Results
Ardent Health Inc.
03/16/2026 | Press release | Distributed by Public on 03/16/2026 14:14
Annual Report for Fiscal Year Ending 12/31, 2025 (Form 10-K)
Management's Discussion and Analysis of Financial Condition and Results of Operations
Management's discussion and analysis of financial condition and results of operations should be read in conjunction with the consolidated financial statements and related notes contained elsewhere in this Annual Report.
Unless otherwise indicated, all relevant financial and statistical information included herein relates to our consolidated operations. Additionally, unless the context indicates otherwise, Ardent Health, Inc. and its affiliates are referred to in this section as "we," "our," or "us."
Forward-Looking Statements
This Annual Report, including the following discussion, may contain certain "forward-looking statements," as that term is defined in the U.S. federal securities laws. These forward-looking statements include, but are not limited to, statements other than statements of historical facts, including, among others, statements relating to our future financial performance, our business prospects and strategy, anticipated financial position, liquidity and capital needs, the industry in which we operate and other similar matters. Words such as "anticipates," "expects," "intends," "plans," "predicts," "believes," "seeks," "estimates," "could," "would," "will," "may," "can," "continue," "potential," "should" and the negative of these terms or other comparable terminology often identify forward-looking statements. When reviewing the discussion below, you should keep in mind the risks and uncertainties that could impact our business. These forward-looking statements are not guarantees of future performance and are subject to risks and uncertainties that could cause actual results to differ materially from the results contemplated by the forward-looking statements, including the risk factors and other cautionary statements described under the heading "Risk Factors" included in this Annual Report. These risks and uncertainties could cause actual results to differ materially from those projected in forward-looking statements contained in this Annual Report or implied by past results and trends. Our historical results are not necessarily indicative of the results that may be expected for any period in the future.
Factors, risks, and uncertainties that could cause actual outcomes and results to be materially different from those contemplated include, among others: (1) general economic and business conditions, both nationally and in the regions in which we operate, including the impact of challenging macroeconomic conditions and inflationary pressures, current geopolitical instability, and impacts from the imposition of, or changes in, tariffs, as well as the potential impact on us of the federal government shutdown or other uncertain political, financial, credit and capital conditions; (2) possible reductions or other changes in Medicare, Medicaid and other state programs, including Medicaid supplemental payment programs, Medicaid waiver programs or state directed payments, that could have an adverse effect on our revenues and business; (3) reduction in the reimbursement rates paid by commercial payors, increased reimbursement denials or payment delays by commercial payors, our inability to retain and negotiate favorable contracts with private third party payors, or an increasing volume of uninsured or underinsured patients; (4) effects of changes in healthcare policy or legislation, including the One Big Beautiful Bill Act (the "OBBBA") and any other reforms that have or may be undertaken by the current presidential administration, and legal and regulatory restrictions on our hospitals that have physician owners; (5) the ability to achieve operating and financial targets, develop and execute mitigation plans to offset to the extent possible impacts from the OBBBA, the expiration of temporary enhanced subsidies for individuals eligible to purchase insurance coverage through health insurance marketplaces and imposition of tariffs, attain expected levels of patient volumes and revenues, and control the costs of providing services; (6) security threats, catastrophic events and other disruptions affecting our, our service providers' or our joint venture ("JV") partners' information technology and related systems, which have adversely affected, and could in the future adversely affect, our relationships with patients and business partners and subject us to legal claims and liabilities, reputational harm and business disruption and adversely affect our financial condition; (7) the highly competitive nature of the healthcare industry and continued industry trends towards clinical transparency and value-based purchasing may impact our competitive position; (8) inability to recruit and retain quality physicians, as well as increasing cost to contract with hospital-based physicians; (9) changes to physician utilization practices and treatment methodologies and other factors outside our control that impact demand for medical services and may reduce our revenues and ability to grow profitability; (10) continued industry trends toward value-based purchasing, third party payor consolidation and care coordination among healthcare providers; (11) inability to successfully complete acquisitions or strategic JVs or inability to realize all of the anticipated benefits; (12) liabilities because of professional liability and other claims brought against our hospitals, physician practices, outpatient facilities or other business operations; (13) exposure to certain risks and uncertainties by the JVs through which we conduct a significant portion of our operations, including anticipated synergies of past acquisitions and the risk that transactions may not receive necessary government clearances; (14) failure to obtain drugs and medical supplies at favorable prices or sufficient volumes; (15) operational, legal and financial risks associated with outsourcing functions to third parties; (16) our facilities are heavily concentrated in Texas and Oklahoma, which makes us sensitive to regulatory, economic and competitive conditions and changes in those states; (17) negative impact of severe weather, climate change, and other factors beyond our control, which could restrict patient access to care or cause one or more facilities to close temporarily or permanently; (18) risks related to the Master Lease with Ventas ("Ventas Master Lease") and its restrictions and limitations on our business; (19) the impact of our significant indebtedness and the ability to refinance such indebtedness on acceptable terms; (20) our failure to comply with complex laws and regulations applicable to the healthcare industry or to adjust our operations in response to changing laws and regulations; (21) the impact of governmental claims or governmental investigations, payor audits and litigation brought against our hospitals, physician practices, outpatient facilities or other business operations; (22) actual or perceived failures to comply with applicable data protection, privacy and security laws, regulations, standards and other requirements; (23) the impact of a deterioration of public health conditions associated with a future pandemic, epidemic or outbreak of infectious disease; (24) inability to or delay in building, acquiring, selling, renovating or expanding our healthcare facilities; (25) failure to comply with federal and state laws relating to Medicare and Medicaid enrollment, permit, licensing and accreditation requirements; (26) the results of our efforts to use technology, including artificial intelligence ("AI") and machine learning, to drive efficiencies, better outcomes and an enhanced
patient experience; (27) our status as a controlled company; (28) conflicts of interest between our controlling stockholder and other holders of our common stock; and (29) other risk factors described in our filings with the SEC.
We caution you that the foregoing list may not contain all of the forward-looking statements made in this Annual Report. You should not rely upon forward-looking statements as predictions of future events.
The forward-looking statements in this Annual Report are based on management's current beliefs, expectations, and projections about future events and trends affecting our business, results of operations, financial condition, and prospects. These statements are subject to risks, uncertainties, and other factors described in the "Risk Factors" section and elsewhere in this Annual Report. We operate in a competitive and rapidly changing environment where new risks and uncertainties can emerge, making it impossible to predict all potential impacts on our forward-looking statements. Consequently, actual results may differ materially from those described. The forward-looking statements pertain only to the date they are made, and we do not undertake any obligation to update them to reflect new information or events unless required by law. You are advised not to place undue reliance on these statements and to consult any additional disclosures we may provide through our other filings with the SEC, such as Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K.
Overview
Ardent is a leading provider of healthcare services in the United States, operating in eight growing mid-sized urban markets across six states: Texas, Oklahoma, New Mexico, New Jersey, Idaho and Kansas. We deliver care through a system of 30 acute care hospitals and more than 280 sites of care with over 2,000 employed and affiliated providers as of December 31, 2025, an increase of 9.4% in total providers compared to December 31, 2024. Affiliated providers are physicians and advanced practice providers with whom we contract for services through a professional services agreement or other independent contractor agreement. We hold a leading position in a majority of our markets, and we believe we are one of the leading healthcare systems based on market share and our integrated network of hospitals, ambulatory facilities, and physician practices. We operate either independently or in partnership with premier academic medical centers, large not-for-profit hospital systems, community physicians, and a community foundation through our well-established and differentiated JV model. Collectively, we operate as a unified organization with a consumer-centric approach to caring for our patients and our communities. Our strategic JV partners offer us significant advantages, including expanded access points, clinical talent availability, local brand recognition, and scale that enable us to accelerate market penetration. We believe that we help our partners enhance their network and regional presence through our operational acumen. We strive to strengthen clinical services, drive operating improvements, and centrally manage operations to optimize hospital performance and enhance patient care. In each of these partnerships, we are the majority owner and serve as the day-to-day operator.
Recent Developments
Term Loan B Facility Refinancing and Repricing
On September 18, 2025, we executed an amendment to our term loan credit agreement (the "Term Loan B Credit Agreement") to refinance the outstanding term loans under our senior secured term loan facility (the "Term Loan B Facility"). The amendment (i) reduced the applicable interest rate by 50 basis points from Term SOFR plus 2.75% to Term SOFR plus 2.25% and from the base rate plus 1.75% to the base rate plus 1.25%, (ii) extended the maturity date to September 18, 2032 and (iii) increased the baskets for certain fixed dollar negative covenants and (iv) reestablished principal payments under the amended Term Loan B Facility, which are due in consecutive equal quarterly installments of 0.25% of the refinanced $777.5 million principal amount beginning on December 31, 2025 (subject to certain reductions from time to time as a result of the application of prepayments), with the remaining balance due upon the new maturity date in September 2032. All other terms of the Term Loan B Credit Agreement were substantially unchanged.
On September 18, 2024, we executed an amendment to reprice our Term Loan B Credit Agreement. The repricing reduced the applicable interest rate by 50 basis points from Term SOFR plus 3.25% to Term SOFR plus 2.75% and from base rate plus 2.25% to base rate plus 1.75%, and it eliminated the credit spread adjustment. No modifications were made to the maturity of the loans as a result of the repricing and all other terms of the Term Loan B Credit Agreement were substantially unchanged.
Regulatory Update
On July 4, 2025, Congress passed the OBBBA, its budget reconciliation act for fiscal year 2025. The OBBBA includes provisions that may impact our financial performance and may substantially modify certain federal statutes and regulations to which our operations are subject. The OBBBA provisions that may impact us have varying effective dates, and we are unable to predict whether or how future legislation, rulemaking, or judicial action will impact implementation of the OBBBA. Of particular relevance to us, the OBBBA may reduce the federal government's overall Medicaid expenditures and tighten Medicaid eligibility requirements. The law limits eligibility for Medicaid by imposing work or community engagement requirements for adults under 65 years old in Medicaid expansion states, including states with waiver-based expansions, subject to limited exceptions, and requires eligibility redeterminations at least every six months for the Medicaid expansion state population. State compliance is required by December 31, 2026.
In addition, the OBBBA includes significant changes to Medicaid funding mechanisms by restricting federal matching funds received by state Medicaid programs. The law prohibits states from establishing new provider assessments or taxes, or increasing the rates of
existing provider assessments, for state fiscal years beginning after October 1, 2026, while also limiting the structure and application of such assessments. The OBBBA also directs the U.S. Department of Health and Human Services to revise regulations governing state directed payment ("SDP") arrangements to cap total payment rates paid by Medicaid managed care organizations for certain services at Medicare payment rates instead of average commercial rates and imposes lower caps in Medicaid expansion states. The revised regulations apply to SDP arrangements established on or after July 4, 2025 unless the program meets certain grandfathering criteria. The OBBBA provides that payments under grandfathered programs will be reduced beginning January 1, 2028.
The OBBBA also made significant changes to the U.S. federal tax law. Significant tax provisions of the OBBBA that will impact us include (i) the return to the EBITDA formula used to calculate the business interest expense limitation under Internal Revenue Code ("IRC") Section 163(j) and (ii) the allowance of 100% bonus depreciation for qualifying property placed in service after January 19, 2025. The provisions of the OBBBA will reduce our current tax liability, but are not expected to have a material impact on our current year tax expense.
Because our facilities rely in part on reimbursement from federal health care programs, including Medicaid, for the reimbursement of services rendered, these changes may have a negative impact on our financial performance. Ongoing budgetary uncertainties and continued efforts to reduce the federal deficit may result in further payment reductions to both Medicaid and Medicare programs. Related to these budgetary concerns, the OBBBA increases the federal deficit such that the sequestration under the Pay-As-You-Go Act of 2010 is required, which could result in cuts to Medicare reimbursement of up to 4% in early 2026 if Congress does not take action.
In addition to changes made to federal healthcare programs, the OBBBA contains policy changes that are expected to decrease the number of individuals who obtain health insurance from Affordable Care Act ("ACA") marketplace exchanges. For example, the OBBBA effectively ends automatic renewals of coverage by requiring pre-enrollment verification of eligibility. In addition to ending automatic renewals of ACA plans, the OBBBA eliminated federal enhanced subsidies of ACA marketplace exchange-based plans, which is likely to result in significant cost increases for ACA plans. We also expect these reforms to ACA marketplace exchange-based plans to adversely impact results in 2026, partially offset by our ongoing resiliency and cost reduction initiatives.
Urgent Care Acquisitions
On January 1, 2025, we completed the acquisitions of certain assets and operations of 18 urgent care clinics in New Mexico and Oklahoma for a combined purchase price of $27.5 million. The consideration transferred on December 31, 2024, consisted solely of cash. Upon closing of the acquisitions, approximately $4.1 million was placed into escrow to cover potential working capital adjustments and to secure certain indemnification obligations pursuant to the terms of the purchase agreements. This escrow amount is included in the total purchase consideration of $27.5 million. Most of the combined purchase price for assets and operations acquired was recorded as goodwill with an immaterial portion allocated to identifiable assets acquired and liabilities assumed. As of December 31, 2025, the fair values of assets and liabilities recorded related to these acquisitions were finalized and the measurement period was closed.
Initial Public Offering and Corporate Conversion
On July 19, 2024, we completed an IPO of 12,000,000 shares of our common stock, at a public offering price of $16.00 per share (the "IPO") for aggregate gross proceeds of $192.0 million and net proceeds of approximately $181.4 million after deducting underwriting discounts and commissions of approximately $10.6 million. The IPO provided the underwriters with an option to purchase up to an additional 1,800,000 shares of our common stock, which was fully exercised by the underwriters, and, on July 30, 2024, we issued 1,800,000 additional shares of common stock at $16.00 per share for additional net proceeds of approximately $27.2 million, after deducting underwriting discounts and commissions of approximately $1.6 million. Our common stock is listed on the New York Stock Exchange under the symbol "ARDT".
On July 17, 2024, in connection with the IPO and immediately prior to the effectiveness of our registration statement on Form S-1, we converted from a Delaware limited liability company into a Delaware corporation by means of a statutory conversion (the "Corporate Conversion") and changed our name to Ardent Health Partners, Inc. As a result of the Corporate Conversion, the outstanding limited liability company membership units and vested profits interest units were converted into 120,937,099 shares of common stock and outstanding unvested profits interest units were converted into 2,848,027 shares of restricted common stock. Immediately following the Corporate Conversion, ALH Holdings, LLC, a subsidiary of Ventas, Inc. ("Ventas"), contributed all of its outstanding common stock in AHP Health Partners, Inc. ("AHP Health Partners"), our direct subsidiary, to Ardent Health Partners, Inc. in exchange for 5,178,202 shares of common stock of Ardent Health Partners, Inc. (the "ALH Contribution"). The Corporate Conversion and the ALH Contribution have been retrospectively applied to prior periods herein for the purposes of calculating basic and diluted net income per share. Our certificate of incorporation authorizes 750,000,000 shares of common stock and 50,000,000 shares of preferred stock, each with a $0.01 par value per share.
ABL Credit Agreement Amendment and Term Loan B Facility Prepayment
On June 26, 2024, we executed an amendment to the credit agreement for our $225.0 million senior secured asset based revolving credit facility (the "ABL Credit Agreement") to increase the revolving commitment by $100.0 million to $325.0 million and extend the maturity date to June 26, 2029. Concurrent with the execution of this amendment on June 26, 2024, we also prepaid $100.0 million
of the outstanding principal on our Term Loan B Facility. The $100.0 million prepayment was applied in direct order of maturities of future payments, and no modification was made to the Term Loan B Facility as a result of this prepayment.
Cybersecurity Incident
In November 2023, we determined that a ransomware cybersecurity incident had impacted and disrupted a number of our operational and information technology systems (the "Cybersecurity Incident"). We continued to experience delays in billing claims and obtaining reimbursements and payments through the first quarter of 2024, and incurred certain expenses related to the Cybersecurity Incident, including expenses to defend claims brought by individuals and other expenses related to the Cybersecurity Incident. On October 4, 2024, we executed a settlement agreement to resolve the consolidated class action litigation related to the Cybersecurity Incident. On October 9, 2024, the District Court preliminarily approved the settlement. Plaintiffs filed a Motion for Final Approval of the Settlement ("Motion for Final Approval"), which we did not oppose. Following a hearing on the Motion for Final Approval that was conducted on August 1, 2025, the Court ordered class counsel, the settlement administrator and us to implement the agreed upon settlement of the consolidated case. Pursuant to the settlement, we made settlement payments, the total of which did not have a material impact on our results of operations, financial position or liquidity. Upon entry of the Final Order, the clerk was ordered to close the case.
Pure Health Equity Investment
On May 1, 2023, Pure Health purchased from the unit holders an equity interest representing 25.0% of the total combined voting power of Ardent Health Partners, LLC at the time for approximately $500 million. In connection with Pure Health's investment, unit holders were eligible to exercise tag-along rights to sell a proportionate share of their individual equity ownership interest in Ardent Health Partners, LLC and AHP Health Partners, our direct subsidiary. Ventas exercised its tag-along right to sell its proportionate share of interest in both Ardent Health Partners, LLC and AHP Health Partners. Ventas sold approximately 24% of its ownership interest in Ardent Health Partners, LLC for $24.2 million in total cash proceeds. Additionally, to fulfill Ventas' right to sell its proportionate share of noncontrolling ownership interest in AHP Health Partners, we exercised our right to repurchase those shares from Ventas for $26.0 million concurrent with Pure Health's purchase of a minority interest in Ardent Health Partners, LLC. The carrying value of Ventas' noncontrolling interest was adjusted proportionate to the shares repurchased to reflect the change in ownership of AHP Health Partners, with the difference between the fair value of the consideration paid and the amount by which noncontrolling interest was adjusted recognized in equity attributable to Ardent Health Partners, LLC. As of December 31, 2025, following the consummation of the IPO and the underwriters' exercise of their option to purchase additional shares, Pure Health and Ventas beneficially owned approximately 21.2% and 6.5%, respectively, of our outstanding common stock.
Key Factors Impacting Our Results of Operations
Staffing and Labor
Our operations are dependent on the efforts, abilities and experience of our management and medical support personnel, such as nurses, pharmacists and lab technicians, as well as our physicians. We compete with other healthcare providers in recruiting and retaining qualified management and support personnel responsible for the daily operations of each of our hospitals and other facilities, including nurses and other non-physician healthcare professionals. At times, the availability of nurses and other medical support personnel has been a significant operating issue for healthcare providers, including at certain of our facilities. The impact of labor shortages across the healthcare industry may result in other healthcare facilities, such as nursing homes, limiting admissions, which may constrain our ability to discharge patients to such facilities and further exacerbate the demand on our resources, supplies and staffing.
We contract with various third parties who provide hospital-based physicians. Third party providers of hospital-based physicians, including those with whom we contract, have experienced significant disruption in the form of regulatory changes, including those stemming from enactment of the No Surprises Act, challenging labor market conditions resulting from a shortage of physicians and inflationary wage-related pressures, as well as increased competition through consolidation of physician groups. In some instances, providers of outsourced medical specialists have become insolvent and unable to fulfill their contracts with us for providing hospital-based physicians. The success of our hospitals depends in part on the adequacy of staffing, including through contracts with third parties. If we are unable to adequately contract with providers, or the providers with whom we contract become unable to fulfill their contracts, our admissions may decrease, and our operating performance, capacity and growth prospects may be adversely affected. Further, our efforts to mitigate the potential impact on our business from third party providers who are unable to fulfill their contracts to provide hospital-based physicians, including through acquisitions of outsourced medical specialist businesses, employment of physicians and re-negotiation or assumption of existing contracts, may be unsuccessful. These developments with respect to providers of outsourced medical specialists, and our inability to effectively respond to and mitigate the potential impact of such developments, may disrupt our ability to provide healthcare services, which may adversely impact our business, financial condition and results of operations.
We also depend on the available labor pool of semi-skilled and unskilled employees in each of the markets in which we operate. In some of our markets, employers across various industries have increased minimum wages, which has created more competition and, in some cases, higher labor costs for this sector of employees.
Supplemental Payments
We receive a significant portion of our revenues from Medicare and Medicaid, and these programs are subject to extensive regulation and frequent changes. Several states in which we operate utilize Medicaid supplemental payment programs requiring periodic CMS approval to provide funding that is separate from base rates. These payments help offset shortfalls in Medicaid reimbursement but generally do not cover the full cost of providing care, particularly after considering state and local provider taxes used to fund the non-federal share of Medicaid spending. States and federal agencies continue to review and adjust supplemental payment structures, and some states have proposed modifications as part of their annual renewal process with CMS. Recent federal legislation also introduces new limits on the financing and payment levels for certain programs. We expect revenue from certain Medicaid supplemental payment programs to decline in 2026 compared to 2025 as program changes take effect.
Seasonality
We typically experience higher patient volumes and revenue in the fourth quarter of each year in our acute care facilities. We typically experience such seasonal volume and revenue peaks because more people generally become ill during the winter months, which in turn results in significant increases in the number of patients we treat during those months. In addition, revenue in the fourth quarter is also impacted by increased utilization of services due to annual deductibles, which are not usually met until later in the year, and patient utilization of their healthcare benefits before they expire at year-end.
Inflation
The healthcare industry is labor intensive. Wages and other expenses increase during periods of inflation and when labor shortages occur in the marketplace. In addition, our suppliers pass along rising costs to us in the form of higher prices. We have implemented cost control measures in an attempt to curb increases in operating costs and expenses. We have generally offset increases in operating costs by increasing reimbursement for services, expanding services and reducing costs in other areas. However, we cannot predict our ability to cover or offset future cost increases, particularly any increases in our cost of providing health insurance benefits to our employees.
Geographic Data
The information below provides an overview of our operations in certain markets as of December 31, 2025.
Texas. We operated 13 acute care hospital facilities (including one managed hospital that is owned by The University of Texas Health Science Center at Tyler, an affiliate of The University of Texas System) with 1,436 licensed beds that serve the areas of Tyler, Amarillo and Killeen, Texas. For the year ended December 31, 2025, we generated 35.7% of our total revenue in the Texas market.
Oklahoma. We operated eight acute care hospital facilities with 1,173 licensed beds that serve the area of Tulsa, Oklahoma. For the year ended December 31, 2025, we generated 23.6% of our total revenue in the Oklahoma market.
New Mexico. We operated five acute care hospital facilities with 619 licensed beds that serve the areas of Albuquerque and Roswell, New Mexico. For the year ended December 31, 2025, we generated 17.0% of our total revenue in the New Mexico market.
New Jersey. We operated two acute care hospital facilities with 476 licensed beds that serve the areas of Montclair and Westwood, New Jersey. For the year ended December 31, 2025, we generated 10.2% of our total revenue in the New Jersey market.
Other Industry Trends
The demand for healthcare services continues to be impacted by the following trends:
•A growing focus on healthcare spending by consumers, employers and insurers, who are actively seeking lower-cost care solutions;
•A shift in patient volumes from inpatient to outpatient settings due to technological advancements and demand for care that is more convenient, affordable and accessible;
•The growing aged population, which requires greater chronic disease management and higher-acuity treatment; and
•Ongoing consolidation of providers and insurers across the healthcare industry.
Additionally, the healthcare industry, particularly acute care hospitals, continues to be subject to ongoing regulatory uncertainty. Changes in federal or state healthcare laws, regulations, funding policies or reimbursement practices, especially those involving reductions to government payment rates or limitations on what providers may charge, could significantly impact future revenue and operations. For example, the No Surprises Act prohibits providers from charging patients an amount beyond the in-network cost sharing amount for services rendered by out-of-network providers, subject to limited exceptions. For services for which balance billing is prohibited, the No Surprises Act includes provisions that may limit the amounts received by out-of-network providers from health
plans. Any reduction in the rates that we can charge or amounts we can receive for our services will reduce our total revenue and our operating margins.
Results of Operations
Revenue and Volume Trends
Our revenue depends upon inpatient occupancy levels, ancillary services and therapy programs ordered by physicians and provided to patients, the volume of outpatient procedures and the charges and negotiated payment rates for such services. Total revenue is comprised of net patient service revenue and other revenue. We recognize patient service revenue in the period in which we provide services. Patient service revenue includes amounts we estimate to be reimbursable by Medicare, Medicaid and other payors under provisions of cost or prospective reimbursement formulas in effect. The amounts we receive from these payors are generally less than the established billing rates, and we report patient service revenue net of these differences (contractual adjustments) at the time we render the services. We also report patient service revenue net of the effects of other arrangements where we are reimbursed for services at less than established rates, including certain self-pay adjustments provided to uninsured patients. We also record estimated implicit price concessions (based primarily on historical collection experience) related to uninsured accounts to record self-pay revenue at the estimated amount expected to be collected.
During the year ended December 31, 2025, a change in accounting estimate resulting from a modification to the technique used to estimate the collectability of accounts receivable and new information provided by recently completed hindsight evaluations of historical collection trends resulted in a decrease in revenue of $42.6 million. During the third quarter of 2025, we implemented a new revenue accounting system that provided management with additional information to more precisely estimate the collectability of accounts receivable, particularly with respect to more timely consideration of payor denial and payment trends. The detailed information provided by the new system during the year ended December 31, 2025, along with our recently completed analysis of historical collection trends, indicated our current collection estimate differed from historical collection estimates thereby resulting in a change in accounting estimate in accordance with ASC 250-10, Accounting Changes and Error Corrections, to be accounted for during the year ended December 31, 2025 (the period of change) and applied prospectively.
Total revenue for the year ended December 31, 2025 increased $358.3 million, or 6.0%, compared to the prior year. The increase in total revenue for the year ended December 31, 2025 consisted of an increase in adjusted admissions of 2.3% and an increase in net patient service revenue per adjusted admission of 3.5%. The increase in adjusted admissions reflected growth in admissions, total surgeries and emergency room visits of 5.3%, 0.2% and 0.2%, respectively. The increase in net patient service revenue per adjusted admission was primarily attributable to increases in revenue from Medicaid supplemental payment programs and higher reimbursement rates compared to the prior year.
Total revenue for the year ended December 31, 2024 increased $556.6 million, or 10.3%, compared to the prior year. The increase in total revenue for the year ended December 31, 2024 consisted of an increase in adjusted admissions of 4.8% and an increase in net patient service revenue per adjusted admission of 5.1%. The increase in adjusted admissions reflected growth in admissions, total surgeries and emergency room visits of 7.1%, 0.7% and 4.5%, respectively. The increase in net patient service revenue per adjusted admission was attributable to a combination of a favorable payor mix, improved service mix as a result of ongoing service line optimization efforts, and an increase in revenue from Medicaid supplemental payment programs compared to the prior year.
During the years ended December 31, 2025 and 2024, we recorded revenue of $707.5 million and $530.3 million, respectively, related to Medicaid supplemental payment programs.
A key competitive strength and a significant component of our growth strategy has been our well-established and differentiated JV model, which has resulted in partnerships with premier academic medical centers, large not-for-profit hospital systems, community physicians, and a community foundation. During the years ended December 31, 2025, 2024, and 2023, total revenue related to these JV entities was $1,843.1 million, $1,732.1 million, and $1,600.0 million, respectively, which represented 29.1%, 29.0%, and 29.6%, respectively, of our total revenue for such periods.
The following table provides the sources of our total revenue by payor:
| Years Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
|
Medicare
|
38.6 | % | 39.2 | % | 39.5 | % | |||||||||||
|
Medicaid
|
9.6 | % | 10.3 | % | 11.2 | % | |||||||||||
|
Other managed care
|
44.3 | % | 43.5 | % | 42.6 | % | |||||||||||
|
Self-pay and other
|
5.6 | % | 5.2 | % | 5.0 | % | |||||||||||
|
Net patient service revenue
|
98.1 | % | 98.2 | % | 98.3 | % | |||||||||||
|
Other revenue
|
1.9 | % | 1.8 | % | 1.7 | % | |||||||||||
|
Total revenue
|
100.0 | % | 100.0 | % | 100.0 | % | |||||||||||
Operating Results Summary for the Years Ended December 31, 2025, 2024, and 2023
The following table sets forth, for the periods indicated, the consolidated results of our operations expressed in dollars and as a percentage of total revenue:
| Years Ended December 31, | |||||||||||||||||||||||||||||||||||
| (Dollars in thousands) | 2025 | 2024 | 2023 | ||||||||||||||||||||||||||||||||
| Amount | % | Amount | % | Amount | % | ||||||||||||||||||||||||||||||
| Total revenue | $ | 6,324,339 | 100.0 | % | $ | 5,966,072 | 100.0 | % | $ | 5,409,483 | 100.0 | % | |||||||||||||||||||||||
| Expenses: | |||||||||||||||||||||||||||||||||||
| Salaries and benefits | 2,657,700 | 42.0 | % | 2,534,756 | 42.5 | % | 2,384,062 | 44.1 | % | ||||||||||||||||||||||||||
| Professional fees | 1,192,645 | 18.9 | % | 1,097,119 | 18.4 | % | 980,270 | 18.1 | % | ||||||||||||||||||||||||||
| Supplies | 1,082,908 | 17.1 | % | 1,033,122 | 17.3 | % | 993,405 | 18.4 | % | ||||||||||||||||||||||||||
| Rents and leases | 109,586 | 1.7 | % | 103,577 | 1.7 | % | 97,444 | 1.8 | % | ||||||||||||||||||||||||||
| Rents and leases, related party | 152,905 | 2.4 | % | 149,229 | 2.5 | % | 145,880 | 2.7 | % | ||||||||||||||||||||||||||
| Other operating expenses | 647,308 | 10.3 | % | 496,219 | 8.2 | % | 451,737 | 8.3 | % | ||||||||||||||||||||||||||
| Government stimulus income | - | 0.0 | % | - | 0.0 | % | (8,463) | (0.2) | % | ||||||||||||||||||||||||||
| Interest expense | 55,202 | 0.9 | % | 65,578 | 1.1 | % | 74,305 | 1.4 | % | ||||||||||||||||||||||||||
| Depreciation and amortization | 155,703 | 2.5 | % | 146,288 | 2.5 | % | 140,842 | 2.6 | % | ||||||||||||||||||||||||||
| Loss on extinguishment and modification of debt | 7,344 | 0.1 | % | 3,388 | 0.1 | % | - | 0.0 | % | ||||||||||||||||||||||||||
| Other non-operating gains | (23,320) | (0.4) | % | (26,264) | (0.4) | % | (1,613) | 0.0 | % | ||||||||||||||||||||||||||
| Total operating expenses | 6,037,981 | 95.5 | % | 5,603,012 | 93.9 | % | 5,257,869 | 97.2 | % | ||||||||||||||||||||||||||
| Income before income taxes | 286,358 | 4.5 | % | 363,060 | 6.1 | % | 151,614 | 2.8 | % | ||||||||||||||||||||||||||
| Income tax expense | 56,223 | 0.9 | % | 63,352 | 1.1 | % | 22,637 | 0.4 | % | ||||||||||||||||||||||||||
| Net income | 230,135 | 3.6 | % | 299,708 | 5.0 | % | 128,977 | 2.4 | % | ||||||||||||||||||||||||||
| Net income attributable to noncontrolling interests | 94,324 | 1.5 | % | 89,365 | 1.5 | % | 75,073 | 1.4 | % | ||||||||||||||||||||||||||
| Net income attributable to Ardent Health, Inc. | $ | 135,811 | 2.1 | % | $ | 210,343 | 3.5 | % | $ | 53,904 | 1.0 | % | |||||||||||||||||||||||
The following table provides information on certain drivers of our total revenue:
| Years Ended December 31, | |||||||||||||||||||||||||||||
|
Consolidated Operating Statistics
|
2025 | % Change | 2024 | % Change | 2023 | ||||||||||||||||||||||||
| Total revenue (in thousands) | $6,324,339 | 6.0 | % | $5,966,072 | 10.3 | % | $5,409,483 | ||||||||||||||||||||||
|
Hospitals operated (at period end)(1)
|
30 | 0.0 | % | 30 | (3.2) | % | 31 | ||||||||||||||||||||||
|
Licensed beds (at period end)(2)
|
4,281 | 0.0 | % | 4,281 | (1.0) | % | 4,323 | ||||||||||||||||||||||
|
Utilization of licensed beds (3)
|
50 | % | 8.7 | % | 46 | % | 2.2 | % | 45 | % | |||||||||||||||||||
|
Admissions(4)
|
165,682 | 5.3 | % | 157,295 | 7.1 | % | 146,887 | ||||||||||||||||||||||
|
Adjusted admissions(5)
|
349,614 | 2.3 | % | 341,781 | 4.8 | % | 326,029 | ||||||||||||||||||||||
|
Inpatient surgeries (6)
|
38,288 | 6.5 | % | 35,937 | 2.3 | % | 35,127 | ||||||||||||||||||||||
|
Outpatient surgeries(7)
|
91,361 | (2.3) | % | 93,497 | 0.0 | % | 93,461 | ||||||||||||||||||||||
| Total surgeries | 129,649 | 0.2 | % | 129,434 | 0.7 | % | 128,588 | ||||||||||||||||||||||
|
Emergency room visits (8)
|
637,325 | 0.2 | % | 636,222 | 4.5 | % | 609,010 | ||||||||||||||||||||||
|
Patient days(9)
|
777,361 | 7.3 | % | 724,363 | 2.3 | % | 708,043 | ||||||||||||||||||||||
|
Total encounters(10)
|
6,102,034 | 5.5 | % | 5,785,709 | 6.9 | % | 5,413,787 | ||||||||||||||||||||||
|
Average length of stay (11)
|
4.69 | 1.7 | % | 4.61 | (4.4) | % | 4.82 | ||||||||||||||||||||||
|
Net patient service revenue per adjusted admission (12)
|
$17,748 | 3.5 | % | $17,144 | 5.1 | % | $16,307 | ||||||||||||||||||||||
(1)"Hospitals operated (at period end)." This metric represents the total number of hospitals operated by us at the end of the applicable period, irrespective of whether the hospital real estate is (i) owned by us, (ii) leased by us or (iii) held through a controlling interest in a JV. This metric includes the managed clinical operations of the hospital at UT Health North Campus in Tyler, Texas ("UT Health North Campus Tyler"), a hospital owned by UTHSCT, an affiliate of The University of Texas System. Since we only manage the clinical operations of UT Health North Campus Tyler, the financial results of such entity are not consolidated under Ardent Health, Inc..
On April 30, 2024, we closed UT Health East Texas Specialty Hospital, a long-term acute care hospital (the "LTAC Hospital") in Tyler, Texas. The LTAC Hospital's inventory and fixed assets were transferred or repurposed to be used by our other hospitals. The LTAC Hospital had 36 licensed patient beds and accounted for approximately $2.6 million and $9.7 million of total revenue and a pre-tax loss of $0.4 million and $1.2 million for the years ended December 31, 2024 and 2023, respectively.
(2)"Licensed beds (at period end)." This metric represents the total number of beds for which the appropriate state agency licenses a facility, regardless of whether the beds are actually available for patient use.
(3)"Utilization of licensed beds." This metric represents a measure of the actual utilization of our inpatient facilities, computed by (i) dividing patient days by the number of days in each period, and (ii) further dividing that number by average licensed beds, which is calculated by dividing total licensed beds (at period end) by the number of days in the period, multiplied by the number of days in the period the licensed beds were in existence.
(4)"Admissions." This metric represents the number of patients admitted for inpatient treatment during the applicable period.
(5)"Adjusted admissions." This metric is used by management as a general measure of combined inpatient and outpatient volume. Adjusted admissions provides management with a key performance indicator that considers both inpatient and outpatient volumes by applying an inpatient volume measure (admissions) to a ratio of gross inpatient and outpatient revenue to gross inpatient revenue. Gross inpatient and outpatient revenue reflect gross inpatient and outpatient charges prior to estimated contractual adjustments, uninsured discounts, implicit price concessions, and other discounts. The calculation of adjusted admissions is summarized as follows:
Adjusted Admissions = Admissions x (Gross Inpatient Revenue + Gross Outpatient Revenue)
Gross Inpatient Revenue
(6)"Inpatient surgeries." This metric represents the number of surgeries performed on patients who have been admitted to our hospitals. Pain management, c-sections, and certain diagnostic procedures are excluded from inpatient surgeries.
(7)"Outpatient surgeries." This metric represents the number of surgeries performed on patients who have not been admitted to our hospitals. Pain management, c-sections, and certain diagnostic procedures are excluded from outpatient surgeries.
(8)"Emergency room visits." This metric represents the total number of patients provided with emergency room treatment during the applicable period.
(9)"Patient days." This metric represents the total number of days of care provided to patients admitted to our hospitals during the applicable period.
(10)"Total encounters." This metric represents the total number of events where healthcare services are rendered resulting in a billable event during the applicable period. This includes both hospital and ambulatory patient interactions.
(11)"Average length of stay." This metric represents the average number of days admitted patients stay in our hospitals.
(12)"Net patient service revenue per adjusted admission." This metric represents net patient service revenue divided by adjusted admissions for the applicable period. Net patient service revenue reflects gross inpatient and outpatient charges less estimated contractual adjustments, uninsured discounts, implicit price concessions, and other discounts.
Overview of the Year Ended December 31, 2025
Total revenue for the year ended December 31, 2025 increased $358.3 million, or 6.0%, compared to the prior year. The increase in total revenue for the year ended December 31, 2025 consisted of an increase in adjusted admissions of 2.3% and an increase in net patient service revenue per adjusted admission of 3.5%. The increase in adjusted admissions reflected growth in admissions, total surgeries and emergency room visits of 5.3%, 0.2% and 0.2%, respectively. The increase in net patient service revenue per adjusted admission was primarily attributable to increases in revenue from Medicaid supplemental payment programs and higher reimbursement rates compared to the prior year.
Total operating expenses increased $435.0 million, and increased 1.6% as a percentage of total revenue, for the year ended December 31, 2025 compared to the prior year. The increase in total operating expenses, as a percentage of total revenue, was primarily driven
by an increase in professional and general liability losses. During the year ended December 31, 2025, we recorded losses of $51.3 million related to the emergence of adverse prior period claim developments, particularly with respect to our New Mexico market, combined with increased social inflationary pressures as described further in Note 11, Self-Insured Liabilities, to our consolidated financial statements included within this Annual Report. The increase in total operating expenses, as a percentage of total revenue, was also impacted by increased provider assessments related to Medicaid supplemental payment programs for the year ended December 31, 2025 compared to the prior year.
Comparison of the Years Ended December 31, 2025 and 2024
Total revenue- Total revenue for the year ended December 31, 2025 increased $358.3 million, or 6.0%, compared to the prior year. The increase in total revenue for the year ended December 31, 2025 consisted of an increase in adjusted admissions of 2.3% and an increase in net patient service revenue per adjusted admission of 3.5%. The increase in adjusted admissions reflected growth in admissions, total surgeries and emergency room visits of 5.3%, 0.2% and 0.2%, respectively. The increase in net patient service revenue per adjusted admission was primarily attributable to increases in revenue from Medicaid supplemental payment programs and higher reimbursement rates compared to the prior year.
Salaries and benefits - Salaries and benefits, as a percentage of total revenue, were 42.0% for the year ended December 31, 2025 compared to 42.5% for the prior year. The decrease in salaries and benefits, as a percentage of total revenue, was primarily attributable to an increase in revenue from Medicaid supplemental payment programs revenue compared to the prior year.
Professional fees -Professional fees, as a percentage of total revenue, were 18.9% for the year ended December 31, 2025 compared to 18.4% for the prior year. The increase in professional fees, as a percentage of total revenue, was attributable to increased cost for hospital-based care providers due to higher patient volumes and rising physician-related expenses.
Supplies - Supplies, as a percentage of total revenue, were 17.1% for the year ended December 31, 2025 compared to 17.3% for the prior year.
Rents and leases -Rents and leases were $109.6 million and $103.6 million for the years ended December 31, 2025 and 2024, respectively.
Rents and leases, related party - Rents and leases, related party, consists of lease expense related to the Ventas Master Lease, under which we lease 10 of our hospitals, and other lease agreements with Ventas for certain medical office buildings. Rents and leases, related party, were $152.9 million and $149.2 million for the years ended December 31, 2025 and 2024, respectively.
Other operating expenses -Other operating expenses, as a percentage of total revenue, were 10.3% for the year ended December 31, 2025 compared to 8.2% for the prior year. Other operating expenses are comprised primarily of repairs and maintenance, utilities, insurance (including professional liability insurance) and provider assessments. The increase in other operating expenses, as a percentage of total revenue, was primarily attributable to an increase in professional and general liability losses. During the year ended December 31, 2025, we recorded losses of $51.3 million related to the emergence of adverse prior period claim developments, particularly with respect to our New Mexico market, combined with increased social inflationary pressures as described further in Note 11, Self-Insured Liabilities, to our consolidated financial statements included within this Annual Report. Other operating expenses, as a percentage of total revenue, was further impacted by increased provider assessments related to Medicaid supplemental payment programs for the year ended December 31, 2025 compared to the prior year.
Interest expense -Interest expense was $55.2 million and $65.6 million for the years ended December 31, 2025 and 2024, respectively. On June 26, 2024, we executed an amendment to our ABL Credit Agreement and prepaid $100.0 million of the outstanding principal on our Term Loan B Facility. The decrease in interest expense was attributable to the reduction in average outstanding principal of our Term Loan B Facility during the year ended December 31, 2025 compared to the prior year.
Loss on extinguishment and modification of debt- During the year ended December 31, 2025, we incurred a loss on debt extinguishment $0.5 million related to the write-off of existing deferred financing costs and original issue discounts and transaction costs of $6.8 million related to the modification of debt associated with the refinancing of our Term Loan B Credit Agreement on September 18, 2025. During the year ended December 31, 2024, we completed a repricing of our Term Loan B Credit Agreement, executed an amendment to our ABL Credit Agreement and prepaid $100.0 million of the outstanding principal on our Term Loan B Facility. In connection with these 2024 transactions, we incurred a loss on debt extinguishment of $1.8 million related to the write-off of existing deferred financing costs and original issue discounts and transaction costs of $1.2 million related to the modification of debt during the year ended December 31, 2024.
Other non-operating gains- Other non-operating gains were $23.3 million and $26.3 million for the years ended December 31, 2025 and 2024, respectively. Other non-operating gains were primarily the result of the recognition of a gain on insurance recovery proceeds of $21.5 million and $19.4 million during the years ended December 31, 2025 and 2024, respectively, related to the Cybersecurity Incident.
Income tax expense - We recorded income tax expense of $56.2 million, which equates to an effective tax rate of 19.6%, for the year ended December 31, 2025 compared to income tax expense of $63.4 million, which equates to an effective tax rate of 17.4%, for the prior year. The decrease in income tax expense was primarily driven by a decrease in income before income taxes, which resulted in a decrease in taxes at the federal statutory rate during the year ended December 31, 2025 compared to the prior year. The increase in the
effective tax rate was primarily driven by an increase in noncontrolling interest earnings as a percentage of pre-tax income during the year ended December 31, 2025.
Net income attributable to noncontrolling interests - Net income attributable to noncontrolling interests was $94.3 million for the year ended December 31, 2025 compared to $89.4 million for the prior year. This net income consisted primarily of $94.3 million and $85.3 million of net income attributable to minority partners' interests in hospitals and ambulatory services that are owned and operated through limited liability companies and consolidated by us for the years ended December 31, 2025 and 2024, respectively. Income from operations before income taxes related to these limited liability companies was $296.5 million and $285.6 million for the years ended December 31, 2025 and 2024, respectively. The remaining portion of net income attributable to noncontrolling interests consists of net income attributable to ALH Holdings, LLC's (a subsidiary of Ventas, a related party) minority interest in AHP Health Partners, our direct subsidiary, prior to the ALH Contribution in July 2024.
Comparison of the Years Ended December 31, 2024 and 2023
For a discussion of our results of operations for the year ended December 31, 2024 compared to the year ended December 31, 2023, see "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K for the year ended December 31, 2024, which was filed with the SEC on February 27, 2025 and is incorporated by reference herein.
Supplemental Non-GAAP Information
We have included certain financial measures that have not been prepared in a manner that complies with U.S. generally accepted accounting principles ("GAAP"), including Adjusted EBITDA and Adjusted EBITDAR. We define these terms as follows:
Performance Measure
•"Adjusted EBITDA" is defined as net income plus (i) provision for income taxes, (ii) interest expense and (iii) depreciation and amortization expense (or EBITDA), as adjusted to deduct noncontrolling interest earnings, and excludes the effects of loss on extinguishment and modification of debt; other non-operating (gains) losses; Cybersecurity Incident recoveries, net of incremental information technology and litigation costs; certain legal matters and related costs; restructuring, exit and acquisition-related costs; change in accounting estimate; New Mexico professional liability accrual; expenses incurred in connection with the implementation of our integrated health information technology system provided by Epic Systems; equity-based compensation expense; and loss (income) from disposed operations. See "Supplemental Non-GAAP Performance Measure."
Valuation Measure
•"Adjusted EBITDAR" is defined as Adjusted EBITDA further adjusted to add back rent expense payable to real estate investment trusts ("REITs"), which consists of rent expense pursuant to the Ventas Master Lease, lease agreements with Ventas for 18 medical office buildings and a lease arrangement with Medical Properties Trust, Inc. ("MPT") for Hackensack Meridian Mountainside Medical Center. See "Supplemental Non-GAAP Valuation Measure."
Supplemental Non-GAAP Performance Measure
Adjusted EBITDA is a non-GAAP performance measure used by our management and external users of our financial statements, such as investors, analysts, lenders, rating agencies and other interested parties, to evaluate companies in our industry.
Adjusted EBITDA is a performance measure that is not prepared in accordance with GAAP and is presented in this Annual Report because our management considers it an important analytical indicator that is commonly used within the healthcare industry to evaluate financial performance and allocate resources. Further, our management believes that Adjusted EBITDA is a useful financial metric to assess our operating performance from period to period by excluding certain material non-cash items and unusual or non-recurring items that we do not expect to continue in the future and certain other adjustments we believe are not reflective of our ongoing operations and our performance.
Because not all companies use identical calculations, our presentation of the non-GAAP measure may not be comparable to other similarly titled measures of other companies.
While we believe this is a useful supplemental performance measure for investors and other users of our financial information, you should not consider the non-GAAP measure in isolation or as a substitute for net income or any other items calculated in accordance with GAAP. Adjusted EBITDA has inherent material limitations as a performance measure, because it adds back certain expenses to net income, resulting in those expenses not being taken into account in the performance measure. We have borrowed money, so interest expense is a necessary element of our costs. Because we have material capital and intangible assets, depreciation and amortization expense are necessary elements of our costs. Likewise, the payment of taxes is a necessary element of our operations. Because Adjusted EBITDA excludes these and other items, it has material limitations as a measure of our performance.
The following table presents a reconciliation of Adjusted EBITDA, a performance measure, to net income, determined in accordance with GAAP:
| Years Ended December 31, | |||||||||||||||||
| (in thousands) | 2025 | 2024 | 2023 | ||||||||||||||
| Net income | $ | 230,135 | $ | 299,708 | $ | 128,977 | |||||||||||
|
Adjusted EBITDA Addbacks:
|
|||||||||||||||||
| Income tax expense | 56,223 | 63,352 | 22,637 | ||||||||||||||
| Interest expense | 55,202 | 65,578 | 74,305 | ||||||||||||||
| Depreciation and amortization | 155,703 | 146,288 | 140,842 | ||||||||||||||
| Noncontrolling interest earnings | (94,324) | (89,365) | (75,073) | ||||||||||||||
| Loss on extinguishment and modification of debt | 7,344 | 3,388 | - | ||||||||||||||
|
Other non-operating losses (gains)(a)
|
1,130 | (4,910) | (1,613) | ||||||||||||||
|
Cybersecurity Incident (recoveries) expenses, net (b)
|
(22,655) | (21,477) | 8,495 | ||||||||||||||
| Certain legal matters and related costs | 900 | 2,000 | - | ||||||||||||||
|
Restructuring, exit and acquisition-related costs (c)
|
13,276 | 12,751 | 13,553 | ||||||||||||||
|
Change in accounting estimate (d)
|
43,298 | - | - | ||||||||||||||
|
New Mexico professional liability accrual (e)
|
54,468 | - | - | ||||||||||||||
|
Epic expenses (f)
|
4,837 | 3,173 | 1,781 | ||||||||||||||
| Equity-based compensation | 39,293 | 17,978 | 904 | ||||||||||||||
| Loss (income) from disposed operations | 207 | 9 | (60) | ||||||||||||||
|
Adjusted EBITDA
|
$ | 545,037 | $ | 498,473 | $ | 314,748 | |||||||||||
(a) Other non-operating losses (gains) include losses and gains realized on certain non-recurring events or events that are non-operational in nature.
(b) Cybersecurity Incident (recoveries) expenses, net represent insurance recovery proceeds associated with the Cybersecurity Incident, net of incremental information technology and litigation costs.
(c) Restructuring, exit and acquisition-related costs represent (i) enterprise restructuring costs, including severance costs related to work force reductions of $10.3 million, $10.4 million, and $12.4 million for the years ended December 31, 2025, 2024, and 2023, respectively, (ii) penalties and costs incurred for terminating pre-existing contracts at acquired facilities of $1.2 million, $0.8 million, and $0.7 million for the years ended December 31, 2025, 2024, and 2023, respectively, and (iii) third party professional fees and expenses, salaries and benefits, and other internal expenses incurred in connection with potential and completed acquisitions of $1.8 million, $1.6 million, and $0.5 million for the years ended December 31, 2025, 2024, and 2023, respectively.
(d) Change in accounting estimate reflects the reduction in total revenue of $42.6 million and its $0.7 million impact on noncontrolling interest earnings as a result of a change in our accounting estimate of the collectability of accounts receivable as described further in Note 2, Summary of Significant Accounting Policies, to our accompanying consolidated financial statements included elsewhere in this Annual Report.
(e) During the year ended December 31, 2025, we recorded net losses of $51.3 million related to the emergence of adverse prior period claim developments, particularly with respect to our New Mexico market, combined with increased social inflationary pressures. These losses included $54.5 million of losses recorded during the third quarter of 2025 for adverse prior-period claim developments in New Mexico that were primarily attributable to recent claim settlements and ongoing litigation arising from the actions of a single provider who was employed between 2019 and 2022 as described further in Note 11, Self-Insured Liabilities, to our accompanying consolidated financial statements included elsewhere in this Annual Report.
(f) Epic expenses consist of various costs incurred in connection with the implementation of Epic, our health information technology system. These costs included (i) professional fees of $2.1 million, $3.1 million, and $1.8 million for the years ended December 31, 2025, 2024, and 2023, respectively, (ii) salaries and benefits of $2.6 million and $0.1 million for the years ended December 31, 2025 and 2024, respectively, and (iii) other expenses related to one-time training and onboarding support costs of $0.1 million for the year ended December 31, 2025. Epic expenses do not include ongoing operating costs of the Epic system.
Liquidity and Capital Resources
Liquidity
Our primary sources of liquidity are available cash and cash equivalents, cash flows from our operations and available borrowings under our ABL Facilities (as defined below). Our primary cash requirements are our operating expenses, the service of our debt, capital expenditures on our existing properties, acquisitions of hospitals and other healthcare facilities, and distributions to noncontrolling interests. We believe the combination of cash flow from operations and available cash and borrowings will be adequate to meet our short-term liquidity needs. Our ability to make scheduled payments of principal, pay interest on, or refinance, our indebtedness, pay distributions or fund planned capital expenditures will depend on our ability to generate cash in the future. This ability is, to a certain extent, subject to general economic, financial, competitive, legislative, regulatory and other factors that are beyond our control.
At December 31, 2025, we had total cash and cash equivalents of $709.6 million and available liquidity of $1,004.2 million. Our available liquidity was comprised of $709.6 million of total cash and cash equivalents plus $294.6 million in available capacity under the ABL Credit Agreement, which is reduced by outstanding borrowings and outstanding letters of credit. In June 2024, we amended the ABL Credit Agreement to increase commitments available thereunder by $100.0 million and extended its maturity date to June 26, 2029. See "Senior Secured Credit Facilities" below for additional information. At December 31, 2025, our net leverage ratio was 0.8x and our lease-adjusted net leverage ratio was 2.5x. Our lease-adjusted net leverage is calculated as net debt as of December 31, 2025, plus 8.0x trailing twelve month REIT rent expense as of the end of the fourth quarter of 2025, divided by the trailing twelve month Adjusted EBITDAR as of December 31, 2025.
During the year ended December 31, 2023, we received and recognized $8.5 million of cash distributions from the Public Health and Social Services Emergency Fund ("Provider Relief Fund"), a provision of the Coronavirus Aid, Relief and Economic Security Act ("CARES Act"), and other state and local programs. For additional information regarding distributions from the Provider Relief Fund and the CARES Act, refer to Note 2, Summary of Significant Accounting Policies, to our consolidated financial statements included within this Annual Report.
Cash Flows
The following table summarizes certain elements of the statements of cash flows (in thousands):
| Years Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Net cash provided by operating activities | $ | 470,510 | $ | 315,026 | $ | 221,698 | |||||||||||
| Net cash used in investing activities | (214,229) | (220,460) | (137,983) | ||||||||||||||
| Net cash (used in) provided by financing activities | (103,465) | 24,642 | (102,262) | ||||||||||||||
Operating Activities
Cash flows provided by operating activities for the year ended December 31, 2025 totaled $470.5 million compared to $315.0 million for the prior year. The increase in operating cash flows during the year ended December 31, 2025 was primarily attributable to changes in net working capital, which primarily consisted of increases in accounts payable driven by the timing of standard payments and strategic cash management practices.
Cash flows provided by operating activities for the year ended December 31, 2024 totaled $315.0 million compared to $221.7 million for the prior year. The increase in operating cash flows during the year ended December 31, 2024 was primarily attributable to an increase in net income of $170.7 million. The increase in cash flows during the year ended December 31, 2024 compared to the prior year was offset by changes in net working capital, which primarily consisted of increases in other receivables related to New Mexico's Medicaid supplemental payment program that was approved by CMS in the fourth quarter of 2024.
Investing Activities
Cash flows used in investing activities for the year ended December 31, 2025 totaled $214.2 million compared to $220.5 million for the prior year. Capital expenditures for non-acquisitions were $211.9 million and $187.5 million for the years ended December 31, 2025 and 2024, respectively.
Cash flows used in investing activities for the year ended December 31, 2024 totaled $220.5 million compared to $138.0 million for the prior year. Capital expenditures for non-acquisitions were $187.5 million and $137.4 million for the years ended December 31, 2024 and 2023, respectively.
Financing Activities
Cash flows used in financing activities for the year ended December 31, 2025 totaled $103.5 million compared to cash flows provided by financing activities of $24.6 million for the prior year. Cash flows used in financing activities for the year ended December 31, 2025 included distributions paid to noncontrolling interests of $88.2 million, payments of principal on long-term debt of $8.0 million, payments of principal on insurance financing arrangements of $15.0 million, and payments of debt issuance cost of $2.6 million, which were partially offset by proceeds from insurance financing arrangements of $15.6 million.
Cash flows provided by financing activities for the year ended December 31, 2024 totaled $24.6 million compared to cash flows used in financing activities of $102.3 million for the prior year. Cash flows provided by financing activities for the year ended December 31, 2024 included IPO proceeds, net of underwriting discounts and commissions, of $208.7 million, proceeds from insurance financing arrangements of $10.8 million, and proceeds from long-term debt of $3.6 million. Cash flows provided by financing activities were partially offset by payments of principal on long-term debt of $108.4 million, which included a prepayment of $100.0 million on the $877.5 million outstanding borrowings under our Term Loan B Facility, and payments of principal on insurance financing arrangements of $10.4 million. Cash flows provided by financing activities for the year ended December 31, 2024 were partially offset by distributions paid to noncontrolling interests of $72.9 million.
Capital Expenditures
We make significant, targeted investments to maintain and modernize our facilities, introduce new technologies, and expand our service offerings. We expect to finance future capital expenditures with internally generated and borrowed funds. Capital expenditures for property and equipment were $211.9 million, $187.5 million, and $137.4 million for the years ended December 31, 2025, 2024, and 2023, respectively.
Ventas Master Lease
Effective August 4, 2015, we sold the real property for ten of our hospitals to Ventas, which is a related party as, prior to our IPO, it was a common unit holder of Ardent Health Partners, LLC and owned shares of common stock of AHP Health Partners and had a representative serving on our board of managers. Concurrent with this transaction, we entered into a 20-year master lease agreement that expires in August 2035 (with a renewal option for an additional ten years) to lease back the real estate. We lease ten of our hospitals pursuant to the Ventas Master Lease. As of December 31, 2025, following the consummation of the IPO and the underwriters' exercise of their option to purchase additional shares, Ventas beneficially owned approximately 6.5% of our outstanding common stock.
The Ventas Master Lease includes a number of significant operating and financial restrictions, including requirements that we maintain a minimum portfolio coverage ratio of 2.2x and a guarantor fixed charge coverage ratio of 1.2x and do not exceed a guarantor net leverage ratio of 6.75x. In addition, the Relative Rights Agreement entered into by and among Ventas, the 5.75% Senior Notes trustee and the administrative agents under our Senior Secured Credit Facilities (as defined below) in connection with the series of debt transactions completed during the year ended 2021 to refinance our then-existing debt, among other things, (i) sets forth the relative rights of Ventas and the administrative agents with respect to the properties and collateral related to the Ventas Master Lease and securing our Senior Secured Credit Facilities, (ii) caps the amount of indebtedness incurred or guaranteed by our subsidiaries that are tenants under the Ventas Master Lease ("Tenants") (together with such Tenants' guarantees of the notes and the Senior Secured Credit Facilities and all other indebtedness incurred or guaranteed by such Tenants) at $375.0 million and (iii) imposes certain incurrence tests on the incurrence of additional indebtedness by such Tenants and by us.
We recorded rent expense of $152.9 million, $149.2 million, and $145.9 million for the years ended December 31, 2025, 2024, and 2023, respectively, related to the Ventas Master Lease and other lease agreements with Ventas for certain medical office buildings.
Senior Secured Credit Facilities
Effective August 24, 2021, we entered into the Term Loan B Facility. The credit agreement governing the Term Loan B Facility provided funding up to a principal amount of $900.0 million with a seven-year maturity. Principal under the Term Loan B Facility was due in quarterly installments of 0.25% of the initial $900.0 million principal amount as of the execution of the credit agreement (subject to certain reductions from time to time as a result of the application of prepayments), with the remaining balance due upon maturity of the Term Loan B Facility. Effective June 8, 2023, we amended the Term Loan B Credit Agreement to replace LIBOR with the Term SOFR and Daily Simple SOFR (each as defined in the amended Term Loan B Credit Agreement) as the reference interest rate. On June 26, 2024, we prepaid $100.0 million of the $877.5 million outstanding borrowings under the Term Loan B Facility using cash on hand, which prepaid all remaining required quarterly principal payments; no modification was made to the Term Loan B Credit Agreement as a result of this prepayment. Effective July 19, 2024, pursuant to the terms of the Term Loan B Credit Agreement and as a result of the IPO, the applicable margin was automatically reduced by 25 basis points to 3.25% over Term SOFR and 2.25% over the base rate. On September 18, 2024, we executed an amendment to reprice our Term Loan B Credit Agreement. The repricing reduced the applicable interest rate by 50 basis points from Term SOFR plus 3.25% to Term SOFR plus 2.75% and from the base rate plus 2.25% to the base rate plus 1.75%, and it eliminated the credit spread adjustment. No modifications were made to the maturity of the loans as a result of the repricing, and all other terms of the Term Loan B Credit Agreement were substantially unchanged. On September 18, 2025, we executed an amendment to refinance the outstanding term loans under our Term Loan B Credit Agreement. The amendment (i) reduced the applicable interest rate by 50 basis points from Term SOFR plus 2.75% to Term SOFR plus 2.25%
and from the base rate plus 1.75% to the base rate plus 1.25%, (ii) extended the maturity date to September 18, 2032, (iii) increased the baskets for certain fixed dollar negative covenants and (iv) reestablished principal payments under the amended Term Loan B Facility, which are due in consecutive equal quarterly installments of 0.25% of the refinanced $777.5 million principal amount beginning on December 31, 2025 (subject to certain reductions from time to time as a result of the application of prepayments), with the remaining balance due upon the new maturity date in September 2032.
Effective July 8, 2021, we entered into the ABL Credit Agreement, which was amended to extend the maturity and increase the revolving commitment on June 26, 2024. The ABL Credit Agreement (as so amended) consists of a $325.0 million senior secured asset-based revolving credit facility with a five year maturity, comprised of (i) a $275.0 million non-UT Health East Texas borrowers tranche (the "non-UT Health East Texas ABL Facility") and (ii) a $50.0 million UT Health East Texas borrowers tranche available to our AHS East Texas Health System, LLC subsidiary and certain of its subsidiaries (the "UT Health East Texas ABL Facility" and, together with the non-UT Health East Texas ABL Facility, the "ABL Facilities"), each subject to a borrowing base. The ABL Facilities mature on June 26, 2029. On September 18, 2025, we further amended the ABL Credit Agreement to align its covenants to those in the amended Term Loan B Credit Agreement.
We refer to the Term Loan B Facility and the ABL Facilities collectively herein as the "Senior Secured Credit Facilities."
Subject to certain exceptions, the ABL Facilities are secured by first priority liens over substantially all of our and each guarantor's accounts and other receivables, chattel paper, deposit accounts and securities accounts, general intangibles, instruments, investment property, commercial tort claims and letters of credit relating to the foregoing, along with books, records and documents, and proceeds thereof (the "ABL Priority Collateral"), and a second priority lien over substantially all of our and each guarantor's other assets (including all of the capital stock of the domestic guarantors and first priority mortgage liens on any fee-owned real property valued in excess of $5,000,000) (the "Term Priority Collateral"). The obligations of the UT Health East Texas ABL Facility are not secured by the assets of the subsidiaries that are also Tenants and certain other subsidiaries related to the Tenants. The obligations under the Term Loan B Facility and the ABL Facilities in excess of the maximum aggregate dollar cap amount permitted to be guaranteed by the Tenants are not secured by the assets of the Tenants.
The Term Loan B Facility is secured by a first priority lien on the Term Priority Collateral and a second priority lien on the ABL Priority Collateral. Certain excluded assets are not included in the Term Priority Collateral or the ABL Priority Collateral. The obligations under the Term Loan B Facility and the ABL Facilities in excess of the maximum aggregate dollar cap amount permitted to be guaranteed by the Tenants are not secured by the assets of the Tenants.
Borrowings under the Term Loan B Facility bear interest at a rate per annum equal to, at our option, either (i) a base rate determined by reference to the highest of (a) the federal funds effective rate plus 0.50%, (b) the rate last quoted by Bank of America as the "Prime Rate" in the United States for U.S. dollar loans, and (c) Term SOFR applicable for an interest period of one month (not to be less than 0.50% per annum), plus 1.00% per annum, in each case, plus an applicable margin, or (ii) Term SOFR (not to be less than 0.50% per annum) for the interest period selected, in each case, plus an applicable margin. The current applicable margin under the Term Loan B Credit Agreement is equal to 1.25% for base rate borrowings and 2.25% for Term SOFR borrowings.
As amended and refinanced on September 18, 2025, the Term Loan B Facility requires quarterly installment payments of 0.25% of the refinanced balance of $777.5 million, with the remaining principal balance due upon maturity. The ABL Facilities do not require installment payments.
At the election of the borrowers under the applicable ABL Facility loan, the interest rate per annum applicable to loans under the ABL Facilities is based on a fluctuating rate of interest determined by reference to either (i) the base rate plus an applicable margin or (ii) Term SOFR (not to be lower than 0.00% per annum) for the interest period selected, plus an applicable margin. The applicable margin is determined based on the percentage of the average daily availability of the applicable ABL Facility. For the non-UT Health East Texas ABL Facility loan, the applicable margin ranges from 0.5% to 1.0% for base rate borrowings and 1.5% to 2.0% for Term SOFR borrowings. The applicable margin for the UT Health East Texas ABL Facility loan ranges from 1.5% to 2.0% for base rate borrowings and 2.5% to 3.0% for Term SOFR borrowings.
Subject to certain exceptions (including with regard to the ABL Priority Collateral), thresholds and reinvestment rights, the Term Loan B Facility is subject to mandatory prepayments with respect to:
•net cash proceeds of issuances of debt by AHP Health Partners or any of its restricted subsidiaries that are not permitted by the Term Loan B Facility;
•subject to certain thresholds, reinvestment permissions and carve-outs, 100% (with step-downs to 50% and 0%, based upon achievement of specified senior secured net leverage ratio levels) of net cash proceeds of certain asset sales;
•subject to certain thresholds, reinvestment permissions and carve-outs, 100% (with step-downs to 50% and 0%, based upon achievement of specified senior secured net leverage ratio levels) of net cash proceeds of certain insurance and condemnation events;
•50% (with step-downs to 25% and 0%, based upon achievement of specified senior secured net leverage ratio levels) of annual excess cash flow, net of certain voluntary prepayments of secured indebtedness, of AHP Health Partners and its subsidiaries commencing with the fiscal year ending December 31, 2022; and
•net cash proceeds received in connection with any exercise of the purchase option of the loans by Ventas under the Relative Rights Agreement.
5.75% Senior Notes due 2029
AHP Health Partners (the "Issuer") issued the 5.75% Senior Notes in an exempt offering pursuant to Rule 144A and Regulation S under the Securities Act that was completed on July 8, 2021. The terms of the 5.75% Senior Notes, which mature on July 15, 2029, are governed by an indenture, dated as of July 8, 2021 (the "2029 Notes Indenture"), among the Issuer, us and certain of the Issuer's wholly-owned domestic subsidiaries, as guarantors, and U.S. Bank, National Association, as trustee. The 2029 Notes Indenture provides that the 5.75% Senior Notes are general senior unsecured obligations of the Issuer, which are unconditionally guaranteed on a senior unsecured basis by us and certain subsidiaries of the Issuer.
The 5.75% Senior Notes bear interest at a rate of 5.75% per annum, which is payable semi-annually, in cash in arrears, on January 15 and July 15 of each year.
The Issuer may redeem the 5.75% Senior Notes, in whole or in part, at any time and from time to time, at the redemption prices set forth below, plus accrued and unpaid interest, if any, to the redemption date, subject to compliance with certain conditions:
|
Date (if redeemed during the 12 month period beginning on July 15 of the years indicated below)
|
Percentage | ||||
| 2025 | 101.438% | ||||
| 2026 and thereafter | 100.000% | ||||
If the Issuer experiences certain change of control events, the Issuer must offer to repurchase all of the 5.75% Senior Notes (unless otherwise redeemed) at a price equal to 101% of the principal amount thereof, plus accrued and unpaid interest, if any, to the repurchase date. If the Issuer sells certain assets and does not reinvest the net proceeds or repay senior debt in compliance with the 2029 Notes Indenture, it must offer to repurchase the 5.75% Senior Notes at 100% of the principal amount thereof, plus accrued and unpaid interest, if any, to the repurchase date.
Contractual Obligations and Contingencies
The following table provides a summary of our commitments and contractual obligations for debt, minimum lease payment obligations under non-cancelable leases and other obligations as of December 31, 2025 (in thousands):
| Payments Due by Period | |||||||||||||||||
| Total |
Less than
1 Year
|
1-3 Years
|
3-5 Years |
After
5 Years
|
|||||||||||||
| Long-term debt obligations, with interest | $ | 1,497,796 | $ | 89,854 | $ | 157,742 | $ | 421,566 | $ | 828,634 | |||||||
| Deferred financing obligations, with interest | 21,822 | 6,800 | 10,480 | 4,542 | - | ||||||||||||
| Operating leases | 2,854,204 | 199,997 | 381,854 | 342,867 | 1,929,486 | ||||||||||||
| Estimated self-insurance liabilities | 213,953 | 35,325 | 43,785 | 98,256 | 36,587 | ||||||||||||
| Total | $ | 4,587,775 | $ | 331,976 | $ | 593,861 | $ | 867,231 | $ | 2,794,707 | |||||||
Outstanding letters of credit are required principally by certain insurers and states to collateralize our workers' compensation programs and self-insured retentions associated with our professional and general liability insurance programs. As of December 31, 2025, we maintained outstanding letters of credit of approximately $33.4 million, which included interest of $3.0 million.
Supplemental Non-GAAP Valuation Measure
Adjusted EBITDAR is a commonly used non-GAAP valuation measure used by our management, research analysts, investors and other interested parties to evaluate and compare the enterprise value of different companies in our industry. Adjusted EBITDAR excludes: (1) certain material non-cash items and unusual or non-recurring items that we do not expect to continue in the future; (2) certain other adjustments that do not impact our enterprise value; and (3) rent expense payable to our REITs. We operate 30 acute care hospitals, 12 of which we lease from two REITs, Ventas and MPT, pursuant to long-term lease agreements. Additionally, we lease 18 medical office buildings from Ventas pursuant to lease agreements with initial terms of 12 years and eight options to renew for additional five-year terms. Our management views the long-term lease agreements with Ventas and MPT, as more like financing arrangements than true operating leases, with the rent payable to such REITs being similar to interest expense. As a result, our capital structure is different than many of our competitors, especially those whose real estate portfolio is predominately owned and not leased. Excluding the rent payable to such REITs allows investors to compare our enterprise value to those of other healthcare companies without regard to differences in capital structures, leasing arrangements and geographic markets, which can vary significantly among companies. Our management also uses Adjusted EBITDAR as one measure in determining the value of prospective acquisitions or
divestitures. Finally, financial covenants in certain of our lease agreements, including the Ventas Master Lease, use Adjusted EBITDAR as a measure of compliance. Adjusted EBITDAR does not reflect our cash requirements for leasing commitments. As such, our presentation of Adjusted EBITDAR should not be construed as a performance or liquidity measure.
Because not all companies use identical calculations, our presentation of the non-GAAP measure may not be comparable to other similarly titled measures of other companies.
While we believe this is a useful supplemental valuation measure for investors and other users of our financial information, you should not consider the non-GAAP measure in isolation or as a substitute for net income or any other items calculated in accordance with GAAP. Adjusted EBITDAR has inherent material limitations as a valuation measure, because it adds back certain expenses to net income, resulting in those expenses not being taken into account in the valuation measure. The payment rent is a necessary element of our valuation. Because Adjusted EBITDAR excludes this and other items, it has material limitations as a measure of our valuation.
The following table presents a reconciliation of Adjusted EBITDAR, a valuation measure, to net income, determined in accordance with GAAP:
| Three Months Ended December 31, | Year Ended December 31, | ||||||||||
| (in thousands) | 2025 | 2025 | |||||||||
| Net income | $ | 74,262 | $ | 230,135 | |||||||
|
Adjusted EBITDAR Addbacks:
|
|||||||||||
| Income tax expense | 18,109 | 56,223 | |||||||||
| Interest expense | 12,383 | 55,202 | |||||||||
| Depreciation and amortization | 41,037 | 155,703 | |||||||||
| Noncontrolling interest earnings | (29,306) | (94,324) | |||||||||
| Loss on extinguishment and modification of debt | - | 7,344 | |||||||||
|
Other non-operating losses (a)
|
- | 1,130 | |||||||||
|
Cybersecurity Incident recoveries, net (b)
|
- | (22,655) | |||||||||
| Certain legal matters and related costs | 900 | 900 | |||||||||
|
Restructuring, exit and acquisition-related costs (c)
|
5,332 | 13,276 | |||||||||
|
Change in accounting estimate (d)
|
- | 43,298 | |||||||||
|
New Mexico professional liability accrual (e)
|
- | 54,468 | |||||||||
|
Epic expenses (f)
|
1,933 | 4,837 | |||||||||
| Equity-based compensation | 9,110 | 39,293 | |||||||||
| Loss from disposed operations | 185 | 207 | |||||||||
|
Rent expense payable to REITs (g)
|
41,786 | 164,308 | |||||||||
|
Adjusted EBITDAR
|
$ | 175,731 | $ | 709,345 | |||||||
(a) Other non-operating losses include losses realized on certain non-recurring events or events that are non-operational in nature.
(b) Cybersecurity Incident recoveries, net represent insurance recovery proceeds associated with the Cybersecurity Incident, net of incremental information technology and litigation costs.
(c) Restructuring, exit and acquisition-related costs represent (i) enterprise restructuring costs, including severance costs related to work force reductions of $4.3 million and $10.3 million for the three months ended and year ended December 31, 2025, respectively, (ii) penalties and costs incurred for terminating pre-existing contracts at acquired facilities of $0.8 million and $1.2 million for the three months ended and year ended December 31, 2025, respectively, and (iii) third party professional fees and expenses, salaries and benefits, and other internal expenses incurred in connection with potential and completed acquisitions of $0.2 million and $1.8 million for the three months ended and year ended December 31, 2025, respectively.
(d) Change in accounting estimate reflects the reduction in total revenue of $42.6 million and its $0.7 million impact on noncontrolling interest earnings as a result of a change in our accounting estimate of the collectability of accounts receivable as described further in Note 2, Summary of Significant Accounting Policies, to our accompanying consolidated financial statements included elsewhere in this Annual Report.
(e) During the year ended December 31, 2025, we recorded net losses of $51.3 million related to the emergence of adverse prior period claim developments, particularly with respect to our New Mexico market, combined with increased social inflationary pressures. These losses included $54.5 million of losses recorded during the third quarter of 2025 for adverse prior-period claim developments in New Mexico that were primarily attributable to recent claim settlements and ongoing litigation arising from the actions of a single provider who was employed between 2019 and 2022 as described further in Note 11, Self-Insured Liabilities, to our accompanying consolidated financial statements included elsewhere in this Annual Report.
(f) Epic expenses consist of various costs incurred in connection with the implementation of Epic, our health information technology system. These costs included (i) professional fees of $0.6 million and $2.1 million for the three months ended and year ended December 31, 2025, respectively, (ii) salaries and benefits of $1.3 million and $2.6 million for the three months ended and year ended December 31, 2025, respectively, and (iii) other
expenses related to one-time training and onboarding support costs of $0.1 million for the year ended December 31, 2025. Epic expenses do not include ongoing operating costs of the Epic system.
(g) Rent expense payable to REITs for the three months ended and year ended December 31, 2025 consists of rent expense of $38.9 million and $152.9 million, respectively, related to the Ventas Master Lease and other lease agreements with Ventas for medical office buildings and rent expense of $2.9 million and $11.4 million, respectively, related to a lease arrangement with MPT for the lease of Hackensack Meridian Mountainside Medical Center.
Critical Accounting Policies and Estimates
The preparation of financial statements in accordance with GAAP requires us to make estimates and assumptions that affect reported amounts and related disclosures. We regularly evaluate the accounting policies and estimates we use. In general, we base the estimates on historical experience and on assumptions that we believe to be reasonable, given the particular circumstances in which we operate. Actual results may vary from those estimates. We consider our critical accounting estimates to be those that (i) involve significant judgments and uncertainties, (ii) require estimates that are more difficult for management to determine, and (iii) may produce materially different outcomes under different conditions or when using different assumptions.
Our critical accounting estimates cover the following areas:
•Revenue recognition;
•Risk management and self-insured liabilities; and
•Income taxes
See Note 2, Summary of Significant Accounting Policies, to our consolidated financial statements included within this Annual Report for information about these critical accounting policies, as well as a description of our other significant accounting policies.
Revenue Recognition
We recognize patient service revenue in the period in which our performance obligation of providing healthcare services to our patients is satisfied. The contractual relationships with patients, in most cases, also involve a third party payor (Medicare, Medicaid, and managed care health plans) and the transaction prices for services are dependent upon terms provided by (Medicare and Medicaid) or negotiated with (managed care health plans) the third party payors. Payment arrangements with third party payors for services provided to their covered patients typically specify payments at amounts less than our standard charges. Our revenue is based upon the estimated amounts we expect to be entitled to receive from patients and third party payors.
Medicare and Medicaid regulations and various managed care contracts under which estimates of contractual adjustments must be calculated are complex and are subject to interpretation and adjustment. We estimate contractual adjustments on a payor-specific basis based on our interpretation of the applicable regulations or contract terms and the historical collection experience of each payor. However, ultimate reimbursements may result in payments that differ from our estimates. Additionally, updates to regulations and contract renegotiations occur frequently, requiring that we regularly review and assess our estimates. Changes in estimates related to contractual adjustments affect the amounts we report as patient service revenue and are recorded in the period the changes occur.
Our facilities provide discounts on gross charges to uninsured patients under our charity and self-pay discount policies. Uninsured patients treated for non-elective care are eligible for charity care if they do not qualify for Medicaid or other federal or state assistance and have income at or below a certain income level. The estimated costs incurred by us to provide services to patients who qualified for charity care were $55.8 million, $43.9 million, and $46.0 million for the years ended December 31, 2025, 2024, and 2023, respectively. We estimate the direct and indirect costs of providing charity care by applying a cost to gross charges ratio to the gross charges associated with providing charity care to patients. Other uninsured patients receive self-pay discounts similar to the discounts provided to many managed care plans. Because we do not pursue collection of amounts qualified under our charity and self-pay discount policy, the discounted portion of such charges are not reported in total revenue.
Due to the complexities involved in the classification and documentation of healthcare services under the laws and regulations governing Medicare and Medicaid programs, our estimates of revenue earned and related reimbursement are often subject to interpretation that could result in payments that are different from our 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 cost reports are prepared and filed and as final settlements are 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 $8.3 million, $5.8 million, and $6.7 million for the years ended December 31, 2025, 2024, and 2023, respectively.
At December 31, 2025 and 2024, our settlements under reimbursement agreements with third party payors were a net payable of $7.8 million and a net receivable of $2.6 million, respectively, of which a receivable of $21.1 million and $29.9 million, respectively, was included in other current assets and a payable of $28.9 million and $27.3 million, respectively, was included in other accrued expenses and liabilities in the 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 our management, adequate provision has been made for any adjustments that may result from such reviews.
The collection of accounts receivable, primarily from Medicare, Medicaid, managed care payors, other third party payors, and patients, is critical to our operating performance. Our primary collection risks relate to uninsured patient accounts and patient accounts whereby the primary insurance carrier has paid the amounts covered by the applicable agreement but the portion of the amount that is the patient's responsibility (primarily deductibles and co-payments) remains outstanding. Implicit price concessions relate primarily to amounts due directly from patients and are estimated and recorded for all uninsured accounts. Our collection procedures are followed until such time that management determines the account is uncollectible, at which time the account is written off.
We routinely review accounts receivable balances by monitoring historical cash collections as a percentage of trailing net operating revenue, as well as by analyzing current period revenue and admissions by payor, aged accounts receivable by payor, days revenue outstanding, and the composition of self-pay receivables. Significant changes in payor mix, business office operations, economic conditions, trends in federal, state and private employer healthcare coverage and other collection indicators could have a significant impact on our results of operations and cash flows.
We consider historical collection experience of each payor and the results of detailed reviews of historical collections at facilities that represent a majority of our revenues and accounts receivable (the "hindsight analysis") as a primary source of information in estimating the collectability of our accounts receivable. We perform the hindsight analysis utilizing twelve-month rolling accounts receivable collection data. During the year ended December 31, 2025, a change in accounting estimate resulting from a modification to the technique used to estimate the collectability of accounts receivable and new information provided by recently completed hindsight evaluations of historical collection trends resulted in a decrease in revenue of $42.6 million. During the third quarter of 2025, we implemented a new revenue accounting system that provided us with additional information to more precisely estimate the collectability of accounts receivable, particularly with respect to more timely consideration of payor denial and payment trends. The detailed information provided by the new system during the year ended December 31, 2025, along with our recently completed analysis of historical collection trends, indicated the current collection estimate differed from historical collection estimates thereby resulting in a change in accounting estimate in accordance with ASC 250-10, Accounting Changes and Error Corrections, to be accounted for during the year ended December 31, 2025 (the period of change). We believe our estimation processes provide reasonable estimates of our revenue and valuation of our accounts receivable.
Risk Management and Self-Insured Liabilities
We maintain certain claims-made commercial insurance related to our professional liability risks and occurrence-based commercial insurance related to our workers' compensation and general liability risks. We provide an accrual representing the estimated ultimate costs of all reported and unreported claims incurred and unpaid through the respective balance sheet dates, which includes the costs of litigating or settling claims. The estimated ultimate costs include estimates of direct expenses and fees of outside counsel and experts, but do not include the general overhead costs of our in-house legal and risk management departments.
At December 31, 2025 and 2024, our professional and general liability accrual for asserted and unasserted claims was $284.6 million and $240.0 million, respectively, of which $224.1 million and $206.0 million, respectively, were included in self-insured liabilities and $60.5 million and $34.0 million, respectively, were included in other accrued expenses and liabilities in the consolidated balance sheets. We estimate receivables for the portion of our professional and general liability accrual that is recoverable under our insurance policies. At December 31, 2025 and 2024, such receivables were $103.5 million and $72.8 million, respectively, of which $53.7 million and $62.5 million, respectively, were included in other assets and $49.8 million and $10.3 million, respectively, were included in other current assets.
The total costs for professional and general liability losses are based on our premiums and retention costs and were $131.3 million, $63.0 million, and $55.5 million during the years ended December 31, 2025, 2024, and 2023, respectively. We experienced an increase in professional and general liability losses during the year ended December 31, 2025, primarily related to the emergence of adverse prior period claim developments, particularly with respect to our New Mexico market, combined with increased social inflationary pressures as described further in Note 11, Self-Insured Liabilities, to our consolidated financial statements included within this Annual Report.
At December 31, 2025 and 2024, our workers' compensation liability accrual for asserted and unasserted claims was $25.7 million and $31.8 million, respectively, of which $16.4 million and $21.1 million, respectively, were included in self-insured liabilities and $9.3 million and $10.7 million, respectively, were included in other accrued expenses and liabilities in the consolidated balance sheets. We estimate receivables for the portion of workers' compensation liability accrual that is recoverable under our insurance policies. At December 31, 2025 and 2024, such receivables were $12.9 million and $12.3 million, respectively, of which $8.2 million and $8.2 million, respectively, were included in other assets and $4.7 million and $4.1 million, respectively, were included in other current assets.
The total amounts for workers' compensation liability losses are based on our premiums and retention costs and were a benefit of $0.2 million, an expense of $8.0 million, and an expense of $6.6 million during the years ended December 31, 2025, 2024, and 2023, respectively.
Our estimates are subject to the effects of trends in loss severity and frequency, and we routinely review and adjust estimates as experience develops or new information becomes known. The liabilities for general, professional and workers' compensation risks could be significantly affected if resolution of current and future claims differ from historical claims trends. The time period required to resolve claims can vary based on a claim's jurisdiction and whether the claim is settled or litigated. The estimation of the timing of payments beyond a year can vary significantly. Changes to the estimated reserve amounts are included in current operating results. While management monitors current claims closely and considers outcomes when estimating its reserve, the complexity of the claims and wide range of potential outcomes often hamper timely adjustments to the assumptions used in the estimates. Due to the considerable variability that is inherent in such estimates, there can be no assurance that the ultimate liability will not exceed our recorded estimates, which could have an adverse effect on our results of operations, financial condition, liquidity and capital resources.
Income Taxes
We account for income taxes associated with the activities of Ardent Health, Inc., which is subject to federal and state income tax as a corporation. We account for income taxes using the asset and liability method. We recognize deferred tax assets and liabilities representing the future tax consequences attributable to differences between the financial reporting and tax bases of assets and liabilities. The primary differences relate to the allowance on patient receivable accounts, accrued liabilities, depreciation methods and periods, and deferred cost amortization methods.
We measure deferred tax assets and liabilities using enacted tax rates that we expect to apply to taxable income in the years in which we expect those temporary differences to be recovered or settled. We recognize the effect on deferred tax assets and liabilities of a difference in estimated and actual tax rates in the period that includes the enactment date. We identify deferred tax assets that more likely than not, based on the available evidence, will be unrealizable in future periods and record a valuation allowance accordingly.
Federal and state tax laws are complex, and our tax positions may be subject to interpretation and adjustment by federal and state taxing authorities. We account for uncertain tax positions in accordance with Accounting Standards Codification ("ASC") 740, Income Taxes("ASC 740"), which prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. Only tax positions that meet the more-likely-than-not recognition threshold may be recognized. The provisions of ASC 740 allow for the classification of interest paid on an underpayment of income tax and related penalties, if applicable, as part of income tax expense, interest expense or another appropriate expense classification based on the accounting policy election of the entity. We have elected to classify interest and penalties as part of income tax expense. The final outcome of audits by federal and state taxing authorities may have a significant effect on our financial position and results of operations. Refer to Note 8 to our consolidated financial statements included within this Annual Report for further discussion on income taxes.
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