1Q26 buybacks of $375mn; 2026 buybacks of $1.5bnAbove 4Q25's $200mn and 1Q25's $189mn, reflecting accelerated capital returns.
• ARDT IMPACT plan2026 EBITDA run-rate benefit target of $55mnUp from the prior $40mn, mainly driven by revenue and expense optimization.
• ARDT AI tool usageAbout 85% of patient visits use the scribe tool; physician documentation time reduced by 35%Reflects the potential contribution of AI investment to efficiency improvement.

Impact & implications

In the short term, 1Q26 earnings may not lead to formal guidance changes, but they will significantly influence investors' views on full-year policy risk, reimbursement mix, and margin elasticity. If THC delivers strong EBITDA, buybacks, and a high-acuity case mix, the market may further strengthen its relative preference; if ACA disenrollment proceeds faster than management assumes, or if SDP approvals are delayed, expectations for HCA, UHS, and ARDT in the second half could come under pressure.

Risks

• Expiration of enhanced ACA subsidies could lead to lower exchange enrollment, a higher uninsured rate, and deterioration in payer mix.
• Supplemental SDP payments in Florida and California are still unresolved, which could affect upside for HCA and UHS.
• January winter storms disrupted care delivery in some markets, and the short-term volume drag may be more visible for UHS.
• Inpatient demand is weak; if outpatient growth cannot offset declines in inpatient and surgical volumes, revenue and margins may come under pressure.
• Wage pressure, employee turnover, professional fees, and denial rates could weigh on margins for companies such as ARDT and HCA.
• Hospital valuations already reflect some resilience, especially HCA, which trades at a premium to history and peers; policy risk could compress multiples.

What to watch

• Whether each company maintains 2026 guidance in 1Q26 earnings and whether they update assumptions for ACA, HIX, and uninsured volumes.
• Whether THC delivers a strong EBITDA beat and confirms a more aggressive 2026 share buyback pace.
• HCA's commentary on Georgia SDP approval, Florida approval progress, and execution of the $10bn buyback authorization.
• Whether UHS behavioral health adjusted patient day growth recovers toward the 2%-3% target, and the impact of Talkspace on the outpatient mix.
• Whether ARDT margins stabilize and whether the IMPACT plan and AI scribe tools translate into visible EBITDA improvement.
• Subsequent Strata monthly inpatient and outpatient volume data, especially whether ACA disenrollment accelerates after the grace period.