King of Prussia, Pa.-based Universal Health Services is expecting to see a $35 million pre-tax earnings headwind in 2026 from the implementation of California’s emergency staffing regulations for freestanding psychiatric hospitals.
The regulation is slated to take effect June 1. Under the new requirements, facilities must staff at least one nurse for every six adult patients and one nurse for every five adolescent patients. At least 50% of nurses counted toward staffing ratios must be registered nurses, with all awake and on duty in the hospital.
UHS is projecting that the requirement will increase labor costs due to the need to adjust the mix of licensed nursing staffing at its facilities, executive vice president and CFO Steve Filton said on the system’s Feb. 26 earnings call. UHS’ estimate includes higher recruiting and training costs and some short-term census disruption as its California facilities ramp up to comply with the rule.
After 2026, UHS is expecting to see a $30 million per year headwind related to the change, Mr. Filton said.
He added that the regulation does not necessarily require UHS to increase its overall headcount.
“I think, actually, we have in excess of the headcount that they’re requiring, but it is a different mix of staff and is more heavily skewed to licensed professionals,” he said. “So we have to change our staffing models in a number of our facilities. We will hire more RNs. We think that there is some sort of upfront investment in doing that.”
He said that in the first couple of months the system may not have all the slots filled “and therefore, we’re anticipating potential short-term volume disruption, but once we are fully staffed — which we think we will be at some point in 2026 — then I think the ongoing costs are reduced.”
The California Department of Public Health will have until July 31, 2027, to finalize permanent regulations, incorporating feedback from front-line employees and hospital operators. The staffing requirements were prompted by an investigative series into widespread dysfunction, abuse and understaffing at California behavioral health hospitals published by the San Francisco Chronicle.
The change was initially set to take effect on Jan. 31, but was delayed until June after pushback from the public and hospitals.
Universal Health Services recorded a net income of $1.5 billion in 2025, up from $1.1 billion in 2024. The system also reported operating income of $2 billion (11.5% operating margin), up from $1.7 billion (10.6% margin) during the same period last year.
