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4 Stocks to Watch in a Rapidly Transforming Hospital Industry
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The Zacks Medical-Hospital industry is in the middle of a major shift as patients and payers push for cheaper care outside traditional hospitals. As a result, the fastest growth is now coming from ambulatory centers and post-acute care providers. However, hospitals still face pressure from rising utilization, higher labor and supply costs, and regulatory uncertainty. To respond, providers are investing in AI and technology upgrades, tightening cost structures and expanding services into lower-cost care settings. Mergers and acquisitions also remain a key strategy, helping companies gain scale, cut costs and expand their reach in a fragmented market. Leaders like Tenet Healthcare Corporation (THC - Free Report) , Universal Health Services, Inc. (UHS - Free Report) , Acadia Healthcare Company, Inc. (ACHC - Free Report) and Community Health Systems, Inc. (CYH - Free Report) are responding by improving efficiency, tightening spending and focusing on selective growth opportunities.
Industry Overview
The Zacks Medical-Hospital industry comprises for-profit hospital companies that provide healthcare through different types of hospitals, including acute care, outpatient, rehabilitation and psychiatric. These entities are engaged in internal medicine, general surgery, cardiology, oncology, neurosurgery, orthopedics, and obstetrics, telehealth, mental health and diagnostic and emergency services. Revenues of these companies depend on inpatient occupancy, medical and ancillary services ordered by physicians and provided to patients, and the volume of ambulatory surgery centers’ (ASC) procedures. These companies receive payments for patient services from the government under the Medicare program, Medicaid, or similar programs, managed care plans (including plans offered through the American Health Benefit Exchanges), private insurers and directly from patients.
4 Key Trends to Watch in the Hospital Industry
Rising Demand, Shifting Care Models: Elective procedures continue to rise, lifting patient volumes and boosting overall utilization. Longer term, an aging U.S. population continues to support steady growth in healthcare demand. National health spending is also climbing, with CMS projecting its share of GDP to rise from 17.6% in 2023 to 20.3% by 2033. Meanwhile, cost pressure and faster tech adoption are pushing more care away from inpatient hospitals and into outpatient clinics, ambulatory centers and even patients’ homes. While this shift can improve convenience and lower costs, it also leaves some hospitals with underused beds and heavy fixed expenses. To adapt, providers are expanding beyond hospital walls through partnerships, home-based services, remote monitoring and preventive care programs.
Efficiency Push to Defend Margins: Hospitals are working through ongoing cost pressure as wages, benefits, and supply expenses remain elevated and unpredictable. At the same time, reimbursement increases have not kept pace with rising operating costs, keeping margins tight. To stay profitable, providers are leaning harder on automation, rethinking staffing models and improving purchasing discipline through vendor renegotiations. Dependence on high-cost contract labor is easing from peak levels, offering some relief. Still, hospitals are facing a new challenge as cyber risks rise, driving up insurance premiums and compliance spending and adding another cost burden across the system.
Tech Adoption Expands Access and Productivity: Hospitals are moving faster on AI, automation, and analytics to cut inefficiencies, support better clinical decisions and reduce administrative workload. These tools are improving care coordination, boosting patient engagement, and helping systems manage costs over time. Telehealth has also become a core part of care delivery, extending hospital reach well beyond the pandemic. It is especially valuable for rural and underserved communities, where virtual visits and remote monitoring can close gaps in access and improve continuity of care.
Scale and Partnerships Drive Stability: Hospital systems are stepping up mergers, acquisitions and partnerships to gain scale, improve efficiency and strengthen financial footing. With the market still highly fragmented, shifting care models and clearer regulatory direction are supporting renewed deal activity. Larger, better-capitalized players are acquiring or backing smaller hospitals under pressure. Partnerships focused on technology, data sharing and new care settings are helping providers expand access, upgrade capabilities and stay competitive in a changing healthcare landscape.
Zacks Industry Rank Indicates Positive Outlook
The group’s Zacks Industry Rank, which is the average of the Zacks Rank of all member stocks, signals promising near-term prospects.The Zacks Medical-Hospital industry, which is housed within the broader Zacks Medical sector, currently carries a Zacks Industry Rank #54, which places it in the top 22% of more than 240 Zacks industries. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than two to one.
Looking at the aggregate earnings estimate revisions, it appears that analysts are becoming optimistic about this group’s earnings growth potential. As a matter of fact, the industry’s earnings estimates for 2026 have gone up by 5.4% over the past year.
Considering the encouraging dynamics of the industry, we will present a few stocks that should be on your watchlist. But it’s worth taking a look at the industry’s shareholder returns and current valuation first.
Industry Lags S&P 500 But Outperforms Sector
The Zacks Medical-Hospital industry has fared better than the broader Zacks Medical sector, though it has underperformed the Zacks S&P 500 Composite over the past year.
The industry has gained 22.5% over this period, significantly outperforming the broader sector’s growth of 5.7% but underperforming the S&P 500's appreciation of 33.8%.
One-Year Price Performance
Industry's Current Valuation
Since hospital operators are capital-intensive and often carry meaningful leverage, it makes sense to value them based on the EV/EBITDA (Enterprise Value/ Earnings before Interest Tax Depreciation and Amortization) ratio. On the basis of the trailing 12-month EV/EBITDA ratio, the industry trades at 7.06X compared with the S&P 500’s 17.16X and the sector’s 9.10X.
Over the past five years, the industry has traded as high as 10.66X and as low as 7.06X, with a median of 8.37X, as the charts below show.
EV/EBITDA Ratio (Past 5 Years)
4 Hospital Stocks to Watch
Community Health Systems: Headquartered in Franklin, TN, it operates a network of acute care hospitals and outpatient centers. The company is benefiting from lower expenses, improving payer mix and higher same-store admissions. Management is also focusing on operational efficiency and selective partnerships to support growth. In parallel, CYH continues to divest non-core assets to sharpen its portfolio and improve long-term profitability, even though these moves could pressure results in the near term.
The Zacks Consensus Estimate for Community Health Systems’ 2026 bottom line has improved 31.1% over the past 60 days. The same for 2027 implies a further 84.1% year-over-year improvement. The consensus mark for 2026 and 2027 revenues is pegged at $11.68 billion and $11.96 billion, respectively. Shares of Community Health Systems have gained 23.3% in the past year. It currently has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Price & Consensus: CYH
Tenet Healthcare: Based in Dallas, TX, it operates acute care hospitals and a large ambulatory care platform. The company is expanding its Ambulatory Care segment through targeted acquisitions to capture rising demand for outpatient procedures. Tenet is also benefiting from a favorable payer mix, improving same-hospital admissions and patient acuity, and continued growth across key service lines.
The Zacks Consensus Estimate for Tenet Healthcare’s 2026 and 2027 bottom line is pegged at $17.30 and $17.41 per share, up 3.1% and 0.7% year over year, respectively. It beat earnings estimates in each of the past four quarters, with an average surprise of 27%. The consensus mark for 2026 and 2027 revenues indicates 3.2% and 1.9% year-over-year growth, respectively. Shares of the company have gained 57.2% over the past year. It currently has a Zacks Rank #3 (Hold).
Price & Consensus: THC
Universal Health Services: Headquartered in King of Prussia, PA, it operates acute care hospitals, outpatient centers and a large behavioral health network. The company provides treatment across areas such as internal medicine, autism services, addiction recovery and military-related care. Growth is being supported by tuck-in acquisitions, rising patient days, facility expansion, additional licensed beds and partnerships that strengthen its behavioral health footprint. UHS has also consistently returned capital to shareholders through buybacks, repurchasing nearly 36% of shares outstanding since 2019.
The Zacks Consensus Estimate for Universal Health’s 2026 and 2027 bottom line is pegged at $23.43 and $25.52 per share, up 7.8% and 8.9% year over year, respectively. It beat earnings estimates in three of the past four quarters and missed once, with an average surprise of 10.7%. The consensus mark for 2026 and 2027 revenues indicates 6.6% and 5.2% year-over-year increases, respectively. Shares of Universal Health have gained 2.9% over the past year. It currently has a Zacks Rank #3.
Price & Consensus: UHS
Acadia Healthcare: Based in Franklin, TN, itoperates Acute Inpatient Psychiatric Facilities and Comprehensive Treatment Centers, which remain its core growth engines. Rising patient volumes and strong demand for mental health and substance use treatment continue to support steady long-term growth. Still, the stock has declined 9.3% over the past year, pressured by ongoing media scrutiny and investor concerns around management discipline. Even so, ACHC’s solid cash generation and meaningful real estate assets provide financial flexibility and downside support. Combined with management’s recent strategic actions to improve execution and strengthen operations, the company appears positioned for a potential recovery.
The Zacks Consensus Estimate for Acadia Healthcare’s 2026 and 2027 bottom line is pegged at $1.48 and $1.61 per share, down 26% and up 8.7% year over year, respectively. It beat earnings estimates in each of the past four quarters, with an average surprise of 43%. The consensus mark for 2026 and 2027 revenues indicates 3% and 6.2% year-over-year growth, respectively. It currently has a Zacks Rank #3.
Price & Consensus: ACHC
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4 Stocks to Watch in a Rapidly Transforming Hospital Industry
The Zacks Medical-Hospital industry is in the middle of a major shift as patients and payers push for cheaper care outside traditional hospitals. As a result, the fastest growth is now coming from ambulatory centers and post-acute care providers. However, hospitals still face pressure from rising utilization, higher labor and supply costs, and regulatory uncertainty. To respond, providers are investing in AI and technology upgrades, tightening cost structures and expanding services into lower-cost care settings. Mergers and acquisitions also remain a key strategy, helping companies gain scale, cut costs and expand their reach in a fragmented market. Leaders like Tenet Healthcare Corporation (THC - Free Report) , Universal Health Services, Inc. (UHS - Free Report) , Acadia Healthcare Company, Inc. (ACHC - Free Report) and Community Health Systems, Inc. (CYH - Free Report) are responding by improving efficiency, tightening spending and focusing on selective growth opportunities.
Industry Overview
The Zacks Medical-Hospital industry comprises for-profit hospital companies that provide healthcare through different types of hospitals, including acute care, outpatient, rehabilitation and psychiatric. These entities are engaged in internal medicine, general surgery, cardiology, oncology, neurosurgery, orthopedics, and obstetrics, telehealth, mental health and diagnostic and emergency services. Revenues of these companies depend on inpatient occupancy, medical and ancillary services ordered by physicians and provided to patients, and the volume of ambulatory surgery centers’ (ASC) procedures. These companies receive payments for patient services from the government under the Medicare program, Medicaid, or similar programs, managed care plans (including plans offered through the American Health Benefit Exchanges), private insurers and directly from patients.
4 Key Trends to Watch in the Hospital Industry
Rising Demand, Shifting Care Models: Elective procedures continue to rise, lifting patient volumes and boosting overall utilization. Longer term, an aging U.S. population continues to support steady growth in healthcare demand. National health spending is also climbing, with CMS projecting its share of GDP to rise from 17.6% in 2023 to 20.3% by 2033. Meanwhile, cost pressure and faster tech adoption are pushing more care away from inpatient hospitals and into outpatient clinics, ambulatory centers and even patients’ homes. While this shift can improve convenience and lower costs, it also leaves some hospitals with underused beds and heavy fixed expenses. To adapt, providers are expanding beyond hospital walls through partnerships, home-based services, remote monitoring and preventive care programs.
Efficiency Push to Defend Margins: Hospitals are working through ongoing cost pressure as wages, benefits, and supply expenses remain elevated and unpredictable. At the same time, reimbursement increases have not kept pace with rising operating costs, keeping margins tight. To stay profitable, providers are leaning harder on automation, rethinking staffing models and improving purchasing discipline through vendor renegotiations. Dependence on high-cost contract labor is easing from peak levels, offering some relief. Still, hospitals are facing a new challenge as cyber risks rise, driving up insurance premiums and compliance spending and adding another cost burden across the system.
Tech Adoption Expands Access and Productivity: Hospitals are moving faster on AI, automation, and analytics to cut inefficiencies, support better clinical decisions and reduce administrative workload. These tools are improving care coordination, boosting patient engagement, and helping systems manage costs over time. Telehealth has also become a core part of care delivery, extending hospital reach well beyond the pandemic. It is especially valuable for rural and underserved communities, where virtual visits and remote monitoring can close gaps in access and improve continuity of care.
Scale and Partnerships Drive Stability: Hospital systems are stepping up mergers, acquisitions and partnerships to gain scale, improve efficiency and strengthen financial footing. With the market still highly fragmented, shifting care models and clearer regulatory direction are supporting renewed deal activity. Larger, better-capitalized players are acquiring or backing smaller hospitals under pressure. Partnerships focused on technology, data sharing and new care settings are helping providers expand access, upgrade capabilities and stay competitive in a changing healthcare landscape.
Zacks Industry Rank Indicates Positive Outlook
The group’s Zacks Industry Rank, which is the average of the Zacks Rank of all member stocks, signals promising near-term prospects.The Zacks Medical-Hospital industry, which is housed within the broader Zacks Medical sector, currently carries a Zacks Industry Rank #54, which places it in the top 22% of more than 240 Zacks industries. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than two to one.
Looking at the aggregate earnings estimate revisions, it appears that analysts are becoming optimistic about this group’s earnings growth potential. As a matter of fact, the industry’s earnings estimates for 2026 have gone up by 5.4% over the past year.
Considering the encouraging dynamics of the industry, we will present a few stocks that should be on your watchlist. But it’s worth taking a look at the industry’s shareholder returns and current valuation first.
Industry Lags S&P 500 But Outperforms Sector
The Zacks Medical-Hospital industry has fared better than the broader Zacks Medical sector, though it has underperformed the Zacks S&P 500 Composite over the past year.
The industry has gained 22.5% over this period, significantly outperforming the broader sector’s growth of 5.7% but underperforming the S&P 500's appreciation of 33.8%.
One-Year Price Performance
Industry's Current Valuation
Since hospital operators are capital-intensive and often carry meaningful leverage, it makes sense to value them based on the EV/EBITDA (Enterprise Value/ Earnings before Interest Tax Depreciation and Amortization) ratio. On the basis of the trailing 12-month EV/EBITDA ratio, the industry trades at 7.06X compared with the S&P 500’s 17.16X and the sector’s 9.10X.
Over the past five years, the industry has traded as high as 10.66X and as low as 7.06X, with a median of 8.37X, as the charts below show.
EV/EBITDA Ratio (Past 5 Years)
4 Hospital Stocks to Watch
Community Health Systems: Headquartered in Franklin, TN, it operates a network of acute care hospitals and outpatient centers. The company is benefiting from lower expenses, improving payer mix and higher same-store admissions. Management is also focusing on operational efficiency and selective partnerships to support growth. In parallel, CYH continues to divest non-core assets to sharpen its portfolio and improve long-term profitability, even though these moves could pressure results in the near term.
The Zacks Consensus Estimate for Community Health Systems’ 2026 bottom line has improved 31.1% over the past 60 days. The same for 2027 implies a further 84.1% year-over-year improvement. The consensus mark for 2026 and 2027 revenues is pegged at $11.68 billion and $11.96 billion, respectively. Shares of Community Health Systems have gained 23.3% in the past year. It currently has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Price & Consensus: CYH
Tenet Healthcare: Based in Dallas, TX, it operates acute care hospitals and a large ambulatory care platform. The company is expanding its Ambulatory Care segment through targeted acquisitions to capture rising demand for outpatient procedures. Tenet is also benefiting from a favorable payer mix, improving same-hospital admissions and patient acuity, and continued growth across key service lines.
The Zacks Consensus Estimate for Tenet Healthcare’s 2026 and 2027 bottom line is pegged at $17.30 and $17.41 per share, up 3.1% and 0.7% year over year, respectively. It beat earnings estimates in each of the past four quarters, with an average surprise of 27%. The consensus mark for 2026 and 2027 revenues indicates 3.2% and 1.9% year-over-year growth, respectively. Shares of the company have gained 57.2% over the past year. It currently has a Zacks Rank #3 (Hold).
Price & Consensus: THC
Universal Health Services: Headquartered in King of Prussia, PA, it operates acute care hospitals, outpatient centers and a large behavioral health network. The company provides treatment across areas such as internal medicine, autism services, addiction recovery and military-related care. Growth is being supported by tuck-in acquisitions, rising patient days, facility expansion, additional licensed beds and partnerships that strengthen its behavioral health footprint. UHS has also consistently returned capital to shareholders through buybacks, repurchasing nearly 36% of shares outstanding since 2019.
The Zacks Consensus Estimate for Universal Health’s 2026 and 2027 bottom line is pegged at $23.43 and $25.52 per share, up 7.8% and 8.9% year over year, respectively. It beat earnings estimates in three of the past four quarters and missed once, with an average surprise of 10.7%. The consensus mark for 2026 and 2027 revenues indicates 6.6% and 5.2% year-over-year increases, respectively. Shares of Universal Health have gained 2.9% over the past year. It currently has a Zacks Rank #3.
Price & Consensus: UHS
Acadia Healthcare: Based in Franklin, TN, itoperates Acute Inpatient Psychiatric Facilities and Comprehensive Treatment Centers, which remain its core growth engines. Rising patient volumes and strong demand for mental health and substance use treatment continue to support steady long-term growth. Still, the stock has declined 9.3% over the past year, pressured by ongoing media scrutiny and investor concerns around management discipline. Even so, ACHC’s solid cash generation and meaningful real estate assets provide financial flexibility and downside support. Combined with management’s recent strategic actions to improve execution and strengthen operations, the company appears positioned for a potential recovery.
The Zacks Consensus Estimate for Acadia Healthcare’s 2026 and 2027 bottom line is pegged at $1.48 and $1.61 per share, down 26% and up 8.7% year over year, respectively. It beat earnings estimates in each of the past four quarters, with an average surprise of 43%. The consensus mark for 2026 and 2027 revenues indicates 3% and 6.2% year-over-year growth, respectively. It currently has a Zacks Rank #3.
Price & Consensus: ACHC