• | | annual base salary; long-term incentive awards, and;
deferred compensation, retirement benefits and other benefits, including perquisites.
Annual Base Salary
Our annual base salary levels are intended to be consistent with competitive pay practices and level of responsibility, with salary increases reflecting competitive trends, our overall financial performance, the performance of each individual executive and general economic conditions.
In establishing the base salary for our named executive officers, various criteria are reviewed including the following:
the executive officer’s achievements, performance in his or her position with us, taking into account the tenure of service, the complexity of the position and current job responsibilities;
Mr. Alan Miller’s recommendations as to the proposed base salary, other than his own;
company financial performance, and;
salaries of similar positions in our healthcare competitor companies and general industry comparisons.
For our named executive officers, an analysis was conducted in 2019 utilizing the most currently available proxy statements and financial results, as filed with the Securities and Exchange Commission, from five companies that we believe are our most direct competitors. We believe these companies, which are indicated below, are comparable peer companies based upon the median revenues of this peer group, which were approximately $13.2 billion as compared to our 2019 revenues of approximately $11.4 billion.
The companies are:
Acadia Healthcare Company, Inc.
Brookdale Senior Living Inc.
Community Health Systems Inc.
| •
| Tenet Healthcare Corporation
|
For Mr. Alan Miller, his 2019 base salary exceeded the 90th percentile of the peer and general industry groups, due to his long tenure in the position, his value as the Company’s founder, his status within the healthcare industry and his performance. The average years of same company/role experience of other executives in the peer group was 6 years compared to Mr. Alan Miller’s 41 years.
For 2019, the actual base salary rates for our named executives were within approximately 15% of their respective median base salary market rates (as assessed relative to our peer and general industry groups). For 2019, for our other named executive officers (excluding Mr. Alan Miller), we targeted the median (50th percentile) base salary paid by the peer companies (listed above), along with the median of broader general industry data, to establish our base market rate. We generally consider our base salaries to be competitive if they are approximately within a 15% range of the median market rate. However, actual base salaries are not dictated solely by the median market rate. We also take into account an individual’s expertise, tenure in the position, responsibilities and achievements.
• | | long-term incentive awards, and; |
For 2020 base salary decisions, we will be expanding our analysis to more specifically include a broader group of for-profit hospitals and health care service companies comparable to our operation and will directly compare base salaries to the following updated peer group:
• | | deferred compensation, retirement benefits and other benefits, including perquisites. |
Compensation Peer Group • | | Acadia Healthcare Company, Inc. |
Acadia Healthcare Company, Inc.
• | | Brookdale Senior Living, Inc. |
Brookdale Senior Living, Inc.
• | | Community Health Systems, Inc. |
Community Health Systems, Inc.
DaVita, Inc.*
• | | Encompass Health Corporation |
Encompass Health Corporation*
• | | Genesis Healthcare, Inc. |
Genesis Healthcare, Inc.*
HCA Healthcare, Inc.
Henry Schein, Inc.*
• | | Laboratory Corporation of America Holdings |
Laboratory Corporation of America Holdings*
Molina Healthcare, Inc.*
• | | Quest Diagnostics Incorporated |
Quest Diagnostics Incorporated*
• | | Select Medical Holdings Corporation |
Select Medical Holdings Corporation*
• | | Tenet Healthcare Corporation |
Annual Base Salary Our annual base salary levels are intended to be consistent with competitive pay practices and level of responsibility, with salary increases reflecting competitive trends, our overall financial performance, the performance of each individual executive and general economic conditions. 25 Universal Health Services, Inc. 2023 Proxy Statement
Executive Compensation In establishing the base salary for our named executive officers, various criteria are reviewed including the following: • | | *indicates the executive officer’s achievements, performance in his or her position with us, taking into account the tenure of service, the complexity of the position and current job responsibilities;
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• | | company will be new tofinancial performance, and; |
• | | salaries of similar positions in our peer group analysis. Annual Cash Incentives
Cash incentives for our named executive officers are awarded under the Executive Incentive Plan, which was adopted by our stockholders at our 2010 Annual Meetingcompetitor companies and re-approved by our stockholders at our 2015 Annual Meeting. The Executive Incentive Plan is intended to support our efforts to attract, retain and motivate highly qualified senior management and other executive officers of the Company and its affiliates through the payment of performance-based incentive compensation. Annual incentive compensation may be awarded under the Executive Incentive Plan to our named executive officers and others as selected by the Compensation Committee for any calendar year. The Compensation Committee believes that the payment of cash incentives to our named executive officers under the Executive Incentive Plan is consistent with the objectives for our compensation programs by rewarding such officers for the achievement of specified business goals and performance objectives and that may increase the value of our stock.general industry comparisons.
The amount of an employee’s cash incentive award for a calendar year is based upon the employee’s target cash incentive and the extent to which the performance goal(s) applicable to the employee are achieved. For each calendar year, an employee’s target cash incentive will be equal to a fixed percentage of the employee’s base salary earned during the year.
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We believe these peer companies, which are indicated above, are comparable peer companies based upon the median revenues of this peer group, which were approximately $11.6 billion in 2022, as compared to our 2022 revenues of approximately $13.4 billion. For 2022, for our other named executive officers (excluding Mr. Alan Miller), we targeted the median (50th percentile) base salary paid by the peer companies (listed above), along with the median of broader general industry data, to establish our base market rate. We generally consider our base salaries to be competitive if they are approximately within a 15% range of the median market rate. For 2022, Mr. Marc Miller, Mr. Filton and Mr. Peterson’s salaries were within 15% of the data (as assessed relative to our peer and general industry groups). Mr. Pember’s salary was within 20%. However, actual base salaries are not dictated solely by the median market rate. We also take into account an individual’s expertise, tenure in the position, responsibilities and achievements. Annual Cash Incentives Cash incentives for our named executive officers are awarded under the Executive Incentive Plan. A new 2022 Executive Incentive Plan was adopted in March, 2022 which contained certain minor updates to our prior plan due to changes in tax laws regarding executive compensation. The Executive Incentive Plan is intended to support our efforts to attract, retain and motivate highly qualified senior management and other executive officers of the Company and its affiliates through the payment of performance-based incentive compensation. Annual incentive compensation may be awarded under the Executive Incentive Plan to our named executive officers and others as selected by the Compensation Committee for any calendar year. The Compensation Committee believes that the payment of cash incentives to our named executive officers under the Executive Incentive Plan is consistent with the objectives for our compensation programs by rewarding such officers for the achievement of specified business goals and performance objectives and that may increase the value of our stock. The amount of an employee’s cash incentive award for a calendar year is based upon the employee’s target cash incentive and the extent to which the performance goal(s) applicable to the employee are achieved. For each calendar year, an employee’s target cash incentive will be equal to a fixed percentage of the employee’s base salary earned during the year. The Compensation Committee establishes performance goals for the named executive officers using such business criteria and other measures of performance discussed herein and the Compensation Committee will establish objective performance goals based upon one or more of the following business criteria: The Compensation Committee establishes performance goals for the named executive officers using such business criteria and other measures of performance discussed herein and the Compensation Committee will establish objective performance goals based upon one or more of the following business criteria:
• | | attainment of certain target levels of, or a specified increase in, after-tax or pre-tax profits; |
• | | attainment of certain target levels of, or a specified increase in, earnings per diluted share or adjusted earnings per diluted share, and; |
• | | attainment of certain target levels of, or a specified increase in, return on capital or return on invested capital. |
In the case of an award intended to qualify as “performance-based compensation”, the applicable target cash incentive, performance goals and performance factors with respect to any calendar year will be established in writing by the Compensation Committee no later than 90 days after the commencement of that year. Promptly after the date on which the necessary financial or other information for a particular year becomes available, the Compensation Committee will determine the amount, if any, of the cash incentive compensation payable to each participant for that calendar year and will certify in writing prior to payment that the performance goals for the year were in fact satisfied. The maximum incentive award which any participant may earn under the Executive Incentive Plan for any calendar year shall not exceed $5 million. The Executive Incentive Plan provides the Compensation Committee with the discretion to establish higher or lower performance factors for levels of performance that are more or less than the target levels. Performance goals may be adjusted for changes in accounting methods, corporate transactions and other similar types of events. 26 Universal Health Services, Inc. 2023 Proxy Statement
Executive Compensation 2022 Annual Cash Incentive Formula and Performance Goals: On March 23, 2022, the Compensation Committee approved specific bonus formulae for the determination of the target annual incentive compensation for the Company’s named executive officers pursuant to the Executive Incentive Plan (the “Plan”) for the year ending December 31, 2022. Under the formulae approved by the Compensation Committee, each of the Company’s named executive officers was assigned a percentage of such executive officer’s 2022 base salary as a target bonus based upon corporate transactions and other similar types of events. On December 22, 2017, the President of the United States signed into law comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act of 2017 (the “TCJA-17”). TCJA-17 modifies Section 162(m) under the Code removing the exception for performance-based compensation applicable to years beginning after December 31, 2017. This change does not apply to compensation stemming from contracts entered into on or before November 2, 2017, unless such contracts were materially modified on or after that date. Compensation agreements entered into and share-based payment awards granted after this date will be subject to the revised terms of Section 162(m).
2019 Annual Cash Incentive Formula and Performance Goals: The Compensation Committee approved the specific formula for the determination of the target annual cash incentive compensation for our executive officers pursuant to the Executive Incentive Plan with respect to the year ending December 31, 2019. Under the formulae approved by the Compensation Committee, each of the Company’s executive officers was assigned a percentage of such executive officer’s base salary as a target bonus to be paid based on pre-specified performance criteria. The corporate performance criteria target bonus award indicated below for Mr. Marc D. Miller is stipulated in his employment agreement dated December 23, 2020, which became effective on January 1, 2021. Mr. Marc Miller’s employment agreement was amended in March, 2022, primarily to provide for the changes to the elements of his compensation implemented in 2022, as discussed above.
Mr. Alan B. Miller is stipulated in his employment agreement dated July 24, 2013, as amended on November 5, 2018. The following table shows each named executive officer’s target bonus as a percentage of his or her base salary for 2019. With respect to Messrs. Alan B. Miller, who previously served as our Chief Executive Officer and Chairman of the Board of Directors, transitioned to the role of Executive Chairman of the Board of Directors effective January 1, 2021. As part of his compensation in connection with his role as Executive Chairman of the Board, Mr. Alan B. Miller may be entitled to bonuses and other compensation (including annual incentive bonuses) as may be determined by the Board of Directors.
The following table shows each executive officer’s corporate performance criteria target bonus as a percentage of their base salary for 2022. With respect to: • | | Messrs. Marc D. Miller and Steve G. Filton – 100% of their annual incentive target bonus for 20192022 was determined usingbased upon the corporate performance criteria, as described below. With respect to Mr. |
• | | Messrs. Pember and Peterson – their 2022 annual incentive target bonus was based upon: |
| • | | 25% of histheir annual incentive bonus wassalary based upon the achievement of the corporate
performance criteria, and and; |
| • | | 75% of histheir annual incentive bonus wassalary based upon the achievement of the divisional income targets, as described below. |
• | | Mr. PetersonEdward H. Sim was hired as Executive Vice President and President, Acute Care, succeeding Mr. Marvin Pember, effective December 5, 2022 and therefore was not eligible for a 2019an annual incentive bonus since his employment commenced in September, 2019.for 2022. | | | | | | | Title
| | Target Incentive
Bonus Award
Name | | Title | | Target Incentive Bonus Award as a % of salary | | | | | Marc D. Miller | | Chief Executive Officer and President | | | 150 | % | | | | Steve G. Filton | | Executive Vice President and Chief Financial Officer | | | 100 | % | | | | Marvin G. Pember | | Former Executive Vice President and President-Acute Care Division | | | 100 | % | | | | Matthew J. Peterson | | Executive Vice President and President-Behavioral Health Division | | | 100 | % of salary | | Alan B. Miller
| | Chief Executive Officer and
Chairman of the Board
| | | 100
| %
| Marc D. Miller
| | President
| | | 65
| %
| Steve G. Filton
| | Executive Vice President
and Chief Financial Officer
| | | 50
| %
| Marvin G. Pember
| | Executive Vice President
and President-Acute
Care Division
| | | 50
| %
| Matthew J. Peterson (commenced employment in September, 2019)
| | Executive Vice President
and President-Behavioral Health Division
| | | 0
| %
|
As part of our peer company compensation review for executive officers as discussed above in Annual Base Salary, we also target the median (50th percentile) market rate from our healthcare peers and the broader general industry data when determining each officer’s target annual incentive. For 2019, our target annual incentive opportunities were assessed as being below the market 25th percentile. Actual cash incentive awards, however, appropriately vary from this targeted level based upon performance, consistent with our pay for performance philosophy, and are detailed in the Summary Compensation Table in this Proxy Statement. The Compensation Committee believes that the annual incentive opportunities offered to our named executive officers are appropriate to facilitate our ability to attract, retain, motivate and reward our named executive officers, and that actual incentive payouts appropriately reflect the Company’s performance.
Pursuant to the Plan and the formulae approved by the Compensation Committee, each executive officer is entitled to receive between 0% and 250% of that executive officer’s target bonus based, either entirely or in part, on the Company’s achievement of a combination of: (i) a specified range of target levels of adjusted net income per diluted share attributable to UHS, and; (ii) a specified range of target levels of return on capital (adjusted net income attributable to UHS divided by quarterly average net capital) for the year ending December 31, 2019. The adjusted net income per diluted share attributable to UHS generally excludes amounts that may be nonrecurring or non-operational in nature or amounts that may be reflected in the current year financial statements that relate to prior years. As disclosed on the Schedule of Non-GAAP Supplemental Information for the year ended December 31, 2019 (“Supplemental Schedule”) included with our 2019 financial results as filed on Form 8-K on February 26, 2020 and attached as Annex A to this Proxy Statement, our 2019 adjusted net income per diluted share excluded the impact of the increase in the reserve established in connection with the civil aspects of the government’s investigation of certain of our behavioral health care facilities, the impact on our provision for income taxes resulting from our adoption of ASU 2016-09 which amended the accounting for employee share-based payment transactions and the impact of the provision for intangible asset impairment to reduce the carrying value of a tradename intangible asset previously recorded in connection with our 2015 acquisition of Foundations Recovery Network, L.L.C.
On March 20, 2019, the Compensation Committee approved specific bonus formulae for the determination of annual incentive compensation for our named executive officers pursuant to the Executive Incentive Plan for the year ending December 31, 2019. Pursuant to the terms of the Executive Incentive Plan for 2019,
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As part of our peer company compensation review for executive officers as discussed above in Annual Base Salary, we also target the median (50th percentile) market rate from our healthcare peers and the broader general industry data when determining each officer’s target annual incentive. Actual cash incentive awards, however, appropriately vary from this targeted level based upon performance, consistent with our pay for performance philosophy, and are detailed in the Summary Compensation Table in this Proxy Statement. The Compensation Committee believes that the annual incentive opportunities offered to our named executive officers are appropriate to facilitate our ability to attract, retain, motivate and reward our named executive officers, and that actual incentive payouts appropriately reflect the Company’s performance. 2022 Annual Cash Incentive Targets: Target Corporate Performance Criteria: On February 24, 2022, we publicly announced that our initial estimated range of adjusted net income per diluted share attributable to UHS for 2022 was $11.90 to $12.90. In June of 2022, based upon our actual operating results experienced during the first six months of 2022, we publicly disclosed a decrease to our previously disclosed estimated range of adjusted net income per diluted share attributable to UHS for 2022 (decreased the upper end of the range to $10.40 per diluted share from $12.90 per diluted share while the lower end of the range was adjusted to $9.60 per diluted share from $11.90 per diluted share); however, our annual incentive performance targets were not impacted by these publicly disclosed revisions. 27 Universal Health Services, Inc. 2023 Proxy Statement
Executive Compensation On March 23, 2022, the Compensation Committee approved specific bonus formulae for the determination of annual incentive compensation for our named executive officers pursuant to the 2022 Executive Incentive Plan for the year ending December 31, 2022. For 2022, our named executive officers were eligible to receive the applicable portion of their annual cash incentive (which were based on the corporate performance criteria) at various increments ranging from 0% of their bonus target award (based upon the achievement of a Target of adjusted net income per diluted share attributable to UHS of $11.15 or less, and Return on Capital of 7.7% or less) up to 200% of their annual cash incentive target award (based upon the achievement of a Target of adjusted net income per diluted share attributable to UHS of $13.64 or greater and Return on Capital of 9.5% or greater). The 2022 Target of adjusted net income per diluted share attributable to UHS, which represented the approximate midpoint within the publicly disclosed range of our projected consolidated earnings per diluted share estimate for the year, was $12.40 per diluted share. The 2022 Return on Capital Target was 8.7% The adjusted net income per diluted share attributable to UHS excludes, among potentially other things if applicable and material and/or nonrecurring or nonoperational in nature, the impact of unrealized gains/losses resulting from changes in the market value of shares of certain equity securities, provision for asset impairments, and the impact on our provision for income taxes and net income attributable to UHS resulting from ASU 2016-09, “Compensation-Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting. The Targets were adjusted from prior years to correlate to the range of our initial estimated 2022 adjusted net income per diluted share attributable to UHS, as publicly disclosed on February 24, 2022. Target Divisional Performance Criteria: Also on March 23, 2022, the Compensation Committee approved the specific bonus formulae based upon the achievement of the divisional income targets pursuant to the 2022 Executive Incentive Plan for the year ended December 31, 2022. Messrs. Pember and Peterson were each entitled to receive between 0% and 200% of their target bonus that was based on the divisional results (75%). The divisional income targets consist of the projected aggregate pre-tax income for our acute care and behavioral health services segments, net of certain deductions which consist primarily of a charge for the estimated cost of capital. The divisional income targets may be adjusted to include or exclude the impact of items, if applicable and material, that are, among other things, nonrecurring or non-operational in nature. For 2022, the divisional income targets were as follows: • | | Acute Care: The divisional income target was determined to be $206.0 million and Mr. Pember was eligible to receive the applicable portion of their annualhis cash incentive (which were based on the corporate performance criteria)(75%) at various increments ranging from 0% based upon the achievement of their bonusacute care divisional income of $185.3 million, up to 200% based upon the achievement of acute care divisional income of $226.6 million or greater. |
• | | Behavioral Health Care: The divisional income target award (basedwas determined to be $420.6 million and Mr. Peterson was eligible to receive the applicable portion of his cash incentive (75%) at various increments ranging from 0% based upon the achievement of behavioral health care divisional income of $378.5 million, up to 200% based upon the achievement of behavioral health care divisional income of $462.7 million or greater. |
2022 Actual Annual Cash Incentive Results: On March 15, 2023, the Compensation Committee determined that, based upon our actual corporate and divisional operating results during the year ended December 31, 2022, the minimum thresholds for the corporate performance criteria and the divisional performance criteria were not achieved and therefore no cash incentives were payable to Messrs. Marc D. Miller, Steve G. Filton, Marvin G. Pember or Matthew J. Peterson. Actual Corporate Performance Criteria: During 2022, our adjusted net income per diluted share attributable to UHS was $9.88, as compared to a target of $12.40 per diluted share and a minimum threshold of $11.16 per diluted share. This adjusted net income per diluted share attributable to UHS for 2022 was publicly disclosed and reconciled to our reported 2022 net income per diluted share attributable to UHS of $9.14, on the Schedule of Non-GAAP Supplemental Information included with our financial results for the year ended December 31, 2022, as 28 Universal Health Services, Inc. 2023 Proxy Statement
Executive Compensation filed on Form 8-K on February 27, 2023. The Return on Capital was 7.0% for 2022, as compared to a target of 8.7% and a minimum threshold of 7.8%. The Return on Capital is calculated by dividing our annual adjusted net income attributable to UHS by the consolidated average net capital. Actual Divisional Performance Criteria: During 2022, the actual divisional income was as follows: • | | Acute Care: The acute care divisional income was a loss of $26.9 million and therefore the minimum income threshold of $185.4 million was not achieved. |
• | | Behavioral Health Care: The behavioral health care divisional income was $354.2 million and therefore the minimum income threshold of $378.6 million was not achieved. |
In determining the corporate and divisional performance criteria, various factors are considered, including the projected revenue and earnings growth over the prior year. Since the value received by stockholders is measured, in large part, by an increase in stock price, which is in turn typically influenced by increases in revenues and earnings, our performance criteria are established at reasonably aggressive levels to encourage the attainment of our financial objectives which, if accomplished, may result in an increase to our stock price and increased value to stockholders. As mentioned above, the corporate performance criteria are established annually (except for 2020 due to the impact of the COVID-19 pandemic and no cash incentive bonuses were paid to any of our named executive officers pursuant to the Executive Incentive Plan) and the Target of adjusted net income per diluted share attributable to UHS directly correlates to our annual earnings guidance that is typically publicly disclosed by us in February of each year. The divisional performance criteria are also established annually and represent each segment’s respective portion of the Company’s consolidated estimated earnings. For each of our named executive officers that had approved specific bonus formulae for the determination of annual incentive compensation pursuant to the Executive Incentive Plan, the following table sets forth the actual 2022 annual incentive bonus awarded as well as the pre-established ranges of potential payouts under our non-equity incentive plan. | | | | | | | | | | | | | | | | | | | | | | | 2022 Non-Equity Incentive Plan Awards | | Name | | Title | | Actual | | | Minimum | | | Target | | | Maximum | | | | | | | | Marc D. Miller | | Chief Executive Officer and President | | $ | — | | | $ | 78,003 | | | $ | 1,950,075 | | | $ | 3,900,150 | | | | | | | | Steve G. Filton | | Executive Vice President and Chief Financial Officer | | $ | — | | | $ | 31,463 | | | $ | 786,574 | | | $ | 1,573,148 | | | | | | | | Marvin G. Pember | | Former Executive Vice President and President-Acute Care | | $ | — | | | $ | 90,856 | | | $ | 790,053 | | | $ | 1,580,106 | | | | | | | | Matthew J. Peterson | | Executive Vice President and President-Behavioral Health Care | | $ | — | | | $ | 76,696 | | | $ | 666,922 | | | $ | 1,333,844 | |
Mr. Alan B. Miller, our Executive Chairman, receives compensation pursuant to his employment agreement which provided for a base salary of $1.0 million in 2022, and the potential for a discretionary cash bonus, as determined by our Board of Directors. No discretionary cash bonus was paid to Mr. Alan B. Miller for the year ended December 31, 2022. The performance goals related to the Executive Incentive Plan, as outlined above, are generally based upon the achievement of our business plan financial objectives. Performance goals are established at reasonably aggressive levels to encourage and motivate executive performance and attainment of our financial objectives. For a further description of the cash incentives and other elements of compensation granted to our named executive officers for 2022, 2021 and 2020, please refer to the Summary Compensation Table in this Proxy Statement. Long-Term Incentives The Compensation Committee believes that the grant of equity-based, long-term compensation, primarily in the form of stock options and restricted shares, to our named executive officers is appropriate to attract and retain such individuals and to motivate them to enhance stockholder value. 29 Universal Health Services, Inc. 2023 Proxy Statement
Executive Compensation Further, long-term incentive awards reward individuals for their performance and achievement of business goals. The Compensation Committee believes that our best interests will be advanced by enabling our named executive officers, who are responsible for our management, growth and success, to receive compensation in the form of long-term incentive awards that may increase in value in conjunction with an increase in the value of our common stock. As is the case with respect to base salaries, a number of factors are taken into account in calibrating grants of long-term incentive awards, including an individual’s performance in light of his or her position, responsibilities and contribution to our financial performance. In addition, the Compensation Committee takes into account an individual’s potential contribution to our growth and productivity. In determining appropriate long-term incentive grants, there is no other predetermined formula, factors or specified list of criteria that is followed. For a description of the long-term incentive awards granted to our named executive officers for 2022, please read the Summary Compensation Table and the Grants of Plan-Based Awards Table included in this Proxy Statement. 2020 Stock Incentive Plan: In May, 2020, at our Annual Meeting, the stockholders approved the 2020 Omnibus Stock and Incentive Plan (“2020 Stock Incentive Plan”), and as a result, as of that date, no additional awards were granted under our previous plan and the reserve for shares that were remaining for future issuance under the previous plan was canceled. The 2020 Stock Incentive Plan provides for the issuance of incentive stock options and non-qualified stock options to purchase shares of our Class B Common Stock, including awards of performance-based stock options with premium exercise prices. Additionally, the 2020 Stock Incentive Plan authorizes awards of restricted stock and restricted stock units, as discussed below, stock appreciation rights and restricted stock units and awards intended to be performance-based awards. The 2020 Stock Incentive Plan is intended to provide a flexible vehicle through which we may offer equity-based compensation incentives to our named executive officers and other eligible personnel in support of our compensation objectives. On March 23, 2022, the Board of Directors adopted an amendment and restatement of our 2020 Omnibus Stock and Incentive Plan, which was approved by our stockholders at our 2022 Annual Meeting, which among other things increased the numbers of shares of our Class B Common Stock that may be issued under the 2020 Stock Incentive Plan by 6.0 million (to 12.1 million shares from 6.1 million shares). Subject to the provisions of the 2020 Stock Incentive Plan, the Compensation Committee has the responsibility and full power and authority to select the persons to whom awards will be made, to prescribe the terms and conditions of each award and make amendments thereto, to construe, interpret and apply the provisions of the Stock Incentive Plan and of any agreement or other instrument evidencing an award and to make any and all determinations and take any and all other actions as it deems necessary or desirable in order to carry out the terms of the Stock Incentive Plan. Stock Options: Typically, option awards under the 2020 Stock Incentive Plan are granted by the Compensation Committee on specific dates that are scheduled in advance, which generally coincide with regularly scheduled meetings of the Compensation Committee and the Board of Directors. There is no separate policy with respect to the timing of option awards to our named executive officers. Typically, option awards are granted to our named executive officers at the same time as option awards are granted to our other employees. In certain circumstances, such as new hires or promotions, option awards are granted separately by the Compensation Committee or our Chief Executive Officer and Chief Financial Officer who are duly authorized by the Compensation Committee. Stock options have such vesting and other terms and conditions as the Compensation Committee, acting in its discretion, may determine. Generally, grants of stock options vest in equal amounts over four years, are scheduled to expire on the fifth anniversary of the date of grant and, unless otherwise determined, employees must be employed by us for such options to vest. We do not have any plan to select option grant dates for our named executive officers in coordination with the release of material non-public information. The exercise price per share of Class B Common Stock covered by an option shall be any price determined by the Compensation Committee, but may not be less than 100% of the fair market value of the underlying Class B Common Stock on the date of grant. The exercise price of incentive stock options shall not be less than 110% of the fair market value on the date of grant if the optionee owns, directly or indirectly, stock possessing more than 10% of the voting power of all classes of our stock. For purposes of the 2020 Stock Incentive Plan, unless otherwise determined by the Compensation Committee, the fair market 30 Universal Health Services, Inc. 2023 Proxy Statement
Executive Compensation value of a share of Class B Common Stock as of any given date is the closing sale price per share reported on a consolidated basis for securities listed on the principal stock exchange or market on which the Class B Common Stock is traded on the date as of which such value is being determined or, if there is no sale on that day, then on the next day on which a sale was reported. Restricted Stock and Restricted Stock Units: The 2020 Stock Incentive Plan provides for the grant of shares or units of our Class B Common Stock to eligible personnel for a purchase price equal to par value. Shares of our Class B Common Stock could be granted under the 2020 Incentive Plan to any of our employees or consultants. Historically, our restricted grants have had a scheduled vesting period ranging from one to five years. Vesting conditions on shares or units issued under the 2020 Incentive Plan may consist of continuing employment for a specified period of time following the purchase date. Alternatively, or in addition, vesting may be tied to the satisfaction of specific performance objectives established by the Compensation Committee based upon any one or more of the business criteria used in determining the bonuses for our named executive officers, as mentioned above. We have the right to repurchase the shares for the same purchase price (par value) if specified vesting conditions are not met. The Compensation Committee believes restricted stock awards and restricted stock units, at times, can be effective in achieving our compensation objectives because it provides employees with a strong retention incentive and aligns the value of the award or unit with our stock price performance. The Compensation Committee may provide that Restricted Stock Awards and Restricted Stock Units shall earn dividends or dividend equivalents (payable in cash or additional shares, or a combination of cash and shares), however, dividends or dividend equivalents may not be paid with respect to any award or unit until vesting requirements are satisfied. Generally, holders of restricted stock and restricted stock units receive dividend equivalents which are subject to vesting in line with the underlying award to which they relate. We do not have any plan to select restricted stock award or restricted stock unit grant dates for our named executive officers in coordination with the release of material non-public information. 2022 Stock-Based Compensation Awards: To further enhance our equity awards program toward performance-based equity awards, as discussed below, in March of 2022, our CEO and NEOs, with the exception of Mr. Edward H. Sim who was hired in December, 2022, each received: (i) 50% of their annual target stock-based compensation awards in the form of options to purchase shares of our Class B Common Stock at the grant date market value, and; (ii) 50% of their annual target stock-based compensation awards in the form of performance-based restricted stock units that will be earned based on the three-year growth in our earnings before interest, taxes, depreciation and amortization, the impacts of other income/expense and net income attributable to noncontrolling interests, as compared to a range of pre-established three-year growth thresholds. On March 23, 2022, our Compensation Committee awarded to our named executive officers: • | | Stock options, issued at $143.81 representing the grant date value, which are scheduled to vest in four equal installments on the first, second, third and fourth anniversaries of the grant date and will expire on March 22, 2027, and; |
• | | Performance-based restricted stock units that will be earned based upon the achievement of a Target of adjusted net income per diluted share attributable to UHS of $9.14 or less, and Return on Capital of 8.7% or less) up to 250% of their annual cash incentive target award (based upon the achievement of a Target of adjusted net income per diluted share attributable to UHS of $10.95 or greater and Return on Capital of 10.5% or greater). Although the cash incentive formula for 2019 was unchanged from 2018’s cash incentive formula, the Targets have been adjusted, as necessary, to correlate to thepre-established specified range of target levels based on the three-year growth in our estimated 2019 adjusted net income per diluted share attributable to UHS, as publicly disclosed. On February 27, 2019, we publicly disclosed our 2019 estimated range of adjusted net income per diluted share attributable to UHS of $9.70 to $10.40. The 2019 Target of adjusted net income per diluted share attributable to UHS, which represented the approximate midpoint within the publicly disclosed range of our projected consolidated earnings per diluted share estimate for the year, was $10.05 per diluted share. The 2019 Return on Capital Target was 9.6%. In October of 2019, based upon our actual operating results experienced during the first nine months of 2019, we publicly disclosed a decrease to our previously disclosed estimated range of adjusted net income per diluted share attributable to UHS for 2019 (reduced the upper end of the range to $9.90 per diluted share from $10.40 per diluted share while the lower end of the range was adjusted to $9.60 per diluted share from $9.70 per diluted share); however, our annual incentive performance targets were not impacted by these publicly disclosed revisions. The revised estimated earnings guidance range for the full year of 2019, as publicly disclosed in October of 2019, assumed, among other things, no change during the fourth quarter of 2019 in the market value of shares of certain marketable securities held for investmentbefore interest, taxes, depreciation and classified as available for sale.
The divisional income targets consist of the projected aggregate pre-tax income for our Acute Care and Behavioral Health Services segments, net of deductions for the allocation of corporate overhead expenses and a charge for the estimated cost of capital. The actual divisional incomeamortization, and the targets generally exclude, amongimpacts of other things, amounts that may be nonrecurring or non-operational in nature or amounts that may be reflected in the current year financial statements that relate to prior years. The divisional income targets may be adjusted to include the impact of acquisitions or divestitures made during the year, if material.
For 2019, to the extent that the actual divisional results exceeded the target, Mr. Pember was entitled to 75% of the following (as applied to his annual base salary) as the portion of his annual bonus that is based upon his divisional income target: (i) 25% if actual results meet the divisional income target; (ii) 50% if actual results exceed the divisional income target by the greater of 5% or $10 million; (iii) 75% if actual results exceed the divisional income target by the greater of 10% or $20 million, and; (iv) 100% if actual results exceed the divisional income target by the greater of 15% or $30 million.
In determining the corporateincome/expense and divisional performance criteria, various factors are considered, including the projected revenue and earnings growth over the prior year. Since the value received by stockholders is measured, in large part, by an increase in stock price, which is in turn typically influenced by increases in revenues and earnings, our performance criteria are established at reasonably aggressive levels to encourage the attainment of our financial objectives which, if accomplished, may result in an increase to our stock price and increased value to stockholders. As mentioned above, the corporate performance criteria are established annually
and the Target of adjusted net income per diluted share attributable to UHS directly correlates to our annual earnings guidance that is typically publicly disclosed by us during the first quarter of each year. The divisional performance criteria are also established annually and represent each division’s respective portion of the corporate performance criteria.
The actual cash incentives awarded for 2019 (which were based upon corporate performance criteria) were based upon the achievement of 92% of the target, as determined by the Compensation Committee on March 18, 2020, based upon our 2019 actual operating results. During 2019, our adjusted net income per diluted share attributable to UHS was $9.99, as compared to a target of $10.05 per diluted share. This adjusted net income per diluted share attributable to UHS for 2019 was publicly disclosed and reconciled to our reported 2019 net income per diluted share attributable to UHS of $9.13, on the Supplemental Schedule (as discussed above) included with our financial results for the year ended December 31, 2019, as filed on Form 8-K on February 26, 2020. The Return on Capital was 9.5% for 2019, as compared to a target of 9.6%. The Return on Capital is calculated by dividing our annual adjusted net income attributable to UHS by the consolidated average net capital. noncontrolling interests.
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The number of stock options and target awards of performance-based restricted stock units awarded to each of our named executive officers on March 23, 2022 were as follows: • | | For 2019, Mr. Pember’s divisional income target was approximately $59 million. The divisional income target consists of the projected aggregate pre-tax income for our Acute Care Services segment, net of deductions for the allocation of corporate overhead expenses and a charge for the estimated cost of capital. The actual divisional income as calculated, was approximately $61 million. If applicable, the divisional income target or actual divisional income was adjusted for certain amounts that may be nonrecurring or non-operational in nature or amounts that may be reflected in the current year financial statements that relate to prior years. Since the actual divisional income compared favorably to the target ($61 million actual divisional income exceeded the $59 million divisional income target by approximately $2 million or 3%), Mr. Pember was entitled to 25% of the portion of his bonus (75%) that was based upon the achievement of the divisional income target.
As indicated above, Mr. Peterson was hired by the Company in September, 2019 and therefore was not eligible for a 2019 annual incentive bonus.
For each of our named executive officers, the following table sets forth the actual 2019 annual incentive bonus awarded as well as the pre-established ranges of potential payouts under our non-equity incentive plan.
| | | 2019 Non-Equity Incentive Plan Awards | | Name | | Title | Actual | | | Minimum | | Target | | Maximum | | Alan B. Miller | | Chief Executive Officer and Chairman of the Board | $ | 1,564,060 | | | $ | 85,003 | | $ | 1,700,065 | | $ | 4,250,163 | | Marc D. Miller | | President | $ | 493,540 | | | $ | 26,823 | | $ | 536,457 | | $ | 1,341,142 | | Steve G. Filton | | Executive Vice President and Chief Financial Officer | $ | 304,031 | | | $ | 16,523 | | $ | 330,469 | | $ | 826,173 | | Marvin G. Pember | | Executive Vice President and President-Acute Care Division | $ | 209,840 | | | $ | 4,336 | | $ | 216,777 | | $ | 737,041 | | Matthew J. Peterson (not eligible in 2019) | | Executive Vice President and President-Behavioral Health Division | $ | 0 | | | $ | 0 | | $ | 0 | | $ | 0 | |
The performance goals related to the Executive Incentive Plan, as outlined above, are generally based upon the achievement of our business plan financial objectives. Performance goals are established at reasonably aggressive levels to encourage and motivate executive performance and attainment of our financial objectives. At the time the Compensation Committee approved the Executive Incentive Plan for fiscal year 2019, we believed that the performance goals were attainable, but not certain. Since the achievement of the corporate performance criteria of 92% of target for each of 2019 and 2018, we believe that our system demonstrates the performance-oriented nature of payouts over time.
For a further description of the cash incentives and other elements of compensation granted to our named executive officers for 2019, 2018 and 2017, please refer to the Summary Compensation Table in this Proxy Statement.
Long-Term Incentives
The Compensation Committee believes that the grant of equity-based, long-term compensation, primarily in the form ofMarc D. Miller - 104,001 stock options and 33,058 performance-based restricted shares, to our named executive officers is appropriate to attract and retain such individuals and to motivate them to enhance stockholder value.stock units.
Further, long-term incentive awards reward individuals for their performance and achievement of business goals. The Compensation Committee believes that our best interests will be advanced by enabling our named executive officers, who are responsible for our management, growth and success, to receive compensation in the form of long-term incentive awards that may increase in value in conjunction with an increase in the value of our common stock.
As is the case with respect to base salaries, a number of factors are taken into account in calibrating grants of long-term incentive awards, including an individual’s performance in light of his or her position, responsibilities and contribution to our financial performance. In addition, the Compensation Committee takes into account an individual’s potential contribution to our growth and productivity. In determining appropriate long-term incentive grants, there is no other predetermined formula, factors or specified list of criteria that is followed.
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• | | For a description of the long-term incentive awards granted to our named executive officers for 2019, please read the Summary Compensation TableAlan B. Miller - 54,691 stock options and the Grants of Plan-Based Awards Table included in this Proxy Statement.17,384 performance-based restricted stock units.
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• | | Stock options. Our Third AmendedSteve G. Filton - 26,471 stock options and Restated 2005 Stock Incentive Plan (the “Stock Incentive Plan”), as amended in 2008, 2011, 20158,414 performance-based restricted stock units.
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• | | Marvin G. Pember - 25,213 stock options and 2017, provides for the issuance of8,014 performance-based restricted stock units (these performance based-restricted stock units were canceled upon Mr. Pember’s retirement on December 31, 2022). |
• | | Matthew J. Peterson - 21,745 stock options to purchase sharesand 6,912 performance-based restricted stock units. |
31 Universal Health Services, Inc. 2023 Proxy Statement
Executive Compensation In January, 2023, related to the commencement of his employment in December, 2022, Mr. Edward H. Sim was awarded 50,000 stock options, issued at $145.65 representing the grant date value. The stock options are scheduled to vest ratably on each of the first four anniversaries of the grant date and are scheduled to expire on the fifth anniversary. Mr. Marvin G. Pember retired from the Company effective as of December 31, 2022. Pursuant to his Separation Agreement and General Release: (i) all of Mr. Pember’s performance based restricted stock units awarded on March 23, 2022 with a grant date fair value of $1.2 million, which were scheduled to be earned based on the three-year growth in certain Company financial metrics, were canceled on December 31, 2022, and; (ii) all of Mr. Pember’s unvested stock options granted prior to his termination date will continue to vest until April 1, 2023 and all stock options scheduled to remain unvested as of April 1, 2023 were canceled as of December 31, 2022, (including 75% of options awarded on March 23, 2022). In determining the number of options to award to our named executive officers, the Compensation Committee reviewed the compensation data and competitive performance data prepared by FW Cook in early 2022, including stock-based compensation, and reviewed historical company practices with respect to stock option and long-term incentive awards. The Committee also considered individual performance in light of a named executive officer’s position, responsibilities and contribution to our financial performance as well as his potential contribution to our growth and productivity. 2021 Stock-Based Compensation Awards After giving consideration to comments received from investors that our equity award program could be enhanced by including performance-based equity awards, and after undertaking a comprehensive review with our third-party compensation consultant (FW Cook) to identify potential performance-based equity award design alternatives, we decided to modify our stock option award program in 2020. As determined by our Compensation Committee, although not required by the terms of the 2020 Stock Incentive Plan, that a portion of the options awarded to the named executive officers of the Company will be exercisable at 110% of the fair market value on the date of grant. In March of 2021 and March of 2020, we have delivered 50% of the award value to our named executive officers, including Mr. Alan B. Miller (our Chief Executive Officer prior to January 1, 2021) and Mr. Marc D. Miller (our Chief Executive Officer effective as of January 1, 2021), in stock options with a premium exercise price of 10% above grant date market value. Deferred Compensation Our Deferred Compensation Plan, which is subject to the applicable provisions of Internal Revenue Code Section 409A, provides that eligible employees may elect to defer a portion of their base salary and bonus award into deferred compensation accounts that accrue earnings based upon the selection of available investment options. Under the Deferred Compensation Plan, an employee is deemed eligible if their base compensation for 2022 was $135,000 or higher and they are performing duties in a qualified position. The base compensation threshold is adjusted from time-to-time for cost-of-living increases. Pursuant to the terms of the Deferred Compensation Plan, the minimum annual amount that can be deferred is 1% of an employee’s base salary. No more than 50% of an employee’s base salary or 95% of an employee’s annual bonus may be deferred under the Deferred Compensation Plan in any calendar year. Employees may allocate a portion of their deferred compensation to be distributed in a lump sum or installments to begin at retirement or a scheduled distribution date. The available investment options consist of certain mutual funds which include: (i) conservative (e.g. money markets or bonds); (ii) moderately conservative (e.g. balanced funds), and; (iii) aggressive (e.g. domestic and international equity). Our obligation to make payments of amounts credited to participants’ deferred compensation accounts is a general unsecured obligation. In addition, under the Deferred Compensation Plan, we may make discretionary contributions on behalf of an eligible employee. Since inception of the Deferred Compensation Plan, we have not made any discretionary contributions on behalf of employees. Two of our named executive officers deferred a portion of their base salary and/or bonus paid during 2022 to the Deferred Compensation Plan. The Compensation Committee believes that, by offering an alternative savings vehicle for our named executive officers, the Deferred Compensation Plan supports our objectives to attract, retain and motivate talented personnel. For a further description of the Deferred Compensation Plan, please refer to the Nonqualified Deferred Compensation table and the narrative discussion included in this Proxy Statement. 32 Universal Health Services, Inc. 2023 Proxy Statement
Executive Compensation Retirement Benefits Our retirement benefits consist of our Executive Retirement Income Plan, Supplemental Executive Retirement Income Plan and a 401(k) plan. These plans are designed in combination to provide an appropriate level of replacement income upon retirement. The Compensation Committee believes that these retirement benefits provide a balanced and competitive retirement program and support our objectives to attract, retain and motivate talented personnel. Supplemental Executive Retirement Income Plan (“SERIP”). In July 2018, the Board of Directors adopted the SERIP. Pursuant to the terms of this plan, a select group of management or other highly compensated employees may be designated as plan participants. Our SERIP, which is subject to the applicable provisions of Internal Revenue Code Section 409A, provides eligible employees with annual employer contributions which are entirely at the Company’s discretion. Generally, each annual contribution vests on the earlier of: (i) the 5th anniversary of the date of funding to the participant’s account, or; (ii) the participant attaining the qualified age of retirement (either age 62 or 65, as stipulated in the SERIP). The SERIP also provides for discretionary alternative vesting schedules for certain supplemental discretionary contributions made on an individual basis. Upon attaining the plan’s qualified age of retirement, distributions are paid in 10 annual installments to the participant. Distributions due to events other than retirement are paid in a lump sum. Our obligation to fund payments to participants’ accounts pursuant to the SERIP is a general unsecured obligation. Four of our named executive officers are participants in the SERIP. In 2018, upon commencement of the SERIP, certain participants of the ERIP, who had not yet approached their qualified age of retirement, were given the option to remain in the ERIP or convert their participation into the SERIP. ERIP participants that elected to convert to the SERIP have been provided with an unfunded, lump sum conversion balance that was credited to the participant’s SERIP account. The unfunded ERIP conversion balances transferred to the SERIP, which were computed based upon the participant’s 2017 salary and will remain permanently unchanged after conversion, are payable over 60 monthly installments, if the participant attains their qualified age of retirement, as previously stipulated in the ERIP. If the participant does not attain their qualified age of retirement, the ERIP conversion balance is forfeited unless the Board of Directors, in its full discretion, determines otherwise. For ERIP participants who elected to convert to the SERIP, their participation in the ERIP was terminated upon conversion and no future benefits will be earned pursuant to the ERIP. SERIP participants who converted from the ERIP are entitled to future benefits pursuant to the terms of the SERIP. Executive Retirement Income Plan (“ERIP”). In October 1993, the Board of Directors adopted the ERIP, which was subsequently closed to new participants effective January 1, 2015. Pursuant to the terms of the ERIP, certain management or other highly compensated employees, who had been previously designated as plan participants by our Board of Directors prior to December 31, 2014, and who had completed at least 10 years of active employment with us, may receive retirement income benefits. Subject to certain conditions, the monthly benefit is payable to a participant who retires after he or she reaches age 62 (applicable to participants added to the ERIP before 2008) or age 65 (applicable to participants added to the ERIP after January 1, 2008). The benefit is equal to 3% of the employee’s average monthly base salary over the three years preceding retirement multiplied by the number of qualified years (not to exceed 10) of the participant’s employment with us. Payment of the benefit will be made in 60 monthly installments following the participant’s retirement date. If a participant’s employment with us is terminated prior to their qualified age of retirement, no ERIP benefits will be payable unless the Board of Directors, in its full discretion, determines otherwise. In 2018, certain participants were transferred to the SERIP and were provided with an unfunded, lump sum conversion balance pursuant to the SERIP, as discussed above. One of our named executive officers remains a participant in the ERIP. For a further description of the SERIP and ERIP, please refer to the Pension Benefits included in this Proxy Statement. 401(k) Plan. We maintain a 401(k) plan for all employees, including our named executive officers, as an additional source of retirement income. Pursuant to the 401(k) plan, in 2022, we made matching contributions (subject to highly compensated employee limits set by the 33 Universal Health Services, Inc. 2023 Proxy Statement
Executive Compensation Internal Revenue Code) to the 401(k) plan of approximately $72 million. All of the named executive officers with the exception of Mr. Edward H. Sim, participated in the 401(k) plan in 2022. Accordingly, we made matching contributions equal to $9,150 to the 401(k) plan for each of the participating named executives. Benefits Our named executive officers are eligible to participate in the benefit plans generally available to all of our employees, which include health, dental, life insurance, vision and disability plans, all of which the Compensation Committee believes are commensurate with plans of other similarly situated public companies in the hospital management industry. Company Aircraft. We have a partial ownership interest in a fixed wing aircraft that is available for business purpose use by members of our management team, including our named executive officers, and for personal use by Messrs. Marc Miller and Alan Miller. When the aircraft is utilized for personal purposes by either individual and/or their family members, the incremental costs incurred, including the regular hourly charges, variable fuel charges and associated fees and taxes, are directly reimbursed to us by Messrs. Marc Miller and/or Alan Miller and therefore no imputed amounts are included in the Summary Compensation Table. Automobile. Commencing in 2022, Mr. Marc D. Miller was provided with an auto allowance as reflected on the Summary Compensation Table in “All other compensation”. During 2019, we purchased a new vehicle which is utilized by Mr. Alan B. Miller. Included in the Summary Compensation Table in “All other compensation” are the amounts related to his personal use of this vehicle. Reimbursement of Relocation Expenses. In the normal course of business, in an effort to satisfy our staffing needs with high-quality personnel and/or support the career development of an employee by enabling them to assume a position of broader scope and complexity, we may need to place an executive in a position in a geographic location which differs from that in which the individual resides. The relocation benefits for our executives are patterned on standard industry practices and are competitive in design. The provisions for relocation benefits are the same for several of the top layers of management and consistently administered. Included in the relocation benefits are reimbursements or direct payment to vendors for expenses that include items like a short duration house hunting trip, movement of household goods and personal items, short duration of interim living expenses and certain closing costs for the sale and purchase of a house. Relocation reimbursement that is taxable to the individual is typically grossed-up to cover the resulting incremental income tax expense. During 2020, we paid certain relocation expenses, including income tax gross-ups, for Mr. Peterson as disclosed on the Summary Compensation Table contained in this proxy statement. Other Perquisites. From time to time, we make tickets to cultural and sporting events available to our employees, including our named executive officers, for business purposes. If not utilized for business purposes, the tickets are made available to our employees, including our named executive officers, for personal use. Split-Dollar Life Insurance Agreements.In December 2010, our Board of Directors approved the Company’s entering into supplemental life insurance plans and agreements on the lives of our Executive Chairman and his wife. As a result of these agreements, as amended in October 2016, based on actuarial tables and other assumptions, during the life expectancies of the insureds, we would pay approximately $28 million in premiums, and certain trusts owned by our Executive Chairman, would pay approximately $9 million in premiums. Based on the projected premiums mentioned above, and assuming the policies remain in effect until the death of the insureds, we will be entitled to receive death benefit proceeds of no less than approximately $37 million representing the $28 million of aggregate premiums paid by us as well as the $9 million of aggregate premiums paid by the trusts. In connection with these policies, we paid approximately $1.0 million in premium payments during each of 2022 and 2021. Based on these projections, which are subject to the achievement of certain investment income and life expectancy assumptions, the total economic pre-tax cost to the Company (which includes the projected cost of capital net of the income resulting from the Company’s expected future receipt of the $9 million of premiums paid by the Trusts) would be approximately $10 million over the life expectancies of the insureds. We estimate that our share of the premium payments due on these policies will approximate $900,000 in 2023 and decrease annually to approximately $200,000 over the life expectancies of the insureds. Our aggregate premium payments (as well as the Trust’s) are expected to be repaid to us utilizing the death benefit proceeds. 34 Universal Health Services, Inc. 2023 Proxy Statement
Executive Compensation The Compensation Committee has determined to offer the above-described fringe benefits and perquisites in order to attract and retain our named executive officers by offering compensation opportunities that are competitive. In determining the total compensation payable to our named executive officers, for a given fiscal year, the Compensation Committee considers such fringe benefits and perquisites. However, with the exception of the above-mentioned split dollar life insurance agreements related to Mr. Alan B. Miller, given the fact that such other fringe benefits and perquisites, which are available to our named executive officers, represent a relatively insignificant portion of their total compensation, they do not materially influence the decisions made by the Compensation Committee with respect to other elements of each individual’s total compensation. For a further description of the fringe benefits and perquisites received by our named executive officers during 2022, please refer to the All Other Compensation table included in this Proxy Statement. Rewards/Compensation Risk Analysis: As part of its oversight of the Company’s executive compensation program, the Compensation Committee considers the impact of the Company’s executive compensation program, and the incentives created by the compensation awards that it administers, on the Company’s risk profile. In addition, the Company reviews all of its compensation policies and procedures, including the incentives that they create and factors that may reduce the likelihood of excessive risk taking, to determine whether they present a significant risk to the Company. The review found that there were no excessive risks encouraged by the Company’s reward programs and the rewards programs do not produce payments that have a material impact on the financial performance of the organization. Approximately 850 employees (including the named executive officers) of our approximate 59,660 full-time employees in the U.S. and U.K. (comprising approximately 1.4% of our full-time employees) have incentive plans that entitle those individuals to larger bonus awards if profitability increases. However, although the plans are based on profitability, the bonus awards for these employees are capped at specific award levels (typically at 125% or less of base salary). Therefore, should our profitability increase, even by significant amounts, we do not believe the additional aggregate bonus awards would have a material unfavorable impact on our future results of operations Summary The foregoing discussion describes the compensation objectives and policies that were utilized with respect to our named executive officers during 2022. In the future, as the Compensation Committee continues to review each element of the executive compensation program with respect to our named executive officers, the objectives of our executive compensation program, as well as the methods that the Compensation Committee utilizes to determine both the types and amounts of compensation to award to our named executive officers, may change. Compensation Committee Report The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis with management; and based on the review and discussions, the Compensation Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this Proxy Statement. COMPENSATION COMMITTEE Eileen C. McDonnell (Chairperson) Elliot J. Sussman, M.D. Compensation Committee Interlocks and Insider Participation The Compensation Committee of the Board of Directors is currently composed of Eileen C. McDonnell and Elliot J. Sussman, M.D. All the members of the Compensation Committee are independent directors and no member has ever been one of our officers or employees or had a relationship with us that required disclosure. 35 Universal Health Services, Inc. 2023 Proxy Statement
SUMMARY COMPENSATION TABLE The following table sets forth certain compensation information for our Chief Executive Officer, our Chief Financial Officer and the other most highly compensated executive officers for services rendered to UHS and its subsidiaries during the past three fiscal years. We refer to these officers collectively as our named executive officers: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Name and principal position | | Year | | | Salary(6.) ($) | | | Bonus ($) | | | Grant Date Fair Value Stock Awards(1.) ($) | | | Grant Date Fair Value Option Awards(2.) ($) | | | Non-Equity Incentive Plan Compensation(3.) ($) | | | Change in Pension Value and Nonqualified Deferred Compensation Earnings(4.) ($) | | | All other compensation(10.) ($) | | | Total ($) | | | | | | | | | | | | Marc D. Miller, Chief Executive Officer and President(7.) | | | 2022 | | | $ | 1,300,050 | | | $ | 0 | | | $ | 4,754,071 | | | $ | 4,754,007 | | | $ | 0 | | | $ | 66,003 | | | $ | 45,845 | | | $ | 10,919,976 | | | | 2021 | | | | 1,100,042 | | | | 0 | | | | 0 | | | | 10,104,427 | | | | 2,750,105 | | | | 52,002 | | | | 14,366 | | | | 14,020,942 | | | | 2020 | | | | 823,020 | | | | 0 | | | | 0 | | | | 1,458,238 | | | | 0 | | | | 49,519 | | | | 15,220 | | | | 2,345,997 | | | | | | | | | | | | Alan B. Miller, Executive Chairman(7.) | | | 2022 | | | $ | 1,000,038 | | | $ | 0 | | | $ | 2,499,993 | | | $ | 2,499,990 | | | $ | 0 | | | $ | 0 | | | $ | 1,138,603 | | | $ | 7,138,624 | | | | 2021 | | | | 1,000,038 | | | | 1,000,000 | (5.) | | | — | | | | 10,104,427 | | | | 0 | | | | 0 | | | | 1,092,036 | | | | 13,196,501 | | | | 2020 | | | | 1,446,473 | | | | 1,000,000 | (5.) | | | 1,000,052 | | | | 8,603,615 | | | | 0 | | | | 44,826 | | | | 1,151,248 | | | | 13,246,214 | | | | | | | | | | | | Steve G. Filton, Executive Vice President and Chief Financial Officer | | | 2022 | | | $ | 786,574 | | | $ | 0 | | | $ | 1,210,017 | | | $ | 1,210,020 | | | $ | 0 | | | $ | 42,881 | | | $ | 18,612 | | | $ | 3,268,104 | | | | 2021 | | | | 714,681 | | | | 0 | | | | 0 | | | | 3,168,736 | | | | 893,351 | | | | 41,232 | | | | 18,162 | | | | 4,836,162 | | | | 2020 | | | | 652,613 | | | | 0 | | | | 0 | | | | 1,020,766 | | | | 0 | | | | 39,656 | | | | 18,043 | | | | 1,731,078 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Marvin G. Pember, Former Executive Vice President and President, Acute Care(8.) | | | 2022 | | | $ | 809,364 | | | $ | 0 | | | $ | 1,152,493 | | | $ | 1,152,516 | | | $ | 0 | | | $ | 44,194 | | | $ | 18,011 | | | $ | 3,176,578 | | | | 2021 | | | | 736,568 | | | | 0 | | | | 0 | | | | 3,180,879 | | | | 782,604 | | | | 42,907 | | | | 14,134 | | | | 4,757,092 | | | | 2020 | | | | 679,177 | | | | 0 | | | | 0 | | | | 1,020,766 | | | | 0 | | | | 41,621 | | | | 17,549 | | | | 1,759,113 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Matthew J. Peterson, Executive Vice President and President, Behavioral Health | | | 2022 | | | $ | 666,922 | | | $ | 0 | | | $ | 994,015 | | | $ | 993,990 | | | $ | 0 | | | $ | 37,402 | | | $ | 19,216 | | | $ | 2,711,545 | | | | 2021 | | | | 623,364 | | | | 0 | | | | 0 | | | | 2,724,166 | | | | 545,444 | | | | 36,408 | | | | 18,351 | | | | 3,947,733 | | | | 2020 | | | | 576,397 | | | | 0 | | | | 0 | | | | 729,119 | | | | 0 | | | | 10,247 | | | | 150,492 | | | | 1,466,255 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Edward H. Sim, Executive Vice President and President, Acute Care(9.) | | | 2022 | | | $ | 59,120 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 59,120 | | | | 2021 | | | | N/A | | | | N/A | | | | N/A | | | | N/A | | | | N/A | | | | N/A | | | | N/A | | | | N/A | | | | 2020 | | | | N/A | | | | N/A | | | | N/A | | | | N/A | | | | N/A | | | | N/A | | | | N/A | | | | N/A | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(1) | In 2022, performance-based restricted stock units were issued under our Class B Common Stock at an exercise price equal to the fair market value on the date of grant. The Stock Incentive Plan is intended to provide a flexible vehicle through which we may offer equity based compensation incentives to our named executive officers and other eligible personnel in support of our compensation objectives. Assuming that the stockholders approve the 2020 Omnibus Stock and Incentive Plan (as described in Proposal No. 2 above) at the Annual Meeting, no additionalPlan. In 2022, our CEO and NEOs each received 50% of their annual target stock-based compensation awards will be granted under the Stock Incentive Plan and the reserve for shares remaining for future issuance will be cancelled at that time. If our stockholders do not approve the 2020 Omnibus Stock and Incentive Plan, the Stock Incentive Plan will remain in effect in its current form.
Awards under the Stock Incentive Plan may be in the form of options to purchase shares of Class B Common Stock (including options intended to qualify as “incentiveperformance-based restricted stock options” within the meaning of Section 422units. The 2022 values represent 100% of the Codetarget, with a grant date value of $143.81 per unit. The performance-based restricted stock units will be based upon achievement of a pre-established specified range of target levels based on the three-year growth in our earnings before interest, taxes, depreciation and options which do not qualify as “incentive stock options”) and stock appreciation rights (“SARs”). Awards may be granted to our present or future employees, our affiliates and our directors and consultants who are not employees. To date, no SARs have been granted.
Typically, option awards are granted by the Compensation Committee on specific dates that are scheduled in advance, which generally coincide with regularly scheduled meetings of the Compensation Committeeamortization, and the Boardimpacts of Directors. There is no separate policy with respectother income/expenses and net income attributable to the timing of option awardsnoncontrolling interests. Prior to our named executive officers. Typically, option awards are granted to our named executive officers at the same time as option awards are granted to our other employees. In certain circumstances, such as new hires or promotions, option awards are granted separately by the Compensation Committee or ourhis transition from Chief Executive Officer and Chief Financial Officer who are duly authorized by the Compensation Committee.
Subject to the provisionsExecutive Chairman of the Stock Incentive Plan, the Compensation Committee has the responsibility and full power and authority to select the persons to whom awards will be made, to prescribe the terms and conditions of each award and make amendments thereto, to construe, interpret and apply the provisions of the Stock Incentive Plan and of any agreement or other instrument evidencing an award and to make any and all determinations and take any and all other actions as it deems necessary or desirable in order to carry out the terms of the Stock Incentive Plan.
Stock options have such vesting and other terms and conditions as the Compensation Committee, acting in its discretion, may determine. Generally, grants of stock options vest in equal amounts over four years, are scheduled to expire on the fifth anniversary of the date of grant and, unless otherwise determined, employees must be employed by us for such options to vest. We do not have any plan to select option grant dates for our named executive officers in coordination with the release of material non-public information. The exercise price per share of Class B Common Stock covered by an option may not be less than 100% of the fair market value of the underlying Class B Common Stock on the date of grant. For purposes of the Stock Incentive Plan, unless otherwise determined by the Compensation Committee, the fair market value of a share of Class B Common StockBoard, effective as of any given date is the closing sale price per share reported on a consolidated basis for securities listed on the principal stock exchange or market on which the Class B Common Stock is traded on the dateJanuary 1, 2021, pursuant to his 2013 employment agreement, as of which such value is being determined or, if there is no sale on that day, then on the next day on which a sale was reported.
In March of 2019, Mr.amended in November, 2018, Alan Miller made recommendations to our Compensation Committee with respect to stock option awards to our named executive officers (except for himself) and other eligible employees. The number of stock options awarded to each of our named executive officers during March of 2019 were as follows: Alan B. Miller (590,000); Marc D. Miller (100,000); Steve G. Filton (70,000), and; Marvin G. Pember (70,000). In determining the number of options to award to our named executive officers, the Compensation Committee considered Mr. Alan Miller’s recommendations and took into account individual performance in light of a named executive officer’s position, responsibilities and contribution to our financial performance as well as his or her potential contribution to our growth and productivity. In addition, the Compensation Committee also reviewed and considered the compensation data and competitive performance data prepared by Pay Governance LLC in early 2019, including stock-based compensation, and reviewed historical company practices with respect to stock option and long-term incentive awards. ). Additionally, as a newly hired executive officer, on September 18, 2019, Mr. Peterson was awarded 50,000 stock options.
Restricted Stock Awards. The Amended and Restated 2010 Employees’ Restricted Stock Purchase Plan (the “Restricted Stock Plan”), which is administered by the Compensation Committee, provides for the grant of shares of our Class B Common Stock to eligible personnel for a purchase price equal to par value. Shares of our Class B Common Stock may be granted under the Restricted Stock Plan to any of our employees or consultants. Historically, our restricted grants have had a scheduled vesting period ranging from one to five years.
Assuming that the stockholders approve the 2020 Omnibus Stock and Incentive Plan (as described in Proposal No. 2 above) at the Annual Meeting, no additional awards will be granted under the Restricted Stock Plan and the reserve for shares remaining for future issuance will be cancelled at that time. If our stockholders do not approve the 2020 Omnibus Stock and Incentive Plan, the Restricted Stock Plan will remain in effect in its current form.
Vesting conditions on shares issued under the Restricted Stock Plan may consist of continuing employment for a specified period of time following the purchase date. Alternatively, or in addition, vesting may be tied to the satisfaction of specific performance objectives established by the Compensation Committee based upon any one or more of the business criteria used in determining the bonuses for our named executive officers, as mentioned above. We have the right to repurchase the shares for the same purchase price (par value) if specified vesting conditions are not met.
The Compensation Committee believes restricted stock awards, at times, can be effective in achieving our compensation objectives because it provides employees with a strong retention incentive and aligns the value of the award with our stock price performance. Additionally, cash dividends are paid on all outstanding awards of restricted stock as an additional element of compensation and to provide employees incentives to sustain or increase our performance. We do not have any plan to select restricted stock award grant dates for our named executive officers in coordination with the release of material non-public information. Mr. Alan Miller was entitled to an annual grant of restricted stock having a minimum value of $1.0 million. There are no such awards stipulated in Alan B. Miller’s employment agreement dated December 23, 2020, which became effective on January 1, 2021. Amount reflected in 2020 represents the grant date value of an award made to Alan B. Miller that year which vested in 2022.
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(2) | In 2022, our CEO and NEOs each received 50% of their annual target stock-based compensation awards in the form of options to purchase shares of our Class B Common Stock at the grant date market value. Amounts in 2022 represent the aggregate fair value of options granted at the market price on the date of grant (grant date fair value of $45.71). Amounts in 2021 represent the aggregate fair value of options granted at the market price on the date of grant (grant date fair value of $40.42) and options granted at 110% of the market price on the date of grant (grant date fair value of $35.98). Options granted in 2022 and 2021 were awarded pursuant to our 2020 Omnibus Stock and Incentive Plan. Amounts in 2020 represent the aggregate fair value of options granted at the market price on the date of grant (grant date fair value of $14.58) and options granted at 110% of the market price on the date of grant (grant date fair value of $12.31). All options granted in 2020 were awarded pursuant to our Amended and Restated 2005 Stock Incentive Plan. For the assumptions used for the fair value valuations, please refer to Note 5—Common Stock, to the Consolidated Financial Statements included in our Annual Report on Form 10-K for the years ended December 31, 2022, 2021 and 2020. |
36 Universal Health Services, Inc. 2023 Proxy Statement
Summary Compensation Table (3) | No cash incentive bonuses were paid to any of our executive officers for the year ended December 31, 2022 since the minimum thresholds of the established corporate and divisional performance goals were not achieved and Mr. Alan B. Miller received no discretionary bonus award for the year. The 2021 and 2020 years reflect the dollar value of annual bonuses earned during each of those years pursuant to the terms of our Executive Incentive Plan. In March of 2022 (for 2021) our Compensation Committee approved annual cash incentive bonuses which, as a percentage of each individual’s annual base salary, were as follows: Marc D. Miller 250%; Steve G. Filton 125%; Marvin G. Pember 106%, and; Matthew J. Peterson 88%. As part of his compensation in connection with his role as Executive Chairman of the Board of Directors, which was effective as of January 1, 2021, Mr. Alan B. Miller did not receive an annual incentive bonus pursuant to the Executive Incentive Plan. However, in March, 2022, our Board of Directors awarded Mr. Alan B. Miller a $1.0 discretionary bonus for 2021. No cash incentive bonuses were paid to any of our executive officers pursuant to the Executive Incentive Plan for the year ended December 31, 2020 as a result of the COVID-19 pandemic and its material unfavorable impact on our results of operations. |
(4) | These amounts represent the aggregate change in pension value for each named executive in 2022, 2021 and 2020 pursuant to the Executive Retirement Income Plan or the Supplemental Executive Retirement Income Plan, as disclosed herein. These amounts are considered service costs. The amounts in this column do not reflect compensation deferrals pursuant to our Nonqualified Deferred Compensation Plan since there are no contributions or benefits provided by us in connection with the plan. |
(5) | In March, 2022 (for 2021), our Compensation Committee awarded a discretionary bonus of $1.0 million during 2019to Mr. Alan B. Miller. Prior to his transition from Chief Executive Officer to Executive Chairman of the Board (effective as of January 1, 2021), pursuant to his 2013 employment agreement, with the Company, as amended in November, 2018. Cash Awards. Mr.2018, Alan B. Miller was entitled to a minimum annual cash award of $1$1.0 million during 2019 pursuant to hisfor 2020. There are no such awards stipulated in Alan B. Miller’s employment agreement with the Company, as amendeddated December 23, 2020, which became effective on January 1, 2021.
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(6) | In June of 2020, in November, 2018. Deferred Compensation
Our Deferred Compensation Plan, which is subjectresponse to the applicable provisions of Internal Revenue Code Section 409A, provides that eligible employees may elect to defer a portion of their base salary and bonus award into deferred compensation accounts that accrue earnings based upon the selection of available investment options. Under the Deferred Compensation Plan, an employee is deemed eligible if their base compensation for 2019 was $125,000 or higher and they are performing duties in a qualified position. The base compensation threshold is adjusted from time-to-time for cost-of-living increases. Pursuant to the terms of the Deferred Compensation Plan, the minimum annual amount that can be deferred is $2,000. No more than 50% of an employee’s base salary or 95% of an employee’s annual bonus may be deferred under the Deferred Compensation Plan in any calendar year. Employees may allocate a portion of their deferred compensation to be distributed in a lump sum or installments to begin at retirement or a scheduled distribution date. The available investment options consist of certain mutual funds which include: (i) conservative (e.g. money markets or bonds); (ii) moderately conservative (e.g. balanced funds), and; (iii) aggressive (e.g. domestic and international equity).
Our obligation to make payments of amounts credited to participants’ deferred compensation accounts is a general unsecured obligation. In addition, under the Deferred Compensation Plan, we may make discretionary contributions on behalf of an eligible employee. Since inception of the Deferred Compensation Plan, we have not made any discretionary contributions on behalf of employees. Three of our named executive officers deferred a portion of their base salary and/or bonus paid during 2019 to the Deferred Compensation Plan. The Compensation Committee believes that, by offering an alternative savings vehicle for our named executive officers, the Deferred Compensation Plan supports our objectives to attract, retain and motivate talented personnel.
For a further description of the Deferred Compensation Plan, please refer to the Nonqualified Deferred Compensation table and the narrative discussion included in this Proxy Statement.
Retirement Benefits
Our retirement benefits consist of our Executive Retirement Income Plan, Supplemental Executive Retirement Income Plan and a 401(k) plan. These plans are designed in combination to provide an appropriate level of replacement income upon retirement. The Compensation Committee believes that these retirement benefits provide a balanced and competitive retirement program and support our objectives to attract, retain and motivate talented personnel.
Supplemental Executive Retirement Income Plan (“SERIP”). In July 2018, the Board of Directors adopted the SERIP. Pursuant to the terms of this plan, a select group of management or other highly compensated employees may be designated as plan participants. Our SERIP, which is subject to the applicable provisions of Internal Revenue Code Section 409A, provides eligible employees with annual employer contributions which are entirely at the Company’s discretion. Generally, each annual contribution vests on the earlier of: (i) the 5th anniversary of the date of funding to the participant’s account, or; (ii) the participant attaining the qualified age of retirement (either age 62 or 65, as stipulated in the SERIP). The SERIP also provides for discretionary alternative vesting schedules for certain supplemental discretionary contributions made on an individual basis. Upon attaining the plan’s qualified age of retirement, distributions are paid in 10 annual installments to the participant. Distributions due to events other than retirement are paid in a lump sum. Our obligation to fund payments to participants’ accounts pursuant to the SERIP is a general unsecured obligation. Four of our named executive officers are participants in the SERIP.
In 2018, upon commencement of the SERIP, certain participants of the ERIP, who had not yet approached their qualified age of retirement, were given the option to remain in the ERIP or convert their participation into the SERIP. ERIP participants that elected to convert to the SERIP have been provided with an unfunded, lump sum conversion balance that was credited to the participant’s SERIP account. The unfunded ERIP conversion balances transferred to the SERIP, which were computed based upon the participant’s 2017 salary and will remain permanently unchanged after conversion, are payable over 60 monthly installments, if the participant attains their qualified age of retirement, as previously stipulated in the ERIP. If the participant does not attain their qualified age of retirement, the ERIP conversion balance is forfeited unless the Board of Directors, in its full discretion, determined otherwise. For ERIP participants who elected to convert to the SERIP, their participation in the ERIP was terminated upon conversion and no future benefits will be earned pursuant to the ERIP. SERIP participants who converted from the ERIP are entitled to future benefits pursuant to the terms of the SERIP.
Executive Retirement Income Plan (“ERIP”). In October 1993, the Board of Directors adopted the ERIP, which was subsequently closed to new participants effective January 1, 2015. Pursuant to the terms of the ERIP, certain management or other highly compensated employees, who had been previously designated as plan
participants by our Board of Directors prior to December 31, 2014, and who had completed at least 10 years of active employment with us, may receive retirement income benefits.
Subject to certain conditions, the monthly benefit is payable to a participant who retires after he or she reaches age 62 (applicable to participants added to the ERIP before 2008) or age 65 (applicable to participants added to the ERIP after January 1, 2008). The benefit is equal to 3% of the employee’s average monthly base salary over the three years preceding retirement multiplied by the number of qualified years (not to exceed 10) of the participant’s employment with us. Payment of the benefit will be made in 60 monthly installments following the participant’s retirement date. If a participant’s employment with us is terminated prior to their qualified age of retirement, no ERIP benefits will be payable unless the Board of Directors, in its full discretion, determines otherwise. In 2018, certain participants were transferred to the SERIP and were provided with an unfunded, lump sum conversion balance pursuant to the SERIP, as discussed above. One of our named executive officers remains a participant in the ERIP.
For a further description of the SERIP and ERIP, please refer to the Pension Benefits included in this Proxy Statement.
401(k) Plan. We maintain a 401(k) plan for all employees, including our named executive officers, as an additional source of retirement income. Pursuant to the 401(k) plan, in 2019, we made matching contributions (subject to highly compensated employee limits set by the Internal Revenue Code) to the 401(k) plan of approximately $56 million. All of the named executive officers participated in the 401(k) plan in 2019. Accordingly, we made matching contributions equal to $8,400 to the 401(k) plan for each of the participating named executives with the exception of Mr. Peterson who received a matching contribution of $5,464..
Benefits
Our named executive officers are eligible to participate in the benefit plans generally available to all of our employees, which include health, dental, life insurance, vision and disability plans, all of whichCOVID-19 pandemic, the Compensation Committee believes are commensurate with plansapproved reductions to the 2020 base salaries of other similarly situated public companiesour executive officers in the hospital management industry.
following amounts: $289,294 for Alan B. Miller, $43,680 for Marc D. Miller, $34,580 for Steve G. Filton, $35,929 for Marvin G. Pember and $30,407 Matthew J. Peterson. In conjunction with these 2020 base salary reductions, the Company Aircraft. We have a partial ownership interest in a fixed wing aircraft that is available for business purpose use by members of our management team, including our named executive officers, and for personal use by Mr. Alan Miller, as stipulated in his employment agreement. Whencontributed the aircraft is utilized for personal purposes by Mr. Alan Miller and/or his family members,funds generated from the incremental costs incurred, including the regular hourly charges, variable fuel charges and associated fees and taxes, are directly reimbursed to us by Mr. Alan Miller and therefore no imputed amounts are included in the Summary Compensation Table. Automobile. Mr. Alan Miller utilizes his automobiles for both business and personal purposes. During 2019, we paid 100% of the cost of a new vehicle purchased for Mr. Miller. Included in the Summary Compensation Table in “All other compensation” for 2019, is $20,604 relatedreductions to the lease value as determined by the IRS, maintenance and fuel costs paid by the Company deemed to be related to his personal vehicle use.
Reimbursement of Relocation Expenses. In the normal course of business, in an effort to satisfyUHS Foundation, our staffing needs with high-quality personnel and/or support the career development of anpreviously established employee by enabling them to assume a position of broader scope and complexity, we may need to place an executive in a position in a geographic location which differs from that in which the individual resides. The relocation benefits for our executives are patterned on standard industry practices and are competitive in design. The provisions forassistance fund.
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(7) | relocation benefits are the same for several of the top layers of management and consistently administered. Included in the relocation benefits are reimbursements or direct payment to vendors for expenses that include items like a short duration house hunting trip, movement of household goods and personal items, short duration of interim living expenses and certain closing costs for the sale and purchase of a house. Relocation reimbursement that is taxable to the individual is typically grossed-up to cover the resulting incremental income tax expense. During 2019, we paid certain relocation expenses, including income tax gross-ups, for Mr. Peterson as disclosed on the Summary Compensation Table contained in this proxy statement.
Other Perquisites. From time to time, we make tickets to cultural and sporting events available to our employees, including our named executive officers, for business purposes. If not utilized for business purposes, the tickets are made available to our employees, including our named executive officers, for personal use.
Split-Dollar Life Insurance Agreements. In December 2010, our Board of Directors approved the Company’s entering into supplemental life insurance plans and agreements on the lives of our chief executive officer (“CEO”) and his wife. As a result of these agreements, as amended in October 2016, based on actuarial tables and other assumptions, during the life expectancies of the insureds, we would pay approximately $28 million in premiums, and certain trusts owned by our CEO, would pay approximately $9 million in premiums. Based on the projected premiums mentioned above, and assuming the policies remain in effect until the death of the insureds, we will be entitled to receive death benefit proceeds of no less than approximately $37 million representing the $28 million of aggregate premiums paid by us as well as the $9 million of aggregate premiums paid by the trusts. In connection with these policies, we paid approximately $1.1 million in premium payments during 2019 and 2018.
Based on these projections, which are subject to the achievement of certain investment income and life expectancy assumptions, the total economic pre-tax cost to the Company (which includes the projected cost of capital net of the income resulting from the Company’s expected future receipt of the $9 million of premiums paid by the Trusts) would be approximately $10 million over the life expectancies of the insureds. We estimate that our share of the premium payments due on these policies will approximate $1.1 million in 2020 and decrease annually to approximately $200,000 over the life expectancies of the insureds. Our aggregate premium payments (as well as the Trust’s) are expected to be repaid to us utilizing the death benefit proceeds.
The Compensation Committee has determined to offer the above-described fringe benefits and perquisites in order to attract and retain our named executive officers by offering compensation opportunities that are competitive. In determining the total compensation payable to our named executive officers, for a given fiscal year, the Compensation Committee considers such fringe benefits and perquisites. However, with the exception of the above-mentioned split dollar life insurance agreements related to Mr. Alan B. Miller given the fact that such other fringe benefits and perquisites, which are available to our named executive officers, represent a relatively insignificant portion of their total compensation, they do not materially influence the decisions made by the Compensation Committee with respect to other elements of each individual’s total compensation. For a further description of the fringe benefits and perquisites received by our named executive officers during 2019, please refer to the All Other Compensation table included in this Proxy Statement.
Rewards/Compensation Risk Analysis: As part of its oversight of the Company’s executive compensation program, the Compensation Committee considers the impact of the Company’s executive compensation program, and the incentives created by the compensation awards that it administers, on the Company’s risk profile. In addition, the Company reviews all of its compensation policies and procedures, including the incentives that they create and factors that may reduce the likelihood of excessive risk taking, to determine whether they present a significant risk to the Company. The review found that there were no excessive risks encouraged by the Company’s reward programs and the rewards programs do not produce payments that have a material impact on
the financial performance of the organization. Approximately 800 employees (including the named executive officers) of our approximate 64,400 full-time employees in the U.S. and U.K. (comprising approximately 1.3% of our full-time employees) have incentive plans that entitle those individuals to larger bonus awards if profitability increases. However, although the plans are based on profitability, the bonus awards for these employees are capped at specific award levels (typically at 125% or less of base salary). Therefore, should our profitability increase, even by significant amounts, we do not believe the additional aggregate bonus awards would have a material unfavorable impact on our future results of operations.
Tax Considerations
Our chief executive officer, our chief financial officer and the next three most highly compensated officers are referred to herein as the named executive officers. For years beginning prior to January 1, 2018, Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”) placed a limit of $1 million on the amount of compensation we may deduct for federal income tax purposes in any one year with respect to our named executive officers with the exception of our chief financial officer. However, performance-based compensation that met certain requirements is excluded from this $1 million limitation.
On December 22, 2017, the President of the United States signed into law comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act of 2017 (the “TCJA-17”). TCJA-17 modifies Section 162(m) by (1) expanding which employees are considered covered employees by including the chief financial officer applicable to years beginning after December 31, 2017, (2) providing that if an individual is a covered employee for a year beginning after December 31, 2016, the individual remains a covered employee for all future years, and (3) removing the exceptions for performance-based compensation applicable to years beginning after December 31, 2017. These changes do not apply to compensation stemming from contracts entered into on or before November 2, 2017, unless such contracts were materially modified on or after that date. Compensation agreements entered into and share-based payment awards granted after this date will be subject to the revised terms of Section 162(m).
In reviewing the effectiveness of the executive compensation program, the Compensation Committee considers the anticipated tax treatment to us and to the named executive officers of various payments and benefits. However, the deductibility of certain compensation payments depends upon the timing of an executive’s vesting or exercise of previously granted awards, as well as interpretations and changes in the tax laws and other factors beyond the Compensation Committee’s control. For these and other reasons, including to maintain flexibility in compensating the named executive officers in a manner designed to promote varying corporate goals, the Compensation Committee did not necessarily, or in all circumstances, limit executive compensation to that which is deductible under Section 162(m) of the Code and had not adopted a policy requiring all compensation to be deductible.
Summary
The foregoing discussion describes the compensation objectives and policies that were utilized with respect to our named executive officers during 2019. In the future, as the Compensation Committee continues to review each element of the executive compensation program with respect to our named executive officers, the objectives of our executive compensation program, as well as the methods that the Compensation Committee utilizes to determine both the types and amounts of compensation to award to our named executive officers, may change.
Compensation Committee Report
The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis with management; and based on the review and discussions, the Compensation Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this Proxy Statement.
COMPENSATION COMMITTEE
Eileen C. McDonnell
Lawrence S. Gibbs
Elliot J. Sussman, M.D.
Compensation Committee Interlocks and Insider Participation
The Compensation Committeewas appointed Executive Chairman of the Board of Directors is composed of Eileen C. McDonnell, Lawrence S. Gibbs and Elliot J. Sussman. All the memberseffective January 1, 2021. He had been Chairman of the Compensation Committee are independent directorsBoard and no member has ever been one of our officers or employees or had a relationship with us that required disclosure.
SUMMARY COMPENSATION TABLE
The following table sets forth certain compensation information for our Chief Executive Officer from our Chief Financial Officer and the other most highly compensated executive officers for services rendered to UHS and its subsidiaries during the past three fiscal years. We refer to these officers collectively as our named executive officers:
Name and principal position | | Year | | Salary ($) | | | Bonus ($) | | | Grant Date Fair Value Stock Awards (1.) ($) | | | Grant Date Fair Value Option Awards (2.) ($) | | | Non-Equity Incentive Plan Compensation (3.) ($) | | | Change in Pension Value and Nonqualified Deferred Compen- sation Earnings (4.) ($) | | | All other compen- sation (7.) ($) | | | Total ($) | | Alan B. Miller, Chairman of the Board and Chief Executive Officer | | 2019 | | $ | 1,700,065 | | | $ | 1,000,000 | | (5.) | $ | 1,000,057 | | | $ | 17,956,614 | | | $ | 1,564,060 | | | $ | 44,520 | | | $ | 1,207,924 | | | $ | 24,473,240 | | | | 2018 | | | 1,665,064 | | | | 1,000,000 | | (5.) | | 1,500,062 | | | | 16,616,760 | | | | 1,531,859 | | | | 43,044 | | | | 1,232,094 | | | | 23,588,883 | | | | 2017 | | | 1,635,063 | | | | 0 | | | | 2,000,060 | | | | 15,978,734 | | | | 719,428 | | | | 43,407 | | | | 1,254,169 | | | | 21,630,861 | | Marc D. Miller, President | | 2019 | | $ | 825,318 | | | $ | 0 | | | $ | 0 | | | $ | 3,043,494 | | | $ | 493,540 | | | $ | 47,164 | | | $ | 15,697 | | | $ | 4,425,213 | | | | 2018 | | | 786,068 | | | | 0 | | | | 0 | | | | 2,816,400 | | | | 470,069 | | | | 333,951 | | | | 16,511 | | | | 4,422,999 | | | | 2017 | | | 752,216 | | | | 0 | | | | 0 | | | | 2,789,508 | | | | 215,134 | | | | 43,152 | | | | 15,285 | | | | 3,815,295 | | Steve G. Filton, Executive Vice President, Chief Financial Officer and Secretary | | 2019 | | $ | 660,938 | | | $ | 0 | | | $ | 0 | | | $ | 2,130,446 | | | $ | 304,031 | | | $ | 38,154 | | | $ | 18,251 | | | $ | 3,151,820 | | | | 2018 | | | 635,903 | | | | 0 | | | | 0 | | | | 1,971,480 | | | | 292,515 | | | | 185,536 | | | | 17,743 | | | | 3,103,177 | | | | 2017 | | | 608,518 | | | | 0 | | | | 0 | | | | 1,895,782 | | | | 133,874 | | | | 30,290 | | | | 17,593 | | | | 2,686,057 | | Marvin G. Pember, Executive Vice President and President, Acute Care Division | | 2019 | | $ | 693,686 | | | $ | 0 | | | $ | 0 | | | $ | 2,130,446 | | | $ | 209,840 | | | $ | 40,185 | | | $ | 19,159 | | | $ | 3,093,316 | | | | 2018 | | | 669,706 | | | | 0 | | | | 0 | | | | 1,971,480 | | | | 202,586 | | | | 178,885 | | | | 18,247 | | | | 3,040,904 | | | | 2017 | | | 643,451 | | | | 0 | | | | 0 | | | | 1,624,956 | | | | 156,037 | | | | 0 | | | | 17,847 | | | | 2,442,291 | | Matthew J. Peterson, Executive Vice President and President, Behavioral Health Division | | 2019 | | $ | 170,775 | | | $ | 100,000 | | (6.) | $ | 0 | | | $ | 1,493,045 | | | $ | 0 | | | $ | 0 | | | $ | 61,915 | | | $ | 1,825,735 | | | | 2018 | | N/A | | | N/A | | | N/A | | | N/A | | | N/A | | | N/A | | | N/A | | | N/A | | | | 2017 | | N/A | | | N/A | | | N/A | | | N/A | | | N/A | | | N/A | | | N/A | | | N/A | |
(1.)
| Represents the grant date fair value of award made during 2019, 2018 and 2017 under the 2010 Amended and Restated Employees’ Restricted Stock Purchase Plan (the “2010 Plan”). The 2019 awards are scheduled to vest ratably over a two-year period. The 2018 and 2017 awards are scheduled to vest ratably over a four-year period. Dividends declared by the Company are paid with respect to outstanding shares of restricted stock.
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(2.)
| For Alan B. Miller, Marc D. Miller, Steve G. Filton and Marvin G. Pember, amounts represent grant date fair value of $30.43 in 2019, $28.16 in 2018 and $27.08 in 2017 for awards made pursuant to our Amended and Restated 2005 Stock Incentive Plan. For Matthew J. Peterson, amount represents grant date fair value of $29.86 for award made in September, 2019. For the assumptions used for the fair value valuations, please refer to Note 5—Common Stock, to the Consolidated Financial Statements included in our Annual Report on Form 10-K for the years ended December 31, 2019, 2018 and 2017.
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(3.)
| Reflects the dollar value of annual bonuses earned during each of the last three years pursuant to the terms of our Executive Incentive Plan as approved by our Compensation Committee on March 18, 2020 (for 2019), March 20, 2019 (for 2018) and March 27, 2018 (for 2017). As a
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| percentage of each individual’s annual base salary, the bonus amounts earned were as follows: Alan B. Miller 92% in each of 2019 and 2018 and, 44% in 2017; Marc D. Miller 60% in each of 2019 and 2018 and 29% in 2017; Steve G. Filton 46% in each of 2019 and 2018 and 22% in 2017, and; Marvin G. Pember, 30% in each of 2019 and 2018 and 24% in 2017. Matthew J. Peterson, who was hired by the Company in September, 2019, was not eligible for a bonus in 2019.
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(4.)
| These amounts represent the aggregate change in pension value for each named executive in 2019, 2018 and 2017 pursuant to the Executive Retirement Income Plan or the Supplemental Executive Retirement Income Plan, as disclosed herein. The amounts in this column do not reflect compensation deferrals pursuant to our Nonqualified Deferred Compensation Plan since there are no contributions or benefits provide by us in connection with the plan.
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(5.)
| The $1,000,000 of cash bonuses paid toinception through December 31, 2020. Mr. Alan Miller in each of 2019 and 2018 were paid pursuant to Mr. Miller’s employment agreement dated July 24, 2013, as amended November 5, 2018.
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(6.)
| The $100,000 cash bonus paid to Mr. Peterson in 2019 was a sign-on bonus upon commencement of employment.
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(7.)
| Components of All Other Compensation are as follows:
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ALL OTHER COMPENSATION TABLE
Name | | Year | | Perquisites and Other Personal Benefits ($) (1.) | | | Tax Reimbur- sements ($) (2.) | | | Insurance Premiums ($) (3.) | | | Company Contributions to Retirement and 401(k) Plans ($) | | | Dividends Paid on Unvested Stock | | | Total ($) | | Alan B. Miller | | 2019 | | $ | 68,948 | | | $ | 0 | | | $ | 1,112,530 | | | $ | 8,400 | | | $ | 18,046 | | | $ | 1,207,924 | | | | 2018 | | | 49,250 | | | | 0 | | | | 1,159,281 | | | | 8,250 | | | | 15,313 | | | | 1,232,094 | | | | 2017 | | | 46,605 | | | | 0 | | | | 1,185,260 | | | | 8,100 | | | | 14,204 | | | | 1,254,169 | | Marc D. Miller | | 2019 | | $ | 1,600 | | | $ | 0 | | | $ | 5,697 | | | $ | 8,400 | | | $ | 0 | | | $ | 15,697 | | | | 2018 | | | 2,564 | | | | 0 | | | | 5,697 | | | | 8,250 | | | | 0 | | | | 16,511 | | | | 2017 | | | 1,488 | | | | 0 | | | | 5,697 | | | | 8,100 | | | | 0 | | | | 15,285 | | Steve G. Filton | | 2019 | | $ | 358 | | | $ | 0 | | | $ | 9,493 | | | $ | 8,400 | | | $ | 0 | | | $ | 18,251 | | | | 2018 | | | 0 | | | | 0 | | | | 9,493 | | | | 8,250 | | | | 0 | | | | 17,743 | | | | 2017 | | | 0 | | | | 0 | | | | 9,493 | | | | 8,100 | | | | 0 | | | | 17,593 | | Marvin G. Pember | | 2019 | | $ | 1,912 | | | $ | 0 | | | $ | 8,847 | | | $ | 8,400 | | | $ | 0 | | | $ | 19,159 | | | | 2018 | | | 900 | | | | 0 | | | | 8,847 | | | | 8,100 | | | | 0 | | | | 17,847 | | | | 2017 | | | 900 | | | | 0 | | | | 8,847 | | | | 8,100 | | | | 0 | | | | 17,847 | | Matthew J. Peterson | | 2019 | | $ | 37,771 | | | $ | 17,992 | | | $ | 688 | | | $ | 5,464 | | | $ | 0 | | | $ | 61,915 | | | | 2018 | | N/A | | | N/A | | | N/A | | | N/A | | | N/A | | | N/A | | | | 2017 | | N/A | | | N/A | | | N/A | | | N/A | | | N/A | | | N/A | |
Amounts for Mr. Alan Miller consist of the following: (i) $25,000 for professional tax services; (ii) $10,773 for payment of country club dues; (iii) $9,330 for accounting services; (iv) $2,906 for maintenance on personal residence; (v) $20,604 for the lease value, fuel and maintenance charges incurred in connection with his automobile, and; (vi) $335 wireless stipend.
Amounts for Messrs. Marc D. Miller was appointed Chief Executive Officer and Steve G. Filton consist of $1,600 and $358, respectively, for sporting event tickets paid for by us.President effective January 1, 2021. Marc D. Miller had previously served as President since May, 2009.
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(8) | Amount for Mr. Marvin G. Pember consistsretired from the Company effective as of $900 for cell phone stipendDecember 31, 2022. Pursuant to his Separation Agreement and $1,012 for sporting event tickets paid forGeneral Release: (i) all of Mr. Pember’s performance based restricted stock units awarded on March 23, 2022 with a grant date fair value of $1.2 million, which were scheduled to be earned based on the three-year growth in certain Company financial metrics, were canceled on December 31, 2022, and; (ii) all of Mr. Pember’s unvested stock options granted prior to his termination date will continue to vest until April 1, 2023 and all stock options scheduled to remain unvested as of April 1, 2023 were canceled as of December 31, 2022, (including 75% of options awarded on March 23, 2022 with a grant date fair value of $864,000).
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(9) | Mr. Edward H. Sim was hired by the Company in December, 2022 to succeed Mr. Marvin G. Pember and has an annual base salary of $775,000. |
(10) | Components of All Other Compensation are as follows: |
37 Universal Health Services, Inc. 2023 Proxy Statement
ALL OTHER COMPENSATION TABLE | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Name | | Year | | | Perquisites and Other Personal Benefits ($)(1.) | | | Tax Reimbursements ($)(2.) | | | Insurance Premiums ($)(3.) | | | Company Contributions to Retirement and 401(k) Plans ($) | | | Dividends Paid on Unvested Stock | | | Total ($) | | | | | | | | | | Marc D. Miller | | | 2022 | | | $ | 31,029 | | | $ | 0 | | | $ | 5,666 | | | $ | 9,150 | | | $ | 0 | | | $ | 45,845 | | | | | | | | | | | | | 2021 | | | | 0 | | | | 0 | | | | 5,666 | | | | 8,700 | | | | 0 | | | | 14,366 | | | | | | | | | | | | | 2020 | | | | 973 | | | | 0 | | | | 5,697 | | | | 8,550 | | | | 0 | | | | 15,220 | | | | | | | | | | Alan B. Miller | | | 2022 | | | $ | 140,172 | | | $ | 0 | | | $ | 987,804 | | | $ | 9,150 | | | $ | 1,477 | | | $ | 1,138,603 | | | | | | | | | | | | | 2021 | | | | 49,064 | | | | 0 | | | | 1,022,750 | | | | 8,700 | | | | 11,522 | | | | 1,092,036 | | | | | | | | | | | | | 2020 | | | | 64,819 | | | | 0 | | | | 1,071,393 | | | | 8,550 | | | | 6,486 | | | | 1,151,248 | | | | | | | | | | Steve G. Filton | | | 2022 | | | $ | 0 | | | $ | 0 | | | $ | 9,462 | | | $ | 9,150 | | | $ | 0 | | | $ | 18,612 | | | | | | | | | | | | | 2021 | | | | 0 | | | | 0 | | | | 9,462 | | | | 8,700 | | | | 0 | | | | 18,162 | | | | | | | | | | | | | 2020 | | | | 0 | | | | 0 | | | | 9,493 | | | | 8,550 | | | | 0 | | | | 18,043 | | | | | | | | | | Marvin G. Pember | | | 2022 | | | $ | 4,327 | | | $ | 0 | | | $ | 4,534 | | | $ | 9,150 | | | $ | 0 | | | $ | 18,011 | | | | | | | | | | | | | 2021 | | | | 900 | | | | 0 | | | | 4,534 | | | | 8,700 | | | | 0 | | | | 14,134 | | | | | | | | | | | | | 2020 | | | | 900 | | | | 0 | | | | 8,099 | | | | 8,550 | | | | 0 | | | | 17,549 | | | | | | | | | | Matthew J. Peterson | | | 2022 | | | $ | 2,979 | | | $ | 0 | | | $ | 7,087 | | | $ | 9,150 | | | $ | 0 | | | $ | 19,216 | | | | | | | | | | | | | 2021 | | | | 2,564 | | | | 0 | | | | 7,087 | | | | 8,700 | | | | 0 | | | | 18,351 | | | | | | | | | | | | | 2020 | | | | 96,130 | | | | 38,695 | | | | 7,117 | | | | 8,550 | | | | 0 | | | | 150,492 | | | | | | | | | | Edward H. Sim | | | 2022 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | | | | | | | | | | | | 2021 | | | | N/A | | | | N/A | | | | N/A | | | | N/A | | | | N/A | | | | N/A | | | | | | | | | | | | | 2020 | | | | N/A | | | | N/A | | | | N/A | | | | N/A | | | | N/A | | | | N/A | |
Amounts for Mr. Marc Miller consists of the following: (i) $19,602 for payment of country club dues and expenses; (ii) $9,937 auto allowance, and; (iii) $1,490 for sporting event tickets paid for by us. Amounts for Mr. Alan Miller consists of the following: (i) $75,000 for professional tax services; (ii) $3,986 for accounting services; (iii) $3,687 for maintenance on personal residence, and; (iv) $57,499 for the lease value, fuel, and repairs and maintenance charges incurred in connection with his company-owned automobile. Amount for Mr. Marvin G. Pember consists of $900 for cell phone stipend and $3,427 in token gifts, grossed up for taxes. Amount for Mr. Matthew J. Peterson consists of the following: (i) $900 for cell phone stipend; (ii) $1,334 related to the Employee Stock Purchase Plan discount, and; (iii) $745 for sporting event tickets paid for by us. 2021: Amounts for Mr. Alan Miller consists of the following: (i) $25,000 for professional tax services; (ii) $5,260 for payment of country club dues; (iii) $1,546 for accounting services; (iv) $3,113 for maintenance on personal residence, and; (v) $14,145 for the lease value, fuel and maintenance charges incurred in connection with his company-owned automobile. Amount for Mr. Marvin G. Pember consists of $900 for cell phone stipend. Amount for Mr. Matthew J. Peterson consists of the following: (i) $900 for cell phone stipend; (ii) $1,334 related to the Employee Stock Purchase Plan discount, and; (iii) $330 for sporting event tickets paid for by us. 2020: Amounts for Mr. Alan Miller consists of the following: (i) $25,000 for professional tax services; (ii) $10,789 for payment of country club dues; (iii) $2,573 for accounting services; (iv) $3,022 for maintenance on personal residence; (v) $23,075 for the lease value, fuel and maintenance charges incurred in connection with his company-owned automobile, and; (vi) $360 wireless stipend. Amount for Mr. Marc D. Miller consists $768 for sporting event tickets paid for by us and $205 for a token gift provided by the Company. Amount for Mr. Marvin G. Pember consists of $900 for cell phone stipend. Amount for Mr. Matthew J. Peterson consists of the following: (i) $94,025 of relocation expenses paid for by the Company; (ii) $1,000 related to the Employee Stock Purchase Plan discount; (iii) $900 for cell phone stipend, and; (iv) $205 for a token gift provided by the Company. (2) | Amount forrepresents reimbursement of income taxes incurred by Mr. Matthew J. Peterson consists of $37,508in connection with relocation expenses paid by us and $263 for cell phone stipend.during 2020. |
2018:
Amounts for Mr. Alan Miller consist of the following: (i) $25,000 for professional tax services; (ii) $15,788 for payment of country club dues; (iii) $3,632 for accounting services; (iv) $2,806 for maintenance on personal residence; (v) $1,724 for fuel and maintenance charges incurred in connection with his automobile, and; (vi) $300 wireless stipend.
Amount for Mr. Marc D. Miller consists of $2,564 for sporting event tickets paid for by us.
Amount for Mr. Marvin G. Pember consist of $900 for cell phone stipend and $250 for sporting event tickets paid for by us.
2017:
Amounts for Mr. Miller consist of the following: (i) $25,000 for professional tax services; (ii) $15,713 for payment of country club dues; (iii) $1,306 for accounting services; (iv) $2,806 for maintenance on personal residence; (v) $980 for fuel and maintenance charges incurred in connection with his automobile; (vi) $300 wireless stipend, and; (vii) $500 for sporting event tickets paid for by us.
Amount for Mr. Marc D. Miller consists of $1,488 for sporting event tickets paid for by us.
Amount for Mr. Marvin G. Pember consist of $900 for cell phone stipend.
(2.)
| Amount represents reimbursement of income taxes incurred by Mr. Peterson in connection with relocation expenses paid by us during 2019.
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(3.)
(3) | Amounts for Messrs. Marc. D. Miller, Steve G. Filton, Marvin G. Pember and Matthew J. Peterson consist of premiums paid in connection with long term disability coverage. |
Amounts for Mr. Alan B. Miller consist of: (i) $1,102,810 in 2019, $1,147,456 in 2018 and $1,173,435 in 2017, of premium payments made in connection with split-dollar-life insurance agreements, as discussed in Split Dollar Life Insurance Agreement, included herein, and; (ii)$9,721 in 2019 and $11,825 in each of 2018 and 2017 of premiums paid in connection with long term disability coverage.
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Amounts for Mr. Alan B. Miller consist of: (i) $978,296 in 2022, $1,013,242 in 2021 and $1,061,667 in 2020, of premium payments made in connection with split-dollar-life insurance agreements, as discussed in Split Dollar Life Insurance Agreement, included herein, and; (ii) $9,508 in each of 2022 and 2021 and $9,726 in 2020 of premiums paid in connection with long term disability coverage. 38 Universal Health Services, Inc. 2023 Proxy Statement
GRANTS OF PLAN-BASED AWARDS The following table provides information regarding plan-based awards granted during fiscal year 2022 to our named executive officers who were employed on the grant date of March 23, 2022. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Approval/ Grant Date | | | Estimated Future Payouts Under Non-Equity Incentive Plan Awards(1.) | | | Estimated Future Payouts Under Equity Incentive Plan Awards(3.) | | | All Other Stock Awards: Number of Shares of Stock or Units(5.) (#) | | | All Other Option Awards: Number of Securities Underlying Options(6.) (#) | | | Exercise or Base Price of Option Awards ($ /Sh) | | | Grant Date Fair Value of Stock and Option Awards(7.) ($) | | | Grant Date Fair Value of Maximum Stock and Option Awards(8.) ($) | | | Closing Price on Grant Date ($ / Sh) | | Name | | Threshold ($)(2.) | | | Target ($)(2.) | | | Maximum ($)(2.) | | | Threshold (#)(4.) | | | Target (#)(4.) | | | Maximum (#)(4.) | | | | | | | | | | | | | | | | Marc D. Miller | | | 3/23/2022 | | | $ | 78,003 | | | $ | 1,950,075 | | | $ | 3,900,150 | | | | | | | | | | | | | | | | — | | | | 104,001 | | | $ | 143.81 | | | $ | 4,754,007 | | | | | | | $ | 143.81 | | | | | | | | | | | | | | | | | | | 3/23/2022 | | | | | | | | | | | | | | | | 16,529 | | | | 33,058 | | | | 49,587 | | | | | | | | | | | | | | | $ | 4,754,071 | | | $ | 7,131,106 | | | $ | 143.81 | | | | | | | | | | | | | | | | Alan B. Miller | | | 3/23/2022 | | | $ | — | | | $ | — | | | $ | — | | | | | | | | | | | | | | | | | | | | 54,691 | | | $ | 143.81 | | | $ | 2,499,990 | | | | | | | $ | 143.81 | | | | | | | | | | | | | | | | | | | 3/23/2022 | | | | | | | | | | | | | | | | 8,692 | | | | 17,384 | | | | 26,076 | | | | — | | | | | | | | | | | $ | 2,499,993 | | | $ | 3,749,990 | | | $ | 143.81 | | | | | | | | | | | | | | | | Steve G. Filton | | | 3/23/2022 | | | $ | 31,463 | | | $ | 786,574 | | | $ | 1,573,148 | | | | | | | | | | | | | | | | | | | | 26,471 | | | $ | 143.81 | | | $ | 1,210,020 | | | | | | | $ | 143.81 | | | | | | | | | | | | | | | | | | | 3/23/2022 | | | | | | | | | | | | | | | | 4,207 | | | | 8,414 | | | | 12,621 | | | | — | | | | | | | | | | | $ | 1,210,017 | | | $ | 1,815,026 | | | $ | 143.81 | | | | | | | | | | | | | | | | Marvin G. Pember | | | 3/23/2022 | | | $ | 90,856 | | | $ | 790,053 | | | $ | 1,580,106 | | | | | | | | | | | | | | | | | | | | 25,213 | | | $ | 143.81 | | | $ | 1,152,516 | | | | | | | $ | 143.81 | | | | | | | | | | | | | | | | | | | 3/23/2022 | | | | | | | | | | | | | | | | 4,007 | | | | 8,014 | | | | 12,021 | | | | — | | | | | | | | | | | $ | 1,152,493 | | | $ | 1,728,740 | | | $ | 143.81 | | | | | | | | | | | | | | | | Matthew J. Peterson | | | 3/23/2022 | | | $ | 76,696 | | | $ | 666,922 | | | $ | 1,333,844 | | | | | | | | | | | | | | | | | | | | 21,745 | | | $ | 143.81 | | | $ | 993,990 | | | | | | | $ | 143.81 | | | | | | | | | | | | | | | | | | | 3/23/2022 | | | | | | | | | | | | | | | | 3,456 | | | | 6,912 | | | | 10,368 | | | | — | | | | | | | | | | | $ | 994,015 | | | $ | 1,491,022 | | | $ | 143.81 | |
(1) | GRANTS OF PLAN-BASED AWARDS
The following table provides information regarding plan-based awards granted during fiscal year 2019Pursuant to ourthe 2022 Executive Incentive Plan and the formula approved by the Compensation Committee, each named executive officers.
| | | | | | | | | All Other Stock | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Awards: | | | All Other | | | Exercise | | | Grant | | | | | | | | | | | | | | | | | | | | | | | | | | | | Number | | | Option | | | or | | | Date | | | | | | | | | | Estimated Future | | | Estimated Future | | of | | | Awards: | | | Base | | | Fair | | | Closing | | | | | | Payouts Under | | | Payouts Under | | Shares | | | Number of | | | Price | | | Value of | | | Price | | | | | | Non-Equity Incentive Plan | | | Equity Incentive Plan | | of | | | Securities | | | of | | | Stock | | | on | | | | Approval/ | | Awards (1.) | | | Awards | | Stock or | | | Underlying | | | Option | | | and Option | | | Grant | | | | Grant | | Threshold | | | Target | | | Maximum | | | Threshold | | Target | | Maximum | | Units | | | Options | | | Awards | | | Awards (5.) | | | Date | | Name | | Date | | ($) (2.) | | | ($) (2.) | | | ($) (2.) | | | ($) | | ($) | | ($) | | (3.) (#) | | | (4.) (#) | | | ($ /Sh) | | | ($) | | | ($ / Sh) | | Alan B. Miller | | 3/20/2019 | | $ | 85,003 | | | $ | 1,700,065 | | | $ | 4,250,163 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 3/20/2019 | | | | | | | | | | | | | | | | | | | | | 7,462 | | | | | | | | | | | $ | 1,000,057 | | | $ | 134.02 | | | | 3/20/2019 | | | | | | | | | | | | | | | | | | | | | — | | | | 590,000 | | | $ | 134.02 | | | $ | 17,956,614 | | | $ | 134.02 | | Marc D. Miller | | 3/20/2019 | | $ | 26,823 | | | $ | 536,457 | | | $ | 1,341,142 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 3/20/2019 | | | | | | | | | | | | | | | | | | | | | — | | | | 100,000 | | | $ | 134.02 | | | $ | 3,043,494 | | | $ | 134.02 | | Steve G. Filton | | 3/20/2019 | | $ | 16,523 | | | $ | 330,469 | | | $ | 826,173 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 3/20/2019 | | | | | | | | | | | | | | | | | | | | | — | | | | 70,000 | | | $ | 134.02 | | | $ | 2,130,446 | | | $ | 134.02 | | Marvin G. Pember | | 3/20/2019 | | $ | 4,336 | | | $ | 216,777 | | | $ | 737,041 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 3/20/2019 | | | | | | | | | | | | | | | | | | | | | — | | | | 70,000 | | | $ | 134.02 | | | $ | 2,130,446 | | | $ | 134.02 | | Matthew J. Peterson | | 3/20/2019 | | N/A | | | N/A | | | N/A | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 9/18/2019 | | | | | | | | | | | | | | | | | | | | | — | | | | 50,000 | | | $ | 151.99 | | | $ | 1,493,045 | | | $ | 151.99 | |
(1.)
| Pursuant to the Executive Incentive Plan and the formula approved by the Compensation Committee, each named executive officer is entitled to receive between 0% and 250%officer other than Mr. Alan B. Miller was entitled to receive between 0% and 200% of that executive officer’s target bonus based, either entirely or in part, on our achievement of certain corporate and divisional performance criteria. As discussed in the Compensation Discussion and Analysis, with respect to Messrs. Alan B. Miller, Marc D. Miller and Steve G. Filton, 100% of their 2019 annual incentive bonus was determined using certain corporate performance criteria, and with respect to Mr. Pember, his 2019 annual incentive bonus was determined utilizing: (i) 25% of his annual salary based upon the achievement of certain corporate performance criteria, and; (ii) 75% of his annual salary based upon the achievement of certain divisional income targets. Mr. Matthew J. Peterson was hired by the Company in September, 2019 and therefore was not eligible for a 2019 annual incentive bonus.
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(2.)
| Estimates calculated based upon 2019 salaries.
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(3.)
| Restricted shares of Class B Common Stock issued under the Company’s Amended and Restated 2010 Employees’ Restricted Stock Purchase Plan.
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(4.)
| Stock option awards issued on March 20, 2019 and September 18, 2019 were issued under our Third Amended and Restated 2005 Stock Incentive Plan. Mr. Matthew J. Peterson was awarded stock options upon commencement of his employment with the Company.
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(5.)
| Represents the full grant date fair value for the stock awards and option awards, calculated in accordance with ASC 718 as described in our Form 10-K for the year ended December 31, 2019.
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Chief Executive Officer Employment Agreement
As discussed in the Compensation Discussion and Analysis, unlike our otherwith respect to Messrs. Marc D. Miller and Steve G. Filton, 100% of their target 2022 annual incentive bonus was determined using certain corporate performance criteria, and with respect to each of Messrs. Pember and Peterson, their target 2022 annual incentive bonus was determined utilizing: (i) 25% of their annual salary based upon the achievement of certain corporate performance criteria, and; (ii) 75% of their annual salary based upon the achievement of certain divisional income targets. |
(2) | Estimates calculated based upon 2022 salaries. |
(3) | Pursuant to the formula approved by the Compensation Committee, each named executive officers, Mr. Alan Miller’s compensation is determined in large part by the terms of his employment agreement. Mr. Miller’s base salary, minimum annual bonus and certain perquisites are determined under his employment agreement. On July 24, 2013, we entered into an employment agreement with Alan B. Miller (“Employment Agreement”) that stipulated that Mr. Miller will serve as the Chairman of our Board of Directors and Chief Executive Officer (“CEO”) through December 31, 2017, and provides for automatic annual renewals unless either party elects otherwise. During 2019, Mr. Miller’s Employment Agreementofficer was automatically renewed for one year through December 31, 2021. In November 2018, we entered into an amendment to the Employment Agreement with Alan B. Miller, in order to adjust certain terms of the minimum annual awards that Mr. Miller will be eligibleentitled to receive during the periodbetween 50% and 150% of his services as CEO. For each year of the CEO employment commencing on January 1, 2019, the annual award under our long-term incentive plan(s) (“LTIP”), as in effect from time to time, will have a minimum value of $2,000,000, with 50% of such annual LTIP award beingthat executive officer’s target stock-based compensation in the form of performance-based restricted stock units. The performance-based restricted stock units will be based upon achievement of a pre-established specified range of target levels based on the three-year growth in our earnings before interest, taxes, depreciation and amortization, and the impacts of other income/expenses and net income attributable to noncontrolling interests.
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(4) | Performance-based restricted stock units issued on March 23, 2022 were issued under our 2020 Omnibus Stock and Incentive Plan. In 2022, our CEO and NEOs each received 50% of suchtheir annual LTIP award beingtarget stock-based compensation awards in the form of cash. LTIP awards received by Mr. Miller shall vest in equal amounts over two years and otherwise shall be subject to conditions as are consistent with terms and conditions applicable to LTIP awards made to our other senior executives. In 2019, Mr. Miller received $1,000,000 in the form of cash, plus $$1,000,057 in the form ofperformance-based restricted stock pursuant to his amended employment agreement. In addition, Mr. Miller received a special cash award in 2018 inunits. |
(5) | Restricted shares of Class B Common Stock issued under the amount of $1,000,000 in connectionCompany’s 2020 Omnibus Stock and Incentive Plan. |
(6) | Stock option awards issued on March 23, 2022 were issued under our 2020 Omnibus Stock and Incentive Plan issued with entering into the amendment. Except as described above, all other terms of the Employment Agreement remain in full force and effect and are unchanged. Mr. Alan Miller participates in benefit plans and programs that are made available to other employees and he receives certain executive perquisites, including, but not limited to, split dollar life insurance benefits, payment of certain automobile costs, payment of country club dues, tax and accounting services, use of a private plane for personal purposes for up to 60 hours per year, subject to reimbursement by Mr. Alan Miller of the incremental costs incurred at market rates, and such other fringe benefits as the Compensation Committee of our Board of Directors may determine (as discussed in the Compensation Discussion and Analysis).
Mr. Alan Miller’s salary as our Chief Executive Officer will be $1,735,700 for 2020 which is a 2.1% increase over his 2019 salary. Mr. Miller is also entitled to an annual bonus opportunity targetexercise price equal to 100% of his salary. The amount of the annual bonusgrant date market value.
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(7) | Represents the full grant date fair value for any year may be more or less than the target amount and will be determined by the Board of Directorsoption awards, calculated in accordance with pre-established performance measures.ASC 718 as described in our Form 10-K for the year ended December 31, 2022. |
(8) | In additionRepresents the maximum performance-based restricted stock unit value if the maximum award is achieved.
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(9) | Mr. Edward H. Sim was hired by the Company in December, 2022 to succeed Mr. Marvin G. Pember. He was awarded stock options in January, 2023 related to the commencement of his employment, which are scheduled to vest ratably over four years. |
Marc D. Miller’s Employment Agreement as Chief Executive Officer Mr. Marc D. Miller was appointed Chief Executive Officer (“CEO”) and President effective January 1, 2021. He has served as President since May, 2009 and prior thereto served as Senior Vice President and co-head of our Acute Care Hospitals since 2007. 39 Universal Health Services, Inc. 2023 Proxy Statement
Grants of Plan-Based Awards Certain elements of Mr. Marc D. Miller’s compensation for 2021 were determined by the terms of his employment agreement that was entered into on December 23, 2020, with an effective date of January 1, 2021. Pursuant to the terms of the employment agreement, Mr. Marc D. Miller will serve as CEO with a term scheduled to end on January 1, 2026, subject, however, to earlier termination, and subject further to automatic renewal for additional one-year periods unless either party elects otherwise. On March 23, 2022, we entered into an amendment to the employment agreement with Mr. Marc D. Miller which increased his annual bonus opportunity and annual base salary, as discussed below. Pursuant to the terms of his employment agreement, as amended on March 23, 2022, Marc Miller’s salary as our CEO will be $1,352,000 for 2023 which is a 4.0% increase over his 2022 base salary. Mr. Marc D. Miller is also entitled to an annual bonus opportunity target equal to 150% of his salary. Mr. Marc Miller’s Agreement was also amended to narrow the circumstances under which Mr. Marc D. Miller can resign from employment with good reason and receive acceleration of future long-term incentive awards, including his Performance Based Restricted Stock Units. The amount of the annual bonus for any year may be more or less than the target amount and will be determined by the Board of Directors in accordance with pre-established performance measures. Additionally, Mr. Marc D. Miller may also be paid during the term of his employment agreement, bonuses and other compensation as may from time to time be determined by the Board of Directors. Mr. Marc D. Miller participates in benefit plans and programs that are made available to other employees and will be eligible to receive annual awards under the Company’s long-term incentive plan(s) (“LTIP”) as in effect from time to time, which will be subject to conditions as are consistent with terms and conditions applicable to LTIP awards made to other senior executives of the Company, subject to certain acceleration rights upon a qualifying termination of employment as set forth in his employment agreement. For a further description of the employment agreement, please refer to the Potential Payments Upon Termination or Change-in-Control section below. For a further description of the compensation setting process with respect to Mr. Marc D. Miller, please refer to the Compensation Discussion and Analysis section above. For a further description of Mr. Marc D. Miller’s benefits under the Company’s Supplemental Executive Retirement Income Plan, please refer to the Pension Benefits section below. Alan B. Miller’s Employment Agreement as Executive Chairman Mr. Alan B. Miller was appointed Executive Chairman of the Board effective January 1, 2021. He had been Chairman of the Board and Chief Executive Officer since our inception in 1978 and also served as President from inception until 2009. Certain elements of Mr. Alan B. Miller’s compensation for 2022 were determined by the terms of his employment agreement that was entered into on December 23, 2020, with an effective date of January 1, 2021. Pursuant to the terms of the employment agreement, as amended on March 23, 2022, Alan B. Miller will serve as Executive Chairman with a term scheduled to end on January 1, 2025, subject, however, to earlier termination, and subject further to automatic renewal for additional one year periods unless either party elects otherwise. Mr. Alan B. Miller’s salary as our Executive Chairman will be $1,040,000 for 2023 which is a 4.0% increase over his 2022 base salary. Additionally, Mr. Alan Miller may also be entitled to bonuses and other compensation as may from time to time be determined by the Board of Directors. Mr. Alan B. Miller will also be eligible to receive annual awards under the Company’s LTIP as in effect from time to time, which will be subject to conditions as are consistent with terms and conditions applicable to LTIP awards made to other senior executives of the Company, subject to certain acceleration rights upon a qualifying termination of employment as set forth in his employment agreement. Mr. Alan Miller’s Agreement was amended to narrow the circumstances under which Mr. Alan B. Miller can resign from employment with good reason and receive acceleration of future long-term incentive awards, including his Performance Based Restricted Stock Units. Mr. Alan B. Miller participates in benefit plans and programs that are made available to other employees and he receives certain executive perquisites, including, but not limited to, split dollar life insurance benefits, payment of certain automobile costs, payment of country club dues, tax and accounting services, use of a private plane for personal purposes for up to 60 hours per year, subject to reimbursement by Mr. Alan B. Miller of the incremental costs incurred at market rates, and such other fringe benefits as the Compensation Committee of our Board of Directors may determine (as discussed in the Compensation Discussion and Analysis). 40 Universal Health Services, Inc. 2023 Proxy Statement
Grants of Plan-Based Awards For a further description of the employment agreement, please refer to the Potential Payments Upon Termination or Change-in-Control section below. For a further description of the compensation setting process with respect to Mr. Alan B. Miller, please refer to the Compensation Discussion and Analysis section above. For a further description of Mr. Alan B. Miller’s benefits under the Company’s Executive Retirement Income Plan, please refer to the Pension Benefits section below. Restricted Stock Grants in 2020 Pursuant to the terms of Mr. Alan B. Miller’s 2013 Employment Agreement (which has since been replaced by the above-mentioned employment agreement as Executive Chairman), in March of 2020, while Mr. Alan B. Miller was serving as CEO, the Compensation Committee approved the March 18, 2020 issuance of 14,774 restricted shares of our Class B Common Stock pursuant to the Amended and Restated 2010 Employees’ Restricted Stock Purchase Plan. The restricted shares issued in March of 2020, which had a grant date market value of $67.69 per share or $1.0 million in the aggregate, vested ratably at 50% in each of March of 2021 and 2022. 41 Universal Health Services, Inc. 2023 Proxy Statement
OUTSTANDING EQUITY AWARDS AT DECEMBER 31, 2022 The following table provides information about the number of outstanding equity awards held by our named executive officers at December 31, 2022. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Option Awards(1.) | | | Stock Awards(2.) | | | | Number of Securities Underlying Unexercised Options (#) | | | Number of Securities Underlying Unexercised Options (#) | | | Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#) | | Option Exercise Price ($) | | | Option Expiration Date | | | Number of Shares or Units of Stock That Have Not Vested (#) | | | Market Value of Shares or Units of Stock That Have Not Vested ($) | | | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) | | | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)(5.) | | Name | | Exercisable | | | Unexercisable | | | | | | | | | | | | Marc D. Miller | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 33,058 | | | $ | 4,657,542 | | | | | | | | | | | | | | | 100,000 | | | | 0 | | | 0 | | $ | 119.64 | | | | 04/12/2023 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | | | | | | | | | | | | 75,000 | | | | 25,000 | | | 0 | | $ | 134.02 | | | | 03/19/2024 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | | | | | | | | | | | | 25,000 | | | | 25,000 | | | 0 | | $ | 67.69 | | | | 03/17/2025 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | | | | | | | | | | | | 29,610 | | | | 29,610 | | | 0 | | $ | 74.46 | | | | 03/17/2025 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | | | | | | | | | | | | 31,250 | | | | 93,750 | | | 0 | | $ | 138.80 | | | | 03/16/2026 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | | | | | | | | | | | | 35,106 | | | | 105,319 | | | 0 | | $ | 152.68 | | | | 03/16/2026 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | | | | | | | | | | | | 0 | | | | 104,001 | | | 0 | | $ | 143.81 | | | | 03/22/2027 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | | | | | | | | | Alan B. Miller | | | | | | | | | | | | | | | | | | | | | 0 | | | | 0 | | | | 17,384 | | | $ | 2,449,232 | | | | | | | | | | | | | | | 390,000 | | | | 0 | | | 0 | | $ | 119.64 | | | | 04/12/2023 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | | | | | | | | | | | | 442,500 | | | | 147,500 | | | 0 | | $ | 134.02 | | | | 03/19/2024 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | | | | | | | | | | | | 147,500 | | | | 147,500 | | | 0 | | $ | 67.69 | | | | 03/17/2025 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | | | | | | | | | | | | 174,700 | | | | 174,699 | | | 0 | | $ | 74.46 | | | | 03/17/2025 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | | | | | | | | | | | | 31,250 | | | | 93,750 | | | 0 | | $ | 138.80 | | | | 03/16/2026 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | | | | | | | | | | | | 35,106 | | | | 105,319 | | | 0 | | $ | 152.68 | | | | 03/16/2026 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | | | | | | | | | | | | 0 | | | | 54,691 | | | 0 | | $ | 143.81 | | | | 03/22/2027 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | | | | | | | | | Steve G. Filton | | | | | | | | | | | | | | | | | | | | | 0 | | | | 0 | | | | 8,414 | | | $ | 1,185,448 | | | | | | | | | | | | | | | 70,000 | | | | — | | | 0 | | $ | 119.64 | | | | 04/12/2023 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | | | | | | | | | | | | 52,500 | | | | 17,500 | | | 0 | | $ | 134.02 | | | | 03/19/2024 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | | | | | | | | | | | | 17,500 | | | | 17,500 | | | 0 | | $ | 67.69 | | | | 03/17/2025 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | | | | | | | | | | | | 20,727 | | | | 20,727 | | | 0 | | $ | 74.46 | | | | 03/17/2025 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | | | | | | | | | | | | 9,800 | | | | 29,400 | | | 0 | | $ | 138.80 | | | | 03/16/2026 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | | | | | | | | | | | | 11,009 | | | | 33,028 | | | 0 | | $ | 152.68 | | | | 03/16/2026 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | | | | | | | | | | | | 0 | | | | 26,471 | | | 0 | | $ | 143.81 | | | | 03/22/2027 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | |
42 Universal Health Services, Inc. 2023 Proxy Statement
Outstanding Equity Awards at December 31, 2022 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Option Awards(1.) | | | Stock Awards(2.) | | | | Number of Securities Underlying Unexercised Options (#) | | | Number of Securities Underlying Unexercised Options (#) | | | Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#) | | Option Exercise Price ($) | | | Option Expiration Date | | | Number of Shares or Units of Stock That Have Not Vested (#) | | | Market Value of Shares or Units of Stock That Have Not Vested ($)(5.) | | | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) | | | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($) | | Name | | Exercisable | | | Unexercisable | | | | | | | | | | | | Marvin G. Pember | | | | | | | | | | | | | | | | | | | | | 0 | | | | 0 | | | | 0 | | | $ | 0 | | | | | | | | | | | | | | | 52,500 | | | | — | | | 0 | | $ | 119.64 | | | | 04/12/2023 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | | | | | | | | | | | | 52,500 | | | | 17,500 | | | 0 | | $ | 134.02 | | | | 03/19/2024 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | | | | | | | | | | | | 17,500 | | | | 8,750 | | | 0 | | $ | 67.69 | | | | 04/01/2024 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | | | | | | | | | | | | 20,727 | | | | 10,364 | | | 0 | | $ | 74.46 | | | | 04/01/2024 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | | | | | | | | | | | | 9,838 | | | | 9,837 | | | 0 | | $ | 138.80 | | | | 04/01/2024 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | | | | | | | | | | | | 11,052 | | | | 11,051 | | | 0 | | $ | 152.68 | | | | 04/01/2024 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | | | | | | | | | | | | 0 | | | | 6,303 | | | 0 | | $ | 143.81 | | | | 04/01/2024 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | | | | | | | | | Matthew J. Peterson(3.) | | | | | | | | | | | | | | | | | | | | | 0 | | | | 0 | | | | 6,912 | | | $ | 973,832 | | | | | | | | | | | | | | | 33,334 | | | | 16,666 | | | 0 | | $ | 151.99 | | | | 09/17/2024 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | | | | | | | | | | | | 6,250 | | | | 12,500 | | | 0 | | $ | 67.69 | | | | 03/17/2025 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | | | | | | | | | | | | 7,402 | | | | 14,805 | | | 0 | | $ | 74.46 | | | | 03/17/2025 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | | | | | | | | | | | | 8,425 | | | | 25,275 | | | 0 | | $ | 138.80 | | | | 03/16/2026 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | | | | | | | | | | | | 9,465 | | | | 28,394 | | | 0 | | $ | 152.68 | | | | 03/16/2026 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | | | | | | | | | | | | 0 | | | | 21,745 | | | 0 | | $ | 143.81 | | | | 03/22/2027 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | | | | | | | | | Edward H. Sim(4.) | | | 0 | | | | 0 | | | 0 | | | N/A | | | | N/A | | | | 0 | | | | 0 | | | | 0 | | | | N/A | |
1. | Stock option awards. Except for Mr. Peterson’s stock options and/or restrictedissued on September 18, 2019 as noted below, all stock grantedoptions are scheduled to Mr. Alan Miller duringvest ratably on the years discussed above in the Compensation Discussionfirst, second, third and Analysis-Restricted Stock Awards and Stock Options, he was also eligible to receive awards under our long-term incentive plan(s), including shares of restricted stock. For a further description of the employment agreement, please refer to the Potential Payments Upon Termination or Change-in-Control section below. For a further description of the compensation setting process with respect to Mr. Miller, please refer to the Compensation Discussion and Analysis section above.
Chief Executive Officer Restricted Stock Grants in 2019, 2018 and 2017
Pursuant to Mr. Alan Miller’s Employment Agreement, in March of 2019, January of 2018 and March of 2017, as indicated below, the Compensation Committee approved the issuance of restricted shares of our Class B
Common Stock to Mr. Alan Miller pursuant to the Amended and Restated 2010 Employees’ Restricted Stock Purchase Plan. The restricted shares issued in March, 2019 had a market value of $1.0 million, the restricted shares issued in January, 2018 had a market value of $1.5 million and the restricted shares issued in March, 2017 had a market value of $2.0 million onfourth anniversary dates from the date of grant. The March ofstock options issued to Mr. Peterson on September 18, 2019 restricted stock grant has a vesting schedule of 50%are scheduled to vest in three equal installments on each of the first and second anniversaries of the date of grant. The January of 2018 and March of 2017 restricted stock grants have a vesting schedule of 25% on each of the first, second, third and fourth anniversaries of the grant date. The forfeiture of these shares prior to the vesting dates are determined pursuant to the terms set forth in the Restricted Stock Purchase Agreement. Dividends declared by the Company are paid with respect to outstanding shares of restricted stock.
7,462 restricted shares of our Class B Common Stock issued on March 20, 2019 (grant date market value of $134.02 per share).
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The applicable grant dates for the options indicated above are set forth below: 12,926 restricted shares of our Class B Common Stock issued on January 17, 2018 (grant date market value of $116.05 per share).
16,057 restricted shares of our Class B Common Stock issued on March 29, 2017 (grant date market value of $124.56 per share).
OUTSTANDING EQUITY AWARDS AT DECEMBER 31, 2019
The following table provides information about the number of outstanding equity awards held by our named executive officers at December 31, 2019.
| | Option Awards (1.) | | Stock Awards (2.) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Equity | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Incentive | | | Equity | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Plan | | | Incentive | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Awards: | | | Plan | | | | | | | | | | | | Equity | | | | | | | | | | | | | | | | | Number | | | Awards: | | | | | | | | | | | | Incentive | | | | | | | | | Number | | | | | | | of | | | Market or | | | | | | | | | | | | Plan | | | | | | | | | of | | | Market | | | Unearned | | | Payout | | | | | | | | | | | | Awards: | | | | | | | | | Shares | | | Value of | | | Shares, | | | Value of | | | | | | | | | | | | Number of | | | | | | | | | or Units | | | Shares | | | Units or | | | Unearned | | | | Number of | | | Number of | | | Securities | | | | | | | | | of Stock | | | or Units | | | Other | | | Shares, | | | | Securities | | | Securities | | | Underlying | | | | | | | | | That | | | of Stock | | | Rights | | | Units or | | | | Underlying | | | Underlying | | | Unexercised | | | Option | | | | | Have | | | That | | | That | | | Other Rights | | | | Unexercised | | | Unexercised | | | Unearned | | | Exercise | | | Option | | Not | | | Have Not | | | Have Not | | | That Have | | | | Options (#) | | | Options (#) | | | Options | | | Price | | | Expiration | | Vested | | | Vested | | | Vested | | | Not Vested | | Name | | Exercisable | | | Unexercisable | | | (#) | | | ($) | | | Date | | (#) | | | ($) (4.) | | | (#) | | | ($) | | Alan B. Miller | | | | | | | | | | | | | | | | | | | | | 28,348 | | | $ | 4,066,804 | | | | 0 | | | | 0 | | | | | 590,000 | | | | 0 | | | | 0 | | | $ | 117.29 | | | 03/17/2020 | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | | 442,500 | | | | 147,500 | | | | 0 | | | $ | 118.62 | | | 03/22/2021 | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | | 295,000 | | | | 295,000 | | | | 0 | | | $ | 124.56 | | | 03/28/2022 | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | | 147,500 | | | | 442,500 | | | | 0 | | | $ | 119.64 | | | 04/12/2023 | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | | 0 | | | | 590,000 | | | | 0 | | | $ | 134.02 | | | 03/19/2024 | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Marc D. Miller | | | 45,000 | | | | 25,000 | | | | 0 | | | $ | 118.62 | | | 03/22/2021 | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | | 51,500 | | | | 51,500 | | | | 0 | | | $ | 124.56 | | | 03/28/2022 | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | | 25,000 | | | | 75,000 | | | | 0 | | | $ | 119.64 | | | 04/12/2023 | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | | 0 | | | | 100,000 | | | | 0 | | | $ | 134.02 | | | 03/19/2024 | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Steve G. Filton | | | 70,000 | | | | - | | | | 0 | | | $ | 117.29 | | | 03/17/2020 | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | | 52,500 | | | | 17,500 | | | | 0 | | | $ | 118.62 | | | 03/22/2021 | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | | 35,000 | | | | 35,000 | | | | 0 | | | $ | 124.56 | | | 03/28/2022 | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | | 17,500 | | | | 52,500 | | | | 0 | | | $ | 119.64 | | | 04/12/2023 | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | | 0 | | | | 70,000 | | | | 0 | | | $ | 134.02 | | | 03/19/2024 | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Marvin G. Pember | | | 0 | | | | 13,750 | | | | 0 | | | $ | 118.62 | | | 03/22/2021 | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | | 0 | | | | 30,000 | | | | 0 | | | $ | 124.56 | | | 03/28/2022 | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | | 0 | | | | 52,500 | | | | 0 | | | $ | 119.64 | | | 04/12/2023 | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | | 0 | | | | 70,000 | | | | 0 | | | $ | 134.02 | | | 03/19/2024 | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Matthew J. Peterson (3.) | | | 0 | | | | 50,000 | | | | 0 | | | $ | 151.99 | | | 09/17/2024 | | | 0 | | | | 0 | | | | 0 | | | | 0 | |
1.
| • | | Stock option awards. The stock options issued to Mr. Matthew J. Peterson on September 18, 2019 are scheduled to vest in three equal installments on the second, third and fourth anniversaries of the grant date. All other stock options are scheduled to vest ratably on the first, second, third and fourth anniversary dates from the date of grant. The applicable grant dates for the options indicated above are set forth below:
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On March 18, 2015, stock options were granted with an exercise price of $117.29
On March 23, 2016, stock options were granted with an exercise price of $118.62.
On March 29, 2017, stock options were granted with an exercise price of $124.56.
On April 13, 2018, stock options were granted with an exercise price of $119.64. |
| • | | On March 20, 2019, stock options were granted with an exercise price of $134.02. |
| • | | On September 18, 2019, stock options were granted with an exercise price of $151.99. 2.
| Restricted Stock Awards. The outstanding restricted stock awards for Mr. Alan B. Miller are scheduled to vest as follows:
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| | | | | | | | | | | | | | | | | | | | | Date | | 2020 | | | 2021 | | | 2022 | | | 2023 | | | TOTAL | | January 17, | | | 3,232 | | | | 3,231 | | | | 3,232 | | | | - | | | | 9,695 | | March 20, | | | 3,731 | | | | 3,731 | | | | - | | | | - | | | | 7,462 | | March 23, | | | 3,162 | | | | - | | | | - | | | | - | | | | 3,162 | | March 29, | | | 4,014 | | | | 4,015 | | | | - | | | | - | | | | 8,029 | | TOTAL | | | 14,139 | | | | 10,977 | | | | 3,232 | | | | - | | | | 28,348 | |
| • | | On March 18, 2020, stock options were granted with an exercise price of $67.69. |
| • | | On March 18, 2020, stock premium stock options were granted with a 10% premium exercise price of $74.46. |
| • | | On March 17, 2021, stock options were granted with an exercise price of $138.80. |
| • | | On March 17, 2021, stock premium stock options were granted with a 10% premium exercise price of $152.68. |
| • | | On March 23, 2022, stock options were granted with an exercise price of $143.81. |
2. | Performance-Based Restricted Stock Units. On March 23, 2022, 50% of the annual target stock-based compensation awards for our CEO and NEOs were issued in the form of performance-based restricted stock units that will be based upon achievement of a pre-established specified range of target levels based on the three-year growth in our earnings before interest, taxes, depreciation and amortization, and the impacts of other income/expenses and net income attributable to noncontrolling interests. |
43 Universal Health Services, Inc. 2023 Proxy Statement
3.
Outstanding Equity Awards at December 31, 2022 3. | Mr. Peterson was hired by the Company in September 2019 and was awarded stock options upon the commencement of his employment, which are scheduled to vest in three equal installments on the second, third and fourth anniversaries of the grant date. |
4. | Mr. Sim was hired by the Company in December, 2022 to succeed Mr. Marvin G. Pember. In connection with the commencement of his employment, in January, 2023, Mr. Sim was awarded 50,000 stock options, with an exercise price of $145.65, that are scheduled to vest ratably over four years and expire in five years. |
5. | Based on the closing sale price of the Class B Common Stock on the New York Stock Exchange on December 30, 2022 of $140.89 per share. |
44 Universal Health Services, Inc. 2023 Proxy Statement
4.
OPTION EXERCISES AND STOCK VESTED The following table provides information about stock option exercises by, and the vesting of stock for, our named executive officers during fiscal year 2022: | | | | | | | | | | | | | | | | | | | Option Awards | | | Stock Awards | | Name | | Number of Shares Acquired on Exercise (#) | | | Value Realized on Exercise ($) | | | Number of Shares Acquired on Vesting (#)(1.) | | | Value Realized on Vesting ($) | | | | | | | Marc D. Miller | | | 103,000 | | | $ | 2,086,780 | | | | — | | | $ | — | | | | | | | Alan B. Miller | | | 790,000 | | | $ | 13,514,550 | | | | 10,619 | | | $ | 1,533,349 | | | | | | | Steve G. Filton | | | 70,000 | | | $ | 1,743,000 | | | | — | | | $ | — | | | | | | | Marvin G. Pember | | | 30,000 | | | $ | 607,800 | | | | — | | | $ | — | | | | | | | Matthew J. Peterson | | | — | | | $ | — | | | | — | | | $ | — | | | | | | | Edward H. Sim | | | — | | | $ | — | | | | — | | | $ | — | |
| Based on the closing sale price of the Class B Common Stock on the New York Stock Exchange on December 31, 2019 of $143.46
(1) | Restricted stock for Alan B. Miller vested as follows: |
| • | | On January 17, 2022, 3,232 shares at $133.67 per share. |
OPTION EXERCISES AND STOCK VESTED
The following table provides information about stock option exercises by, and the vesting of stock for, our named executive officers during fiscal year 2019:
| | Option Awards | | | Stock Awards | | Name | | Number of Shares Acquired on Exercise (#) | | | Value Realized on Exercise ($) | | | Number of Shares Acquired on Vesting (#) (1.) | | | Value Realized on Vesting ($) | | Alan B. Miller | | | 590,000 | | | $ | 35,665,350 | | | | 13,604 | | | $ | 1,811,791 | | Marc D. Miller | | | 210,000 | | | $ | 9,056,863 | | | | | | | | | | Steve G. Filton | | | 70,000 | | | $ | 4,384,100 | | | | | | | | | | Marvin G. Pember | | | 188,750 | | | $ | 7,441,854 | | | | | | | | | | Matthew J. Peterson | | | - | | | $ | - | | | | | | | | | |
(1.)
| • | | Restricted stock for Alan B. Miller vested as follows:
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On January 17, 2019, 3,231 shares at $129.64 per share.
On March 18, 2019, 3,1982022, 7,387 shares at $134.24$149.09 per share. On March 23, 2019, 3,161 shares at $135.31 per share.
On March 29, 2019, 4,014 shares at $133.51 per share.
PENSION BENEFITS
Executive Retirement Income Plan (“ERIP”)
In October 1993, the Board of Directors adopted the ERIP,
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45 Universal Health Services, Inc. 2023 Proxy Statement
PENSION BENEFITS Executive Retirement Income Plan In October 1993, the Board of Directors adopted the Executive Retirement Income Plan (“ERIP”), which was subsequently closed to new participants effective January 1, 2015. Pursuant to the terms of the ERIP, certain management or other highly compensated employees, who had been previously designated as plan participants by our Board of Directors prior to December 31, 2014, and who had completed at least 10 years of active employment with us, may receive retirement income benefits. Subject to certain conditions, the monthly benefit is payable to a participant who retires after he or she reaches age 62 (applicable to participants added to the plan before 2008) or age 65 (applicable to participants added to the plan after January 1, 2008). The benefit is equal to 3% of the employee’s average monthly base salary over the three years preceding retirement multiplied by the number of qualified years (not to exceed 10) of the participant’s employment with us. Upon attaining the qualified age of retirement as stipulated in the plan, subject to certain conditions, payment of ERIP benefits are made to participants in 60 monthly installments following their retirement date. In certain circumstances, the participant may elect to receive the present value of the payments in one lump sum or receive payments over a period of 10 years. If a participant’s employment with us is terminated prior to their qualified age of retirement, no ERIP benefits will be payable unless the Board of Directors, in its full discretion, determines otherwise. In 2018, upon commencement of the Supplemental Executive Retirement Income Plan (“SERIP”), as discussed below, certain participants of the ERIP, who had not yet approached their qualified age of retirement, were given the option to remain in the ERIP or convert their participation into the SERIP. Please see Supplemental Executive Retirement Income Plan below for additional disclosure related to participants who elected to convert from the ERIP to the SERIP. Mr. Alan B. Miller remains a participant in the ERIP. Mr. Alan B. Miller’s aggregate benefit payable under the ERIP (for the 60 months in which the participant receives benefits), assuming retirement as of December 31, 2022, amounted to approximately $2.6 million. Pursuant to Alan B. Miller’s employment contract dated December 23, 2020, for purposes of the ERIP, the monthly compensation for the three years preceding retirement shall be deemed to be the average monthly compensation for the three years ended immediately prior to January 1, 2021. As discussed below, Marc D. Miller and Steve G. Filton converted their ERIP participation into the SERIP. Marvin G. Pember and Matthew J. Peterson were not previously ERIP participants. The following tables provide information about pension benefits pursuant to our ERIP for our named executive officer, as described below. | | | | | | | | | Name | | Number of Years Credited Service (#) | | Value of Accumulated Benefit ($) (1.) | | | Payments During Last Fiscal Year ($) | | | | | Alan B. Miller | | 44 | | $ | 2,270,794 | | | 0 |
(1) | 4% discount rate applied over the three years preceding retirement multiplied by the number of qualified years (not to exceed 10) of the participant’s employment with us.projected post-retirement 5-year payout period. Upon attaining the qualified age of retirement as stipulated in the plan, subject to certain conditions, payment of ERIP benefits are made to participants in 60 monthly installments following their retirement date. In certain circumstances, the participant may elect to receive the present value of the payments in one lump sum or receive payments over a period of 10 years. If a participant’s employment with us is terminated prior to their qualified age of retirement, no ERIP benefits will be payable unless the Board of Directors, in its full discretion, determines otherwise.
In 2018, upon commencement of the Supplemental Executive Retirement Income Plan (“SERIP”), as discussed below, certain participants of the ERIP, who had not yet approached their qualified age of retirement, were given the option to remain in the ERIP or convert their participation into the SERIP. Please see Supplemental Executive Retirement Income Plan below for additional disclosure related to participants who elected to convert from the ERIP to the SERIP.
Mr. Alan B. Miller remains a participant in the ERIP. Mr. Alan B. Miller’s aggregate benefit payable under the ERIP (for the 60 months in which the participant receives benefits), assuming retirement as of December 31, 2019, amounted to approximately $2.5 million. As discussed below, Marc D. Miller and Steve G. Filton converted their ERIP participation into the SERIP.
The following tables provide information about pension benefits pursuant to our ERIP for our named executive officer, as described below.
Name | | Number of Years Credited Service (#) | | | Value of Accumulated Benefit ($) (1.) | | | Payments During Last Fiscal Year ($) | | Alan B. Miller | | | 41 | | | $ | 2,225,968 | | | | 0 | |
(1.)
| 4% discount rate applied over the projected post-retirement 5-year payout period.
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Supplemental Executive Retirement Income Plan (“SERIP”)
In July, 2018, the Board of Directors adopted the SERIP.
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Supplemental Executive Retirement Income Plan In July, 2018, the Board of Directors adopted the Supplemental Executive Retirement Income Plan (“SERIP”). Pursuant to the terms of the SERIP, a select group of management or other highly compensated employees may be designated as plan participants. Our SERIP, which is subject to the applicable provisions of Internal Revenue Code Section 409A, provides eligible employees with annual employer contributions which are entirely at the Company’s discretion. Generally, each annual contribution vests on the earlier of: (i) the 5th anniversary of the date of funding to the participant’s account, or; (ii) the participant attaining the qualified age of retirement (either age 62 or age 65, as stipulated in the SERIP). The SERIP also provides for discretionary alternative vesting schedules for certain supplemental discretionary contributions made on an individual basis. Upon attaining the SERIP’s qualified age of retirement, distributions are paid in 10 annual installments to the participant upon the participants retirement. Distributions due to events other than retirement are paid in a lump sum. Our obligation to make payments of amounts credited to participants’ accounts is a general unsecured obligation. 46 Universal Health Services, Inc. 2023 Proxy Statement
Pension Benefits As discussed above, a select group of employees who were previously participants in the ERIP and elected to convert to the SERIP, have been provided with an unfunded, lump sum conversion balance that was credited to the participant’s SERIP account. The unfunded ERIP conversion balances transferred to the SERIP, which were computed based upon the participant’s 2017 salary and will remain permanently unchanged after conversion, are payable over 60 monthly installments, if the participant attains their qualified age of retirement, as previously stipulated in the ERIP. If the participant does not attain their qualified age of retirement, the ERIP conversion balance is forfeited unless the Board of Directors, in its full discretion, determined otherwise. For ERIP participants who elected to convert to the SERIP, their participation in the ERIP was terminated upon conversion and no future benefits will be earned pursuant to the ERIP. SERIP participants who converted from the ERIP are entitled to future benefits pursuant to the terms of the SERIP. Marc D. Miller and Steve G. Filton elected to convert their ERIP participation into the SERIP. As a result of their elections, their unfunded ERIP conversion balances, which are reflected below and were computed based upon their 2017 salaries, will remain permanently unchanged. Marvin G. Pember and Matthew J. Peterson, who were not previously ERIP participants, also participate in the SERIP. The following tables provide information about pension benefits pursuant to our SERIP for our named executive officers as described below. Mr. Edward H. Sim was not a participant in the SERIP during 2022. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | SERIP Beginning Balance 1/1/2022 ($) | | | Company SERIP Contributions in Last Fiscal Year ($)(1.) | | SERIP Losses in Last Fiscal Year ($) | | | SERIP Distributions ($) | | SERIP Balance at Last Fiscal Year-End ($) | | | ERIP Conversion Balance to SERIP | | | Aggregate Balance at Last Fiscal Year-End ($) | | Name | | Vested | | | Unvested | | | | | | | | | | | Marc D. Miller | | $ | 244,412 | | | $66,003 | | $ | (41,650 | ) | | $0 | | $ | 0 | | | $ | 268,765 | | | $ | 1,136,438 | | | $ | 1,405,203 | | | | | | | | | | | Steve G. Filton | | $ | 180,842 | | | $42,881 | | $ | (26,629 | ) | | $0 | | $ | 197,094 | | | $ | 0 | | | $ | 919,340 | | | $ | 1,116,434 | | | | | | | | | | | Marvin G. Pember | | $ | 363,633 | | | $44,194 | | $ | (51,537 | ) | | $0 | | $ | 356,290 | | | $ | 0 | | | $ | 0 | | | $ | 356,290 | | | | | | | | | | | Matthew J. Peterson | | $ | 48,887 | | | $37,402 | | $ | (10,147 | ) | | $0 | | $ | 0 | | | $ | 76,142 | | | $ | 0 | | | $ | 76,142 | |
(1) | Amounts represent discretionary contributions made on an individual basis. Upon attainingby the SERIP’s qualified age of retirement, distributions are paid in 10 annual installments to the participant upon the participants retirement. Distributions due to events other than retirement are paid in a lump sum. Our obligation to make payments of amounts credited to participants’ accounts is a general unsecured obligation. As discussed above, a select group of employees who were previously participants in the ERIP and elected to convertCompany during 2022 to the SERIP have been provided with an unfunded, lump sum conversion balance that was credited to the participant’s SERIP account. The unfunded ERIP conversion balances transferred to the SERIP, which were computed based upon the participant’s 2017 salaryaccounts and will remain permanently unchanged after conversion, are payable over 60 monthly installments, if the participant attains their qualified age of retirement, as previously stipulatedconsidered service costs.
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47 Universal Health Services, Inc. 2023 Proxy Statement
NONQUALIFIED DEFERRED COMPENSATION PLAN Our Deferred Compensation Plan, which is subject to the applicable provisions of Internal Revenue Code Section 409A provides that eligible employees may elect to defer a portion of their base salary and bonus award into investment options in lieu of receiving cash. Under the Deferred Compensation Plan, an employee is deemed eligible if their base compensation for 2022 was $135,000 or higher and they are performing duties in a qualified position. The base compensation threshold is adjusted annually for cost-of-living increases. Pursuant to the terms of the Deferred Compensation Plan, the minimum annual amount that can be deferred is 1% of an employee’s base salary. No more than 50% of an employee’s base salary or 95% of an employee’s annual bonus may be deferred under the Deferred Compensation Plan in any calendar year. Employees may allocate a portion of their deferred compensation to be distributed in a lump sum or installments to begin at retirement or a scheduled distribution date. The available investment options consist of certain mutual funds which include: (i) conservative (e.g. money markets or bonds); (ii) moderately conservative (e.g. balanced funds), and; (iii) aggressive (e.g. domestic and international equity). Our obligation to make payments of amounts credited to participants’ deferred compensation accounts is a general unsecured obligation. In addition, under the Deferred Compensation Plan, we may make discretionary contributions on behalf of an eligible employee. Since inception of the Deferred Compensation Plan, we have not made any discretionary contributions on behalf of employees. Our obligations under the Deferred Compensation Plan in connection with an employee’s retirement account are payable, beginning at retirement at age 55 and 10 years of service for deferrals made prior to January 1, 2016, and age 55 and 5 years of service for deferrals made on or after January 1, 2016, in equal installments over a ten year period; except that an employee may make a distribution election to receive the balance of the participant’s retirement account in either a single lump sum or equal annual or less frequent installments over a period not to exceed ten years. For deferrals made on or after January 1, 2016, an employee may elect to defer the retirement distribution to begin one year following retirement. An employee or designated beneficiary will receive a lump sum as a result of death, disability, or termination, other than for retirement. An employee may change his distribution elections by making new distribution elections at least 12 months prior to the date on which such payment was otherwise scheduled to be made and must be delayed until a date that is at least five years after the date the distribution was previously scheduled to begin. Our obligations under the Deferred Compensation Plan in connection with an employee’s scheduled distribution are payable in a lump sum or installments of two to ten years, commencing on the date indicated by the employee. If the employee’s employment is terminated prior to the distribution of obligations in accordance with a scheduled distribution then the amounts credited to such accounts will be transferred to the employee’s retirement account and distributed in accordance with the employee’s distribution election for that account. If an employee experiences a financial hardship that is the result of an “unforeseeable emergency,” as defined under the Deferred Compensation Plan, he or she may apply to the administrator of the Deferred Compensation Plan for an emergency withdrawal against his or her accounts. Such an emergency withdrawal may be allowed at the discretion of the administrator, in which case the employee’s account will be reduced accordingly. The following table provides information about our Deferred Compensation Plan for our named executive officers. | | | | | | | | | | | | | | | | | | | | | Name | | Executive Contributions in Last Fiscal Year ($)(1.) | | | Company Contributions in Last Fiscal Year ($) | | | Aggregate Earnings in Last Fiscal Year ($) | | | Aggregate Withdrawals / Distributions ($) | | | Aggregate Balance at Last Fiscal Year-End ($) | | | | | | | | Marc D. Miller | | $ | 0 | | | $ | 0 | | | $ | (77,557 | ) | | $ | 0 | | | $ | 237,439 | | | | | | | | Alan B. Miller | | $ | 0 | | | $ | 0 | | | $ | (696,249 | ) | | $ | 0 | | | $ | 2,833,532 | | | | | | | | Steve G. Filton | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | | | | | | | Marvin G. Pember | | $ | 1,138,500 | | | $ | 0 | | | $ | (1,035,904 | ) | | $ | (26,993 | ) | | $ | 5,238,193 | | | | | | | | Matthew J. Peterson | | $ | 426,114 | | | $ | 0 | | | $ | (111,462 | ) | | $ | 0 | | | $ | 719,062 | | | | | | | | Edward H. Sim | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 0 | |
(1) | Amounts included in “salary” in the ERIP. If the participant does not attain their qualified age of retirement, the ERIP conversion balanceSummary Compensation Table. |
48 Universal Health Services, Inc. 2023 Proxy Statement
Nonqualified Deferred Compensation Plan Split-Dollar Life Insurance Agreements: See Split-Dollar Life Insurance Agreements as included above in this Proxy Statement. Potential Payments Upon Termination or Change-in-Control Potential Payments Upon Termination Alan B. Miller January 1, 2021 Employment Agreement: On December 23, 2020, we entered into a new employment agreement with Alan B. Miller (“New Employment Agreement”) which provides the terms and conditions on Mr. Alan Miller’s continuing service with the Company and supersedes the previous amended and restated employment agreement dated as of July 24, 2013. The New Employment Agreement became effective on January 1, 2021 and contemplates that Mr. Alan Miller will be employed by the Company as Executive Chairman of the Board of Directors of the Company and provides for automatic annual renewals unless either party elects otherwise at least one year in advance. Mr. Alan Miller’s Agreement was also amended to make certain changes to narrow the circumstances under which Mr. Alan Miller can resign from employment with good reason and receive acceleration of future long-term incentive awards, including his Performance Based Restricted Stock Units. In general, Mr. Alan Miller’s long-term stock-based incentives awards granted during or before employment as Executive Chairman will become fully vested upon termination of his employment as Executive Chairman at the time such employment ends, other than by us for “cause” or voluntarily by Mr. Alan Miller before or at the end of the applicable term (under circumstances not involving a breach of the New Employment Agreement by us). If Mr. Alan Miller’s employment is forfeited unless the Board of Directors, in its full discretion, determined otherwise. For ERIP participants who elected to convert to the SERIP, their participation in the ERIP was terminated for “cause”, as defined in the New Employment Agreement, he will be entitled to any benefits payable to or earned by Mr. Alan Miller with respect to any period of his employment or other service prior to the date of such discharge. If Mr. Alan Miller’s employment is terminated due to his disability, Mr. Alan Miller shall be paid an amount equal to one-half of Mr. Alan Miller’s base salary, payable in twelve equal monthly installments. Additionally, Mr. Alan Miller would be entitled to the accelerated vesting of his unvested long-term stock-based incentive awards granted during or before employment as Executive Chairman. If Mr. Alan Miller’s employment or service terminates due to his death, Mr. Alan Miller’s beneficiary shall receive any salary and reimbursements that would otherwise have been payable to Mr. Alan Miller as of the date of his death in addition to any life insurance benefits under insurance policies maintained on Mr. Alan Miller’s life by us and for which Mr. Alan Miller had the right to designate the beneficiary. If Mr. Alan Miller terminates his employment or other service under the New Employment Agreement because of a material change in the duties of his office or any other breach by us of our obligations, or in the event of the termination of Mr. Alan Miller’s employment by us without cause or otherwise in breach of the New Employment Agreement, subject to the terms of his Employment Agreement, Mr. Alan Miller will generally continue to receive for the remainder of the employment term all of the cash compensation, long-term equity incentive compensation and other benefits as if his employment or service had not terminated, and the vesting of his long-term incentive plan awards will accelerate. We may condition Mr. Alan Miller’s right to receive any severance benefits on his execution of a general release in favor of us. 49 Universal Health Services, Inc. 2023 Proxy Statement
Nonqualified Deferred Compensation Plan The following table provides quantitative disclosure of the estimated payments that would be made to Mr. Alan Miller under his New Employment Agreement as of December 31, 2022, the last business day of our fiscal 2022: | | | | | | | | | | | | | | | | | | | | | | | Cash Severance Payment ($) | | | Perquisites/ Benefits ($) | | | Vesting Acceleration of Previously Granted Stock Based Awards ($)(d.) | | | Long Term Incentive Plan Awards ($)(e.) | | | Total Termination Benefits ($) | | | | | | | | Alan B. Miller | | | | | | | | | | | | | | | | | | | | | | | | | | | Termination by Us for “Cause” | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | | | | | | | Termination Due to Mr. Alan Miller’s Disability | | $ | 520,000(a.) | | | $ | 0 | | | $ | 23,611,517 | | | $ | 2,449,232 | | | $ | 26,580,749 | | | | | | | | Termination Due to Mr. Alan Miller’s Death | | $ | 0 | | | $ | 0 | | | $ | 23,611,517 | | | $ | 2,449,232 | | | $ | 26,060,749 | | | | | | | | Termination by Mr. Alan Miller for “Breach by the Company” or Termination by the Company Without Cause | | $ | 2,100,800(b.) | | | $ | 1,891,532(c.) | | | $ | 23,611,517 | | | $ | 2,449,232 | | | $ | 30,053,081 | |
(a) | Based upon conversion and no future benefits will be earned pursuant to the ERIP. SERIP participants who converted from the ERIP are entitled to future benefits pursuant to the terms of the SERIP. Marc D. Miller and Steve G. Filton elected to convert their ERIP participation into the SERIP. As a result of their elections, their unfunded ERIP conversion balances, which are reflected below and were computed based upon their 2017 salaries, will remain permanently unchanged. Marvin G. Pember and Matthew J. Peterson, who were not previously ERIP participants, also participate in the SERIP.
The following tables provide information about pension benefits pursuant to our SERIP for our named executive officers as described below.
Name | | SERIP Beginning Balance 1/1/2019 ($) | | | Registrant SERIP Contributions in Last Fiscal Year ($) (1.) | | | SERIP Gains in Last Fiscal Year ($) | | | SERIP Distributions ($) | | | SERIP Balance at Last Fiscal Year-End ($) | | | ERIP Conversion Balance to SERIP | | Aggregate Balance at Last Fiscal Year-End ($) | | | | | | | | | | | | | | | | | | | | Vested | | Unvested | | | | | | | | | Marc D. Miller | | $ | 38,819 | | | $ | 47,164 | | | $ | 14,366 | | | $ | - | | | $ | - | | $ | 100,349 | | | $ | 1,136,438 | | $ | 1,236,787 | | Steve G. Filton | | $ | 32,870 | | | $ | 38,154 | | | $ | 8,136 | | | $ | - | | | $ | 79,160 | | $ | - | | | $ | 919,340 | | $ | 998,500 | | Marvin G. Pember | | $ | 163,911 | | | $ | 40,185 | | | $ | 29,432 | | | $ | - | | | $ | 233,528 | | $ | - | | | $ | - | | $ | 233,528 | |
| (1.)
| Amounts represent discretionary contributions made by the Company during 2019 to the SERIP accounts.
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Deferred Compensation
Our Deferred Compensation Plan, which is subject to the applicable provisions of Internal Revenue Code Section 409A provides that eligible employees may elect to defer a portion of their base salary and bonus award into investment options in lieu of receiving cash. Under the Deferred Compensation Plan, an employee is deemed eligible if their base compensation for 2019 was $125,000 or higher and they are performing duties in a qualified position. The base compensation threshold is adjusted annually for cost-of-living increases.
Pursuant to the terms of the Deferred Compensation Plan, the minimum annual amount that can be deferred is $2,000. No more than 50% of an employee’s base salary or 95% of an employee’s annual bonus may be deferred under the Deferred Compensation Plan in any calendar year. Employees may allocate a portion of their deferred compensation to be distributed in a lump sum or installments to begin at retirement or a scheduled distribution date. The available investment options consist of certain mutual funds which include: (i) conservative (e.g. money markets or bonds); (ii) moderately conservative (e.g. balanced funds), and; (iii) aggressive (e.g. domestic and international equity). Our obligation to make payments of amounts credited to participants’ deferred compensation accounts is a general unsecured obligation. In addition, under the Deferred Compensation Plan, we may make discretionary contributions on behalf of an eligible employee. Since inception of the Deferred Compensation Plan, we have not made any discretionary contributions on behalf of employees.
Our obligations under the Deferred Compensation Plan in connection with an employee’s retirement account are payable, beginning at retirement at age 55 and 10 years of service for deferrals made prior to January 1, 2016, and age 55 and 5 years of service for deferrals made on or after January 1, 2016, in equal installments over a ten year period; except that an employee may make a distribution election to receive the balance of the participant’s retirement account in either a single lump sum or equal annual or less frequent installments over a period not to exceed ten years. For deferrals made on or after January 1, 2016, an employee may elect to defer the retirement distribution to begin one year following retirement. An employee or designated beneficiary will receive a lump sum as a result of death, disability, or termination, other than for retirement. An employee may change his distribution elections by making new distribution elections at least 12 months prior to the date on which such payment was otherwise scheduled to be made and must be delayed until a date that is at least five years after the date the distribution was previously scheduled to begin.
Our obligations under the Deferred Compensation Plan in connection with an employee’s scheduled distribution are payable in a lump sum or installments of two to ten years, commencing on the date indicated by the employee. If the employee’s employment is terminated prior to the distribution of obligations in accordance with a scheduled distribution then the amounts credited to such accounts will be transferred to the employee’s retirement account and distributed in accordance with the employee’s distribution election for that account.
If an employee experiences a financial hardship that is the result of an “unforeseeable emergency,” as defined under the Deferred Compensation Plan, he or she may apply to the administrator of the Deferred Compensation Plan for an emergency withdrawal against his or her accounts. Such an emergency withdrawal may be allowed at the discretion of the administrator, in which case the employee’s account will be reduced accordingly.
NONQUALIFIED DEFERRED COMPENSATION
The following table provides information about our Deferred Compensation Plan for our named executive officers.
Name | | Executive Contributions in Last Fiscal Year ($) (1.) | | | Registrant Contributions in Last Fiscal Year ($) | | | Aggregate Earnings in Last Fiscal Year ($) | | | Aggregate Withdrawals / Distributions ($) | | | Aggregate Balance at Last Fiscal Year-End ($) | | Alan B. Miller | | $ | 100,000 | | | $ | 0 | | | $ | 450,517 | | | $ | 0 | | | $ | 2,438,070 | | Marc D. Miller | | $ | 0 | | | $ | 0 | | | $ | 49,415 | | | $ | 0 | | | $ | 203,788 | | Steve G. Filton | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | Marvin G. Pember | | $ | 529,457 | | | $ | 0 | | | $ | 586,737 | | | $ | (45,128 | ) | | $ | 2,976,848 | | Matthew J. Peterson | | $ | 60,000 | | | $ | 0 | | | $ | 2,176 | | | $ | 0 | | | $ | 62,176 | |
(1.)
| Amounts included in “salary” in the Summary Compensation Table.
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Split-Dollar Life Insurance Agreements:
See Split-Dollar Life Insurance Agreements as included above in this Proxy Statement.
Potential Payments Upon Termination or Change-in-Control
Potential Payments Upon Termination
On July 24, 2013, we entered into an employment agreement, as amended on November 5, 2018, with Alan B. Miller (“Employment Agreement”) that stipulates that Mr. Miller will serve as the Chairman of our Board of Directors and Chief Executive Officer (“CEO”) through December 31, 2017, and provides for automatic annual renewals unless either party elects otherwise. During 2019, Mr. Miller’s Employment Agreement was automatically renewed for one year through December 31, 2021. The agreement also contemplates that Mr. Alan Miller will remain as Executive Chairman of our Board of Directors during the term of his CEO employment. The Employment Agreement also contains customary non-disparagement, non-solicitation and non-competition provisions.
In general, Mr. Alan Miller’s long-term stock-based incentive awards granted pursuant to his Employment Agreement will become fully vested upon termination of his employment other than by us for “cause” or voluntarily by Mr. Alan Miller before the end of the applicable term (under circumstances not involving a breach of the Employment Agreement by us).
If Mr. Alan Miller’s employment is terminated for “cause”, as defined in the Employment Agreement, he will be entitled to any benefits payable to or earned by Mr. Miller with respect to any period of his employment or other service prior to the date of such discharge.
If Mr. Alan Miller’s employment as Chief Executive Officer is terminated due to his disability, Mr. Alan Miller shall be paid a pro rata portion of the annual bonus which would otherwise have been payable for the year in which his employment terminates, plus an amount equal to one-half(6 months) of Mr. Alan Miller’s 2023 base salary.
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(b) | Assumes (i) continuation of all cash compensation through 2024 (automatic annual renewal termination date), and; (ii) annual base salary payableincrease of 2.0% through 2024. |
(c) | Assumes (i) continuation of all entitled perquisites through 2024; (ii) continuation of insurance premiums in twelve equal monthly installments. If Mr. Alan Miller’s employment or service terminatesconnection with long-term disability, our 401(k) match and other charges, all of which were based upon the actual 2022 amounts. Additionally, assumes premiums due to his death,in connection with split-dollar life insurance agreements through 2024. Please see the Summary Compensation and the All Other Compensation table included herein.
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(d) | Mr. Alan Miller’s beneficiary shall receive a pro rata portionRepresents the intrinsic value of the annual bonus which would otherwise have been payable to Mr. Alan Miller foraccelerated stock options based upon the closing price per share of the Class B Common Stock on the NYSE on December 30, 2022 of $140.89 per share. The full grant date fair values of these awards were included in the Summary Compensation Table in the year of his death.original grant.
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(e) | If Mr. Miller terminates his employment or other service underRepresents the Employment Agreement becauseintrinsic value of a material changethe accelerated performance based restricted stock units based upon the closing price per share of the Class B Common Stock on the NYSE on December 30, 2022 of $140.89 per share. The full grant date fair values of these awards were included in the Summary Compensation Table in the year of original grant.
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Marc D. Miller January 1, 2021 Employment Agreement: On December 23, 2020, we entered into an employment agreement with Marc D. Miller (“MDM Employment Agreement”) which provides for the employment of Mr. Marc Miller as Chief Executive Officer (“CEO”) for an initial term beginning January 1, 2021 and ending on January 1, 2026, subject to earlier termination in accordance with its terms, and subject to automatic annual renewal for additional one-year periods unless either party elects to terminate the terms of Mr. Marc Miller’s employment at the end of the initial term or at the end of the renewal term by giving one year’s advance written notice of such termination. On March 23, 2022, Mr. Marc Miller’s Agreement was also amended to narrow the circumstances under which Mr. Marc Miller can resign from employment with good reason and receive acceleration of future long-term incentive awards, including his Performance Based Restricted Stock Units. At all times during the term of employment, Mr. Marc Miller shall be nominated to serve as a member of the Board of Directors. In general, Mr. Marc Miller’s long-term stock-based incentives awards granted during or before employment as CEO will become fully vested upon termination of his employment as CEO at the time such employment ends, other than by us for “cause” or voluntarily by Mr. Marc Miller before or at the end of the applicable term (under circumstances not involving a breach of the MDM Employment Agreement by us). 50 Universal Health Services, Inc. 2023 Proxy Statement
Nonqualified Deferred Compensation Plan If Mr. Marc Miller’s employment is terminated for “cause”, as defined in the MDM Employment Agreement, he will be entitled to any benefits payable to or earned by Mr. Marc Miller with respect to any period of his employment or other service prior to the date of such discharge. If Mr. Marc Miller’s employment is terminated due to his disability, Mr. Marc Miller shall be paid a pro rata portion of the annual bonus which would otherwise have been payable for the year in which his employment terminates, plus an amount equal to one-half of Mr. Marc Miller’s base salary, payable in twelve equal monthly installments. If Mr. Marc Miller’s employment or service terminates due to his death, Mr. Marc Miller’s beneficiary shall receive any salary and reimbursements that would otherwise have been payable to Mr. Marc Miller as of the date of his death, in addition to a pro rata portion of the annual bonus which would otherwise have been payable for the year of his death. Mr. Marc Miller’s beneficiary shall also receive any life insurance benefits under insurance policies maintained on Mr. Marc Miller’s life by us and for which Mr. Marc Miller had the right to designate the beneficiary. If Mr. Marc Miller terminates his employment or other service under the MDM Employment Agreement because of a material change in the duties of his office or any other breach by us of our obligations, or in the event of the termination of Mr. Marc Miller’s employment by us without cause or otherwise in breach of the MDM Employment Agreement, subject to the terms of his Employment Agreement, Mr. Marc Miller will generally continue to receive for the remainder of his employment term all of the cash compensation, long-term equity incentive compensation and other benefits as if his employment or service had not terminated, and the vesting of his long-term incentive plan awards will accelerate. We may condition Mr. Marc Miller’s right to receive any severance benefits on his execution of a general release in favor of us. The following table provides quantitative disclosure of the estimated payments that would be made to Mr. Marc Miller under his employment agreement as of December 31, 2022, the last business day of our fiscal 2022: | | | | | | | | | | | | | | | | | | | | | | | Cash Severance Payment ($) | | | Perquisites/ Benefits ($) | | | Vesting Acceleration of Previously Granted Stock Based Awards ($)(d.) | | | Long Term Incentive Plan Awards ($)(e.) | | | Total Termination Benefits ($) | | | | | | | | Marc D. Miller | | | | | | | | | | | | | | | | | | | | | | | | | | | Termination by Us for “Cause” | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | | | | | | | Termination Due to Mr. Marc Miller’s Disability | | $ | 1,690,000(a.) | | | $ | 0 | | | $ | 4,164,679 | | | $ | 4,657,542 | | | $ | 10,512,221 | | | | | | | | Termination Due to Mr. Marc Miller’s Death | | $ | 0 | | | $ | 0 | | | $ | 4,164,679 | | | $ | 4,657,542 | | | $ | 8,822,221 | | | | | | | | Termination by Mr. Marc Miller for “Breach by the Company” or Termination by the Company Without Cause | | $ | 10,344,152(b.) | | | $ | 305,733(c.) | | | $ | 4,164,679 | | | $ | 4,657,542 | | | $ | 19,472,106 | |
(a) | Based upon 50% of the targeted 2023 non-equity incentive plan bonus award and 50% (6 months) of Mr. Marc Miller’s 2023 base salary. |
(b) | Assumes (i) continuation of all cash compensation through 2025 (automatic annual renewal termination date); (ii) annual base salary increase of 2.0% through 2025, and; (iii) an annual bonus award equal to 150% of his office or anyestimated base salary through 2025, which assumes the achievement of the bonus opportunity target. . |
(c) | Assumes (i) continuation of insurance premiums in connection with long-term disability, our 401(k) match and other breach by uscharges, all of our obligations, orwhich were based upon the actual 2022 amounts, and, (ii) continuation of SERIP plan contributions. |
(d) | Represents the intrinsic value of the accelerated stock options based upon the closing price per share of the Class B Common Stock on the NYSE on December 30, 2022 of $140.89 per share. The full grant date fair values of these awards were included in the eventSummary Compensation Table in the year of original grant. |
(e) | Represents the intrinsic value of the termination of Mr. Alan Miller’s employment by us without cause or otherwise in breachaccelerated performance based restricted stock units based upon the closing price per share of the Employment Agreement, Mr. Alan Miller will generally continue to receive allClass B Common Stock on the NYSE on December 30, 2022 of the cash compensation, benefits and minimum long term incentive compensation set forth$140.89 per share. The full grant date fair values of these awards were included in the Employment Agreement as if his employment or service had not terminated, and the vesting of his long-term incentive plan awards will accelerate. The following table provides quantitative disclosure of the estimated payments that would be made to Mr. Alan Miller under his Employment Agreement as of December 31, 2019, the last business day of our fiscal 2019, assuming that the Employment Agreement would have been in effect at that time:
| | Cash Severance Payment ($) | | | | Perquisites/ Benefits ($) | | | | Vesting Acceleration of Previously Granted Stock Based Awards ($) (e.) | | | Long Term Incentive Plan Awards ($) | | | | Total Termination Benefits ($) | | Alan B. Miller | | | | | | | | | | | | | | | | | | | | | | | | Termination by Us for “Cause” | | $ | 0 | | | | $ | 0 | | | | $ | 0 | | | $ | 0 | | | | $ | 0 | | Termination Due to Mr. Alan Miller’s Disability | | $ | 1,735,700 | | (a.) | | $ | 0 | | | | $ | 29,416,154 | | | $ | 0 | | | | $ | 31,151,854 | | Termination Due to Mr. Alan Miller’s Death | | $ | 0 | | | | $ | 0 | | | | $ | 29,416,154 | | | $ | 0 | | | | $ | 29,416,154 | | Termination by Mr. Alan Miller for “Breach by the Company” or Termination by the Company Without Cause | | $ | 7,012,228 | | (b.) | | $ | 2,350,349 | | (c.) | | $ | 29,416,154 | | | $ | 4,000,000 | | (d.) | | $ | 42,778,731 | |
(a.)
| Based upon 50% of the targeted 2020 non-equity incentive plan bonus award and 50% (6 months) of Mr. Alan Miller’s 2020 base salary.
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(b.)
| Assumes (i) continuation of all cash compensation through 2021 (automatic annual renewal termination date); (ii) annual base salary increase of 2.0% through 2021, and; (iii) an annual bonus award equal to 100% of his estimated base salary through 2021, which assumes the achievement of the bonus opportunity target set forth under Mr. Alan Miller’s employment agreement.
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(c.)
| Assumes (i) continuation of all entitled perquisites through 2021; (ii) continuation of insurance premiums in connection with long-term disability, our 401(k) match and charges all of which were based upon the actual 2019 amounts. Additionally, assumes premiums due in connection with split-dollar life insurance agreements through 2021. Please see the Summary Compensation and the All Other Compensation table included herein.
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(d.)
| Pursuant to the terms of the amendment to the Employment Agreement dated November 5, 2018, assumes continuation of minimum long-term incentive compensation through 2021 with 50% being in the form of restricted stock and 50% in the form of cash.
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(e.)
| Represents the intrinsic value of the accelerated stock options and restricted stock awards based upon the closing price per share of the Class B Common Stock on the NYSE on December 31, 2019 of $143.46 per share. The full grant date fair values of these awards were included in the Summary Compensation Table in the year of original grant.
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In addition, in the eventyear of an involuntary termination of their respective employment by the Company without cause, Mr. Pember and Mr. Peterson are each entitled to receive salary continuation for 12 months and Mr. Peterson is also entitled to reimbursement of a portion of his COBRA premium for 12 months. Assuming such an involuntary termination of their respective employment had occurred as of December 31, 2019, Mr. Pember and Mr. Peterson would be entitled to receive aggregate cash severance payments of $697,591 and $600,000, respectively, and Mr. Peterson would have been entitled to the reimbursement of a portion of his COBRA premium aggregating to $7,800.original grant.
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51 Universal Health Services, Inc. 2023 Proxy Statement
Nonqualified Deferred Compensation Plan Other Executive Officers In addition, in the event of an involuntary termination of their respective employment by the Company without cause, Messrs. Peterson and Sim are each entitled to receive salary continuation for 12 months. Messrs. Peterson and Sim are also entitled to reimbursement of a portion of their COBRA premium for 12 months. Assuming such an involuntary termination of their respective employment had occurred as of December 31, 2022, Messrs. Peterson and Sim would be entitled to receive aggregate cash severance payments of $675,000 and $775,000, respectively, and Messrs. Peterson and Sim would have been entitled to the reimbursement of a portion of their COBRA premium aggregating to $21,403 and $21,568, respectively. Potential Payments upon a Change of Control Pursuant to our Third Amended and Restated 2005 Stock Incentive Plan and our 2020 Omnibus Stock and Incentive Plan, (as of December 31, 2022, all unvested awards of our named executive officers were granted under these two plans), all of our employees receive full acceleration of the vesting of any unvested stock optionsaward in the event that such stock optionsawards are not assumed or substituted by the surviving or acquiring company following a change of control of the Company. The intrinsic value of our named executive officers’ stock options for which vesting would have accelerated assuming a change in control of the Company in which equity awards are not assumed or substituted had occurred as of December 31, 2019,2022, is as follows: Marc D. Miller: $4,164,680; Alan B. Miller: $25,349,350;$23,611,517; Steve G. Filton: $2,839,566; Marvin G. Pember: $1,469,765; Matthew J. Peterson: $1,951,321 and Edward H. Sim: $0. Additionally, the intrinsic value of our named executive officers’ performance based restricted stock units for which vesting would have accelerated assuming a change in control of the Company in which equity awards are not assumed or substituted had occurred as of December 31, 2022 is as follows: Marc D. Miller: $4,324,820;$4,657,542; Alan B. Miller: $2,449,232; Steve G. Filton: $3,007,550;$1,185,448; Marvin G. Pember: $2,819,900, and;$0; Matthew J. Peterson: $973,832, and; Edward H. Sim: $0. Such intrinsic values of the accelerated stock options and accelerated restricted stock units were calculated based upon the closing price per share of our common stock on December 31, 201930, 2022 of $143.46$140.89 as reported on the NYSE. Vesting acceleration of stock option awards and restricted stock unit awards, if such equity awards are not assumed or substituted, is the only benefit provided to our named executive officers in the event of a change of control. In the event of a termination of employment following a change in control of the Company, the named executive officers may be entitled to payments and benefits as described above under “Potential Payments Upon Termination”. CEO Pay Ratio Asrequired by Section 953(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”), and Item 402(u) of Regulation S-K, we are providing the following information about the relationship of the annual total compensation of our employees and the annual total compensation of Mr. Alan B.Marc D. Miller, the Chairman of our Board of Directors andcurrent Chief Executive Officer. Office and President. As is permitted under the SEC rules, we reasonably determined our median employee by using the greater of total annual W-2 wages of employees both in the U.S. and the U.K. who were employed as of December 31, 20192022 (excluding Mr. Marc Miller), or calculated annualized pay for those who commenced work during 20192022 or were on a leave of absence. The employee population consisted of our full-time, part-time and temporary employees. The inclusion of part-time and temporary employees reduces the median of the annual total compensation for the overall group of our employees. Due to the amount of turnover and job status changes that exist in the healthcare industry, we recalculated the median employee in 20192022 and determined that person’s total compensation was $38,931.$49,369. The ratio of CEO pay to median worker pay is 629:221:1.
The SEC rules for identifying the median compensated employee and calculating the pay ratio based on that employee’s annual total compensation allow companies to adopt a variety of methodologies, to apply certain exclusions and to make reasonable estimates and assumptions that reflect their compensation practices. As such, the pay ratio reported by other companies may not be comparable to the pay ratio reported above, as other companies may have different employment and compensation practices and may utilize different methodologies, exclusions, estimates and assumptions in calculating their own pay ratios. 52 Universal Health Services, Inc. 2023 Proxy Statement
PAY VERSUS PERFORMANCE TABLE The following section was prepared in accordance with Item 402(v) of the SEC’s RegulationS-K. The following table provides additional compensation information for the past three fiscal years for our Chief Executive Officer (“CEO”) and ournon-CEO Named Executive Officers (“Other NEOs”), as well as totalsha reholder return, net income attributable to UHS, Inc. and adjusted earnings per share, diluted performance results for our fiscal years ending in 2022, 2021 and 2020: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Summary Compensation Table Total for CEO (1) | | | Compensation Actually Paid to CEO (2) | | | Summary Compensation Table Total for CEO 2 (1) | | | Compensation Actually Paid to CEO 2 (2) | | | Summary Compensation Table Total for other NEOs (1) | | | Average Compensation Actually Paid for other NEOs (1)(2) | | | Value of initial fixed $100 investment based on: | | | Net Income attributable to UHS ($ in thousands) | | | Economic Adjusted Earnings per share, diluted (4) | | | Total Shareholder Return (3) | | | Peer Group Total Shareholder Return (3) | | | | | | | | | | | | | 2022 | | $ | — | | | $ | — | | | $ | 10,919,976 | | | $ | 13,476,236 | | | $ | 3,270,794 | | | $ | 5,112,238 | | | $ | 100 | | | $ | 167 | | | $ | 675,609 | | | $ | 9.88 | | | | | | | | | | | | | 2021 | | $ | — | | | $ | — | | | $ | 14,020,942 | | | $ | 9,784,532 | | | $ | 6,684,372 | | | $ | 995,897 | | | $ | 91 | | | $ | 181 | | | $ | 991,590 | | | $ | 11.82 | | | | | | | | | | | | | 2020 | | $ | 13,246,214 | | | $ | 47,969,126 | | | $ | — | | | $ | — | | | $ | 1,825,611 | | | $ | 6,273,018 | | | $ | 96 | | | $ | 114 | | | $ | 943,953 | | | $ | 11.12 | |
(1) | Named executive officers included in the above compensation columns reflect the following: |
| | | | | | | | | | | | | 2022 | | Marc D. Miller | | Alan B. Miller, Filton, Pember, Peterson, Sim | | | | 2021 | | Marc D. Miller | | Alan B. Miller, Filton, Pember, Peterson | | | | 2020 | | Alan B. Miller | | Marc D. Miller, Filton, Pember, Peterson |
(2) | SEC rules require certain adjustment be made to the Summary Compensation Table (“SCT”) totals to determine “Compensation Actually Paid” (“CAP”) as reported in the Pay Versus Performance Table. CAP does not necessarily represent cash and/or equity value transferred to the applicable NEO without restriction, but rather is a value calculated under applicable SEC rules. In general, CAP is calculated as the total compensation from the SCT, adjusted to include, among other things, the fair market value of equity awards as of December 31 of the applicable year or, if earlier, the vesting date (rather than the grant date). No adjustment is made for dividends or other earnings, since dividends are factored into the fair value of the award. |
The following tables detail these adjustments: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Year End Value of New Awards (i) | | | of Unvested Prior Awards (ii) | | | Change in Value of Vested Prior Awards | | | Change in Value of Awards that Failed to Meet Vesting Conditions | | | (c) = (i) + (ii) + (iii) + (iv) | | | | | | | | | | | | | | | 2022 | | CEO 1 | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | | | | | | | | | | | 2022 | | CEO 2 | | $ | 10,919,976 | | | $ | 9,508,078 | | | $ | 9,680,126 | | | $ | 430,267 | | | $ | 1,953,945 | | | $ | 0 | | | $ | 12,064,338 | | | $ | 13,476,236 | | | | | | | | | | | | 2022 | | Non-CEO NEOs | | $ | 3,270,794 | | | $ | 2,342,607 | | | $ | 1,915,653 | | | $ | 865,575 | | | $ | 1,920,853 | | | $ | (518,031 | ) | | $ | 4,184,050 | | | $ | 5,112,238 | | | | | | | | | | | | 2021 | | CEO 1 | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | | | | | | | | | | | 2021 | | CEO 2 | | $ | 14,020,942 | | | $ | 10,104,427 | | | $ | 8,545,032 | | | $ | (2,230,851 | ) | | $ | (446,165 | ) | | $ | 0 | | | $ | 5,868,017 | | | $ | 9,784,532 | | | | | | | | | | | | 2021 | | Non-CEO NEOs | | $ | 6,684,372 | | | $ | 4,794,552 | | | $ | 4,054,620 | | | $ | (4,194,869 | ) | | $ | (753,674 | ) | | $ | 0 | | | $ | (893,923 | ) | | $ | 995,897 | | | | | | | | | | | | 2020 | | CEO 1 | | $ | 13,246,214 | | | $ | 9,603,667 | | | $ | 48,125,827 | | | $ | 9,138,224 | | | $ | (12,937,472 | ) | | $ | 0 | | | $ | 44,326,579 | | | $ | 47,969,126 | | | | | | | | | | | | 2020 | | CEO 2 | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | | | | | | | | | | | 2020 | | Non-CEO NEOs | | $ | 1,825,611 | | | $ | 1,057,222 | | | $ | 5,664,134 | | | $ | 1,053,709 | | | $ | (1,213,213 | ) | | $ | 0 | | | $ | 5,504,630 | | | $ | 6,273,018 | |
(3) | Total Shareholder Return (“TSR”) is determined based upon the value of an initial fixed investment of $100. The TSR peer group consists of the industry line peer group reflected in our 2022 Annual Report on Form10-K pursuant to Item 201(e) of RegulationS-K. The companies in the peer group are as follows: Arcadia Healthcare Company, Inc., Community Health Systems, Inc., HCA Healthcare, Inc., and Tenet Healthcare Corporation. Each year reflects the cumulative total return assuming $100 invested on December 31, 2019 in our common stock and in the our peer group, including subsequent reinvestment of dividends. |
53 Universal Health Services, Inc. 2023 Proxy Statement
Pay Versus Performance Table (4) | Adjusted earnings per share, diluted, was selected by the Company as the Company-Selected Measure (“CSM”). It is anon-Generally Accepted Accounting Principles (“GAAP”) financial measure. A reconciliation of adjusted earnings per share, diluted, to the most directly comparable financial measure calculated in accordance with GAAP is included in the Company’s Form8-K filed with the SEC on February 27, 2023. |
Changes in pension values for each of the named executives in 2022, 2021 and 2020 pursuant to the Executive Retirement Income Plan or the Supplemental Executive Retirement Income Plan, as described herein, are considered service costs. No equity awards of the named executives were granted and vest in the same year for 2022, 2021 and 2020. Measures that were most important to the last fiscal year The following performance measures reflect the Company’s most important performance measures in effect for 2022, as further described and defined in the Compensation Discussion and Analysis: Adjusted earnings per share, diluted Income before income taxes for each of the acute care and behavioral health division Return on capital As described in our “Compensation Discussion and Analysis”, the Compensation Committee bases the compensation decisions with respect to the named executive officers on an evaluation of one or more of objective business criteria, including the performance measures listed above. The importance of adjusted earnings per share, diluted, and return on capital is reflected in our use of these measures when setting performance standards applicable to the annual incentive compensation for our named executive officers pursuant to the 2022 Executive Incentive Plan. Performance-based restricted stock units awarded to each of our named executive officers will be earned based upon the achievement of apre-established specified range of target levels based on the three-year growth in our earnings before interest, taxes, depreciation and amortization, and the impacts of other income/expense and net income attributable to noncontrolling interests. Our compensation philosophy of aligning pay strongly with performance is grounded in best practices that are regulatory compliant, financially sound and provide long-term value to stockholders. Analysis of the Information Presented in the Pay Versus Performance Table The following charts show the relationship between the Company’s cumulative three-year TSR and that of the industry line peer group reflected in our 2022 Annual Report on Form10-K pursuant to Item 201(e) of RegulationS-K, as well as the relationships between CAP and the required financial performance measures in the Pay Versus Performance table above – Company TSR, net income and the Company-selected measure of adjusted earnings per share, diluted. Universal Health Services, Inc. 2023 Proxy Statement
Pay Versus Performance Table 55 Universal Health Services, Inc. 2023 Proxy Statement
DIRECTOR COMPENSATION 2022 Director Compensation: The following table provides information concerning the compensation of our non-employee Directors for 2019.2022. | Name | | Fees Earned or Paid in Cash ($) | | | Grant Date Fair Value Stock Awards (1.) ($) | | | Grant Date Fair Value Option Awards (2.) ($) | | | Non-Equity Incentive Plan Compensation ($) | | | All Other Compensation ($) | | | Total ($) | | | Fees Earned or Paid in Cash ($) | | | Grant Date Fair Value Stock Awards(1.) ($) | | | Grant Date Fair Value Option Awards(2.) ($) | | | Non-Equity Incentive Plan Compensation ($) | | | All Other Compensation ($) | | | Total ($) | | | Nina Chen-Langenmayr | | | $ | 27,945 | | | $ | 132,969 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 160,914 | | | Lawrence S. Gibbs | | $ | 81,500 | | | $ | 0 | | | $ | 304,349 | | | $ | 0 | | | $ | 0 | | | $ | 385,849 | | | $ | 127,142 | | | $ | 200,054 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 327,196 | | Robert H. Hotz (3.) | | $ | 85,336 | | | $ | 0 | | | $ | 304,349 | | | $ | 0 | | | $ | 0 | | | $ | 389,685 | | | | Eileen C. McDonnell | | $ | 91,082 | | | $ | 0 | | | $ | 304,349 | | | $ | 0 | | | $ | 0 | | | $ | 395,431 | | | $ | 131,521 | | | $ | 200,054 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 331,575 | | | Warren J. Nimetz | | $ | 65,000 | | | $ | 0 | | | $ | 304,349 | | | $ | 0 | | | $ | 0 | | | $ | 369,349 | | | $ | 92,137 | | | $ | 200,054 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 292,191 | | | Maria R. Singer | | | $ | 120,327 | | | $ | 200,054 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 320,381 | | | Elliot J. Sussman, M.D. | | $ | 84,582 | | | $ | 0 | | | $ | 304,349 | | | $ | 0 | | | $ | 0 | | | $ | 388,931 | | | $ | 142,212 | | | $ | 200,054 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 342,266 | |
(1.) (1) | ThereRestricted stock units were noissued as follows:
|
| • | | On May 18, 2022, 1,680 restricted stock awards madeunits were issued to our non-employee directors during 2019. |
(2.)
| Each non-employee director received 10,000 stock options on March 20, 2019, which hadeach of Lawrence S. Gibbs, Eileen C. McDonnell, Warren J. Nimetz, Maria R. Singer and Elliot J. Sussman, M.D., with a grant date fair value of $304,349$200,054, or $30.43$119.08 per share.
|
(3.)
| Mr. Robert H. Hotz resigned from our Board These shares are scheduled to fully vest on the earlier of Directors on March 1, 2020.
|
| Asthe one-year anniversary of December 31, 2019 the following stock options were outstanding for each director:
|
date of grant and the next annual meeting of stockholders which is at least 50 weeks after the immediately preceding year’s annual meeting. In connection with the resignation of Lawrence S. Gibbs | | | 60,000
| | Robert H. Hotz (a.)
| | | 26,250
| | Eileen C. McDonnell
| | | 26,250
| | Warren J. Nimetz
| | | 20,000
| | Elliot J. Sussman, M.D.
| | | 20,000
| |
| (a.)
| Mr. Hotz resigned from the Board of Directors, on March 1, 2020. Atthe Compensation Committee determined that time, Mr. Hotz hadGibbs’ outstanding restricted stock unit award may continue to vest through the following outstandingdate of the Annual Meeting.
|
| • | | On September 21, 2022, 1,405 restricted stock options thatunits were cancelled asissued to Nina Chen-Langenmayr, with a grant date fair value of that date: (i) 2,500 granted on March 29, 2017 at $124.56 per share; (ii) 5,000 granted on April 13, 2018 at $119.64 per share, and; (iii) 7,500 granted on March 20, 2019 at $134.02$132,969, or $94.64 per share. On January 29, 2020,These shares are scheduled to fully vest on the one year anniversary of the date of grant. |
(2) | There were no stock option awards made to ournon-employee directors during 2022. |
Our non-employee directors do not participate in either of our retirement income plans or nonqualified deferred compensation plan. As of December 31, 2022 the following equity awards were outstanding for each active director: | | | | | | | | | | | Name | | Option Awards | | Stock Awards | | | | Nina Chen-Langenmayr | | | | — | | | | | 1,405 | | | | | Lawrence S. Gibbs(1) | | | | 40,000 | | | | | 1,680 | | | | | Eileen C. McDonnell | | | | 25,000 | | | | | 1,680 | | | | | Warren J. Nimetz | | | | 40,000 | | | | | 1,680 | | | | | Maria R. Singer | | | | 20,000 | | | | | 1,680 | | | | | Elliot J. Sussman, M.D. | | | | 27,500 | | | | | 1,680 | |
(1) | In connection with the resignation of Lawrence S. Gibbs from the Board of Directors, approved an extensionthe Compensation Committee determined that Mr. Gibbs’ outstanding option awards with respect to 17,500 shares that would have terminated on the date of his resignation may continue to be exercisable through the date of the expiration date, to May 15, 2020, on the followingAnnual Meeting and that Mr. Gibbs’ outstanding restricted stock options: (i) 3,750 granted on March 23, 2016 at $118.62 per share (all of these stock option vested on March 23, 2020); (ii) 2,500 granted on March 29, 2017 at $124.56 per share (all of these stock options vested on March 29, 2020); (iii) 2,500 granted on April 13, 2018 at $119.64 (all of these stock options are scheduledunit award may continue to vest on April 13, 2020), and; (iv) 2,500 granted on March 20, 2019 at $134.02 per share (allthrough the date of these stock options vested on March 20, 2020). the Annual Meeting. |
20192022 Cash Compensation. During 2019,Compensation:
As discussed below, effective March 23, 2022, all non-employee directors received a pro rata annual retainer of $65,000$100,000 for service on the Board of Directors. Additionally, during 2019, Eileen C. McDonnell, Chairperson of the Audit Committee received an annual retainer of $10,000 for her services in that capacity. Lawrence S. Gibbs, Robert H. Hotz 56 Universal Health Services, Inc. 2023 Proxy Statement
Director Compensation Additionally: • | | Eileen C. McDonnell, Chairperson of the Audit Committee, received a pro rata annual retainer of $25,000 for her services in that capacity. |
• | | Lawrence S. Gibbs, Maria R. Singer and Elliott J. Sussman, M.D., as members of the Audit Committee, each received a pro rata annual retainer of $12,500 for services in that capacity. |
• | | Eileen C. McDonnell, Chairperson of the Compensation Committee, received a pro rata annual retainer of $15,000 for her services in that capacity. |
• | | Lawrence S. Gibbs and Elliot J. Sussman, M.D., as members of the Compensation Committee, each received a pro rata annual retainer of $7,500. |
• | | Elliot J. Sussman, M.D., Chairman of the Nominating and Governance Committee, received a pro rata annual retainer of $10,000 for his services in that capacity; as well as a pro-rata annual retainer fee of $22,500 for his services as Chairman of the Quality and Compliance Committee. |
• | | Lawrence S. Gibbs and Maria R. Singer, as members of both the Nominating and Governance Committee and the Quality and Compliance Committee, each received pro rata annual retainers of $5,000 and $11,250, respectively, for their services in those capacities. |
As discussed below, prior to March 23, 2022, each received an annual retainer of $2,500 for services in that capacity. Also during 2019, Robert H. Hotz, Chairman of the Compensation Committee received a pro rata annual retainer of $5,000 for his services in that capacity through May 20, 2019 ($1,918 on pro rata basis). Eileen C. McDonnell, Chairperson of the Compensation Committee effective May 20, 2019, received a pro rata annual retainer of $5,000 for her services in that capacity ($3,082 on pro rata basis). Additionally, Robert H. Hotz, Chairman of the Nominating and Governance Committee received a pro rata annual retainer of $5,000 for his services in that capacity through May 20, 2019 ($1,918 on pro rata basis) and Elliot J. Sussman, M.D., Chairman of the Nominating and Governance Committee effective May 20, 2019, received a pro rata annual retainer of $5,000 for his services in that capacity ($3,082 on pro rata basis). Each non-employee director also was paid a $1,000 meeting fee for participation in each committee meeting in excess of 30 minutes. No meeting fees were paid after March 23, 2022. Committee meeting fees paid during 2019through March 23, 2022 were as follows: Robert H. Hotz, Lawrence S. Gibbs and Elliot J. Sussman, M.D. were each paid $14,000$6,000, and; Maria R. Singer and Eileen C. McDonnell were each paid $5,000. 2022 Restricted Stock Units: On May 18, 2022, all active non-employee directors on that date received 1,680 restricted stock units of our Class B Common Stock. The restricted stock units had a grant date value of $200,054 or $119.08 per share. These restricted stock units were granted under our 2020 Omnibus Stock and Incentive Plan. The restricted stock units awarded to non-employee directors on May 18, 2022 will fully vest on the earlier of the on-year anniversary of the date of grant and the next annual meeting of stockholders which is at least 50 weeks after the immediately preceding year’s annual meeting. On September 21, 2022, Nina Chen-Langenmayr was paid $13,000. Warren J. Nimetzappointed to the UHS Board of Directors and was not paid any committee meeting fees during 2019. 2019 Stock Option Awards. On March 20, 2019, all non-employee directors received options to purchase 10,000 sharesawarded 1,405 restricted stock units of our Class B Common Stock at an exercise pricewith a grant date value of $134.02$132,969 or $94.64 per share. These restricted stock units are scheduled to fully vest on the one-year anniversary of the date of grant.
Changes to Director Compensation: On March 23, 2022, in connection with its annual evaluation of our non-employee director compensation program, the Compensation Committee recommended, and our Board of Directors approved, changes to various elements of compensation for the non-employee members of our Board of Directors. Below is a general summary of those changes, as compared to 2021: • | | Decrease in equity compensation, with accompanying increase in cash compensation. |
• | | Shift from denominating equity awards as a fixed number of shares to a fixed dollar amount. |
• | | Elimination of all committee meeting fees. |
After reviewing market data prepared by FW Cook, the Compensation Committee determined that the pay mix for our non-employee director compensation program could be more closely aligned with the non-employee director pay mix at our peer group companies. For example, in 2021, our non-employee directors received 83% of total compensation in the form of equity compensation whereas equity pay of peer group non-employee directors accounted for 60% of total compensation. Conversely, the 57 Universal Health Services, Inc. 2023 Proxy Statement
Director Compensation weighting of cash compensation was significantly below that of our peer group. Accordingly, our Compensation Committee determined that a decrease in equity compensation and accompanying increase in cash compensation (consisting of Board and Committee cash retainers), was warranted. Additionally, all committee meeting fees were eliminated to align with peer group practice. The Compensation Committee also aligned with peer group practice by: (i) eliminating the use of stock options hadwith five-year vesting and, instead, awarded restricted stock units (“RSUs”) that fully vest on the earlier of the one-year anniversary of the date of grant and the next annual meeting of stockholders which is at least 50 weeks after the immediately preceding year’s annual meeting, and; (ii) converting the denomination of equity grants from a fixed number of shares in 2021 (10,000 stock options awarded to each non-employee director) to a fixed dollar value beginning in 2022 (in the form of RSUs with a grant date fair value of $30.43 per share. These stock optionsapproximately $200,000). Beginning with the 2022 stock-based awards, the Compensation Committee has also decided to shift the annual grant date for the non-employee directors’ awards, which were historically granted underat the Board of Directors’ meeting held in March, to the Board of Directors’ meeting held in May, after the Annual Meeting of Stockholders. This timing change is being implemented to align the annual stock-based compensation award date for our Third Amended and Restated 2005 Stock Incentive Plan, vest ratably over four years and expire onnon-employee directors, with the fifth anniversaryannual shareholders’ meeting at which directors are elected, which is held each May. As compared to 2021, below is a summary of the grant date.annual cash retainers and stock-based compensation awards for our non-employee directors after giving effect to the changes implemented in 2022 (the changes to the annual cash retainers were effective as of March 24, 2022). | | | | | | | | | Annual cash retainers: | | 2021 | | | 2022 | | | | | Board member | | $ | 65,000 | | | $ | 100,000 | | | | | Audit Committee Chairperson | | $ | 10,000 | | | $ | 25,000 | | | | | Quality & Compliance Committee Chairperson | | $ | 7,500 | | | $ | 22,500 | | | | | Compensation Committee Chairperson | | $ | 5,000 | | | $ | 15,000 | | | | | Nominating & Governance Committee Chairperson | | $ | 5,000 | | | $ | 10,000 | | | | | Audit Committee Member | | $ | 2,500 | | | $ | 12,500 | | | | | Quality & Compliance Committee Member | | $ | 1,500 | | | $ | 11,250 | | | | | Compensation Committee Member | | $ | 0 | | | $ | 7,500 | | | | | Nominating & Governance Committee Member | | $ | 0 | | | $ | 5,000 | | | | | Meeting fees ($1,000 per Committee meeting) | | | (A) | | | $ | 0 | | | | | Annual stock-based compensation: | | | | | | | | | | Grant date value of awards | | $ | 404,199 | | | $ | 200,054 | |
(A) | During 2021, total combined committee meetings fees of $59,000 were paid to members of the Audit Committee, Quality & Compliance Committee, Compensation Committee and Nominating & Governance Committee for participation in committee meetings in excess of 30 minutes. Effective March 24, 2022, committee meeting fees are no longer be paid. |
58 Universal Health Services, Inc. 2023 Proxy Statement
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS Alan B. Miller serves as the Chairman of our Board of Directors and Chief Executive Officer (“CEO”).Chairman. Alan B. Miller also serves as the Chairman of the Board of Trustees, CEO and President of Universal Health Realty Income Trust (“UHT”), a publicly traded real estate investment trust which commenced operations in 1986. The Company acts as advisor to UHT pursuant to the terms of an annually renewable advisory agreement and also leases the real property of certain of its facilities from UHT. UHS has agreed to make a $1 million contribution to the Miller Theater which is a non-profit theater operated by the Kimmel Center, Inc. and was named after Mr. Miller in March, 2022. The contribution, in honor of Alan B. Miller, will be made in four annual installments of $250,000 each, the first of which was made in December, 2022. Marc D. Miller serves as our Chief Executive Officer (“CEO”), President and a member of our Board of Directors. Marc D. Miller is the son of Alan B. Miller. Marc D. Miller is a named executive officer and therefore the salary and other compensation arrangements between us and Marc D. Miller are disclosed and described throughout this Proxy Statement. Additionally, Marc D. Miller serves as a member of the Board of Trustees of UHT and also serves as a member of the Board of Directors of Premier, Inc., a healthcare performance improvement alliance which contracts with the Company pursuant to a group purchasing agreement. Warren J. Nimetz, a member of our Board of Directors and a member of the Executive Committee and the Finance Committee, is a Partner in Norton Rose Fulbright US LLP, the law firm we use as outside corporate counsel. WeIn 2022, we paid approximately $201,000$572,000 in legal fees to this law firm in 2019.for services to the Company. This law firm also provides personal legal services to Alan B. Miller, our CEO.Executive Chairman. Mr. Nimetz is the trustee of certain trusts for the benefit of Alan B. Miller and his family. Pursuant to our Code of Business Conduct and Corporate Standards, all employees, officers and directors of the Company and its subsidiaries are prohibited from engaging in any relationship or financial interest which is a
conflict of interest with, or which interferes or has the potential to interfere with, the interests of the Company or any of its subsidiaries or facilities. In addition, all employees, officers and directors of the Company and its subsidiaries are required to disclose to our chief compliance officer any financial interest or ownership interest or any other relationship that he or she (or a member of his or her immediate family) has with customers, vendors, or competitors of the Company or any of its subsidiaries or facilities. All employees, officers and directors of the Company and its subsidiaries are prohibited from entering into a related party transaction with the Company without the prior approval of Ms. Mia Meloni, our Chief Compliance Officer. Any request for the Company to enter into a transaction with an employee, officer or director or any of such persons’ immediate family members must first be presented to our Chief Compliance Officer for review, consideration and approval. In approving or rejecting the proposed agreement, our Chief Compliance Officer will consider the relevant facts and circumstances available and deemed relevant, including but not limited to, the risks, costs, and benefits to the Company, the terms of the transactions, the availability of other sources for comparable services or products, and, if applicable, the impact on director independence. Our Chief Compliance Officer shall only approve those agreements that, in light of known circumstances, are in or are not inconsistent with, the Company’s best interests, as determined in good faith by our Chief Compliance Officer. Except as otherwise disclosed in this Proxy Statement, since the beginning of the Company’s last fiscal year, we have not been a party to, and we have no plans to be a party to, any transaction or series of similar transactions in which the amount involved exceeded or will exceed $120,000 and in which any employee, executive officer or director, holder of more than 5% of our voting securities, or any member of the immediate family of any of the foregoing, had or will have a direct or indirect material interest. Please see “Corporate Governance—Director Independence” for additional information on the independence of our directors. 59 Universal Health Services, Inc. 2023 Proxy Statement
CORPORATE GOVERNANCE Director Independence Our Board of Directors has affirmatively determined that four of its seven current members (Lawrence S. Gibbs, Eileen(Eileen C. McDonnell, Maria R. Singer, Nina Chen-Langenmayr and Elliot J. Sussman, M.D.) are independent directors under the applicable rules and regulations of the SEC and the New York Stock Exchange listing standards. In determining independence, the Board of Directors affirmatively determines each year whether directors have any material relationship with us. When assessing the materiality of a director’s relationship with us, the Board of Directors considers all relevant facts and circumstances, not merely from the director’s standpoint, but also from the standpoint of the persons or organizations with which the director has an affiliation. Material relationships can include commercial, banking, industrial, consulting, legal, accounting, charitable and familial relationships. The Board of Directors has concluded that no material relationship exists between us and any of our independent directors, other than each such person’s position as one of our directors. We are eligible to be treated as a controlled company under New York Stock Exchange Rule 303A due to the fact that the family of Alan B. Miller holds more than 95% of the shares of Class A and Class C Common Stock, which is entitled to elect 80% of the entire Board of Directors and constitutes more than 50% of our aggregate voting power. New York Stock Exchange Rule 303A states that a controlled company need not have a majority of independent directors on its board or have nominating/corporate governance and compensation
committees composed entirely of independent directors. We have elected to avail ourselves of a limited aspect of the Rule 303A exemption, determining that the Nominating & Governance Committee is not responsible for identifying and recommending qualified candidates for Board positions that, in accordance with our Restated Certificate of Incorporation, are to be elected by the holders of Class A and Class C Common Stock of the Company. We currently intend to have a majority of independent directors on our Board of Directors and all independent directors on our Audit Committee, Compensation Committee and Nominating & Governance Committee. Meetings of the Board of Directors Regular meetings of the Board of Directors are generally held every other month, while special meetings are called when necessary. Before each Board of Directors or committee meeting, directors are furnished with an agenda and background materials relating to matters to be discussed. During 2019,2022, there were six regular meetings of the Board of Directors. All or substantially all directors participated in each of the meetings of the Board of Directors and all or substantially all of the meetings held by the respective committees on which they served, if applicable. Directors are expected to attend the Annual Meeting of Stockholders. All of our directors attended the 2019virtual 2022 Annual Meeting of Stockholders. Our Corporate Governance Guidelines provide that the Board of Directors shall hold, in accordance with a schedule determined by the Nominating & Governance Committee of the Board of Directors, executive sessions where non-management directors (i.e., directors who are not our officers, but who do not otherwise have to qualify as “independent directors”) meet without management participation (except as otherwise specifically requested by the non-management directors). Interested parties may communicate directly and confidentially with the presiding director or with the non-management directors of the Board of Directors as a group by writing to that person or group at Universal Health Services, Inc., c/o Secretary, Universal Corporate Center, 367 South Gulph Road, P.O. Box 61558, King of Prussia, PA 19406. Board Leadership Structure and Board of Directors Mr. Alan B. Miller serves as both the Company’sExecutive Chairman of the Board and CEO.Board. Eileen C. McDonnell serves as the Lead Independent Director and presides over the executive sessions of the non-management directors. The Company believes this structure allows all of the non-management directors to participate in the full range of the Board’s responsibilities with respect to its oversight of the Company’s management. The Board has determined that this leadership structure is appropriate given the size and complexity of the Company, the number of directors overseeing the Company and the Board’s oversight responsibilities. 60 Universal Health Services, Inc. 2023 Proxy Statement
Corporate Governance The specific experience, qualifications, attributes or skills that led to the conclusion that each Director should serve as a Director of the Company, in light of the Company’s business and structure, are as follows: Alan B. Miller hasMiller: Has been a Director of the Company since 1978. Mr. Alan Miller has been the Company’s1978 and is currently Executive Chairman of the Board of Directors andBoard. Effective January 2021, Mr. Alan B. Miller stepped down as CEO, a position he has held since 1978, when he founded the Company. Prior thereto, he was President, Chairman of the Board and Chief Executive Officer of American Medicorp, Inc. Mr. Alan Miller currently serves as Chairman of the Board of Trustees, CEOChief Executive Officer and President of Universal Health Realty Income Trust. Mr. Alan Miller oversees all of the Company’s businesses, its operations, development and overall strategy. As a result of his many years of service, Mr. Alan B. Miller provides expertise on the hospital management industry.
Marc D. Miller hasMiller: Has been a Director of the Company since 2006 and was appointed CEO in January 2021. He continues to serve as President of the Company, ina position he has held since May 2009. Previously he has served in various management positions including: Senior Vice President and Co-Head of our Acute Care Division (2007-2009) and Vice President, Acute Care Division (2004-2007). Also served in various roles in our Acute Care Division since 2003 and served in other management positions at various acute care hospitals from 1999 to 2003. Additionally, Mr. Marc D. Miller serves as a member of the Board of Trustees of Universal Health Realty Income Trust and as a member of the Board of Directors of Premier, Inc. Mr. Marc D. Miller provides expertise on the hospital management industry. Lawrence S Gibbs has been a Directoroversees all of the Company since 2011. SinceCompany’s businesses, its operations, development and overall strategy.
Nina Chen-Langenmayr: Was appointed to the Board of Directors in September 2019, he2022. She has served as a product managerSpecial Projects Consultant at AIG, artificial intelligence platform.The Welcoming Center in Philadelphia since 2013. Prior thereto, heshe served as Partner, Client Relationship Management Group at Mercer. Ms. Chen-Langenmayr, a Juris Doctor, has multiple years of experience in the Chief Investment Officer at Erdos Capital, Managing Partner at Cannonball Trading, LLC (2010human capital management and outsourcing arena, particularly in the pharmaceutical and healthcare industries. Prior to 2017),that, Ms. Chen-Langenmayr practiced law, with emphasis in the areas of employee benefits and compensation law. She is a Portfolio Manager at JP Morgan Chase Bank NA (2006 to 2009)Founding Member of the Asian Pacific American Bar Association of Pennsylvania and a Portfolio Manager at Millennium Partners, LLC (2005 to 2006). Mr. Gibbsmember of the Forum of Executive Women. Ms. Chen-Langenmayr, an independent director, provides expertise on corporate financehealthcare and investment matters.human capital management. Eileen C. McDonnell hasMcDonnell: Has been a Director of the Company since 2013. Ms. McDonnell currently serves as Chairman and Chief Executive Officerof the Board of The Penn Mutual Life Insurance Company. She served as Executive Chairman of Penn Mutual from January 2022 until her retirement in December 2022. She joined Penn Mutual in 2008 and previously served as PresidentChief Executive Officer of the company.company until December 2021. Ms. McDonnell was also appointed to The Penn Mutual Board of Trustees in 2010. Before joining Penn Mutual, Ms. McDonnell founded ExecMPower, a strategic planning and executive coaching consultancy. Previously, she was president of New England Financial, a wholly owned subsidiary of MetLife, and senior vice president of the Guardian Life Insurance Company. From 2011 to 2021, Ms. McDonnell also servesserved on the Board of Janney Montgomery Scott LLC, a wholly owned subsidiary of Penn Mutual. Ms. McDonnell also servesserved as a Director of the Insurance Federation of Pennsylvania serves on the Corporate Council of Children’s Hospital of Philadelphia, and iswas a national advisor to Vision 2020,VisionForward, an initiative of Drexel University College of Medicine Institute for Women’s Health and Leadership. Ms. McDonnell, an independent director, provides expertise on the insurance industry and financial matters. Warren Nimetz hasNimetz: Has been a Director of the Company since January 2018. He has been a Partner at the law firm of Norton Rose Fulbright US LLP since 1987, and he is Administrative Partner of the New York office.1987. Mr. Nimetz focuses his practice on general corporate and securities law, with special emphasis on mergers and acquisitions of public and private companies including tender offers, leveraged and other buyouts, private equity investments, joint ventures and related corporate governance issues. He also has substantial experience with all types of financing transactions, including public offerings, private placements and bank and other institutional lending and structured finance. Mr. Nimetz has special expertise in structuring and negotiating transactions involving the acquisition, financing and disposition of hospital and other health care and life science companies and properties. Mr. Nimetz provides expertise on legal matters. Maria R. Singer was elected to our BoardSinger: Has been a Director of Directors inthe Company since March 2020. She is Chief Operating Officer, Corporate Finance at Houlihan Lokey. She previously served as Managing Director and COO of Blackstone Advisory Partners (2008 to 2015). She also served in various roles at Lehman Brothers, Inc. including Senior Vice President, Office of the Chairman and Senior Vice President, Debt Capital Markets (2002 to 2008). Ms. Singer, an independent director, provides expertise on financial and strategic advisory matters. Elliot J. Sussman, M.D. has: Has been a Director of the Company since March 2018. He is Chairman of The Villages Health. He previously served as President and Chief Executive Officer of Lehigh Valley Hospital and
Health Network from 1993 through 2010. 61 Universal Health Services, Inc. 2023 Proxy Statement
Corporate Governance He has been a member of the Board of Directors of Yale New Haven Health System since 2011. Dr. Sussman, an independent director, provides expertise on the management of hospitals and health systems.systems and on health care quality and compliance matters. The Board holds six regular meetings each year to consider and address matters involving the Company. The Board also may hold special meetings to address matters arising between regular meetings. These meetings may take place in person or by telephone. The independent directors also regularly meet in executive sessions outside the presence of management. The Board has access to legal counsel for consultation concerning any issues that may occur during or between regularly scheduled Board meetings. As discussed below, to assist the Board in performing its oversight responsibilities, the Board has established a Compensation Committee, an Audit Committee, a Nominating & Governance Committee, a Quality and Compliance Committee, an Executive Committee and a Finance Committee to assist the Board in performing its oversight responsibilities.Committee. The Nominating & Governance Committee annually oversees a self-evaluation of the current Board members and those committees as the Board shall specify from time to time and reports to the Board with respect to whether the Board and its committees are functioning effectively. The full Board discusses each evaluation report to determine what, if any, actions should be taken to improve the effectiveness of the Board or any committee thereof. The Board’s Role in Risk Oversight Consistent with its responsibility for oversight of the Company, the Board, among other things, oversees risk management of the Company’s business affairs directly and through the committee structure that it has established. The principal risks associated with the Company are risks related to concentration of the locations of our facilities, dependence on payments from the government and other third party payors,payers, the impact of the Coronavirus pandemic on our facilities and the markets in which they operate, cyber security, a worsening of the economic and employment conditions in the United States, uncertainties regarding health care reform, the inability to collect payments from patients, competition for patients from other hospitals and health care providers, our ability to recruit and retain quality physicians, our ability to attract and retain qualified nurses and medical support staff, compliance with extensive laws and government regulations, liabilities from claims brought against our facilities, governmental investigations, regulatory actions, whistleblower lawsuits and purported stockholder class action lawsuits, accreditation of our facilities, acquisition and integration of hospitals, state efforts to regulate the construction or expansion of health care facilities, fluctuations in our operating results, quarter to quarter earnings and other factors, significant corporate regulation as a public company, and dependence on key management personnel. The Board’s role in the Company’s risk oversight process includes regular reports from senior management on areas of material risk to the Company, including operational, financial, legal and regulatory, and strategic and reputational risks. The full Board (or the appropriate committee) receives these reports from management to identify and discuss such risks. The Board periodically reviews with management its strategies, techniques, policies and procedures designed to manage these risks. Under the overall supervision of the Board, management has implemented a variety of processes, procedures and controls to address these risks. The Board requires management to report to the full Board on a variety of matters at regular meetings of the Board and on an as-needed basis, including the performance and operations of the Company and other matters relating to risk management. The Audit Committee also receives regular reports from the Company’s independent registered public accounting firm on internal control and financial reporting matters. These reviews are conducted
in conjunction with the Board’s risk oversight function and enable the Board to review and assess any material risks facing the Company. Eileen C. McDonnell, the Lead Independent Director, periodically meets with management and the Company’s independent registered public accounting firm to review and discuss the activities of the Company and to provide direction with respect thereto. Policy on Hedging Transactions The Company has a policy that prohibits employees and directors from engaging in any hedging transaction that would result in lack of exposure to the full risks of stock ownership. Prohibited hedging transactions include, but are not limited to, collars, forward sale contracts, trading in publicly-traded options, puts, calls or other derivative instruments related to our common stock or debt. 62 Universal Health Services, Inc. 2023 Proxy Statement
Corporate Governance Stockholder Communications Stockholders who wish to send communications to the Board of Directors or an individual director should address such communications to Universal Health Services, Inc., c/o Secretary, Universal Corporate Center, 367 South Gulph Road, P.O. Box 61558, King of Prussia, PA 19406. The Secretary will forward such communications to the Board of Directors or the specified individual director to whom the communication is directed unless such communication is unduly hostile, threatening, illegal or similarly inappropriate, in which case the Secretary has the authority to discard the communication or take appropriate legal action regarding such communication. Committees of the Board of Directors The Compensation Committee, the Audit Committee, the Nominating & Governance Committee, the Quality and Compliance Committee, the Executive Committee and the Finance Committee are the standing committees of the Board of Directors. A current copy of our Corporate Governance Guidelines, Code of Business Conduct and Corporate Standards, Code of Ethics for Senior Financial Officers, Compensation Committee Charter, Nominating & Governance Committee Charter and Audit Committee Charter are available free of charge on our website at www.uhsinc.com.www.uhs.com. Copies of these documents also are available in print free of charge to any stockholder who requests them. We intend to satisfy the disclosure requirements under Item 5.05 of Form 8-K relating to amendments to or waivers of any provision of our Code of Ethics for Senior Financial Officers by promptly posting the information on our website. Compensation Committee. The current members of the Compensation Committee are Eileen C. McDonnell (Chairperson), Lawrence S. Gibbs and Elliot J. Sussman, M.D., The Compensation Committee met one time during 2019. The Board of Directors has determined, in its business judgment, that each member of the Compensation Committee qualifies as an “independent” director under the regulations adopted by the SEC and the New York Stock Exchange.
The Compensation Committee reviews and approves our goals and objectives relevant to the compensation of our Chief Executive Officer and other executive officers, evaluates their performance, determines and approves their compensation level, reviews and determines the form and amount of compensation of the non-management members of the Board of Directors, administers incentive-compensation plans and equity-based plans and approves compensation awards, among other duties and responsibilities.
The amount and mix of the compensation paid to our named executive officers and directors are evaluated on an annual basis. See the section titled “Compensation Setting Process,” in the Compensation Discussion & Analysis for an additional discussion.
The Compensation Committee has the authority to establish one or more subcommittees that shall have the responsibilities and consist of those members of the Compensation Committee as the Compensation Committee may determine from time to time. The Compensation Committee also has the sole authority to retain and terminate compensation consultants to assist it in evaluating our compensation plans, particularly those pertaining to our directors, our Chief Executive Officer and our other executive officers, and to approve the fees and other terms relating to the provision of those services. As discussed in the Compensation Discussion and Analysis, unlike our
other named executive officers, Mr. Alan Miller’s compensation is determined in large part by the terms of his employment agreement.
Audit Committee.Committee: Current members of the Audit Committee are Eileen C. McDonnell (Chairperson), Lawrence S. Gibbs, Maria R. Singer and Elliot J. Sussman, M.D. No member serves on the audit committee of more than three public companies. The Audit Committee met thirteentwelve times during 2019.2022. Lawrence S. Gibbs, who was a member of the Audit Committee during 2022, resigned from the Board of Directors effective as of March 31, 2023. The Board of Directors has determined, in its business judgment, that each member of the Audit Committee qualifies as an “independent” director under the regulations adopted by the SEC and the New York Stock Exchange and is financially literate and that Eileen C. McDonnell qualifies as an “audit committee financial expert” under SEC regulations and has accounting or related financial management expertise. The Audit Committee provides assistance to the Board of Directors in fulfilling its financial, compliance and quality oversight responsibility to the stockholders, potential stockholders, the investment community and others relating to:to the integrity of our financial statements, the financial reporting process, the systems of internal accounting and financial controls, the performance of our internal audit function and independent auditors, the independent auditors’ qualifications and independence and our compliance with legal and regulatory requirements.requirements and quality of care standards. This Committee has the authority, duties and responsibilities set forth in its Audit Committee Charter, as amended. The Audit Committee’s oversight includes review and oversight of the Company’s health care compliance program. The Audit Committee periodically reviews our data security programs, including cyber security and procedures regarding disaster recovery and critical business continuity, and reviews our programs and plans that management has established with data security compliance programs and test preparedness. Compensation Committee:Current members of the Compensation Committee are Eileen C. McDonnell (Chairperson) and Elliot J. Sussman, M.D. Lawrence S. Gibbs, who was a member of the Compensation Committee during 2022, resigned from the Board of Directors effective as of March 31, 2023. The Board of Directors intends to designate a new committee member to replace Mr. Gibbs. The Compensation Committee met six times during 2022, four of which were during the period of January 1, 2022 through March 23, 2022 in connection with the changes implemented during 2022 to the elements of compensation for our named executive officers and members of the Board of Directors. The Board of Directors has determined, in its business judgment, that each member of the Compensation Committee qualifies as an “independent” director under the regulations adopted by the SEC and the New York Stock Exchange. The Compensation Committee reviews and approves our goals and objectives relevant to the compensation of our Chief Executive Officer and other executive officers, evaluates their performance, determines and approves their compensation level, reviews and determines the form and amount of compensation of the non-management members of the Board of Directors, administers incentive-compensation plans and equity-based plans and approves compensation awards, among other duties and responsibilities. 63 Universal Health Services, Inc. 2023 Proxy Statement
Corporate Governance The amount and mix of the compensation paid to our named executive officers and directors are evaluated on an annual basis. See the section titled “Compensation Setting Process,” in the Compensation Discussion & Analysis for an additional discussion. The Compensation Committee has the authority to establish one or more subcommittees that shall have the responsibilities and consist of those members of the Compensation Committee as the Compensation Committee may determine from time to time. The Compensation Committee also has the sole authority to retain and terminate compensation consultants to assist it in evaluating our compensation plans, particularly those pertaining to our directors, our Executive Chairman, Chief Executive Officer and our other executive officers, and to approve the fees and other terms relating to the provision of those services. As discussed in the Compensation Discussion and Analysis, certain elements of Messrs. Alan Miller’s and Marc. Miller’s compensation is determined by the terms of their employment agreements. Nominating & Governance Committee.Committee: The current members of the Nominating & Governance Committee are Elliot J. Sussman, M.D., (Chairman), Lawrence S. Gibbs and Maria R. Singer. Lawrence S. Gibbs, who was a member of the Nominating & Governance Committee during 2022, resigned from the Board of Directors effective as of March 31, 2023. The Board of Directors intends to designate a new committee member to replace Mr. Gibbs. This Committee did not meetmet three times during 2019.2022. The Board of Directors has determined, in its business judgment, that each member of the Nominating & Governance Committee qualifies as an “independent” director under the regulations adopted by the SEC and the New York Stock Exchange. The Nominating & Governance Committee was established, with respect to those directors who are to be elected by the holders of Class B and Class D Common Stock of the Company in accordance with the our Restated Certificate of Incorporation, for the purpose of: (i) assisting the Board of Directors by identifying individuals who are qualified to become directors, consistent with the criteria approved by the Board of Directors; (ii) recommending to the Board of Directors Class B and D director nominees for the next annual meeting of stockholders at which a Class B and D director is to be elected; (iii) developing and recommending to the Board of Directors a set of corporate governance principals in the form of our corporate governance guidelines; (iv) leading and overseeing the Board of Directors in its annual review of the performance of the Board of Directors and our management, and; (v) recommending to the Board of Directors director nominees for each committee of the Board of Directors. The Nominating & Governance Committee provides such assistance in identifying and recommending Class A and Class C Common Stock director nominees as may be requested by the entire Board of Directors. The Nominating & Governance Committee adopted our Corporate Governance Guidelines. In light of the concentration of over 95%approximately 90% of the voting power of our Class A and Class C Common Stock in a single individual and related entities, and in accordance with the “Controlled Companies” exemption set forth in Section 303A of the New York Stock Exchange Listed Company Manual, the Nominating & Governance Committee is not responsible for identifying and recommending qualified candidates for directors that, in accordance with our Restated Certificate of Incorporation, are to be elected by the holders of Class A and Class C Common Stock. The Nominating & Governance Committee shall, however, provide such assistance in identifying and recommending Class A and C Director nominees as may be requested by the entire Board of Directors.
The Nominating & Governance Committee will consider Class B and D director nominees recommended by stockholders. Under our Restated Certificate of Incorporation, the number of directors to be elected by the Class B and D Common stockholders is limited to 20% of the entire Board of Directors, or a maximum of two directors. Stockholders who wish to recommend a nominee for the Nominating & Governance Committee’s consideration may do so by submitting the individual’s name and qualifications to the Nominating & Governance Committee c/o Secretary, Universal Corporate Center, 367 South Gulph Road, P.O. Box 61558, King of Prussia, PA 19406. Recommendations must be received by the Nominating & Governance Committee no later than the date by which stockholder proposals for presentation at the next Annual Meeting must be received.received and should include the information required by our Amended and Restated Bylaws and any other information regarding the director nomination required by the Exchange Act, and the rules and regulations promulgated thereunder, including Rule 14a-19 of the Exchange Act. Please see the Questions and Answers section of this Proxy Statement. Recommended nominees will only be considered if there is a vacancy or if the Board of Directors decides to increase the number of directors. The Nominating & Governance Committee identifies and evaluates committee-recommended Class B and D director nominees considering, among other factors, the following minimum qualifications: the individual’s integrity, experience, education, expertise, independence and any other factors that the Board of Directors and the Nominating & Governance Committee deem would 64 Universal Health Services, Inc. 2023 Proxy Statement
Corporate Governance enhance the effectiveness of the Board of Directors and our governance. The Nominating & Governance Committee seeks persons who have achieved prominence in their fields and who possess significant experience in areas of importance to the Company. Additionally, strong analytical skills, independence, energy, forthrightness and integrity are desired characteristics that the Nominating & Governance Committee seeks in potential candidates. We do not have a formal policy with regard to the consideration of diversity in identifying director nominees. However, the Board of Directors believes that it is essential that its members represent diverse viewpoints, with a broad array of experiences, professions, skills, geographic representation and backgrounds, including diversity of gender and race that, when considered as a group, provide a sufficient mix of perspectives to allow the Board of Directors to best fulfill its responsibilities to the long-term interests of our stockholders. The Nominating & GovernanceBoard has refreshed Board composition by replacing 60% of the non-management members of the Board within the last five years. The Board has three female members, one of whom, Eileen McDonnell serves as lead director and one of whom is a member of an underrepresented minority group. Quality and Compliance Committee: The current members of the Quality and Compliance Committee will evaluateare Elliot J. Sussman, M.D. (Chairman), Nina Chen-Langenmayr and Maria R. Singer. Lawrence S. Gibbs, who was a nominee onmember of the same basis ifQuality and Compliance Committee during 2022, resigned from the individual is recommended by a stockholder.Board of Directors effective as of March 31, 2023. The Nominating & GovernanceQuality and Compliance Committee does not currently pay a feehas the responsibility of assisting the Board in fulfilling its oversight responsibilities concerning review of our policies and procedures relating to a third partyhealthcare-related regulatory and compliance issues and the delivery of quality medical care to identify or evaluate nominees, but may consider from time to time engaging a search firm to identify Class Bpatients. The Quality and D director candidates.Compliance Committee met four times during 2022. Executive Committee: The current members of the Executive Committee. are Alan B. Miller (Chairman), Marc D. Miller, Eileen C. McDonnell and Warren J. Nimetz. The Executive Committee has the responsibility, between meetings of the Board of Directors, to advise and aid our officers in all matters concerning the management of the business and, while the Board of Directors is not in session, has the power and authority of the Board of Directors to the fullest extent permitted under law. The Executive Committee did not meet in 2019. Current2022. Finance Committee: The current members of the ExecutiveFinance Committee are Alan B. Miller (Chairman), Eileen C. McDonnell, Marc D. Miller, and Warren J. Nimetz. Finance Committee.Nimetz and Maria R. Singer. The Finance Committee is responsible for reviewing our overall long-term financial planning. The Finance Committee did not meet during 2019. Members2022.
ENVIRONMENTAL, SOCIAL AND GOVERNANCE Our commitment toward improving society in a meaningful way Since acquiring its first hospital in 1979, UHS has been strongly committed to treating patients and staff members with utmost respect. We are proud of this Committee are Alan B. Miller (Chairman),our reputation as a trusted healthcare provider and a valued partner in each of our local communities. In 2022, UHS enhanced transparency regarding our long-standing procedures and processes that underscore our environmental, social and governance (“ESG”) commitments, processes and best practices to address areas needing improvement, and increased our focus on the development and execution of new initiatives supporting patients, employees and communities. We organized our ESG working group, including a multi-disciplinary team of senior executives, named a Corporate ESG Director and identified key areas of focus for the coming year. Historically, reporting, and consequently oversight, of certain ESG-related efforts has been addressed independently across four Board Committees. As of 2021, we have been reporting on our overall ESG initiative to the Board of Directors. OUR PRINCIPLES We stand for excellence, each and every day, at each and every encounter. Our Principles set a high bar and reflect our purpose. | 1. | We Provide Superior Quality Patient Care |
| 2. | We Value Each Member of Our Team and All Their Good Work |
| 3. | We Are Committed to Being a Highly Ethical Healthcare Provider |
| 4. | We Are Devoted to Serving Our Local Community |
65 Universal Health Services, Inc. 2023 Proxy Statement
Corporate Governance Corporate Recognition UHS’ commitment to excellence is reflected in its long-standing record of achievement including our multiple appearances on Fortune 500, Fortune’s World’s Most Admired Companies list, Philadelphia Business Journal’s Largest Healthcare Systems and Hospitals in the Philadelphia Region, and Largest Public Companies in the Philadelphia Area lists. In 2022, we were proud to announce that our President and CEO, Marc D. Miller, Warren J. Nimetzwas recognized by Modern Healthcare as one of the 100 Most Influential People in Healthcare for his leadership and Maria R. Singer.impact on the industry. OUR INVESTMENT IN A SUSTAINABLE ENVIRONMENT UHS recognizes its responsibility to implement environmentally sustainable practices and is committed to complying with applicable legal and regulatory environmental standards to protect patients, visitors, staff and communities. Our environmental stewardship includes, but is not limited to, following best practices when managing our energy usage, construction and design of new build and/or major renovations and disposing of waste. Energy Efficiency Progress Our Centralized Utility Billing Management System monitors energy usage across our U.S. operations. By streamlining data collection and reporting, we can identify and act on inefficiencies faster and more easily. The platform alerts us to any significant deviation from average energy costs. Now with full-year baseline data in place, we can monitor usage year-to-year and investigate any discrepancies as well. Our Acute Care facilities monitor the efficiencies of their heating, ventilation and air conditioning (“HVAC”) component operations through use of an automatic fault detection and diagnostics platform. Reports, generated either monthly or quarterly, flag deviations from optimal operations, especially for those facilities equipped with Retro-Commissioning and Monitoring- Based Commissioning. In 2022, UHS earmarked an additional $1.18 million to retrofit California-area hospitals with higher-efficiency, LED lighting certified by ENERGY STAR® or DesignLights Consortium. While these upgrades were not yet completed at year’s end, the project’s projected annual savings amount to nearly $290,000 and 2.2 million kWh or 950 metric tons of carbon dioxide (CO2) equivalent. Also in 2022, UHS spent an additional $680,000 toward Retro-Commission (RCx) and Monitoring- Based Commission (MBCx) HVAC systems at select Acute Care facilities. All told, between 2017-2022, our RCx/MBCx initiative upgraded 14 facilities, resulting in an overall savings of $2.14 million, 19.3 million kWh and nearly 970,000 therms. During the year, UHS also committed more than $572,000 to provide Automatic Fault Detection and Diagnostics systems to Acute Care facilities over a five-year span. By the end of the year, the AFDD Platform was operational at 16 facilities; installation at an additional seven facilities is expected to be completed in 2023. This upgrade will not only proactively avoid mechanical failures but also ensure optimal operation efficiencies of the HVAC systems. Certifications and Registrations UHS made significant progress in its pursuit of U.S. Environmental Protection Agency’s (“EPA”) ENERGY STAR® certifications. As of February 2023, 15 UHS Acute Care facilities had earned this designation, up from two in 2021. ENERGY STAR® certified buildings and plants are verified to perform in the top 25% of buildings nationwide, based on weather-normalized source energy use that considers the occupancy, hours of operation and other key metrics. Newly certified facilities include Desert View Hospital, Doctors Hospital of Laredo, Northern Nevada Medical Center, Northwest Texas Healthcare System, South Texas Health System McAllen, St. Mary’s Regional Medical Center, Valley Health Specialty Hospital, an extension of Spring Valley Hospital as well as six others within The Valley Health System. 66 Universal Health Services, Inc. 2023 Proxy Statement
Corporate Governance Green Building Construction Despite the challenges of pandemic-related materials availability issues, UHS continues to set high environmental standards. Our construction and design of new builds or major renovations must comply with federal, state and local energy efficiency standards and energy codes. Additionally, we require that the project’s ENERGY STAR® Score Rating meets or exceeds 90. Lastly, any new construction or major renovation project $20 million or higher will be assessed for Green Building Initiatives’ Green Globes® or U.S. Green Building Council’s LEED certification. As of February 2023, six UHS Acute Care facilities have Green Globes® certifications, including Northern Nevada Sierra Medical Center. Our West Henderson Hospital (currently under construction) is registered, requiring us to file for certification within four years. Spring Valley Hospital Medical Center in Las Vegas became a member of Practice Green Health. Our Cedar Hill Regional Medical Center GW Health (currently under construction) in Washington, D.C. will have solar panels on its garage that will provide energy assistance to over 200 households in the adjacent community. Healthier Work Environments Coordinated efforts across multiple departments, including Environmental Services and Supply Chain, ensure our work environments, products and services are safe and sustainable for staff, patients and visitors. Despite post-pandemic disruptions to manufacturing and transportation, the teams’ focus on providing healthier environments for all stakeholders remained steadfast. Investing in Clean Environments We continue to use Green Seal and GREENGUARD chemicals to maintain safe and clean environments for employees and visitors. In 2022, we expanded the use of Green Seal certified products to include additional products, such as floor pads and dusting sheets. Manatee Memorial Hospital and Northwest Texas Healthcare System earned the AORN GO Clear Award—Gold.™ AORN recognizes operating rooms that present a smoke-free environment for staff and patient safety. The goal is to have all UHS Operating Rooms achieve this award by the end of 2024. Our contractors are required to track and report the percentage of demolition and construction waste recycled. We are pleased to highlight summaries of waste savings and/or diversions from a couple of our recent projects. Whether it is a new build or major reconstruction or expansion, our projects are designed to incorporate environmentally friendly materials and processes, from its energy conscious design through demolition and waste removals. South Texas Health System Edinburg Edinburg, TX (151,810 sq. ft. of new construction and 20,565 sq. ft. of renovation). During 2022, South Texas Health System Edinburg completed the construction of a new five-story patient tower, which doubled the facility’s overall size. The first floor of the tower is now the new and expanded Emergency Department. During these projects: • | | Three 94%-efficient heating water condensing boilers were installed in the new tower to serve all of the hydronic heating water for the heating and air system. |
• | | Nearly 220 energy-efficient light fixtures replaced older fixtures. |
• | | Higher efficiency refrigerators/freezers were installed in the newly renovated Dietary section. |
67 Universal Health Services, Inc. 2023 Proxy Statement
Corporate Governance River Vista Behavioral Health Madera, CA (~80,000 sq. ft. of new construction). This new facility is expected to open in April 2023. Between February 2022 and January 2023, the teams achieved high diversion rates. • | | Nearly 390 tons of materials were diverted, for an overall diversion rate of 92.37%. |
• | | Clean/unpainted drywall and metal combined to account for 65% of materials diverted, followed by clean wood (13%), mixed recyclable (8%) and waste (trash) (8%). |
Responsible Waste and Pollution Management While multiple initiatives have long been in place to support the responsible disposal of pollution and waste, in 2022, we began framing a comprehensive waste management and recycling program. The program will be based, in part, on waste management studies recently conducted at Valley Health System hospitals in Las Vegas. We expect to roll out this comprehensive waste management program across our U.S. operations in the near future. In the meantime, our facilities continued to participate in trainings and initiatives focused on the proper disposal of waste that resulted in effective reductions of CO2 emissions and/or increased in recycled/reused materials. In 2022, these included: • | | Facilities conducted annual waste training to support our initiative for disposing waste responsibly. Data on waste streams were collected monthly and reported through the individual hospital’s Environment of Care committees to identify opportunities to reduce non-recycled material and increase recycled material. In 2022, this initiative documented 12.5 million pounds of recycled material. |
• | | Participation in our reusable sharps container program mitigated more than 1.3 million pounds of greenhouse gases (compared to single-use containers). This is equivalent to CO2 emissions from 69,307 gallons of gasoline consumed and the preservation of 740 acres of forest. |
Also in 2022, new initiatives were launched, including a food waste pilot study at The George Washington University Hospital (GW Hospital). The study evaluated the cause of waste, areas of where waste was produced, the service period/area, food type wasted and weight of what was wasted. Based on this data, we were able to make meaningful process changes. We will have the program implemented in all Acute Care facilities by April 2023 with a Year One goal of waste accounting for 4% or less of our total spend. By wasting less, we will conserve valuable resources such as energy, water and land. Further, facilities conducted and documented weekly inspections of Central Accumulation Areas where waste covered under the Resource Conservation and Recovery Act was stored for pickup from our approved vendor. These inspections ensured proper waste segregation, packaging and labeling, as well as a safe and secure physical environment satisfying requirements from the EPA and Department of Health. Environmental Service operations also trained staff on proper waste handling, which included transportation of waste within the facility. This training satisfies an annual Department of Transportation requirement for handling and storing waste. Staff was also supported by a new Hazardous Materials and Waste Program playbook developed by the Environmental Risk and Emergency Management (“EM”) team to provide educational and programmatic assistance for the Hazardous Materials Management Program at the facility level. This valuable resource educated Acute Care and Behavioral Health staff on key topics, such as labeling of receptacles and containers as well as storage area and inspection requirements. The playbook also shared tools, templates for procedures/plans and best practices to ensure a safe and compliant program. The EM team also revised the facilities’ HazMat Dashboard to ensure ongoing waste stream segregation compliance. Training on the updated dashboard was provided for both the Acute Care and Behavioral Health Division staff. Reprocessing and Waste Diversion In 2022, 28 of our Acute Care facilities and two surgery centers utilized two FDA-approved third-party manufacturers, Stryker Sustainability and Innovative Health, for reprocessing of their respective, approved medical devices. Combined, these vendors helped our UHS facilities divert nearly 37,000 pounds of waste from landfills. 68 Universal Health Services, Inc. 2023 Proxy Statement
Corporate Governance By purchasing reprocessed electrophysiology devices from Innovative Health, five Acute Care facilities mitigated 827 pounds of CO2 emissions in 2022. Further, through participation in Stryker’s Products for the Planet program, 513 trees were planted in National Forests on behalf of UHS reprocessing efforts. In addition to reprocessing of medical devices, UHS Acute Care facilities partnered with manufacturers who collect their own manufactured devices, disassemble them and then recycle the individual components. End-of-life computer equipment underwent required security measures and then were recycled exclusively through a vendor-managed program. Conservation of Natural Resources The System Water Management Team (“WMT”) includes Facilities Operations, Infection Prevention, Environmental Services and Risk Management and oversees all aspects of potable and utility water processes. Each hospital site, as well as the identified outpatient clinics, have a site WMT that manages its water systems and evaluates the necessary hazard control and validation data to ensure the systems are maintained at the highest degree of safety. We maintain supporting documents that are compliant with a HACCP-based Water Management Program (“WMP”), which meets the requirements of ANSI/ASHRAE Standard 188-2021 (Legionellosis: Risk Management Practices for Building Water Systems). As part of that same standard, UHS has designed and implemented a WMP to manage the environmental aspects of water streams (e.g., domestic/potable water systems, cooling tower systems, outdoor decorative water features) for the safety of patients, visitors and employees. Future short-term plans include developing a corporate-wide water management program, including the reduction of water consumption through initiatives such as irrigation controls. Culinary and Nutrition The Culinary and Nutrition Department resides as part of our Corporate Supply Chain structure and provides oversight and direction for our overall food program sourcing and contracting. In 2022, we continued our Food as Healing Fuel approach, despite the challenges presented by an unstable and inflationary marketplace. Whenever possible, the team used Locked Order Guides to secure products with the best availability and value, but also those from sustainable sources for practical reasons. First, and foremost, we needed products to get to patients. We also needed to minimize the effects of rampant food and disposable cost inflation through Contract Compliance and Purchasing Program Maximizations. Lastly, we needed items that are sustainable for that day, as well as in the future. Also, as post-pandemic census and visitor counts rose, so did meal production and thus our potential for recycling efforts. A survey of 68 of our Acute Care and Behavioral Health facilities found eight different categories of items are being recycled. Used fryer oil was recycled most often (75% of facilities surveyed), followed by cardboard (62%). Our recycling initiatives in 2022 also included promoting the use of reusable items such as melamine plates, reusable but safe rubberized plastic utensils and even reusable take-out containers that can last over a year. In 2023, we expect the Behavioral Health Division’s usage of these reusable items to increase by 20%. Notably, in 2022 our sustainable product usage increased to account for more than $3.2 million of products used by UHS kitchens. Our goal is to increase this to $4 million in 2023 and $5 million in 2024. In the past year, the Support Services team worked with hospitals to improve access to gluten-free menu products for patients following gluten-free diets at our Acute Care facilities. Since 2021, 12 of our Acute Care facilities have attained Gluten Free Food Service certification by the Gluten Intolerance Group. This certification can only be obtained if all menu items are produced in a food production area free from cross-contact with menu items containing gluten. Our organization demonstrates its commitment to patient safety by investing time and expertise needed to master trainings and successfully pass the required audit for this initiative. 69 Universal Health Services, Inc. 2023 Proxy Statement
Corporate Governance In 2022, UHS ramped up its plant-forward menuing across Acute Care and Behavioral Health facilities. The culinary and dietary experts created numerous plant-centric recipes, such as General Tso’s Tofu, and introduced new food choices, such as gluten-free vegan menu items, to its patient and café menus. Within the Behavioral Health Division alone, the number of available plant-forward items increased 18% since the previous year. We expect to develop this initiative further to meet the increasing demand for animal-based food alternatives, but also help lower gas emissions and environmental contamination and help patients and visitors avoid high saturated fats. Cygnet Health Care Working Toward Targets Cygnet Health Care operates UHS’ behavioral health facilities in the United Kingdom.It takes its environmental responsibilities seriously and invested more than £2 million at sites to help tackle climate change. Their ambitious Sustainability Strategy includes: • | | Net zero carbon commitment for direct and indirect emissions by 2035 |
• | | Net zero carbon emissions in supply chain by 2045 |
• | | Procuring 100% of electricity from renewable sources since 2021 |
Recycling across Cygnet has increased from 16% in 2019 to 31% in 2022. This is due to initiatives such as the ‘right size right shape’ project, in partnership with Cygnet’s waste management provider, which monitors the recycling habits across sites and supports greater awareness. In 2022, Cygnet Health Care completed the installation of solar panels to five of its top 22 electricity usage sites, which now accounts for approximately one-quarter of the electricity at each site. In just one site, the CO2 emissions that are avoided equate to 21,631 kg per year or 21.63 metric tons. This is equivalent to 865 trees (it takes 40-46 trees to compensate for 1 metric ton of C02). Installation of solar panels at the remaining 17 sites is expected to be completed by April 2023. Learn more: cygnethealth.co.uk/about/environmental-social-governance-esg/ Cygnet has introduced new technology across its vehicle fleet to lower CO2 emissions, save fuel, reduce accidents and enhance the safe, comfortable transfer of patients across its U.K.-wide services. The installation of a new tracking and driver training device in all company-owned vehicles has seen a reduction of CO2 emissions by 122 metric tons, a cost savings of more than £50k through improved fuel economy, more environmentally friendly driving styles, improved safety and a reduction in insurance claims. OUR COMMITMENT TO SOCIAL CAUSES Support of social causes has long been an integral part of our corporate responsibility. We continually seek opportunities to provide high-quality care to patients and their families, maintain a high level of support and respect for valued employees and strive to make a positive impact on our local communities. High-Quality & Equitable Healthcare Services Our facilities are designed to provide a safe and welcoming environment, with caring experts on hand to help each individual meet their specific needs. During 2022, UHS’ Acute Care and Behavioral Health Divisions worked diligently preparing necessary plans and processes to meet The Joint Commission’s industrywide Health Equity Standards that came into effect January 1, 2023. The Divisions’ respective Clinical Quality teams created guidelines for their facilities and worked with dedicated personnel to improve current patient intake forms to better identify, and improve reporting of, inequities among patients. The individual clinical teams are developing resources, in coordination with those available in our local communities, to support equitable care for patients. Our facilities are expected to follow the new guidelines and starting in 2023, provide updates to their respective Executive Committee and Board of Directors. 70 Universal Health Services, Inc. 2023 Proxy Statement
Corporate Governance Excellence in Quality and Safety In 2022, the Acute Care Division clinical acuity was recognized by industry groups. Most notably: • | | 13 UHS Acute Care hospitals earned an “A” or “B” safety grade from The Leapfrog Group, arguably the industry’s highest safety standard. |
• | | Emergency room at Fruitville, an extension of Lakewood Ranch Medical Center, was named a Press Ganey 2022 HX Guardian of Excellence Award®—Patient Experience winner. This accolade recognizes the facility as being in the top 5% of healthcare providers evaluated in patient experience. |
• | | St. Mary’s Regional Medical Center was one of 429 hospitals to earn The Centers for Medicare & Medicaid Services (CMS) Five-Star Overall Rating based on its performance across various measures of quality including safety of care, readmission rate, mortality, timely and effective care and patient experience. |
• | | St. Mary’s Regional Medical Center and GW Hospital were recognized among America’s Best Physical Rehabilitation Centers for 2022 by Newsweek/Statista. Facilities were chosen based on a rigorous methodology that includes data from a survey of thousands of medical experts as well as key performance indicators based on the U.S. Centers for Medicare & Medicaid Services. |
In 2022, the Acute Care Division celebrated a sharp decline in its maternal mortality rate and for the first time, zero maternal deaths involving hemorrhage. At 8.9 per 100,000 births, UHS’ maternal mortality rate was significantly lower than the U.S. rate of 23.9 per 100,000 as reported by the Centers for Disease Control and Prevention. Improvements can be attributed at least in part, to the 2020 launch of UHS’ Quality in Obstetrics Education Program. The program has offered UHS OB Departments increased education and patient safety programs aimed at the leading causes of maternal deaths, obstetrical hemorrhage and pregnancy-related hypertension, among others. Within the Behavioral Health Division, the Clinical Services Department continued to collect, analyze and act on the Division’s clinical and quality outcomes. Results in 2022 found: • | | 80% of patients exhibited statistically meaningful improvement on clinical outcome measures. |
• | | 89% of patients agreed their treatment goals and needs were met. |
• | | 84% of professional referral sources surveyed indicated a UHS facility was their “provider of choice.” |
In the U.K., 82% of Cygnet Health Care facilities evaluated by regulators, including the Care Quality Commission (CQC), earned a Good or Outstanding rating. Educational Services Exceed National Averages UHS’ dedicated teachers, principals and support staff continued to help students excel and recover educationally with individualized strategies including tutoring, online remediation and extra mental health supports in the classroom. We are proud to report that in 2022: • | | 90% of parents and guardians felt that the academic staff truly cares about their child. |
• | | 88% were satisfied with the facility’s education program. |
UHS earned high scores from the industry’s reputable accreditation agency, Cognia. In 2022, all six of our schools that underwent a Cognia accreditation engagement review exceeded the agency’s national education accreditation scores. Hill Crest Behavioral Health’s Higdon Hill School was named a Cognia School of Distinction. The school was recognized for earning this top honor by Alabama Governor, Kay Ivey, State Superintendent, Eric Mackey, and other state and Cognia Dignitaries. Investing to Meet High Standards Acute Care and Behavioral Health Quality and Clinical teams focus on staff training and incorporate evidence-based clinical outcome assessment metrics to effectively track and measure our performance and optimize clinical services. 71 Universal Health Services, Inc. 2023 Proxy Statement
Corporate Governance To that end, all patient care staff within the Acute Care and Behavioral Health Divisions complete numerous trainings each year, including those related to our core tenets of quality care and safety. In 2022, employees from both Divisions combined completed nearly 3.1 million educational courses online, including those related to patient safety, skills training, regulatory and quality. Additionally, employees completed numerous in-person trainings throughout the year based on their role as well as facility and regulatory requirements. In addition, all Behavioral Health Division patient care staff, regardless of status or role, and select Acute Care Division patient care staff, were trained and certified in various nationally accredited or recognized behavior management techniques. Certification is to be maintained according to the standards and requirements set forth by these certifying bodies. Many UHS facilities augmented this training with their evidence-based verbal de-escalation curriculum. UHS invests in employee surveys with the aim of improving clinical performance. Every other year, both Divisions implement surveys aimed at assessing the extent to which our facilities’ culture support patient safety and safe practices. In March 2023, our Acute Care Division will participate in its next Agency for Healthcare Research and Quality (ARHQ) Patient Safety Culture Hospital Survey. Meanwhile, in 2022, the Behavioral Health Division’s Safety Culture survey was issued to 188 facilities; 42% of nearly 43,000 employees participated. As with the ARHQ survey, our questionnaire gained employee insight on key hospital measures such as Organizational Learning-Continuous Improvement, Reporting Patient Safety Events and Supervisor, Manager or Clinical Leader Support for Patient Safety. The Clinical Quality teams use the results of these surveys to measure performance, identify areas for improvement and benchmark our facilities against industry averages. The Hughes Center partnered with the Danville Otterbots for creation of a sensory room at their baseball stadium creating inclusivity for their fan base. In Spring 2022, the Otterbots unveiled the new room that includes cuddle swings, fidget boards, soft LED lights, wall-to-wall padding, different textured rugs, sound-deadening headphones, comfortable chairs, sensory-friendly fidget toys and a blackout curtain. UHS implements a corporation-wide biannual Employee Engagement Survey to provide leadership valuable employee insights, including perceived expectations and level of preparedness: Engaging in safe work practices is expected of me in my job: • | | 4.31 Acute Care Division (a) |
• | | 4.27 Behavioral Health Division (b) |
I am adequately trained to ensure safety at work: • | | 4.20 Acute Care Division (a) |
• | | 4.08 Behavioral Health Division (b) |
* Ratings based on scale of 1 (strongly disagree) to 5 (strongly agree). (a) 20,379 respondents. (b) 19,605 respondents. CHARITABLE CARE UHS continued to support our local communities through charity care and uninsured discount programs. Combined, our U.S. Acute Care facilities’ contributions for qualified patients neared $2.3 billion in 2022. 72 Universal Health Services, Inc. 2023 Proxy Statement
Corporate Governance COMMUNITY PARTNERS UHS continued its long-standing partnership with the National Action Alliance for Suicide Prevention, helping individuals connect with support when they find themselves in crisis. Our Behavioral Health facilities champion the Action Alliance’s Zero Suicide initiative, reminding local communities that they are a resource for hope, resiliency, connectedness and recovery. With pandemic protocols lifted, UHS was able to resume its long-standing alliance with the Philadelphia Ronald McDonald House. Led by Assistant Director of Culinary/Nutrition who designed the menu and provided ingredients, select Corporate employees prepared and served dinner to families whose children are being treated at Children’s Hospital of Philadelphia. UHS regularly partners with several organizations that support active-duty military personnel and veterans. At this year’s annual Veteran’s Day event, Corporate employees were introduced to Alpha Bravo Canine, a local non-profit that raises, trains and donates service dogs to disabled veterans. Corporate employees participated in the annual Wreaths Across America in which they placed over 225 wreaths at cemeteries in the Philadelphia area. The Behavioral Health Division teamed up with HMP Global’s Psychiatry & Behavioral Health Learning Network to provide employees, referring partners and other valued community partners access to educational webinars on a variety of healthcare topics. Webinars are held quarterly and provide continuing education credits to those who attend live. In 2022, the webinar series yielded over 4,700 registrations; approximately 45% of which were live participants. Facilities often joined forces with local chapters of national organizations by sponsoring, hosting and/ or participating in their awareness- and fundraising events—and leaders from across the corporation continue to support some of our partners by serving as Committee or Board members. Community Outreach UHS is committed to being a valued partner with our local communities, not only as a trusted healthcare provider, but also by investing in community development projects, hosting community involvement activities and supporting local charities. Engagements include volunteer opportunities and in-kind donations, such as toy collections and food drives. For the past two decades, UHS has contributed to state-specific educational programs to help fund student scholarships and/or provide supplemental funding to our local communities’ school districts. In 2022, we contributed more than $6 million to seven state programs. UHS continued our work in raising awareness of the opioid crisis and acquired the license to host screenings of an 80-minute documentary, Tipping the Pain Scale. UHS held a viewing for Corporate employees and facilities hosted free screening events for their local communities. Throughout the year, both Acute Care and Behavioral Health facilities hosted in-person and virtual events encouraging healthy lifestyles as well as connecting families and friends to important health and wellness resources. Events included free health screenings, blood drives, educational classes and informational sessions on multiple physical and mental health diseases and conditions. Workforce Demographics UHS is extremely proud of the teams who work together to deliver high-quality services across the United States and United Kingdom. It is their expertise, hard work, dedication and collaboration that have allowed us to achieve a great number of successes this past year and laid the groundwork for many exciting opportunities in the future. We are committed to the principle of Equal Employment Opportunity (“EEO”) for all employees and applicants. As an EEO Employer, UHS supports and fully commits to recruitment, selection, placement, promotion and compensation of all individuals without regard to race, color, religion, age, sex (including pregnancy, gender identity, and sexual orientation), genetic information, national origin, disability status, protected veteran status or any other characteristic protected by federal, state or local laws. 73 Universal Health Services, Inc. 2023 Proxy Statement
Corporate Governance 2022 Employee Engagement We value employees and are committed to all being treated with dignity and respect. These commitments are reflective in our policies and procedures as well as the results of our 2022 Employee Engagement Survey. Based on a rating of 1 (strongly disagree) and 5 (strongly agree), UHS earned favorable ratings in the following metrics: • | | The person I report to treats employees with respect - 4.20 |
• | | My facility treats employees fairly regardless of age, race, sex, disability or sexual orientation - 4.09 |
• | | The person I report to cares about my well-being - 4.12 |
Global Workforce In 2022, the global workforce increased 5% to nearly 94,000 as U.S. and U.K. workforces grew 4% and 10%, respectively. Diversity Across New Hires in U.S. and Those Promoted In the United States, nearly 24,200 employees were hired during 2022. Further, more than 6,060 employees were promoted. As a founding member company of Veteran Jobs Mission, UHS is committed to reducing unemployment among U.S. military veterans. We continue to honor this commitment by increasing the number of military hires year over year. In 2022, UHS hired 1,815 veterans, up 20% over the previous year’s counts for the second year in a row. Among the veterans hired during 2022, 46% were female and 56% were ethnically diverse. 74 Universal Health Services, Inc. 2023 Proxy Statement
Corporate Governance U.S. Workforce Female employees continue to make up the majority of the workforce at UHS and its facilities. The average tenure of female employees in 2022 was in line with that of their male peers. We appreciate diversity in the workforce, which reflects the diversity of the communities we serve. Individuals who identify as white account for less than half of the workforce. U.K. Workforce Diversity is also shown in the makeup of the workforce in the U.K. Diversity, Equity and Inclusion UHS’ commitment to diversity, equity and inclusion (“DEI”) includes regularly monitoring employment practices to ensure equity, regardless of an employee’s gender, race or ethnicity and championing for inclusive behaviors through leadership example, policies and procedures, trainings and special events. 75 Universal Health Services, Inc. 2023 Proxy Statement
Corporate Governance In 2022, UHS Corporate formed a DEI taskforce, chaired by the SVP, Human Resources. Meanwhile, there are facility-based committees designed to recognize and highlight multicultural backgrounds and other DEI-focused initiatives. The George Washington University Hospital’s (“GW”) Diversity and Inclusion Advisory Council is a multidisciplinary cross section of diverse employees, chaired by GW’s chief executive officer. Its mission includes earning the GW community’s trust; creating a culture of safety, celebration and acceptance where differences are valued; driving awareness and education on diversity, equity and inclusion; ensuring proportional representation of communities served exists within hospital committees; and developing measurable goals for the Hospital that are impactful with sustainable change. Within the Behavioral Health Division, St. Louis Behavioral Medicine Institute (“SLBMI”) has a Diversity, Equity, Inclusion & Belonging Committee, whose mission is to “intentionally facilitate a culture of diversity, equity, inclusion and belonging, and to foster the process of continued growth through learning, identifying blind spots and implementing impactful change.” The Committee is open to all SLBMI employees and regularly disseminates DEI information to all staff. Its 2022 accomplishments included working with the facility’s Gender Affirming Program to create SLBMI’s Pronoun Policy and Procedures, updating its patient registration forms and incorporating issues of diversity in all clinical trainings. During 2022, UHS continued to participate in the U.S. Federal work opportunity program for employers who invest in hiring individuals from certain targeted groups who consistently faced barriers to employment. In YTD September 2022, UHS screened more than 4,500 individuals for the program; all of whom were hired, including the 30% who qualified for the program. UHS also participates in the U.S. New Market Zone and Qualified Opportunity Zone programs designed to encourage private investment and/or hiring and retention of individuals from areas identified as being in distress or rural areas that are in need of revitalization. Since January 2022, UHS completed a few projects under this program, including the construction of Granite Hills Hospital and Via Linda Behavioral Health. These facilities, which are located in these qualified locations, opened in 2022. Cygnet Health Care’s Multicultural Network now has 105 ambassadors across the U.K. who help to promote inclusion and raise awareness of issues affecting ethnic minority staff and service users. In its second full year, the Multi-Cultural Network expanded its offering to include: • | | A new mentorship program to support ethnic minority staff with personal and professional development. |
• | | ID badges with the option of carrying the phonetic pronunciation of names if desired. |
• | | Inclusive interviews—The Network supports interviews across Cygnet to ensure fairness and equality in recruitment processes. |
• | | A review of mandatory equality & diversity training along with our Unconscious Bias training to ensure both are relevant to staff and services. |
• | | A robust action plan which was developed following Cygnet’s first Race Equality Survey. |
Looking ahead, we hope to coordinate efforts and facilitate sharing of charters and best practices. Recruitment and Retention During the year UHS made a positive impact on employees’ intent to stay. Through internal surveys, employees indicated that they appreciate and value many of the initiatives we recently added to address the headwinds of retention including: career ladders and progression, career development, engagement during the work day and ongoing recruitment and retention strategies. By year end, we recorded a 22% decrease in Registered Nurse openings and a 31% decrease in mental health technician openings. We also listened carefully to employee feedback and took responsive action. We strengthened our recruitment efforts, improved the overall hiring and onboarding experience, expanded the training resources employees need to do their jobs effectively and safely, facilitated more teamwork and collaboration, established new Recharge Rooms at many of our Behavioral Health facilities for staff rejuvenation, addressed burnout, expanded mentorship, launched the new Employee Assistance Program, and best of all, increased employee engagement. 76 Universal Health Services, Inc. 2023 Proxy Statement
Corporate Governance Surveys are issued to new hires after their first seven and first 30 days to solicit feedback about the hiring and onboarding process. In 2022, our overall recruitment process earned a 90% satisfaction rating. Meanwhile, 91% of individuals who responded to our candidate hiring survey (33% response rate) indicated they were satisfied or highly satisfied with the process. Similarly, in 2022, 85% of individuals who responded to our onboarding survey (21% response rate) indicated they were satisfied or highly satisfied with the process. Workforce Policies UHS has a clear set of policies developed to reflect our Corporate Mission and Purpose and the high standards we have for employees. Employment policies identify resources available to staff and/or define the company’s internal process for various events (e.g., scheduled leave, performance reviews, grievance reporting). They are communicated and enforced to ensure fair and equitable treatment for all employees. Our Background Screening Policy requires criminal, sanction and drug screening as well as education, license and employment verification prior to hire. Onboarding employees are trained on policies that reflect our corporate culture and values (e.g., Code of Conduct, Discrimination and Harassment Prevention Policy, Employee Conduct and Work Rules Policy, and Drug and Alcohol Policy). Depending on their role, Division and employment status, employees may be required to complete training on key policies that fulfill regulatory obligations and/or promote safe and healthy work environments (e.g., HIPAA Privacy and Security Rules, Workplace Violence Prevention Policy, Grievance Reporting and Dispute Resolution Policy). Employees have access to all policies either through their local HR department and/or internal intranet. Employee Development and Training In keeping with UHS’ culture of continuous improvement, training opportunities are available for all employees, regardless of level or status. These include formal instructor-led, in-person or virtual training, informal mentoring or networking opportunities, or self-administered online courses. Training programs are designed to assist with personal and skill development, career advancement and succession planning. In addition to mandatory trainings that focus on keeping employees mindful and informed of key policies and skill sets, many are voluntary. All trainings are tailored to include potential Americans with Disabilities Act accommodations. During Orientation, new hires learn UHS’ Mission, Vision, Principles and Values, key policies and procedures as well as available benefits and resources. The capstone course is a two-hour overview of our founding principle, Service Excellence. Time focused on its attributes—continuous improvement, employee development, ethical and fair treatment of all, teamwork, compassion and innovation in service delivery—provides new hires a deep understanding of the company’s culture. The Service Excellence Standards—treating everyone as a guest, demonstrating professionalism and excellence and practicing teamwork—are shared to help guide the desired approach to day-to-day activities. Service Excellence Facilitator Certification Workshops are available for facility employees identified by their leadership for consistently upholding and demonstrating the UHS Service Excellence Standards. The multi-session virtual workshop develops facilitation skills, reviews best practices for how to effectively manage a learning environment and provides an in-depth explanation of the Service Excellence presentation. Certified Facilitators foster the Service Excellence culture and deliver trainings at their own facilities. TEAM C.A.R.E., the employee enrichment experience at our UHS Corporate Offices, brings inspiring events, content and programming for health/wellness, social/ community and career enrichment. This is designed to expand our employees’ professional network, help them meet new colleagues and offer opportunities to engage in rewarding activities. 77 Universal Health Services, Inc. 2023 Proxy Statement
Corporate Governance TEAM C.A.R.E. also offers Corporate employees access to trainings or events that support professional development (i.e., UHS Toastmasters Club, Executive Speaker Series, Business Book Clubs, The Power of Professional Women’s Career Conversations and Diversity events). In the U.K., in addition to the mandatory training requirements, Cygnet Health Care training offerings in 2022 included: Mental Health First Aid, Coaching & Mentoring, Apprenticeship Programs and “A Masterclass in Compassionate Leadership” led by Professor Michael West. During 2022, 130 employees became certified as Service Excellence Facilitators by completing one of the 15 multi-session virtual workshops led by UHS Learning and Development Facilitators. The Learning and Development team began branding their efforts under the “U Learn” brand in 2022. Within U Learn, there are three tracks: Invest in U, Manage U and Develop U. Invest in U is designed to refresh, remind, and provide learning opportunities that help to enhance one’s skills and knowledge for all staff. In 2022 the courses covered topics such as business writing fundamentals, e-mail etiquette, time management and effective meeting guidelines. The Manage U track provides leadership skills designed for supervisors and managers. The programs include Stepping Into Leadership, HR Essentials and m3 Management Development Program. We support new supervisors across all parts of the organization through the training program “Stepping Into Leadership.” Designed for first-time supervisors, the program provides new supervisors with the foundation to: • | | Smoothly transition from an individual contributor to an effective leadership role |
• | | Apply strategies to build an engaged workforce and high performing team |
• | | Confidently engage in difficult workplace conversations |
• | | Resolve and de-escalate workplace conflict |
• | | Foster a culture of Service Excellence |
In 2022, 40 Stepping Into Leadership Classes were held for a combined 700 participants, to account for over 1,000 hours of training for new supervisors. Notably, the number of participants and training hours for our m3 program, which is designed for employees of all leadership levels, increased substantially in the last year. In 2022, 152 m3 classes were attended by 2,900 employees for a total of more than 7,200 hours of training. The Develop U track contains specialty programs focused on employee and team development. Courses in this track include Take Charge of your Professional Development, Train to Retain: A Hiring Manager’s Toolkit for Successful On-boarding, and Everything DiSC Workplace. The Learning and Development team delivered the Acute Care Division’s Resourcing for High Quality and Safe Care, and the Behavioral Health Division’s Trauma-Informed Care programs. 78 Universal Health Services, Inc. 2023 Proxy Statement
Corporate Governance Graduate Medical Educational Programs We have been steadily growing the UHS Graduate Medical Education Program since 2018. Its goals include developing excellence in graduate medical education and creating a reliable pipeline of newly trained doctors and pharmacists to join our network of healthcare professionals and ultimately improving access to healthcare in our valued communities. UHS Sponsored GME Programs In 2022, 18 UHS Sponsored Programs operated out of the following UHS Acute Care hospitals/ health systems: Aiken Regional Medical Centers, Manatee Memorial Hospital, Southwest Healthcare (Temecula Valley Hospital, Rancho Springs Hospital, Inland Valley Hospital and Corona Regional Medical Center), Texoma Medical Center, The Valley Health System (Centennial Hills Hospital, Desert Springs Hospital, Henderson Hospital, Spring Valley Hospital and Summerlin Hospital Medical Center) and Wellington Regional Medical Center. Of our 18 UHS Sponsored Programs, 17 are accredited by the Accreditation Council of Graduate Medical Education. Further, both of our Pharmacy Residency Programs are accredited by the American Society of Health System Pharmacists. In 2022, UHS Sponsored Programs continued to offer specialties/sub-specialties in Emergency Medicine, Family Medicine, General Surgery, Internal Medicine, Pharmacy and Transitional Year programs, while adding Cardiology, OB/GYN, Pulmonary and Sports Medicine. In July 2022, a total of 316 residents—representing an increase of 20% over the previous year—participated in UHS Sponsored Programs. By July 2023, the number of UHS Sponsored Programs and residents is expected to increase by 33% and 26%, respectively. This growth will be driven, at least in part, by a new program being developed by our South Texas Health System. Academic Partnership GME Programs In 2022, The George Washington University Hospital, Northwest Texas Healthcare System and Valley Hospital Medical Center collectively offered 50 Academic Partnership Programs. More than 590 residents and fellows participated. Learn more: uhs.com/careers/graduate-medical-education 79 Universal Health Services, Inc. 2023 Proxy Statement
Corporate Governance Other Professional Development Programs Across the company we offer educational and work opportunities, including internships, externships, and clinical field placement opportunities. We also continued efforts to expand the Strategic Partnerships with Nursing program with other medical technology schools. Congratulations to the 2022 recipients of Lakewood Ranch Medical Center (“LWRMC”) Foundation’s Nursing Scholarship program. Since it was created in 2018, the Foundation has awarded 27 scholarships to those studying for associate’s, bachelor’s or master’s degrees. Eligible candidates include nursing students who reside in Manatee or Sarasota County and who are currently participating in a clinical affiliation at LWRMC, or a nurse employed by a hospital and enrolled in a graduate program leading to a Master of Science degree in nursing. UHS also supports employees’ professional development through financial assistance programs. UHS annually earmarks approximately $1 million for its Tuition Reimbursement Program to support employees participating in degree or certification programs. Our facilities also offer student loan repayment to engage recent graduates in the workforce, as well as support the pursuit of continuing education. For our 2022 Summer Internship Program, UHS successfully recruited and onboarded 44 interns, a 43% increase over the previous year. Interns attended two Orientation sessions, up to 13 leadership “Lunch & Learn” sessions, professional development workshops and networking events. The interns worked across five departments at our Corporate Offices: Information Services (32 interns), Supply Chain (8), Revenue Cycle (2), Design and Construction (1) and Legal (1). Of the 32 Information Services (IS) interns, 43% identified as diverse. The program was a success. On a scale of 1-10 (10 being highest), 71% of interns rated their overall experience a score of 9 or 10, and all reported they would recommend UHS to other students for an internship. Further, of the 35 IS or Supply Chain interns expecting to graduate college between August 2022 and May 2023, we extended 16 offers, 15 of which were accepted. Employee Benefits UHS’ non-pay benefit program seeks to attract top talent, yet also serves to retain and support current staff. Its well-rounded “Benefits for Living Better” program addresses employees’ physical, mental, financial and professional needs. The program is constantly being evaluated and adjusted to not only be competitive in our markets, but responsive to employee needs. Key highlights of the 2022 program included: • | | A new, more robust line of EAP Services, including Work/Life services, Legal/Financial consultations, Child and Elder Care services and Concierge assistants |
• | | Flexible work arrangements including compressed work week, hybrid work-from-home schedule and remote work |
• | | A variety of employment status options, especially among clinical staff, including part-time, per diems, on call, temporary and job sharing |
Employees have access to enhanced benefits through various free events and programs, such as Mindset Spark Sessions which included two free events designed to help drive positive and intentional thinking for the benefit of mental and physical well-being, and the Fertility and Family Planning Education and Support program through Fertility IQ to help navigate family planning. UHS Foundation for Employees The UHS Foundation is a 501(c)(3) nonprofit entity that supports UHS employees who have been affected by hardship due to either qualified natural disasters (e.g., hurricanes, fires) or a national public health emergency (e.g., the COVID-19 pandemic). Since it was established in 2005, the UHS Foundation has raised more than $2.9 million in support of impacted employees and their families. 80 Universal Health Services, Inc. 2023 Proxy Statement
Corporate Governance Employee Engagement On alternating years, through use of a third-party independent vendor, UHS’ Corporate Human Resources deploys either a comprehensive 50+ question Employment Engagement Survey or a brief 20-question Pulse Survey. Based on this employee feedback, UHS is able to measure performance as well as to identify and act on areas for improvement. To protect employees’ privacy, responses are kept confidential and results are shared as aggregate totals by department. Management is encouraged to share results with their staff, develop action plans for any low-performing metrics, address any concerns and solicit suggestions in the spirit of continuous improvement. Our 2022 Employee Engagement Survey found that employees scored UHS Overall (Corporate, Acute Care, Behavioral Health and IPM collectively) highest in the categories of Job Fit, Teamwork, Safety, Management and Resiliency. 2022 Employee Engagement Survey—UHS Overall Highest scoring items. Ratings based on scale of 1 (strongly disagree) to 5 (strongly agree). Notably, 75% of survey respondents were engaged with the company and reportedly intend to be working here in 3 years. TEAM C.A.R.E. events are initiated based on suggestions from employees and aim to support causes and/or organizations that are aligned with UHS’ Mission and Principles. Since 2018, TEAM C.A.R.E. has sponsored an annual golf tournament to benefit the UHS Foundation. In September 2022, the 4th uhsbenefits.ehrAnnual UHS Golf Tournament raised more than $110,000, which was matched by UHS, and donated to the UHS Foundation. Employee Recognition and Awards Corporate and facility leadership in the U.S. and U.K. regularly recognize employees for their dedication to the organization, and exceptional care bestowed to patients and their families through formal annual events as well as throughout the year. The Service Excellence Award is UHS’ annual top honor bestowed to three Corporate Home Office employees for their professional, effective and efficient service to all stakeholders. This prestigious award is also given annually at the facility-level, to a deserving Acute Care facility, a Behavioral Health facility and a Behavioral Health Residential Treatment Center in the U.S. Quality Awards are annual rewards for earning exceptional industry and patient quality and safety ratings. Typically, the award is presented to one facility in each category: Acute Care facility, Behavioral Health facility and Behavioral Health Residential Treatment Center. The annual Chairman’s Council Award is presented to facility CEOs who meet or exceed quality goals and financial goals, earn exceptional patient satisfaction scores, and demonstrate community involvement and overall leadership. Three-time recipients of the Chairman’s Council Award are presented the Eagle Award. 81 Universal Health Services, Inc. 2023 Proxy Statement
Corporate Governance Service Anniversary certificates and gifts are presented upon Corporate employees’ milestone work anniversaries. At the Corporate Office, employees are recognized for every five years of service. Employee recognition awards are regularly presented at the facility level for those nominated by leadership or peers for exemplary performance. To facilitate peer-to-peer recognition, Cygnet hosts a monthly Characters of Care Award while the UHS Corporate Office has a ‘Cheers for Peers’ program. Introduced in March 2022, this program enables employees to post a note or an image on our Corporate network to acknowledge colleagues who go “above and beyond.” Each Division has a Great (Good) Catch program to recognize staff who by early intervention, prevented either an actual or possible negative outcome. Each Behavioral Health facility contributes four Good Catches a month. They are trended and used to develop education work product for the Division. In the Acute Care Division, Great Catches are promoted at the facility level and presented at the monthly Corporate Patient Safety Council, so these learnings can be shared across the entire Division. Our Recharge Room program is proving to be a meaningful way for Behavioral Health facilities to engage with, and show their appreciation for their staff. The number of facilities with these dedicated spaces designed to offer employees solace during their busy day, increased from 6 in 2021 to more than 50 by the end of 2022. Employees were invited to participate in the selection of their room’s name, design and features (e.g., massage chairs, aroma stations, décor, etc.). Facilities are using surveys (via online or QR code) to measure employees’ use and reaction to room visits, including any impact on their stress levels. Privacy and Data Security UHS’ Privacy and Data Security team is led by the Chief Compliance and Privacy Officer and the Chief Information Security Officer, along with designated hospital-based facility Privacy and Security Officers. The team’s mission is to preserve the confidentiality, integrity and availability of information assets in accordance with Information Security Policies for employees and patients. To this end, the focus remains on appropriately identifying, selecting, deploying, maintaining and improving information security controls based on the National Institute of Standards and Technologies Cybersecurity Framework . We comply with privacy and security policies, as well as several related federal and state laws, including the Health Insurance Portability and Accountability Act of 1996 (“HIPAA”) Security Rule and the Payment Card Industry requirements that govern compliant technology and processing of consumer credit card information. Our compliance with these requirements is reviewed by external parties. For example, each year a third-party firm certifies our PCI environment with attestation to our acquiring banks. We have approximately 48 privacy and security-related policies maintained at the Corporate level and locally by U.S. facilities. Additionally, we deploy numerous technologies and engage third parties to provide intelligence services to UHS. The UHS Information Services team evaluates information security controls on a regular basis through penetration testing, assessment and evaluations to review system effectiveness. Third-party cybersecurity firms also provide monitoring and investigation services, including regular security penetration tests and audits. In addition to these measures, UHS invests time and resources toward training all employees. As frontline defenders in our efforts to ensure privacy and security of our information, employees participate in trainings and phishing exercises to learn how to identify possible threats. Collectively, more than 45,000 hours of employee training are conducted each year, including mandatory annual data privacy and cybersecurity training for all employees. Beyond the people, processes and technologies, UHS also understand the Cybersecurity risks that exist among our Supply Chain vendors. To address this, UHS has a process to assess risk, evaluate and even require third-party verification of our vendors and suppliers as they engage in our contracting process. 82 Universal Health Services, Inc. 2023 Proxy Statement
Corporate Governance Ultimately, issues and events can arise. However, when they do, UHS has an Incident Response Plan and if needed, Disaster Recovery processes that are engaged to minimize impact on availability of services. Finally, UHS also has multiple governance processes to review the health and maturity of our Cybersecurity program through regular review of key performance indicators, metrics and roadmaps to promote the use of recent technologies and manage risks. OUR GOVERNANCE STRUCTURE As reflected in the Board of Directors’ Corporate Governance Guidelines, UHS has a deep-rooted commitment to a system of governance that enhances corporate responsibility and accountability. From its start in 1979 as an organization of 6 employees to a nearly 94,000 employee-strong, dual-continent enterprise, this commitment remains intact today. Board of Directors The Company’s business is conducted by its employees, managers and officers under the oversight of the Board of Directors. The Board is elected by the Company’s stockholders in accordance with the Company’s Articles of Incorporation, to oversee management and to assure that the long-term interests of the stockholders are served. UHS’ Board of Directors is chaired by Founder and Executive Chairman Alan B. Miller. There are currently six committees: Audit Committee, Compensation Committee, Executive Committee, Finance Committee, Nominating and Governance Committee, and Quality and Compliance Committee. Nina Chen-Langenmayr was elected to the Board of Directors in September 2022 and appointed to UHS’ Quality and Compliance Committee, effective January 1, 2023. With the appointment of Ms. Chen-Langenmayr, the Board now has eight members; five (63%) of whom are independent, and three (38%) are female. Ms. Chen-Langenmayr had a 13+ year tenure at Mercer, including her last role as Partner, gaining significant leadership experience in talent management, performance management, business development and benefits. She currently serves as the Special Projects Consultant for The Welcoming Center, a 501(c)(3) non-profit organization that promotes inclusive economic growth through immigrant integration. In the U.K., a 12-member Executive Management Board provides governance to our Cygnet Health Care facilities through its Board sub-committees, which meet quarterly and have overall responsibility for the quality of care delivered across all services that Cygnet provides. They are supported by an Advisory Board; all three of its members are independent and hold non-executive positions. Twenty-five percent of the Executive Management Board and 33% of the Advisory Board are women. 83 Universal Health Services, Inc. 2023 Proxy Statement
Corporate Governance Management Evaluation and Succession The Nominating & Governance Committees of UHS and Cygnet Health Care, respectively, evaluate the performance of the Company’s management annually and discuss this evaluation with the entire Board following the end of each fiscal year. The Board, or a committee of the Board, oversees the Company’s management succession planning, including its policies and principles regarding the selection of and succession to the Chief Executive Officer of the Company in the event of emergency, retirement or other circumstance. Local Governance In the U.S., the Board of Directors at each of the Acute Care and Behavioral Health facilities have decision-making authority over financial and non-clinical operations issues. Meanwhile, Executive Leadership teams, organized Medical Staff and local governing bodies jointly oversee the day-to-day operations of these facilities, as well as our ambulatory surgery centers. Facilities’ local governing bodies also have Medical Staff oversight. Within the Acute Care Division, the facilities’ local governing bodies are typically comprised of a team of local community members, medical staff and hospital or regional leadership. Within the Behavioral Health Division, the local governing bodies are typically represented by local and Division leadership and may include current or retired medical staff. As with all healthcare providers, UHS facilities are subject to regular visits and inspections by federal and state regulatory agencies. All our U.S. facilities are fully accredited by widely respected, independent organizations including The Joint Commission (TJC) and the Commission on Accreditation of Rehabilitation Facilities . In the U.K., our Cygnet facilities are subject to regulatory review by the CQC, among others. Some of our Acute Care facilities have also earned accreditations by specialized benchmarking entities (e.g., American College of Radiology, American College of Surgeons, College of American Pathologists and American College of Cardiology). Within the UHS organization, our Acute Care and Behavioral Health Divisions each have a Division Compliance Officer as well as designated Facility Compliance Officers who oversee their respective facilities’ local compliance programs and obligations. Similarly, the Acute Care and Behavioral Health Divisions each have Chief Medical Officers (“CMOs”) and quality designees at the divisional and regional levels, as well as at select individual facilities. CMOs determine medical strategy and provide oversight of medical staff and utilization management, while quality teams manage and oversee clinical and regulatory programs. Leadership analyzes performance metrics monthly, and shares best practices across facilities to promote quality and safety, including outcomes measurement as primary initiatives in each organization. The Behavioral Health Division’s Admissions, Risk Management and Corporate Clinical teams’ focus is on the quality of patient care at our locations to work towards meeting, if not exceeding, the expectations. Risk Management Measures Each Acute Care and Behavioral Health Division’s Risk Management program is led by a Division Risk Management Director, who is supported by Senior and/or Regional Risk Managers and Facility Risk Managers. In addition, the Acute Care Division has a Medication Safety Risk Manager who focuses their efforts on safe medication use including analysis and oversight of the medication administration system. This comprehensive risk management program is also comprised of a dedicated Corporate Loss Control (Employee Injury) staff, Claims Management professionals, as well as an Environmental Risk and Emergency Management team. UHS utilizes an Enterprise Risk Management (“ERM”) approach to mitigate loss and promote employee and patient safety. This approach comprises the traditional risk management model components of Risk Identification, Risk Analysis, Risk Control and Risk Financing as well as utilization of the ERM domains (i.e., Operational, Human Capital, Strategic, Clinical/Patient Safety, Financial, Legal/Regulatory, Technology and Hazard). 84 Universal Health Services, Inc. 2023 Proxy Statement
Corporate Governance Each of these core components is supported by dedicated teams that utilize time-tested processes, procedures and/or tools, such as risk assessments, dashboards and data analytics to meet their core objectives. This may include the collecting, reporting and analysis of data against internal or nationally available benchmarks. While prevention of patient safety events is core to our mission of providing safe, high-quality care, adverse events do occur. Risk identification tools include The Joint Commission’s Sentinel Events Alerts, Root Cause Analysis and Failure Mode and Effects Analysis, as well as internal safety tools, such as patient safety event reports on adverse outcomes, adverse drug reactions, medication errors and patient concerns. Executive and Unit Safety rounding and patient safety surveys are also instruments used for early detection of potential adverse or unexpected patient outcomes and hazards. To meet the Patient Safety Risk objectives, loss prevention and control methods are in place to assess high-risk clinical areas, such as new service lines. Patient Safety Newsletters, Safety Watches and Clinical Risk Alerts, as well as evaluation of the facility risk management programs, are conducted regularly with processes and procedures adapted as needed. Our Claims process offers a systematic approach to reducing financial loss and negative community image in cases where preventative measures may have failed and an injury or other negative outcome occurs. Decisions that affect the financial sustainability of the organization, access to capital or external financial ratings through business relationships or the timing and recognition of revenue and expenses comprise the financial focus for risk management. To ensure financial stability and solvency, risk transferring techniques are analyzed, evaluated and implemented. During 2022, the Incident Command team responded to several emergencies due to extreme weather. In late September, when Hurricane Ian, a destructive Category 4 Atlantic hurricane was approaching, the team was activated, and our emergency preparedness protocols and processes were put into place. In the end, patients and staff of just one facility needed to be evacuated to other UHS facilities, while the remaining 26 facilities in the affected area were returned to regular operation within 24-48 hours. Patient Safety Organizations The Acute Care and Behavioral Health Divisions each have their own Patient Safety Organization (PSO) to govern their respective risk management process. These PSOs, which are registered with the federal government under the Agency for Healthcare Research and Quality, voluntarily report and analyze data to help facilities identify opportunities to mitigate risk, reduce patient harm and improve quality of care. The Acute Care Division’s Corporate Patient Safety Council identifies its patient safety priorities for the year. At the local level, each facility has a Patient Safety Council that meets monthly to analyze patient safety data to ensure the appropriate processes are in place to prevent patient, employee and visitor harm and monitor the effectiveness of the process improvements put in place. The Behavioral Health Division also has a Corporate Patient Safety Council that is chaired by the Division’s Chief Clinical Officer and is a multidisciplinary Committee comprised of key leaders and representatives from Plant Operations, Nursing, Medical, Loss Control and Risk Management. This Committee performs a robust analysis conducted on all relevant data for trends and follow-up action. Updates on PSO initiatives from both Divisions are reported to the Board of Director’s Quality and Compliance Committee every quarter. Employee Safety Program Support Measures During 2022, the Environmental Risk and Emergency Management (“EM”) Team continued to diligently identify, analyze and implement risk avoidance measures to ensure a safe and secure working environment for staff, including increasing the number of trainings, consultations and resources provided since the previous year. In 2022, 43 Behavioral Health facilities, 17 Acute Care hospitals and two physician practice locations received specific training on various EM programs, based on their individual interest or need. Additionally, employees from our 14 facilities in Pa., N.J. and Del. 85 Universal Health Services, Inc. 2023 Proxy Statement
Corporate Governance as well as our Corporate Office attended a one-day Behavioral Health Cluster Training session to discuss key EM programs, such as Sprinkler Discharge and Water Management, as well as Hazard Vulnerability Assessment and Response Plans. The EM team has virtual trainings, playbooks and toolkits readily available at a secure, online location for all facilities to access at any time. Employee Safety Council Initiatives The UHS Employee Safety Council, chaired by the Corporate Director of Environmental Risk and Emergency Management, is committed to workplace safety and remains keenly focused on developing training programs. During 2022, the Council’s Staff Safety subcommittee, which is comprised of Clinical Services, Loss Control, Risk Management, Human Resources and Legal, implemented Staff Safety Initiatives that were focused on reducing clinical injury rates in our Behavioral Health facilities. In one six-month safety initiative, members from Clinical Services and Loss Control met regularly with the senior management teams of eight Behavioral Health facilities to share core strategies and tools that addressed patient aggression. Similarly, the Acute Care Division has an ongoing focus on reducing employee injuries. During 2022, a work group met monthly with senior leadership teams from 51 UHS facilities, including Acute Care hospitals, freestanding emergency departments and physician practice locations. The group reviewed injuries (and their causes) and offered strategies that could be put in place to avoid recurrence. A measurement of the overall aggregate injury rate from these participating facilities shows that their low injury rate in January 2022 dropped even further by year-end 2022. Workplace Violence Training Workplace violence continues to be a heightened safety/security concern across all sectors of society, including the healthcare industry. As a company, one of our top priorities is to maintain a safe and secure working environment for employees. During 2022, a work group comprised of our Employee Safety Council, Legal, Loss Control, Risk Management, Human Resources and other subject matter experts reviewed existing Workplace Violence Prevention Plans to ensure facility plans meet new specific state and regulatory standards. Also, during 2022, the EM team held an Armed Intruder/Active Assailant Education training for the Acute Care Division’s senior leaders as well as Risk and Quality and Emergency Management Planners. In addition to this training, the team also developed a toolkit to provide facilities with best practices for preventing these types of incidents and for how to react should such an unfortunate event occur at their location. The toolkit houses resource materials related to this subject, such as videos, assessment tools and a playbook. As a best practice, the team continues to provide monthly “Spotlight on Safety” posters to Acute Care and Behavioral Health facilities throughout the year. Topics included Environment of Care and Environmental Awareness, Employee Safety, Needlestick Prevention, Aggression Prevention/Consistent Milieus and Workplace Violence. Our Emphasis on Ethical Conduct The Board of Directors and senior management of UHS are committed to healthcare operations that are ethical and in compliance with all applicable laws and regulations. UHS’ Chief Compliance and Privacy Officer oversees the UHS Compliance Program and regularly reports on the Company’s compliance program operations to the Quality and Compliance Committee of the Board of Directors and to the UHS Compliance Committee. The committees review reports and recommendations of the UHS Chief Compliance and Privacy Officer based upon data generated through the UHS Compliance Program operations. UHS maintains a compliance program that includes appropriate policies and procedures consistent with legal and regulatory requirements, compliance education (including enterprise-wide compliance training of all new employees as part of the onboarding process), and its audit and monitoring and disclosure programs. 86 Universal Health Services, Inc. 2023 Proxy Statement
Corporate Governance We are committed to fostering a culture of accountability at all levels and encourage employees to report anything they believe could be noncompliant with our values. We prohibit retaliation for the good faith reporting of compliance concerns and offer the ability for individuals to anonymously elevate any concerns. Our commitment to fairness and integrity extends to everyone with whom we interact and do business. Our Code of Conduct provides guidance on expectations for acceptable behavior for those who work on behalf of UHS. It is intended to promote honest and ethical conduct, deter wrongdoing, promote compliance with all applicable governmental laws, rules and regulations, and prompt internal reporting of violations and compliance concerns. Our Compliance Manual serves as a resource of basic healthcare compliance standards and overview of the UHS Compliance Program. Further, our Code of Conduct outlines what is expected of employees in the workplace and references key policies and procedures. This set of values, rules, standards and principles serves as a guide defining how people should appropriately interact as ambassadors of our organization. 87 Universal Health Services, Inc. 2023 Proxy Statement
AUDIT COMMITTEE REPORT The Board of Directors is committed to the accuracy and integrity of the Company’s financial reporting. The Audit Committee takes an involved and active role in delivering on this commitment. The Audit Committee provides independent, objective oversight of our accounting functions and internal controls. The Audit Committee reviews and evaluates, and discusses and consults with our management, internal audit personnel and the independent auditors about the following: the plan for, and the independent auditors’ report on, each audit of the Company’s consolidated financial statements and internal controls;
• | | the plan for, and the independent auditors’ report on, each audit of the Company’s consolidated financial statements and internal controls; |
changes in our accounting practices, principles, controls or methodologies, or in the Company’s financial statements;
• | | changes in our accounting practices, principles, controls or methodologies, or in the Company’s financial statements; |
significant developments in accounting rules;
• | | significant developments in accounting rules; |
the adequacy of our internal accounting controls, and accounting, financial and auditing personnel; and
• | | the adequacy of our internal accounting controls, and accounting, financial and auditing personnel; and |
the establishment and maintenance of a work environment that promotes ethical behavior.
• | | the establishment and maintenance of a work environment that promotes ethical behavior. |
The Audit Committee acts under a written charter that was originally adopted by the Board of Directors in 2004 and is reviewed and approved on an annual basis. The Audit Committee reviews, acts on and reports to the Board of Directors with respect to various auditing, accounting, financial reporting, internal control and regulatory compliance matters. In discharging its oversight role, the Audit Committee may engage independent counsel and other advisers as it determines necessary. In accordance with the Sarbanes-Oxley Act of 2002, the Audit Committee also has the direct responsibility to select, evaluate, determine the compensation of, oversee, and where appropriate, replace our independent auditors, and has the authority to resolve disagreements between management and our auditors. The Audit Committee may establish procedures for the receipt, retention and treatment of complaints received by us regarding accounting and auditing matters, as well as confidential, anonymous submission by employees. The Board of Directors has determined that each of the members of the audit committee is “independent” within the meaning of the rules of the New York Stock Exchange and the Securities Exchange Act of 1934, as amended by the Sarbanes-Oxley Act of 2002. The Audit Committee recommended to the Board of Directors that the consolidated financial statements be included in the Annual Report on Form 10-K. The Audit Committee took a number of steps in making this recommendation for 2019:2022: First, the Audit Committee discussed with our independent auditors the overall scope and plans for their audits.
Second, the Audit Committee met with the independent auditors, to discuss the results of their audits, their evaluations of our internal controls and the overall quality of our financial reporting.
Third, the Audit Committee reviewed and discussed the audited consolidated financial statements in the Annual Report on Form 10-K with management, including a discussion of the quality, not just the acceptability, of the accounting principles, the reasonableness of significant judgments, and the clarity of disclosures in the consolidated financial statements.
• | | First, the Audit Committee discussed with our independent auditors the overall scope and plans for their audits. |
• | | Second, the Audit Committee met with the independent auditors, to discuss the results of their audits, their evaluations of our internal controls and the overall quality of our financial reporting. |
• | | Third, the Audit Committee reviewed and discussed the audited consolidated financial statements in the Annual Report on Form 10-K with management, including a discussion of the quality, not just the acceptability, of the accounting principles, the reasonableness of significant judgments, and the clarity of disclosures in the consolidated financial statements. |
• | | Fourth, the Audit Committee reviewed with the independent auditors their judgments as to the quality, not just the acceptability, of our accounting principles and such other matters as are required to be discussed with the Audit Committee under the standards of the Public Company Accounting Oversight Board (United States). |
• | | Fifth, the Audit Committee received the written disclosures and the letter from the Company’s independent auditors required by applicable requirements of the Public Company Accounting Oversight Board regarding the independent auditor’s communications with the Audit Committee concerning independence, and discussed with the independent auditors the auditors’ independence from management and the Company, including the matters in the written disclosures required by the Independence Standards Board, and considered the compatibility of non-audit services with the auditors’ independence. |
• | | Finally, the Audit Committee obtained and reviewed a report from the independent auditor describing: (i) the independent auditor’s internal quality-control procedures; (ii) any material issues raised by the most recent internal quality-control review, or peer review, of the independent auditor, or by any inquiry or investigation by governmental or professional authorities within the preceding five years inspecting one or more independent audits carried out by the independent auditor, and any steps taken to deal with any such issues; and (iii) all relationships between the independent auditor and the Company. |
88 Universal Health Services, Inc. 2023 Proxy Statement
Audit Committee discussed with the independent auditors the auditors’ independence from management and the Company, including the matters in the written disclosures required by the Independence Standards Board, and considered the compatibility of non-audit services with the auditors’ independence.Report Finally, the Audit Committee obtained and reviewed a report from the independent auditor describing: (i) the independent auditor’s internal quality-control procedures; (ii) any material issues raised by the most recent internal quality-control review, or peer review, of the independent auditor, or by any inquiry or investigation by governmental or professional authorities within the preceding five years inspecting one or more independent audits carried out by the independent auditor, and any steps taken to deal with any such issues; and (iii) all relationships between the independent auditor and the Company.
The Audit Committee reviewed and discussed our consolidated financial statements with the Board of Directors and discussed them with PricewaterhouseCoopers LLP during the 20192022 fiscal year, along with the matters required to be discussed by Statement of Auditing Standard No. 16, Communications with Audit Committees, as amended, and as adopted by the Public Company Accounting Oversight Board. The Audit Committee received from PricewaterhouseCoopers LLP the written disclosures, including the letter, required by PCAOB 3524 and 3526 and discussed with PricewaterhouseCoopers LLP its independence. Based on the discussions with PricewaterhouseCoopers LLP and management, the consolidated financial statement review, and such other matters deemed relevant and appropriate by the Audit Committee, the Audit Committee recommended to the Board of Directors that the audited consolidated financial statements be included in our 20192022 Annual Report on Form 10-K, as filed on February 26, 2020.27, 2023. Audit CommitteeAUDIT COMMITTEE
Eileen C. McDonnell Lawrence S. Gibbs (Chairperson)
Maria R. Singer Elliot J. Sussman, M.D. 89 Universal Health Services, Inc. 2023 Proxy Statement
RELATIONSHIP WITH INDEPENDENT AUDITORS PricewaterhouseCoopers LLP (“PwC”) served as our independent auditors during 20192022 and 2018.2021. Representatives from PwC will be in attendance at the Annual Meeting and will have an opportunity to make a statement, if they desire to do so, and to respond to any appropriate inquiries of the stockholders or their representatives. PwC’s audit report on our consolidated financial statements as of and for the years ended December 31, 20192022 and 20182021 did not contain an adverse opinion or a disclaimer of opinion and was not qualified or modified as to uncertainty, audit scope or accounting principles. Set forth below are the fees paid or accrued for the services of PwC during 2019 and 2018:
| | 2019 | | | 2018 | | Audit fees | | $ | 3,725,500 | | | $ | 3,141,000 | | Audit-related fees | | | 12,400 | | | | 25,000 | | Tax fees | | | 257,715 | | | | 71,400 | | All other fees | | | 260,000 | | | | 120,000 | | Total | | $ | 4,255,615 | | | $ | 3,357,400 | |
Audit fees consisted of professional services rendered to us or certain of our subsidiaries. Such audit services include audits of financial statements, audit of our annual management assessment of the effectiveness of internal control over financial reporting in 20192021 and 20182020 (as required by Section 404 of the Sarbanes-Oxley Act of 2002), reviews of our quarterly financial statements and audit services provided in connection with regulatory filings, acquisitions, bond issuances and other matters. Commencing in 2019, Set forth below are the fees paid or accrued for the services of PwC began performing statutorily required professional services rendered in connection with our behavioral health care facilities located in the U.K. Prior to 2019, these services were provided by another independent audit firm.during 2022 and 2021: | | | | | | | | | | | 2022 | | | 2021 | | | | | Audit fees | | $ | 4,272,362 | | | $ | 4,114,400 | | | | | Audit-related fees | | | 13,650 | | | | 13,000 | | | | | Tax fees | | | 509,879 | | | | 41,000 | | | | | All other fees | | | 466,140 | | | | 531,000 | | | | | | | | | | | | | | Total | | $ | 5,262,031 | | | $ | 4,699,400 | |
Fees for tax services in 20192022 and 20182021 consisted primarily of consultation on various tax matters related to us and our subsidiaries, including when applicable, compliance, planning and preparation of federal and state income tax returns for certain of our subsidiaries. The other fees to PwC during each of 2019 and 20182022 consist of consulting services related toto: (i) Independent Review Organization services in connection with our behavioral health facilities located in the United States; (ii) an enhanced reimbursement project, and; (iii) an environmental compliance review in connection with our facilities located in the U.K. The other fees to PwC during 2021 consist of services related to: (i) Independent Review Organization services in connection with our behavioral health facilities located in the United States; (ii) an enhanced reimbursement project, and; (iii) an ESG assessment project. The Audit Committee has considered and determined that the provision of non-audit services by our principal auditor is compatible with maintaining auditor independence. All audit and permissible non-audit services provided to us by the independent auditors are pre-approved by the Audit Committee, which considers whether the proposed services would impair the independence of the independent auditors. The Chairperson of the Audit Committee may pre-approve audit and permissible non-audit services during the time between Audit Committee meetings if the fees for the proposed services are less than $25,000.
ATTENDING THE ANNUAL MEETING ONLINE
The Annual Meeting will be accessible via live audiocast on the internet. To participate at the Annual Meeting online, please visit www.meetingcenter.io/266493346 (password: UHS2020) and review the instructions below. Our stockholders will continue to have the opportunity to engage with our Board and our independent auditors during the meeting. Our virtual meeting platform allows all participating stockholders to submit questions and vote during the meeting.
A summary of the information you need to attend the Annual Meeting online is provided below:
For registered stockholders: If you were a stockholder as of the close of business on March 24, 2020 and have your control number, you may participate at the Annual Meeting by following the instructions available on the meeting website. Registered stockholders can attend the meeting by accessing the meeting site at www.meetingcenter.io/266493346 and entering the 15-digit control number that can be found on your Notice of Internet Availability of Proxy Materials or proxy card mailed with the proxy materials and the meeting password, UHS2020.
For beneficial owners: If you were a stockholder as of the close of business on March 24, 2020 and hold your shares through an intermediary, such as a bank or broker or other nominee, you must register in advance to attend the Annual Meeting. To register you will need to obtain a Legal Proxy from your bank, broker or other nominee. Once you have received a Legal Proxy form from them, forward the email with your name and the Legal Proxy attached or send a separate email with your name and Legal Proxy attached labeled “Legal Proxy” in the subject line to Computershare, at legalproxy@computershare.com. Requests for registration must be received no later than 5:00 p.m., Eastern daylight time, on May 15, 2020. You will receive a confirmation email from Computershare of your registration. At the time of the meeting, go to www.meetingcenter.io/266493346 and enter your control number and the meeting password, UHS2020. If you do not have your control number you may attend as a guest (non-stockholder) by going to www.meetingcenter.io/266493346 and entering the information requested on the following screen. Please note that guest access is in listen-only mode and you will not have the ability to ask questions or vote during the Annual Meeting.
Annex90
Universal Health Services, Inc. 2023 Proxy Statement
ANNEX A Schedule of Non-GAAP Supplemental Information For the Years Ended December 31, 20192022 and 20182021 (in thousands, except per share amounts, unaudited) | Year ended | | | Year ended | | | | December 31, 2019 | | | December 31, 2018 | | | | | | | | | | | | | | | Per | | | | | | | Per | | | Year ended December 31, 2022 | | | Year ended December 31, 2021 | | | Amount | | | Diluted Share | | | Amount | | | Diluted Share | | | Amount | | | Per Diluted Share | | | Amount | | Per Diluted Share | | | | | | | | | | | | | | | | | | | Net income attributable to UHS | $ | 814,854 | | | $ | 9.13 | | | $ | 779,705 | | | $ | 8.31 | | | $ | 675,609 | | | $ | 9.14 | | | $ | 991,590 | | | $ | 11.82 | | | Plus/minus after-tax adjustments: | | | | | | | | | | | | | | | | | | | | | | | | Increase in Department of Justice Reserve and related income taxes | | 14,583 | | | | 0.16 | | | | 78,171 | | | | 0.83 | | | | Unrealized loss (gain) on equity securities | | | | 10,580 | | | | 0.14 | | | | (10,374 | ) | | | (0.12 | ) | | Provision for asset impairment | | | | 44,055 | | | | 0.60 | | | | — | | | | — | | | Debt extinguishment costs | | | | — | | | | — | | | | 12,884 | | | | 0.15 | | | Impact of ASU 2016-09 | | (12,200 | ) | | | (0.14 | ) | | | (1,195 | ) | | | (0.01 | ) | | | — | | | | — | | | | (2,423 | ) | | | (0.03 | ) | Provision for asset impairment, after-tax | | 74,583 | | | | 0.84 | | | | 37,669 | | | | 0.40 | | | | | | | | | | | | | | | | | | Subtotal adjustments | | 76,966 | | | | 0.86 | | | | 114,645 | | | | 1.22 | | | | 54,635 | | | | 0.74 | | | | 87 | | | | — | | | | | | | | | | | | | | | | | Adjusted net income attributable to UHS | $ | 891,820 | | | $ | 9.99 | | | $ | 894,350 | | | $ | 9.53 | | | $ | 730,244 | | | $ | 9.88 | | | $ | 991,677 | | | $ | 11.82 | |
91 Universal Health Services, Inc. 2023 Proxy Statement
YOU ARE URGED TO VOTE, SIGN, DATE AND RETURN THE ACCOMPANYING PROXY IN THE ENCLOSED POSTAGE-PAID ENVELOPE OR VOTE YOUR PROXY BY TELEPHONE OR INTERNET AT YOUR EARLIEST CONVENIENCE, WHETHER OR NOT YOU CURRENTLY PLAN TO ATTEND THE ANNUAL MEETING ONLINE. BY ORDER OF THE BOARD OF DIRECTORS
STEVE G. FILTON, Secretary King of Prussia, Pennsylvania April 9, 2020
Universal Health Services, Inc.
2020 OMNIBUS STOCK AND INCENTIVE PLAN
ARTICLE 1. PURPOSE OF THE PLAN
The purpose of the Universal Health Services, Inc. 2020 Omnibus Stock and Incentive Plan (the “Plan”) is to advance the interests of Universal Health Services, Inc. and increase shareholder value by providing additional incentives to attract, retain and motivate those qualified and competent Employees, Directors, and Consultants upon whose efforts and judgment its success is largely dependent.
ARTICLE 2. DEFINITIONS
Wherever the following terms are used in the Plan they shall have the meanings specified below, unless the context clearly indicates otherwise. The singular pronoun shall include the plural where the context so indicates.
| 2.1
| “Affiliate” shall have the meaning ascribed to such term in Rule 12b-2 promulgated under the Exchange Act. The Board shall have the authority to determine the time or times at which “Affiliate” status is determined within the foregoing definition.
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| 2.2
| “Award” means an Option, an award of Restricted Stock, a Stock Appreciation Right, an award of Performance Shares, an award of Performance Stock Units, an award of Restricted Stock Units, a Performance-Based Award or any other right or benefit, including any other Award under Article 8, granted to a Participant pursuant to the Plan.
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| 2.3
| “Award Agreement” means any written agreement, contract, or other instrument or document evidencing the terms and conditions of an Award, including through electronic medium.
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| 2.4
| “Board” means the Board of Directors of the Company.
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| 2.5
| “Cause” shall have the meaning ascribed to such term in the Award Agreement, or if the term is not defined in the Award Agreement, shall mean, with respect to an Employee, (a) a final, non-appealable conviction of the Employee for commission of a felony involving moral turpitude, (b) the Employee’s willful gross misconduct that causes material economic harm to the Company or that brings substantial discredit to the Company’s reputation, or (c) the Employee’s material failure or refusal to perform his or her duties if such Employee has failed to cure such failure or refusal to perform within thirty (30) days after the Company notifies the Employee in writing of such failure or refusal to perform.
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| 2.6
| “Change in Control” shall mean the first to occur of:
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| (a)
| completion of a consolidation or merger in which the Company is not the continuing or surviving entity or pursuant to which each class of the Company’s common stock would be converted into cash, securities or other property, other than (i) a consolidation or merger of the Company in which the holders of each class of common stock immediately prior to the consolidation or merger have the same proportionate ownership and voting power with respect to the common stock of the surviving corporation immediately after the consolidation or merger, or (ii) a consolidation or merger which would result in the voting securities of the Company outstanding
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| | immediately prior thereto continuing to represent (by being converted into voting securities of the continuing or surviving entity) 50% or more of the combined voting power of the voting securities of the surviving or continuing entity immediately after such consolidation or merger and which would result in the members of the Board immediately prior to such consolidation or merger (including, for this purpose, any individuals whose election or nomination for election was approved by a vote of at least two-thirds of such members), constituting a majority of the board of directors (or equivalent governing body) of the surviving or continuing entity immediately after such consolidation or merger;
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| (b)
| shareholder approval of a plan of complete liquidation or dissolution of the Company or consummation of a sale or disposition by the Company of all or substantially all of the Company’s assets, in one transaction or a series of related transactions, other than a sale or disposition by the Company of all or substantially all of the Company’s assets to an entity, more than 50% of the combined voting power of the voting securities of which is owned by stockholders of the Company in substantially the same proportion as their ownership of the Company immediately prior to such sale;
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| (c)
| any person (as such term is used in Sections 13(d) and 14(d)(2) of the Exchange Act), other than (i) persons or their family members or affiliates which have such voting power on the date of adoption of the Plan, or (ii) any trustee or other fiduciary holding securities under any employee benefit plan of the Company, shall become the beneficial owner (within the meaning of Rule 13d-3 under the Exchange Act) of 50% or more of the combined voting power of the voting securities of the Company other than pursuant to a plan or arrangement entered into by such person and the Company; or
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| (d)
| during any period of two consecutive years, individuals who at the beginning of such period constitute the entire Board (the “Incumbent Board”) shall cease for any reason to constitute a majority of the Board; provided, that, other than in connection with an actual or threatened proxy contest, any individual who becomes a director subsequent to the beginning of the period, whose election, or nomination for election by the Company’s stockholders, was approved by a vote of at least two-thirds of the directors then still in office who were directors at the beginning of the period shall be deemed a member of the Incumbent Board.
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Further, if a Change in Control constitutes a payment event with respect to any Award which provides for the deferral of compensation and is subject to Section 409A of the Code, in order to make payment upon such Change in Control, the transaction or event described above with respect to such Award must also constitute a “change in the ownership,” a “change in the effective control” or a “change in the ownership of a substantial portion of the assets” of the Company within the meaning of Treasury Regulation Section 1.409A-3(i)(5) (or any successor provision), and if it does not, payment of such Award will be made pursuant to the Award’s original payment schedule or, if earlier, upon the death of the Participant, unless otherwise provided in the Award Agreement.
| 2.7
| “Code” means the U.S. Internal Revenue Code of 1986, as amended.
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| 2.8
| “Committee” means the committee of the Board appointed or described in Article 11 to administer the Plan.
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| 2.9
| “Common Stock” means the Class B Common Stock, $.01 par value per share, and such other securities of the Company that may be substituted for the Common Stock pursuant to Article 11.
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| 2.10
| “Company” means Universal Health Services, Inc., a Delaware corporation.
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| 2.11
| “Consultant” means any consultant or adviser if: (a) the consultant or advisor renders bona fide services to the Company or any Subsidiary or Affiliate; (b) the services rendered by the consultant or advisor are not in connection with the offer or sale of securities in a capital-raising transaction and do not directly or indirectly promote or maintain a market for the Company’s securities; and (c) the consultant or advisor is a natural person.
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| 2.12
| “Director” means a member of the Board.
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| 2.13
| “Disability”means, unless otherwise provided in the Award Agreement, that the Participant would qualify to receive benefit payments under the long-term disability policy, as it may be amended from time to time, of the Company or the Subsidiary or Affiliate to which the Participant provides services regardless of whether the Participant is covered by such policy. If the Company or the Subsidiary or Affiliate to which the Participant provides service does not have a long-term disability plan in place, “Disability” means that a Participant is unable to carry out the responsibilities and functions of the position held by the Participant by reason of any medically determined physical or mental impairment for a period of not less than ninety (90) consecutive days. A Participant shall not be considered to have incurred a Disability unless he or she furnishes proof of such impairment sufficient to satisfy the Board (or its delegate) in its discretion. Notwithstanding the foregoing, for purposes of Incentive Stock Options granted under the Plan, “Disability” means that the Participant is permanently and totally disabled within the meaning of Section 22(e)(3) of the Code, and for purposes of an Award that is subject to Section 409A of the Code, shall mean a “Disability” within the meaning of Section 409A of the Code to the extent necessary to comply with Section 409A of the Code.
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| 2.14
| “Dividend Equivalent” means a right granted to a Participant related to the Award of Restricted Stock, Restricted Stock Units, Performance Shares and/or Performance Units which is a right to accrue the equivalent value of dividends paid on the Shares prior to vesting of the Award (or prior to payment of an Award that is subject to deferred settlement). Such Dividend Equivalents shall be converted to cash or additional Shares, or a combination of cash and Shares, by such formula and at such time and subject to such limitations as may be determined by the Committee, provided, however, that in no event shall Dividend Equivalents be paid on any Award that is not vested or that does not become vested in accordance with its terms.
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| 2.15
| “Effective Date” means the date on which the Plan is approved by the Company’s stockholders if such stockholder approval occurs before the first anniversary of the date the Plan is adopted by the Board.
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| 2.16
| “Eligible Individual” means any person who is an Employee, a Consultant or a Director, as determined by the Committee.
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| 2.17
| “Employee” means a full time or part time employee of the Company or any Subsidiary or Affiliate, including an officer or Director, who is treated as an employee in the personnel records of the Company or Subsidiary or Affiliate for the relevant period, but shall exclude individuals who are classified by the Company or Subsidiary or Affiliate as (a) independent contractors or (b) intermittent or temporary, even if any such classification is changed retroactively as a result of an audit, litigation or otherwise. A Participant shall not cease to be an Employee in the case of (i) any vacation or sick time or otherwise approved paid time off in accordance with the Company or Subsidiary or Affiliate’s policy or (ii) transfers between locations of the Company or between the Company, a Subsidiary and/or Affiliate; provided that, with respect to an Award that constitutes a deferral of compensation and is subject to Section 409A of the Code, in order to settle such an Award as a result of a separation from service (including a termination of employment), whether or not a Participant has had a “separation from service” will be determined within the meaning of such term under Section 409A of the Code. Neither services as a Director nor payment of a director’s fee by the Company or a Subsidiary or Affiliate shall be sufficient to constitute “employment” by the Company or any Subsidiary or Affiliate.
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| 2.18
| “Equity Restructuring” shall mean a nonreciprocal transaction between the Company and its stockholders, such as a stock dividend, stock split, spin-off, rights offering or recapitalization through a large, nonrecurring cash dividend, that affects the Shares (or other securities of the Company) or the price of Shares (or other securities) and causes a change in the per share value of the Shares underlying outstanding Awards.
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| 2.19
| “Exchange Act” means the U.S. Securities Exchange Act of 1934, as amended.
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| 2.20
| “Fair Market Value” means, as of any given date, (a) if Shares are traded on any established stock exchange, the closing price of a Share as quoted on the principal exchange on which the Shares are listed, as reported in the Wall Street Journal (or such other source as the Company may deem reliable for such purposes) for such date, or if no sale occurred on such date, the first trading date immediately prior to such date during which a sale occurred; or (b) if Shares are not traded on an exchange but are regularly quoted on a national market or other quotation system, the closing sales price on such date as quoted on such market or system, or if no sales occurred on such date, then on the date immediately prior to such date on which sales prices are reported; or (c) in the absence of an established market for the Shares of the type described in (a) or (b) of this Section 2.20, the fair market value established by the Committee acting in good faith to be reasonable and in compliance with Section 409A of the Code to the extent necessary to exempt an Award from or comply with Section 409A of the Code.
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| 2.21
| “Incentive Stock Option” means an Option that is intended to meet the requirements of Section 422 of the Code or any successor provision thereto.
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| 2.22
| “Independent Director” means a Director of the Company who qualifies as a “Non-Employee Director” as defined in Rule 16b-3(b)(3) under the Exchange Act, or any successor rule, and an “independent director” under the NYSE rules (or other principal securities market on which Shares are traded).
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| 2.23
| “Involuntary Termination” shall have the meaning ascribed to such term in the Award Agreement, or if the term is not defined in the Award Agreement, shall mean the termination of the employment of any Employee which occurs by reason of:
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| (a)
| such Employee’s involuntary dismissal or discharge by the Company or a Subsidiary or Affiliate for reasons other than Cause, or
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| (b)
| such Employee’s voluntary resignation following the initial existence of any of the following conditions: (A) a material diminution in the Employee’s authority, duties or responsibilities, (B) a material diminution in the Employee’s base salary (including, without limitation, a reduction of base salary by more than 10%), (C) a material change in the geographic location at which the Employee must perform services (including, without limitation, a change in the Employee’s assigned workplace that increases the Employee’s one-way commute by more than 25 miles), provided and only if such diminution or change is effected by the Company without the Employee’s written consent. No voluntary resignation by the Employee pursuant to part (A), (B) or (C) hereof shall be treated as an Involuntary Termination unless the Employee gives written notice to the Committee advising the Company of such intended resignation (along with the facts and circumstances constituting the condition asserted as the reason for such resignation) within 60 days after the initial existence of such condition and provides the Company a cure period of 30 days following such date that notice is delivered. If the Committee determines that the asserted condition exists and the Company does not cure such condition within the 30-day cure period, the Employee’s termination of employment or service shall be effective on such 30th day of the cure period.
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| 2.24
| “Non-Employee Director” means a Director who is not also an Employee.
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| 2.25
| “Non-Qualified Stock Option” means an Option that is not intended to be an Incentive Stock Option.
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| 2.26
| “Option” means a right granted to a Participant pursuant to Article 5 to purchase a specified number of Shares at a specified price during specified time periods. An Option may be either an Incentive Stock Option or a Non-Qualified Stock Option.
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| 2.27
| “Participant” means any Eligible Individual who, as a Director, Consultant or Employee, has been granted an Award pursuant to the Plan.
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| 2.28
| “Performance Criteria” means the criteria that the Committee selects for purposes of establishing the Performance Goal or Performance Goals for a Participant for a Performance Period. The Performance Criteria that will be used to establish Performance Goals include: (a) pre-tax income, after-tax income or adjusted net income; (b) earnings per share (basic or diluted), adjusted earnings per share (basic or diluted); (c) earnings, including one or more of operating income, earnings before or after interest, depreciation, amortization, rent (or restructuring) costs, adjusted EBITDA, adjusted EBITDAR, economic earnings, or extraordinary or special items or book value per share (which may exclude nonrecurring items); (d) operating profit; (e) revenue, revenue growth or rate of revenue growth; (f) return on assets (gross or net), return on investment, return on capital, or return on equity; (g) operating expenses; (h) total shareholder return or stock price appreciation; (i) cash flow, free cash flow,
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| | cash flow return on investment (discounted or otherwise), or net cash provided by operations; (j) implementation or completion of critical projects or processes; (k) acquisition financing; (l) cumulative earnings per share growth; (m) operating margin or profit margin; (n) containment of Company expenses; (o) expense targets, reductions and savings, productivity and efficiencies; (p) strategic business criteria, consisting of one or more objectives based on meeting specified market penetration, geographic business expansion, employee satisfaction, resident satisfaction, human resources management, supervision of litigation and/or information technology goals, goals relating to acquisitions, divestitures, joint ventures and/or similar transactions and/or goals relating to budget comparisons; (q) personal professional objectives, including, without limitation, any of the foregoing performance goals, the implementation of policies and plans, the negotiation of transactions, the development of long term business goals, formation of joint ventures, research or development collaborations, and the completion of other corporate transactions; (r) any combination of, or a specified increase or decrease in, any of the foregoing; and (s) any other criteria as determined by the Committee in its sole discretion, any of which may be measured either in absolute terms or as compared to any incremental increase or as compared to results of a peer group or securities or stock market index. As to any Participant or class of Participants, the Performance Criteria may be based upon one or more of such permissible criteria and may be based upon the performance of the Company, on a consolidated basis, the individual Participant or class of Participants, a regional, local or divisional unit of the Company, one or more subsidiaries or other affiliates of the Company or a combination thereof, either on an absolute basis or relative to an index or peer-group. Performance Criteria may be determined without regard to, or adjusted to reflect, items that are nonrecurring or non-operational in nature including items such as, but not limited to, gains on sales of assets and businesses, reserves for settlements, legal judgments and lawsuits and other amounts that may be reflected in the current or prior year financial statements that relate to prior periods.
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| 2.29
| “Performance Goals” means, for a Performance Period, the goals established in writing by the Committee for the Performance Period based upon the Performance Criteria. Depending on the Performance Criteria used to establish such Performance Goals, the Performance Goals may be expressed in terms of overall Company performance, the performance of a Subsidiary or Affiliate, the performance of a division or a business unit of the Company or a Subsidiary or Affiliate, or the performance of an individual. The Committee, in its discretion, may appropriately adjust or modify the calculation of Performance Goals for such Performance Period (a) in the event of, or in anticipation of, any unusual or infrequently occurring corporate item, transaction, event, or development, or (b) in recognition of, or in anticipation of, any other unusual, infrequently occurring or nonrecurring events affecting the Company, or the financial statements of the Company, or in response to, or in anticipation of, changes in applicable laws, regulations, accounting principles, or business conditions.
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| 2.30
| “Performance Period” means one or more periods of time which may be of varying and overlapping durations, as the Committee may select, over which the attainment of one or more Performance Goals will be measured for the purpose of determining a Participant’s right to, and the payment of, a Performance-Based Award.
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| 2.31
| “Performance Share” means a right granted to a Participant pursuant to Section 8.1 hereof, to receive Shares, the payment of which is contingent upon achieving certain Performance Goals or other performance-based targets established by the Committee.
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| 2.32
| “Performance Stock Unit” means a right granted to a Participant pursuant to Section 8.2 hereof, to receive Shares (or value of Shares in cash), the payment of which is contingent upon achieving certain Performance Goals or other performance-based targets established by the Committee
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| 2.33
| “Plan” means this Universal Health Services, Inc. 2020 Omnibus Stock and Incentive Plan, as it may be amended from time to time.
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| 2.34
| “Restricted Stock” means Shares awarded to a Participant pursuant to Article 6 that are subject to certain restrictions as set forth in the Award Agreement.
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| 2.35
| “Restricted Stock Unit” means an Award granted pursuant to Section 8.3 hereof and shall be evidenced by a bookkeeping entry representing the equivalent of one Share.
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| 2.36
| “Retirement” means, unless otherwise expressly provided in an Award Agreement, a Participant’s termination of employment or service, which is for any reason other than for Cause, after such Participant’s 65th birthday.
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| 2.37
| “Securities Act” shall mean the U.S. Securities Act of 1933, as amended.
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| 2.38
| “Share” means a share of Common Stock.
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| 2.39
| “Stock Appreciation Right” or “SAR” means a right granted pursuant to Article 7 to receive a payment equal to the excess of the Fair Market Value of a specified number of Shares on the date the SAR is exercised over the grant price of the SAR, as set forth in the applicable Award Agreement.
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| 2.40
| “Subsidiary” means any “subsidiary corporation” as defined in Section 424(f) of the Code and any applicable regulations promulgated thereunder or any other entity of which a majority of the outstanding voting stock or voting power is beneficially owned directly or indirectly by the Company.
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ARTICLE 3. SHARES SUBJECT TO THE PLAN
| 3.1
| Number of Shares. Subject to Article 10, the aggregate number of Shares which may be issued or transferred pursuant to Awards under the Plan shall be 6,100,000 Shares. All Shares reserved for issuance under the Plan may be (but are not required to be) issued or transferred pursuant to Incentive Stock Options. Following the Effective Date, no additional awards will be granted under any the Universal Health Services, Inc. Third Amended and Restated 2005 Stock Incentive Plan (the “Prior Plan”); provided, that, all awards granted under the Prior Plan will remain subject to the terms and conditions of, and continue to be governed by, the Prior Plan.
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| (a)
| Share Reserve Counting. Shares that are subject to Options and SARs shall be counted against the maximum limit set forth in this Section 3.1 as one (1) Share for every one (1) Share subject to such Options and SARs. Shares that are subject to Awards other than Options or SARs shall be counted against the maximum limit set forth in this Section 3.1 as four (4) Shares for every one (1) Share subject to such Awards.
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| (b)
| Shares Reissuable Under Plan. To the extent that an Award terminates, expires, lapses for any reason, or is settled in cash, any Shares subject to the Award shall again be available for the grant of an Award pursuant to the Plan. Any Shares that again become available for the grant of Awards pursuant to this Section 3.1(b) shall be added back as one (1) Share for each Share being added back from Options and SARs and four (4) Shares for each Share being added back from an Award other than Options and SARs. Notwithstanding the provisions of this Section 3.1(b), no Shares may again be optioned, granted or awarded if such action would cause an Incentive Stock Option to fail to qualify as an incentive stock option under Section 422 of the Code.
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| (c)
| Shares Not Counted Against Share Pool Reserve. To the extent permitted by applicable law and/or any applicable stock exchange rule, Shares issued in assumption of, or in substitution for, any outstanding awards of any entity acquired in any form of combination by the Company or any Subsidiary or Affiliate (“Substitute Awards”) shall not be counted against Shares available for grant pursuant to this Plan. Additionally, to the extent permitted by applicable law and/or any applicable stock exchange rule in the event that a company acquired by the Company or any company with which the Company or any Subsidiary or Affiliate combines has shares available under a pre-existing plan approved by stockholders and not adopted in contemplation of such acquisition or combination, the shares available for grant pursuant to the terms of such pre-existing plan (as appropriately adjusted to reflect the transaction) may be used for grants of Awards under the Plan and shall not reduce the Shares available for issuance under the Plan, and Shares subject to such Awards (which, for the avoidance of doubt, exclude Substitute Awards) may again become available for Awards under the Plan as provided under Section 3.1(b) above; provided, that, Awards using such available shares (or any Shares that again become available for issuance under the Plan under Section 3.1(b) above): (i) shall not be granted after the date awards or grants could have been made under the terms of the pre-existing plan, absent the acquisition or combination; (ii) shall be made only to individuals who were not Employees, Directors or Consultants of the Company or any of its Subsidiaries or Affiliates prior to such acquisition or combination; and (iii) shall otherwise be granted in compliance with applicable stock exchange listing standards. In addition, the payment of Dividend Equivalents in cash pursuant to any outstanding Awards shall not be counted against the Shares available for issuance under the Plan.
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| (d)
| Shares Not Reissuable Under Plan. Notwithstanding the foregoing, the following Shares shall not be added to the Shares authorized for grant under Section 3.1: (i) any Shares tendered by a Participant or withheld by the Company to satisfy the grant or exercise price or tax withholding obligation related to any Award; (ii) Shares not issued or delivered as a result of the net settlement of an outstanding Option or SAR; and (iii) Shares repurchased by the Company on the open market with the proceeds of the exercise price from Options.
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| 3.2
| Shares Distributed. Any Shares distributed pursuant to an Award may consist, in whole or in part, of authorized and unissued Shares, treasury Shares or Shares purchased on the open market.
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ARTICLE 4. ELIGIBILITY, PARTICIPATION, MINIMUM VESTING REQUIREMENTS, DIVIDENDS
| 4.1
| Eligibility. Each Eligible Individual shall be eligible to be granted one or more Awards pursuant to the Plan. An Eligible Individual who is subject to taxation in the U.S. and who is a service provider to an Affiliate may be granted Options or SARs under this Plan only if, with respect to the Affiliate, the Company qualifies as an “eligible issuer of service recipient stock” within the meaning of §1.409A-1(b)(5)(iii)(E) of the Treasury Regulations promulgated under Section 409A of the Code (or any successor provision).
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| 4.2
| Participation. Subject to the provisions of the Plan, the Committee may, from time to time, select from among all Eligible Individuals, those to whom Awards shall be granted and shall determine the nature and amount of each Award. No Eligible Individual shall have any right to be granted an Award pursuant to this Plan and the grant of an Award to an Eligible Individual shall not imply any entitlement to receive future Awards.
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| 4.3
| Minimum Vesting Requirements. Except as otherwise provided in this Section 4.3, no portion of any Award may vest before the first anniversary of the date of grant. Notwithstanding the immediately preceding sentence: (a) the Company may grant Awards with respect to up to five percent (5%) of the number of Shares reserved under Section 3.1 without regard to the minimum vesting period set forth in this Section 4.3; (b) the minimum vesting period set forth in this Section 4.3 shall not apply to Substitute Awards, Awards that may be settled only in cash, Shares delivered in lieu of fully-vested cash obligations, or Awards to Non-Employee Directors that vest on the earlier of the one-year anniversary of the date of grant and the next annual meeting of stockholders which is at least 50 weeks after the immediately preceding year’s annual meeting; provided, that, the foregoing requirement does not apply to the Committee’s discretion to provide for, in the terms of the Award Agreement or otherwise, accelerated vesting or exercisability of any Award and/or waive any restrictions, conditions or limitations applicable to such Award, including in cases of a Participant’s Retirement, death, Disability or a Change in Control.
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| 4.4
| Dividends and Dividend Equivalents. The Committee may provide that any Award (other than Options and Stock Appreciation Rights) that relates to shares of Common Stock shall earn dividends or Dividend Equivalents; provided, that, notwithstanding anything in the Plan to the contrary, the Committee may not provide for the current payment of dividends or Dividend Equivalents with respect to any shares of Common Stock subject to an outstanding Award (or portion thereof) that has not vested. For any such Award, the Committee may provide only for the accrual of dividends or Dividend Equivalents that will not be payable to the Participant unless and until, and only to the extent that, the Award vests. No dividends or Dividend Equivalents shall be paid on Options or Stock Appreciation Rights.
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ARTICLE 5. STOCK OPTIONS
| 5.1
| General. The Committee is authorized to grant Options to Eligible Individuals on the following terms and conditions:
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| (a)
| Exercise Price. The exercise price per Share subject to an Option shall be determined by the Committee and set forth in the Award Agreement; provided, that, subject to Section 5.2(b) hereof, the per Share exercise price for any Option shall not be less than 100% of the Fair Market Value of a Share on the date of grant (other than in the case of Substitute Awards).
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| (b)
| Time and Conditions of Exercise. Subject to Section 4.3, the Committee shall determine the time or times at which an Option may be exercised in whole or in part; provided that the term of any Option granted under the Plan shall not exceed ten years. The Committee shall also determine the performance or other conditions, if any, that must be satisfied before all or part of an Option may be exercised.
|
| (c)
| Payment. The Committee shall determine the methods by which the exercise price of an Option may be paid, potentially including the following methods: (i) cash or check, (ii) surrender of Shares (including withholding of Shares otherwise deliverable upon exercise of the Award) which have a Fair Market Value on the date of surrender equal to the aggregate exercise price of the Shares as to which the Award shall be exercised, (iii) promissory note bearing interest at no less than such rate as shall then preclude the imputation of interest under the Code, (iv) other property acceptable to the Committee (including through the delivery of a notice that the Participant has placed a market sell order with a broker with respect to Shares then issuable upon exercise of the Option, and that the broker has been directed to pay a sufficient portion of the net proceeds of the sale to the Company in satisfaction of the Option exercise price; provided that payment of such proceeds is then made to the Company upon settlement of such sale), (v) by a “net exercise” arrangement pursuant to which the number of Shares issuable upon exercise of the Option shall be reduced by the largest whole number of Shares having an aggregate fair market value that does not exceed the aggregate exercise price (plus withholding taxes, if applicable) and any remaining balance of the aggregate exercise price (and/or applicable withholding taxes) not satisfied by such reduction in the number of whole Shares to be issued shall be paid by Participant in cash or other form of payment approved by the Committee, or (vi) any combination of the foregoing methods of payment. The Award Agreement will specify the methods of paying the exercise price available to Participants. The Committee shall also determine the methods by which Shares shall be delivered or deemed to be delivered to Participants. Notwithstanding any other provision of the Plan to the contrary, no Participant who is a Director or an “executive officer” of the Company within the meaning of Section 13(k) of the Exchange Act shall be permitted to pay the exercise price of an Option, or continue any extension of credit with respect to the exercise price of an Option, with a loan from the Company or a loan arranged by the Company in violation of Section 13(k) of the Exchange Act.
|
| (d)
| Expiration. Subject to Section 5.1(b) and Section 5.2(b) hereof, an Option may not be exercised to any extent by anyone after the first to occur of the following events:
|
| (i)
| Ten years from the date it is granted, unless an earlier time is set in the Award Agreement;
|
| (ii)
| Three months after the Participant’s termination of employment or service, except as otherwise provided in clause (iii) below; and
|
| (iii)
| One year after the date of the Participant’s termination of employment or service on account of death or Disability. Upon the Participant’s Disability or death, any Options exercisable at the Participant’s Disability or death may be exercised by the Participant’s legal representative or representatives, by the person or persons entitled to do so pursuant to the Participant’s last will and testament, or, if the Participant fails to make testamentary disposition of such Option or dies intestate, by the person or persons entitled to receive the Option pursuant to the applicable laws of descent and distribution.
|
| (e)
| Evidence of Grant. All Options shall be evidenced by an Award Agreement between the Company and the Participant. The Award Agreement shall include such additional provisions as may be specified by the Committee.
|
| 5.2
| Incentive Stock Options. Incentive Stock Options shall be granted only to Employees of the Company or of any Subsidiary that qualifies as a “subsidiary corporation” under Section 424(f) of the Code and any applicable regulations promulgated thereunder, and the terms of any Incentive Stock Options granted pursuant to the Plan, in addition to the requirements of Section 5.1 hereof, must comply with the provisions of this Section 5.2.
|
| (a)
| Dollar Limitation. The aggregate Fair Market Value (determined as of the time the Option is granted) of all Shares with respect to which Incentive Stock Options are first exercisable by a Participant in any calendar year may not exceed $100,000 or such other limitation as imposed by Section 422(d) of the Code, or any successor provision. To the extent that Incentive Stock Options are first exercisable by a Participant in excess of such limitation, the excess shall be considered Non-Qualified Stock Options.
|
| (b)
| Ten Percent Owners. An Incentive Stock Option shall be granted to any individual who, at the date of grant, owns stock possessing more than ten percent of the total combined voting power of all classes of Shares of the Company only if such Option is granted at an exercise price that is not less than 110% of Fair Market Value on the date of grant and the Option is exercisable for no more than five years from the date of grant.
|
| (c)
| Notice of Disposition. The Participant shall give the Company prompt notice of any disposition of Shares acquired by exercise of an Incentive Stock Option within (i) two years from the date of grant of such Incentive Stock Option or (ii) one year after the transfer of such Shares to the Participant.
|
| (d)
| Right to Exercise. During a Participant’s lifetime, an Incentive Stock Option may be exercised only by the Participant.
|
| (e)
| Failure to Meet Requirements. Any Option (or portion thereof) purported to be an Incentive Stock Option, which, for any reason, fails to meet the requirements of Section 422 of the Code shall be considered a Non-Qualified Stock Option.
|
ARTICLE 6.RESTRICTED STOCK AWARDS
| 6.1
| Grant of Restricted Stock. The Committee is authorized to make Awards of Restricted Stock to any Eligible Individual selected by the Committee in such amounts and subject to such terms and conditions as determined by the Committee. All Awards of Restricted Stock shall be evidenced by an Award Agreement.
|
| 6.2
| Purchase Price. At the time of the grant of an Award of Restricted Stock, the Committee shall determine the price, if any, to be paid by the Participant for each Share subject to the Award of Restricted Stock. To the extent required by applicable law, the price to be paid by the Participant for each Share subject to the Award of Restricted Stock shall not be less than the par value of a Share (or such higher amount required by applicable law). The purchase price of Shares acquired pursuant to the Award of Restricted Stock shall be paid either: (i) in cash at the time of purchase; (ii) at the sole discretion of the Committee, by services rendered or to be rendered to the Company or a Subsidiary or Affiliate; or (iii) in any other form of legal consideration that may be acceptable to the Committee in its sole discretion and in compliance with applicable law.
|
| 6.3
| Issuance and Restrictions. Restricted Stock shall be subject to such restrictions on transferability and other restrictions as the Committee may impose (including, without limitation, limitations on the right to vote Restricted Stock). These restrictions may lapse separately or in combination at such times, pursuant to such circumstances, in such installments, or otherwise, as the Committee determines at the time of the grant of the Award or thereafter. Further, notwithstanding any provision herein to the contrary, no dividends will be paid on Restricted Stock that has not vested; however, the Committee, in its discretion, may authorize the accrual of Dividend Equivalents on Restricted Stock.
|
| 6.4
| Forfeiture. Subject to Section 4.3, except as otherwise determined by the Committee at the time of the grant of the Award or thereafter, upon termination of employment or service during the applicable restriction period, Restricted Stock that is at that time subject to restrictions shall be forfeited; provided, however, that the Committee may (a) provide in any Restricted Stock Award Agreement that restrictions or forfeiture conditions relating to Restricted Stock will be waived in whole or in part in the event of terminations resulting from specified causes, and (b) in other cases waive in whole or in part restrictions or forfeiture conditions relating to Restricted Stock.
|
| 6.5
| Certificates for Restricted Stock. Restricted Stock granted pursuant to the Plan may be evidenced in such manner as the Committee shall determine. If certificates representing shares of Restricted Stock are registered in the name of the Participant, certificates must bear an appropriate legend referring to the terms, conditions, and restrictions applicable to such Restricted Stock, and the Company may, at its discretion, retain physical possession of the certificate until such time as all applicable restrictions lapse.
|
ARTICLE 7. STOCK APPRECIATION RIGHTS
| 7.1
| Grant of Stock Appreciation Rights.
|
| (a)
| A Stock Appreciation Right may be granted to any Eligible Individual selected by the Committee. A Stock Appreciation Right shall be subject to such terms and conditions not inconsistent with the Plan as the Committee shall impose and shall be evidenced by an Award Agreement, provided that the term of any Stock Appreciation Right shall not exceed ten years.
|
| (b)
| A Stock Appreciation Right shall entitle the Participant (or other person entitled to exercise the Stock Appreciation Right pursuant to the Plan) to exercise all or a specified portion of the Stock Appreciation Right (to the extent then exercisable pursuant to its terms) and to receive from the Company an amount equal to the product of (i) the excess of (A) the Fair Market Value of the Shares on the date the Stock Appreciation Right is exercised over (B) the grant price of the Stock Appreciation Right and (ii) the number of Shares with respect to which the Stock Appreciation Right is exercised, subject to any limitations the Committee may impose.
|
| 7.2
| Grant Price. The grant price per Share subject to a Stock Appreciation Right shall be determined by the Committee and set forth in the Award Agreement; provided that, the per Share grant price for any Stock Appreciation Right shall not be less than 100% of the Fair Market Value of a Share on the date of grant (other than in the case of Substitute Awards).
|
| 7.3
| Payment and Limitations on Exercise.
|
| (a)
| Subject to Section 7.3(b) hereof, payment of the amounts determined under Section 7.1(b) hereof shall be in cash, in Shares (based on its Fair Market Value as of the date the Stock Appreciation Right is exercised) or a combination of both, as determined by the Committee.
|
| (b)
| To the extent any payment under Section 7.1(b) hereof is effected in Shares, it shall be made subject to satisfaction of all applicable provisions of Section 5.1(c) pertaining to Options.
|
ARTICLE 8. OTHER TYPES OF AWARDS
| 8.1
| Performance Share Awards. Any Eligible Individual selected by the Committee may be granted one or more Awards of Performance Shares which shall be denominated in a number of Shares and which may be linked to any one or more of the Performance Criteria or other specific performance criteria determined appropriate by the Committee, in each case on a specified date or dates or over any period or periods determined by the Committee. In making such determinations, the Committee shall consider (among such other factors as it deems relevant in light of the specific type of award) the contributions, responsibilities and other compensation of the particular Participant. The Committee may authorize Dividend Equivalents to be accrued with respect to outstanding Performance Share Awards. Performance Share Awards shall be subject to applicable withholding taxes (as further set forth in Section 14.3).
|
| 8.2
| Performance Stock Units. Any Eligible Individual selected by the Committee may be granted one or more Performance Stock Unit awards which shall be denominated in unit equivalents of Shares and/or units of value including dollar value of Shares and which may be linked to any one or more of the Performance Criteria or other specific performance criteria determined appropriate by the Committee, in each case on a specified date or dates or over any period or periods determined by the Committee. In making such determinations, the Committee shall consider (among such other factors as it deems relevant in light of the specific type of award) the contributions, responsibilities and other compensation of the particular Participant. On the settlement date, the Company shall, subject to Section 9.5(a) and satisfaction of applicable withholding taxes (as further set forth in Section 14.3), transfer to the Participant one unrestricted, fully transferable Share for each Performance Stock Unit scheduled to be paid out on such date and not previously forfeited. Alternatively, settlement of a Performance Stock Unit may be made in cash (in an amount reflecting the Fair Market Value of Shares that would have been issued) or any combination of cash and Shares, as determined by the Committee, in its sole discretion, in either case, less applicable withholding taxes (as further set forth in Section 14.3). The Committee may authorize Dividend Equivalents to be accrued with respect to outstanding Performance Stock Units.
|
| 8.3
| Restricted Stock Units. The Committee is authorized to make Awards of Restricted Stock Units to any Eligible Individual selected by the Committee in such amounts and subject to such terms and conditions as determined by the Committee. At the time of grant, the Committee shall specify the date or dates on which the Restricted Stock Units shall become fully vested and nonforfeitable, and may specify such conditions to vesting as it deems appropriate. The vesting conditions may be based on the passage of time or the attainment of performance-based conditions. On the settlement date, the Company shall, subject to Section 9.5(a) hereof and satisfaction of applicable withholding taxes (as further set forth in Section 14.3), transfer to the Participant one unrestricted, fully transferable Share for each Restricted Stock Unit scheduled to be paid out on such date and not previously forfeited. Alternatively, settlement of a Restricted Stock Unit may be made in cash (in an amount reflecting the Fair Market Value of Shares that would have been issued) or any combination of cash and Shares, as determined by the Committee, in its sole discretion, in either case, less applicable withholding taxes (as further set forth in Section 14.3). The Committee may authorize Dividend Equivalents to be accrued with respect to outstanding Restricted Stock Units.
|
| 8.4
| Other Awards. The Committee is authorized under the Plan to make any other Award to an Eligible Individual that is not inconsistent with the provisions of the Plan and that by its terms involves or might involve the issuance of (i) Shares, (ii) a right with a Share-related exercise or conversion privilege related to the passage of time, the occurrence of one or more events, or the satisfaction of performance criteria or other conditions, or (iii) any other right with the value derived from the value of the Shares. The Committee may establish one or more separate programs under the Plan for the purpose of issuing particular forms of Awards to one or more classes of Participants on such terms and conditions as determined by the Committee from time to time.
|
| 8.5
| Vesting. Subject to Section 4.3, the vesting conditions applicable to an Award granted pursuant to Article 8 shall be set by the Committee in its discretion.
|
| 8.6
| Term. Except as otherwise provided herein, the term of any Award of Performance Shares, Performance Stock Units, Restricted Stock Units and any other Award granted pursuant to this Article 8 shall be set by the Committee in its discretion.
|
| 8.7
| Exercise or Purchase Price. The Committee may establish the exercise or purchase price, if any, of any Award of Performance Shares, Performance Stock Units, Restricted Stock Units and any other Award granted pursuant to this Article 8; provided, however, that such price shall not be less than the par value of a Share on the date of grant, unless otherwise permitted by applicable state law.
|
| 8.8
| Exercise upon Termination of Employment or Service. An Award of Performance Shares, Performance Stock Units, Restricted Stock Units and any other Awards granted pursuant to this Article 8 shall only be exercisable or payable while the Participant is an Employee, Consultant or Director, as applicable; provided, however, that the Committee in its sole and absolute discretion may provide that an Award of Performance Shares, Performance Stock Units, Restricted Stock Units or any other Award granted pursuant to this Article 8 may be exercised or paid subsequent to a termination of employment or service, as applicable, or following a Change in Control of the Company, or because of the Participant’s Retirement, death or Disability, or otherwise.
|
| 8.9
| Form of Payment. Payments with respect to any Awards granted under this Article 8 shall be made in cash, in Shares or a combination of both, as determined by the Committee.
|
| 8.10
| Award Agreement. All Awards under this Article 8 shall be subject to such additional terms and conditions as determined by the Committee and shall be evidenced by an Award Agreement.
|
| 8.11
| Timing of Settlement. At the time of grant, the Committee shall specify the settlement date applicable to an Award of Performance Shares, Performance Stock Units, Restricted Stock Units or any other Award granted pursuant to this Article 8, which shall be no earlier than the vesting date(s) applicable to the relevant Award, or it may be deferred to any later date to the extent and under the terms determined by the Committee, subject to compliance with Section 409A of the Code. Until an Award granted pursuant to this Article 8 has been settled, the number of Shares subject to the Award shall be subject to adjustment pursuant to Article 10 hereof.
|
ARTICLE 9. PROVISIONS APPLICABLE TO AWARDS
| 9.1
| Stand-Alone and Tandem Awards. Awards granted pursuant to the Plan may, in the discretion of the Committee, be granted either alone, in addition to, or in tandem with, any other Award granted pursuant to the Plan. Awards granted in addition to or in tandem with other Awards may be granted either at the same time as or at a different time from the grant of such other Awards.
|
| 9.2
| Award Agreement. Awards under the Plan shall be evidenced by Award Agreements that set forth the terms, conditions and limitations for each Award which may include the term of an Award, the provisions applicable in the event the Participant’s employment or service terminates, and the Company’s authority to unilaterally or bilaterally amend, modify, suspend, cancel or rescind an Award.
|
| 9.3
| Limits on Transfer. No right or interest of a Participant in any Award may be pledged, encumbered, or hypothecated to or in favor of any party other than the Company or a Subsidiary or Affiliate, or shall be subject to any lien, obligation, or liability of such Participant to any other party other than the Company or a Subsidiary or Affiliate. Except as otherwise provided by the Committee, no Award shall be assigned, transferred, or otherwise disposed of by a Participant other than by will or the laws of descent and distribution or pursuant to beneficiary designation procedures approved from time to time by the Committee (or the Board in the case of Awards granted to Non-Employee Directors). The Committee by express provision in the Award or an amendment thereto may permit an Award (other than an Incentive Stock Option) to be transferred to, exercised by and paid to certain persons or entities related to the Participant, including, but not limited to, members of the Participant’s family, charitable institutions, or trusts or other entities whose beneficiaries or beneficial owners are members of the Participant’s family and/or charitable institutions, or to such other persons or entities as may be expressly approved by the Committee, pursuant to such conditions and procedures as the Committee may establish. Any permitted transfer shall be subject to the condition that the Committee receive evidence satisfactory to it that the transfer is being made for estate and/or tax planning purposes (or to a “blind trust” in connection with the Participant’s termination of employment or service with the Company or a Subsidiary or Affiliate to assume a position with a governmental, charitable, educational or similar non-profit institution) and on a basis consistent with the Company’s lawful issue of securities. Notwithstanding anything contrary in this Section 9.3 or Section 9.4 below, no Award may be transferred for value or consideration.
|
| 9.4
| Beneficiaries. Notwithstanding Section 9.3 hereof, a Participant may, if permitted by the Committee, designate a beneficiary to exercise the rights of the Participant and to receive any distribution with respect to any Award upon the Participant’s death. A beneficiary, legal guardian, legal representative, or other person claiming any rights pursuant to the Plan is subject to all terms and conditions of the Plan and any Award Agreement applicable to the Participant, except to the extent the Plan and Award Agreement otherwise provide, and to any additional restrictions deemed necessary or appropriate by the Committee. If the Participant is married and resides in a community property state, a designation of a person other than the Participant’s spouse as his or her beneficiary with respect to more than 50% of the Participant’s interest in the Award shall not be effective without the prior written consent of the Participant’s spouse. If no beneficiary has been designated or survives the Participant, payment shall be made to either the person’s estate or legal representative or the person entitled thereto pursuant to the Participant’s will or the laws of descent and distribution (or equivalent laws outside the U.S.). Subject to the foregoing, a beneficiary designation may be changed or revoked by a Participant at any time provided the change or revocation is filed with the Committee.
|
| 9.5
| Stock Certificates; Book Entry Procedures.
|
| (a)
| Notwithstanding anything herein to the contrary, the Company shall not be required to issue or deliver any certificates evidencing Shares pursuant to the exercise of any Award, unless and until the Board has determined, with advice of counsel, that the issuance and delivery of such certificates is in compliance with all applicable laws, regulations of governmental authorities and, if applicable, the requirements of any exchange on which the Shares are listed or traded. All certificates evidencing Shares delivered pursuant to the Plan are subject to any stop-transfer orders and other
|
| | restrictions as the Committee deems necessary or advisable to comply with federal, state or local securities or other laws, including laws of jurisdictions outside of the United States, and the rules and regulations of any national securities exchange or automated quotation system on which the Shares are listed, quoted, or traded. The Committee may place legends on any certificate evidencing Shares to reference restrictions applicable to the Shares. In addition to the terms and conditions provided herein, the Board may require that a Participant make such reasonable covenants, agreements, and representations as the Board, in its discretion, deems advisable in order to comply with any such laws, regulations, or requirements. The Committee shall have the right to require any Participant to comply with any timing or other restrictions with respect to the settlement or exercise of any Award, including a window-period limitation, as may be imposed in the discretion of the Committee.
|
| (b)
| Notwithstanding any other provision of the Plan, unless otherwise determined by the Committee or required by any applicable law, rule or regulation, the Company shall not deliver to any Participant certificates evidencing Shares issued in connection with any Award and instead such Shares shall be recorded in the books of the Company (or, as applicable, its transfer agent or stock plan administrator).
|
| 9.6
| Accelerated Vesting and Deferral Limitations. The Committee shall not have the discretionary authority to accelerate or delay issuance of Shares or payment of cash under an Award that constitutes a deferral of compensation within the meaning of Section 409A of the Code, except to the extent that such acceleration or delay may, in the discretion of the Committee, be effected in a manner that will not cause any person to incur taxes, interest or penalties under Section 409A of the Code.
|
| 9.7
| Paperless Administration. In the event that the Company establishes, for itself or using the services of a third party, an automated system for the documentation, granting or exercise of Awards, such as a system using an internet website or interactive voice response, then the paperless documentation, granting or exercise of Awards by a Participant may be permitted through the use of such an automated system.
|
ARTICLE 10. CHANGES IN CAPITAL STRUCTURE
| (a)
| In the event of any stock dividend, stock split, combination or exchange of shares, merger, consolidation or other distribution (other than normal cash dividends) of Company assets to stockholders, or any other change affecting the Shares or the price of the Shares other than an Equity Restructuring, the Committee shall make such adjustments, if any, as the Committee in its discretion may deem appropriate to reflect such change with respect to (a) the aggregate number and kind of shares that may be issued under the Plan (including, but not limited to, adjustments of the limitations in Section 3.1 hereof); (b) the number and kind of Shares subject to outstanding Awards and the terms and conditions of any outstanding Awards (including, without limitation, any applicable performance targets or criteria with respect thereto); and (c) the grant or exercise price per Share for any outstanding Awards under the Plan.
|
| (b)
| In the event of any transaction or event described in Section 10.1(a) hereof or any unusual or nonrecurring transactions or events affecting the Company, any affiliate of the Company, or the financial statements of the Company or any affiliate, or of changes in applicable laws, regulations or accounting principles, the Committee, in its sole and absolute discretion, and on such terms and conditions as it deems appropriate, either by the terms of the Award or by action taken prior to the occurrence of such transaction or event and either automatically or upon the Participant’s request, is hereby authorized to take any one or more of the following actions whenever the Committee determines that such action is appropriate in order to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the Plan or with respect to any Award under the Plan, to facilitate such transactions or events or to give effect to such changes in laws, regulations or principles:
|
| (i)
| To provide for either (A) termination of any such Award in exchange for an amount of cash, if any, equal to the amount that would have been attained upon the exercise of such Award or realization of the Participant’s rights (and, for the avoidance of doubt, if as of the date of the occurrence of the transaction or event described in this Section 10.1 the Committee determines in good faith that no amount would have been attained upon the exercise of such Award or realization of the Participant’s rights, then such Award may be terminated by the Company without payment) or (B) the replacement of such Award with other rights or property selected by the Committee in its sole discretion;
|
| (ii)
| To provide that such Award be assumed by the successor or survivor corporation, or a parent or subsidiary thereof, or shall be substituted for by similar options, rights or awards covering the stock of the successor or survivor corporation, or a parent or subsidiary thereof, with appropriate adjustments as to the number and kind of shares and prices;
|
| (iii)
| To make adjustments in the number and type of Shares (or other securities or property) subject to outstanding Awards, and in the number and kind of outstanding Restricted Stock and/or in the terms and conditions of (including the grant or exercise price), and the criteria included in, outstanding options, rights and awards;
|
| (iv)
| To provide that such Award shall be exercisable or payable or fully vested with respect to all Shares covered thereby, notwithstanding anything to the contrary in the Plan or the applicable Award Agreement; and
|
| (v)
| To provide that the Award cannot vest, be exercised or become payable after such event.
|
| (c)
| In connection with the occurrence of any Equity Restructuring, and notwithstanding anything to the contrary in Sections 10.1(a) and 10.1(b) hereof:
|
| (i)
| The number and type of securities subject to each outstanding Award and the exercise price or grant price thereof, if applicable, shall be equitably adjusted. The adjustments provided under this Section 10.1(c)(i) shall be nondiscretionary and shall be final and binding on the affected Participant and the Company.
|
| (ii)
| The Committee shall make such equitable adjustments, if any, as the Committee in its discretion may deem appropriate to reflect such Equity Restructuring with respect to the aggregate number and kind of shares that may be issued under the Plan (including, but not limited to, adjustments of the limitations in Section 3.1 hereof).
|
| 10.2
| Change in Control. Notwithstanding Section 10.1 hereof, if a Change in Control occurs, the parties to the Change in Control may agree that outstanding Awards shall be assumed by, or converted into an award with respect to shares of common stock of, the successor or acquiring company (or a parent company thereof). In the event that the successor company does not assume or substitute any such outstanding Award, the Award shall be fully vested and, to the extent not exercised prior to the Change in Control, cancelled in exchange for the right to receive an amount equal to the excess, if any, of the per Share consideration received by the holders of outstanding Shares in the Change in Control transaction over the exercise or base price for such Shares. No consideration will be payable in respect of the cancellation of an Option or SAR with an exercise or base price per share that is equal to or greater than the value of the Change in Control transaction consideration per share. The Board may in its sole discretion accelerate, in whole or in part, the vesting of any outstanding Award upon the occurrence of a Change in Control, whether or not the vesting requirements set forth in the applicable Award agreement have been satisfied and whether or not the Award is otherwise assumed or substituted by the successor company.
|
| 10.3
| No Other Rights. Except as expressly provided in the Plan, no Participant shall have any rights by reason of any subdivision or consolidation of Shares of any class, the payment of any dividend, any increase or decrease in the number of Shares of any class or any dissolution, liquidation, merger, or consolidation of the Company or any other corporation. Except as expressly provided in the Plan or pursuant to action of the Committee under the Plan, no issuance by the Company of Shares of any class, or securities convertible into Shares of any class, shall affect, and no adjustment by reason thereof shall be made with respect to, the number of Shares subject to an Award or the grant or the exercise price of any Award.
|
ARTICLE 11. ADMINISTRATION
| 11.1
| Committee. Except as specified herein or as otherwise determined by the Board, the Plan shall be administered by a Committee consisting of two or more members of the Board. Unless otherwise determined by the Board, the Committee shall consist solely of two or more members of the Board each of whom is an Independent Director; provided, that, any action taken by the Committee shall be valid and effective, whether or not members of the Committee at the time of
|
| | such action are later determined not to have satisfied the requirements for membership set forth in this Section 11.1 or otherwise provided in any charter of the Committee. Notwithstanding the foregoing: (a) the full Board, acting by a majority of its members in office, shall conduct the general administration of the Plan with respect to all Awards granted to Non-Employee Directors and for purposes of such Awards the term “Committee” as used in this Plan shall be deemed to refer to the Board and (b) the Committee may delegate its authority hereunder to the extent permitted by Section 11.5 hereof. In its sole discretion, the Board may at any time and from time to time exercise any and all rights and duties of the Committee under the Plan except with respect to matters which under Rule 16b-3 under the Exchange Act, or any regulations or rules issued thereunder, are required to be determined in the sole discretion of the Committee. Except as may otherwise be provided in any charter of the Committee, appointment of Committee members shall be effective upon acceptance of appointment; Committee members may resign at any time by delivering written notice to the Board; and vacancies in the Committee may only be filled by the Board.
|
| 11.2
| Action by the Committee. Unless otherwise established by the Board or in any charter of the Committee, a majority of the Committee shall constitute a quorum and the acts of a majority of the members present at any meeting at which a quorum is present, and acts approved in writing by a majority of the Committee in lieu of a meeting, shall be deemed the acts of the Committee. Each member of the Committee is entitled to, in good faith, rely or act upon any report or other information furnished to that member by any officer or other employee of the Company or any Subsidiary or Affiliate, the Company’s independent certified public accountants, or any executive compensation consultant or other professional retained by the Company to assist in the administration of the Plan.
|
| 11.3
| Authority of Committee. Subject to any specific designation in the Plan, the Committee has the exclusive power, authority and discretion to:
|
| (a)
| Designate Participants to receive Awards;
|
| (b)
| Determine the type or types of Awards to be granted to each Participant;
|
| (c)
| Determine the number of Awards to be granted and the number of Shares to which an Award will relate;
|
| (d)
| Determine the terms and conditions of any Award granted pursuant to the Plan, including, but not limited to, the exercise price, grant price, or purchase price, any restrictions or limitations on the Award, any schedule for lapse of forfeiture restrictions or restrictions on the exercisability of an Award, and accelerations or waivers thereof, any provisions related to non-competition and recapture of gain on an Award, based in each case on such considerations as the Committee in its sole discretion determines;
|
| (e)
| Determine whether, to what extent, and pursuant to what circumstances an Award may be settled in, or the exercise price of an Award may be paid in, cash, Shares, other Awards, or other property, or an Award may be canceled, forfeited, or surrendered;
|
| (f)
| Prescribe the form of each Award Agreement, which need not be identical for each Participant;
|
| (g)
| Decide all other matters that must be determined in connection with an Award;
|
| (h)
| Establish, adopt, or revise any rules and regulations as it may deem necessary or advisable to administer the Plan;
|
| (i)
| To suspend or terminate the Plan at any time provided that such suspension or termination does not materially impair rights and obligations under any outstanding Award without written consent of the affected Participant.
|
| (j)
| Interpret the terms of, and any matter arising pursuant to, the Plan or any Award Agreement; and
|
| (k)
| Make all other decisions and determinations that may be required pursuant to the Plan or as the Committee deems necessary or advisable to administer the Plan.
|
| 11.4
| Decisions Binding. The Committee’s interpretation of the Plan, any Awards granted pursuant to the Plan, any Award Agreement and all decisions and determinations by the Committee with respect to the Plan are final, binding, and conclusive on all parties.
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| 11.5
| Delegation of Authority. To the extent permitted by applicable law, including, without limitation, Section 157(c) of the Delaware General Corporation Law, the Committee may from time to time (i) delegate to a committee of one or more members of the Board or one or more officers of the Company the authority, subject to such terms as the Committee shall determine, to perform such functions, including the authority to grant or amend Awards to Participants, as the Committee may determine, and (ii) delegate to any person or subcommittee (who may, but need not, be members of the Committee) such Plan-related administrative authority and responsibilities as it deems appropriate; provided, however, the Committee may not delegate its authority with respect to non-ministerial actions relating to Awards to Employees who are subject to the reporting requirements of Section 16(a) of the Exchange Act or officers of the Company (or Directors) to whom authority to grant or amend Awards has been delegated hereunder. For the avoidance of doubt, provided it meets the limitation in the preceding sentence, this delegation shall include the right to modify Awards as necessary to accommodate changes in the laws or regulations. Any delegation hereunder shall be subject to the restrictions and limits that the Committee specifies at the time of such delegation, and the Committee may at any time rescind the authority so delegated or appoint a new delegatee. At all times, the delegatee appointed under this Section 11.5 shall serve in such capacity at the pleasure of the Committee.
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ARTICLE 12. PLAN EXPIRATION DATE
The Plan will continue in effect until it is terminated by the Board pursuant to Section 13.1 hereof, except that no Award may be granted under the Plan from and after the tenth anniversary of the Effective Date. Any Awards that are outstanding on the date the Plan terminates shall remain in force according to the terms of the Plan and the applicable Award Agreement.
ARTICLE 13. AMENDMENT, MODIFICATION, AND TERMINATION
| 13.1
| Amendment, Modification, and Termination. Subject to Section 14.15 hereof, with the approval of the Board, at any time and from time to time, the Committee may terminate, amend or modify the Plan; provided, however, that (a) to the extent necessary and desirable to comply with any applicable law, regulation, or stock exchange rule, the Company shall obtain stockholder approval of any Plan amendment in such a manner and to such a degree as required, and (b) stockholder approval shall be required for any amendment to the Plan that (i) increases the number of shares available under the Plan (other than any adjustment as provided by Article 10), or (ii) permits the Committee to extend the exercise period for an Option beyond ten years from the date of grant. Notwithstanding any provision in this Plan to the contrary, absent approval of the stockholders of the Company, no Option or SAR may be amended to reduce the per share exercise price of the shares subject to such Option or SAR below the per share exercise price as of the date the Option or SAR is granted and, except as permitted by Article 10, (a) no Option or SAR may be granted in exchange for, or in connection with, the cancellation, surrender or substitution of an Option or SAR having a higher per share exercise price and (b) no Option or SAR may be cancelled in exchange for, or in connection with, the payment of a cash amount or another Award at a time when the Option or SAR has a per share exercise price that is higher than the Fair Market Value of a Share.
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| 13.2
| Awards Previously Granted. Except with respect to amendments made or other actions taken pursuant to Section 14.15 hereof or any amendment or other action with respect to an outstanding Award that may be required or desirable to comply with applicable law, as determined in the sole discretion of the Committee, no termination, amendment, or modification of the Plan shall adversely affect in any material way any Award previously granted pursuant to the Plan without the prior written consent of the Participant; provided, however, that an amendment or modification that may cause an Incentive Stock Option to become a Non-Qualified Stock Option shall not be treated as adversely affecting the rights of the Participant.
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ARTICLE 14. GENERAL PROVISIONS
| 14.1
| No Rights to Awards. No Eligible Individual or other person shall have any claim to be granted any Award pursuant to the Plan, and neither the Company nor the Committee is obligated to treat Eligible Individuals, Participants or any other persons uniformly.
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| 14.2
| No Stockholders Rights. Except as otherwise provided herein, a Participant shall have none of the rights of a stockholder with respect to Shares covered by any Award, including the right to vote or receive dividends, until the Participant becomes the record owner of such Shares, notwithstanding the exercise of an Option or other Award.
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| 14.3
| Withholding. The Company or any Subsidiary or Affiliate, as appropriate, shall have the authority and the right to deduct or withhold, or require a Participant to remit to the Company, an amount sufficient to satisfy U.S. federal, state and local taxes and taxes imposed by jurisdictions outside of the United States (including income tax, social insurance contributions, payment on account and any other taxes that may be due) that the Company or a Subsidiary or Affiliate determines are required to be withheld with respect to any taxable event concerning a Participant arising as a result of this Plan or to take such other action as may be necessary in the
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| | opinion of the Company or a Subsidiary or Affiliate, as appropriate, to satisfy withholding obligations for the payment of taxes. The Committee may in its discretion and in satisfaction of the foregoing requirement direct the Company to withhold, or allow a Participant to elect to have the Company withhold, Shares otherwise issuable under an Award (or allow the return of Shares) having a Fair Market Value equal to the sums required to be withheld; the number of Shares so withheld may be determined using rates of up to, but not exceeding, the maximum federal, state, local and/or foreign statutory tax rates applicable in a particular jurisdiction on the date that the amount of tax to be withheld is to be determined. No Shares shall be delivered hereunder to any Participant or other person until the Participant or such other person has made arrangements acceptable to the Committee for the satisfaction of these tax obligations with respect to any taxable event concerning the Participant or such other person arising as a result of Awards made under this Plan.
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| 14.4
| No Right to Employment or Services. Nothing in the Plan or any Award Agreement shall interfere with or limit in any way the right of the Company or any Subsidiary or Affiliate to terminate any Participant’s employment or services at any time, nor confer upon any Participant any right to continue in the employ or service of the Company or any Subsidiary or Affiliate.
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| 14.5
| Unfunded Status of Awards. The Plan is intended to be an “unfunded” plan for incentive compensation. With respect to any payments not yet made to a Participant pursuant to an Award, nothing contained in the Plan or any Award Agreement shall give the Participant any rights that are greater than those of a general creditor of the Company or any Subsidiary or Affiliate.
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| 14.6
| Indemnification. To the extent allowable pursuant to applicable law, each member of the Committee or of the Board shall be indemnified and held harmless by the Company from any loss, cost, liability, or expense that may be imposed upon or reasonably incurred by such member in connection with or resulting from any claim, action, suit, or proceeding to which he or she may be a party or in which he or she may be involved by reason of any action or failure to act pursuant to the Plan and against and from any and all amounts paid by him or her in satisfaction of judgment in such action, suit, or proceeding against him or her; provided he or she gives the Company an opportunity, at its own expense, to handle and defend the same before he or she undertakes to handle and defend it on his or her own behalf. The foregoing right of indemnification shall not be exclusive of any other rights of indemnification to which such persons may be entitled pursuant to the Company’s Certificate of Incorporation or Bylaws, as a matter of law, or otherwise, or any power that the Company may have to indemnify them or hold them harmless.
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| 14.7
| Relationship to other Benefits. No payment pursuant to the Plan shall be taken into account in determining any benefits pursuant to any pension, retirement, savings, profit sharing, group insurance, termination programs and/or indemnities or severance payments, welfare or other benefit plan of the Company or any Subsidiary or Affiliate except to the extent otherwise expressly provided in writing in such other plan or an agreement thereunder.
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| 14.8
| Expenses. The expenses of administering the Plan shall be borne by the Company and/or its Subsidiaries and/or Affiliates.
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| 14.9
| Titles and Headings. The titles and headings of the Sections in the Plan are for convenience of reference only and, in the event of any conflict, the text of the Plan, rather than such titles or headings, shall control.
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| 14.10
| Fractional Shares. No fractional Shares shall be issued and the Committee shall determine, in its discretion, whether cash shall be given in lieu of fractional shares or whether such fractional shares shall be eliminated by rounding up or down as appropriate.
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| 14.11
| Limitations Applicable to Section 16 Persons. Notwithstanding any other provision of the Plan, the Plan, and any Award granted or awarded to any Participant who is then subject to Section 16 of the Exchange Act, shall be subject to any additional limitations set forth in any applicable exemptive rule under Section 16 of the Exchange Act (including any amendment to Rule 16b-3 under the Exchange Act) that are requirements for the application of such exemptive rule. To the extent permitted by applicable law, the Plan and Awards granted or awarded hereunder shall be deemed amended to the extent necessary to conform to such applicable exemptive rule.
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| 14.12
| Government and Other Regulations. The obligation of the Company to make payment of awards in Shares or otherwise shall be subject to all applicable laws, rules, and regulations of the United States and jurisdictions outside the United States, and to such approvals by government agencies, including government agencies in jurisdictions outside of the United States, in each case as may be required or as the Company deems necessary or advisable. Without limiting the foregoing, the Company shall have no obligation to issue or deliver evidence of title for Shares subject to Awards granted hereunder prior to: (a) obtaining any approvals from governmental agencies that the Company determines are necessary or advisable, and (b) completion of any registration or other qualification with respect to the Shares under any applicable law in the United States or in a jurisdiction outside of the United States or ruling of any governmental body that the Company determines to be necessary or advisable or at a time when any such registration or qualification is not current, has been suspended or otherwise has ceased to be effective. The inability or impracticability of the Company to obtain or maintain authority from any regulatory body having jurisdiction, which authority is deemed by the Company’s counsel to be necessary to the lawful issuance and sale of any Shares hereunder, shall relieve the Company of any liability in respect of the failure to issue or sell such Shares as to which such requisite authority shall not have been obtained and shall constitute circumstances in which the Committee may determine to amend or cancel Awards pertaining to such Shares, with or without consideration to the affected Participant. The Company shall be under no obligation to register pursuant to the Securities Act, as amended, any of the Shares paid pursuant to the Plan. If the Shares paid pursuant to the Plan may in certain circumstances be exempt from registration pursuant to the Securities Act, as amended, the Company may restrict the transfer of such Shares in such manner as it deems advisable to ensure the availability of any such exemption.
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| 14.13
| Governing Law. The Plan and all Award Agreements shall be construed in accordance with and governed by the laws of the State of Delaware. Notwithstanding the foregoing, Section 14.14 is intended to be governed by the Federal Arbitration Act and, as a result, to the fullest extent allowed by the Federal Arbitration Act, state laws governing arbitration provisions that would otherwise apply to Section 14.14 are preempted.
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| (a)
| Except as otherwise specially provided in this Plan or an Award Agreement, any and all disputes, controversies or claims arising out of, relating to or in connection with this Plan, any Award Agreement, or any Award made hereunder, shall be exclusively and finally settled by arbitration administered by the American Arbitration Association (“AAA”). Either party may initiate arbitration by notice to the other party (a “Request for Arbitration”). The arbitration shall be conducted in accordance with the AAA rules governing commercial arbitration in effect at the time of the arbitration, except as they may be modified by the provisions of this Section 14.14. The place of the arbitration shall be Philadelphia, Pennsylvania. The arbitration shall be conducted by a single arbitrator appointed by the Participant from a list of at least five (5) individuals who are independent and qualified to serve as an arbitrator submitted by the Company within fifteen (15) days after delivery of the Request for Arbitration. The Participant will make his or her appointment within ten (10) days after he or she receives the list of qualified individuals from the Company. In the event the Company fails to send a list of at least five (5) qualified individuals to serve as arbitrator to the Participant within such fifteen-day time period, then the Participant shall appoint such arbitrator within twenty-five (25) days from the Request for Arbitration. In the event the Participant fails to appoint a person to serve as arbitrator from the list of at least five (5) qualified individuals within ten (10) days after his or her receipt of such list from the Company, the Company shall appoint one of the individuals from such list to serve as arbitrator within five (5) days after the expiration of such ten (10) day period. Any individual will be qualified to serve as an arbitrator if he or she is an individual who has no material business relationship, directly or indirectly, with any of the parties to the action and who has at least ten (10) years of experience in the practice of law with experience in executive compensation matters. The arbitration shall commence within thirty (30) days after the appointment of the arbitrator; the arbitration shall be completed within sixty (60) days of commencement; and the arbitrator’s award shall be made within thirty (30) days following such completion. The parties may agree in writing to extend the time limits specified in the foregoing sentence.
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| (b)
| The arbitrator will apply the substantive law (and the law of remedies, if applicable) of the State of Delaware without giving effect to the principles of conflicts of law, and will be without power to apply any different substantive law. The arbitrator will render an award and a written opinion in support thereof. Such award shall include payment by the non-prevailing party to the prevailing party of the prevailing party’s costs related to the arbitration and reasonable attorneys’ fees and expenses. The arbitrator shall have full authority to resolve all issues in dispute, including the arbitrator’s own jurisdiction, whether any dispute must be arbitrated under this Section 14.14, whether this Section 14.14 is void or voidable, and to award compensatory remedies and other remedies permitted by law. The arbitrator also has the authority to grant provisional remedies, including, without limitation, injunctive relief, and to award specific performance. The arbitrator may entertain a motion to dismiss and/or a motion for summary judgment by any party, applying the standards governing such motions under the Federal Rules of Civil Procedure, and may rule upon any claim or counterclaim, or any portion thereof (a “Claim”), without holding an evidentiary hearing, if, after affording the parties an
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| | opportunity to present written submission and documentary evidence, the arbitrator concludes that there is no material issue of fact and that the Claim may be determined as a matter of law. The parties waive, to the fullest extent permitted by law, any rights to appeal, or to review of, any arbitrator’s award by any court. The arbitrator’s award shall be final and binding, and judgment on the award may be entered in any court of competent jurisdiction, including, without limitation, the courts of Montgomery County, Pennsylvania. The Company and each Participant under this Plan irrevocably submits to the non-exclusive jurisdiction and venue in the courts of the Commonwealth of Pennsylvania and the United States sitting in Philadelphia, Pennsylvania in connection with any such proceeding, and waives any objection based on forum non conveniens. THE COMPANY AND EACH PARTICIPANT IRREVOCABLY WAIVES SUCH PARTY’S RIGHT TO A TRIAL BY JURY IN CONNECTION WITH ANY ACTION TO ENFORCE AN ARBITRATOR’S DECISION OR AWARD PURSUANT TO SECTION 14.14(a) OF THIS PLAN.
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| (c)
| The parties agree to maintain confidentiality as to all aspects of the arbitration, except as may be required by applicable law, regulations or court order, or to maintain or satisfy any suitability requirements for any license by any state, federal or other regulatory authority or body, including, without limitation, professional societies and organizations; provided, that nothing herein shall prevent a party from disclosing information regarding the arbitration for purposes of enforcing the award. The parties further agree to obtain the arbitrator’s agreement to preserve the confidentiality of the arbitration.
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| 14.15
| Section 409A. Except as provided in Section 14.16 hereof, to the extent that the Committee determines that any Award granted under the Plan is subject to Section 409A of the Code, the Award Agreement evidencing such Award shall incorporate the terms and conditions required by Section 409A of the Code. To the extent applicable, the Plan and Award Agreements shall be interpreted in accordance with Section 409A of the Code and Department of Treasury regulations and other interpretive guidance issued thereunder, including without limitation any such regulations or other guidance that may be issued after the date the Plan became effective. Notwithstanding any provision of the Plan to the contrary, in the event that following the date an Award is granted the Committee determines that the Award may be subject to Section 409A of the Code and related Department of Treasury guidance (including such Department of Treasury guidance as may be issued after the date the Plan became effective), the Committee may adopt such amendments to the Plan and the applicable Award Agreement or adopt other policies and procedures (including amendments, policies and procedures with retroactive effect), or take any other actions, including amendments or actions that would result in a reduction to the benefits payable under an Award, in each case, without the consent of the Participant, that the Committee determines are necessary or appropriate to (a) exempt the Award from Section 409A of the Code and/or preserve the intended tax treatment of the benefits provided with respect to the Award, or (b) comply with the requirements of Section 409A of the Code and related Department of Treasury guidance and thereby avoid the application of any penalty taxes under such Section or mitigate any additional tax, interest and/or penalties or other adverse tax consequences that may apply under Section 409A of the Code if compliance is not practical.
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| 14.16
| No Representations or Covenants with respect to Tax Qualification. Although the Company may endeavor to (a) qualify an Award for favorable tax treatment under the laws of the United States or jurisdictions outside of the United States (e.g., incentive stock options under Section 422 of the Code) or (b) avoid adverse tax treatment (e.g., under Section 409A of the Code), the Company makes no representation to that effect and expressly disavows any covenant to maintain favorable or avoid unfavorable tax treatment, anything to the contrary in this Plan, including Section 14.15 hereof, notwithstanding. The Company shall be unconstrained in its corporate activities without regard to the potential negative tax impact on holders of Awards under the Plan. Nothing in this Plan or in an Award Agreement shall provide a basis for any person to take any action against the Company or any Affiliate based on matters covered by Section 409A of the Code, including the tax treatment of any Awards, and neither the Company nor any Affiliate will have any liability under any circumstances to the Participant or any other party if the Award that is intended to be exempt from, or compliant with, Section 409A of the Code, is not so exempt or compliant or for any action taken by the Committee with respect thereto.
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| 14.17
| Clawback/Recovery. All Awards granted under the Plan will be subject to recoupment in accordance with any clawback policy that the Company is required to adopt pursuant to the listing standards of any national securities exchange or association on which the Company’s securities are listed or as is otherwise required by the Dodd-Frank Wall Street Reform and Consumer Protection Act or other Applicable Laws. In addition, the Committee may impose such other clawback, recovery or recoupment provisions on an Award as the Committee determines necessary or appropriate in view of Applicable Laws, governance requirements or best practices, including, but not limited to, a reacquisition right in respect of previously acquired Shares or other cash or property upon the occurrence of cause (as determined by the Committee).
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| 14.18
| Provisions for Foreign Participants. The Committee may modify Awards granted to Participants who are foreign nationals or employed outside of the United States or establish sub-plans or procedures under the Plan to recognize differences in laws, rules, regulations or customs of foreign jurisdictions with respect to tax, securities, currency, employee benefit or other matters.
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* * * *6, 2023
92
UNIVERSAL HEALTH SERVICES, INC. Directors For The Annual Meeting Of Stockholders To Be Held On May 20, 2020 Alan B. Miller and Steve Filton and each of them, as the true and lawful attorneys, agents and proxies of the undersigned, with full power of substitution, are hereby authorized to represent and to vote, as designated below, all shares of Class A Common Stock and Class C Common Stock of Universal Health Services, Inc. (the “Company”) held of record by the undersigned on March 24, 2020 at the Annual Meeting of Stockholders to be held at 10:00 a.m. on Wednesday, May 20, 2020, virtually via live audio webcast available at www.meetingcenter.io/266493346, and at any adjournment thereof. To participate at the Annual Meeting online, please visit www.meetingcenter.io/266493346 and use the password: UHS2020. Any and all proxies heretofore given are hereby revoked. Important Notice Regarding Availability of2023 Proxy Materials for the Stockholder Meeting to be held on Wednesday, May 20, 2020. The Proxy Statement and Annual Report to Stockholders are available at www.edocumentview.com/uhs THIS PROXY IS CONTINUED ON THE REVERSE SIDE. PLEASE SIGN ON THE REVERSE SIDE AND RETURN PROMPTLY
| | | PROXY | | CLASS A COMMON STOCK CLASS C COMMON STOCK |
| UNIVERSAL HEALTH SERVICES, INC. This Proxy Solicited By The Board Of Directors For The Annual Meeting Of Stockholders To Be Held On May 17, 2023 Alan B. Miller and Steve Filton and each of them, as the true and lawful attorneys, agents and proxies of the undersigned, with full power of substitution, are hereby authorized to represent and to vote, as designated below, all shares of Class A Common Stock and Class C Common Stock of Universal Health Services, Inc. (the “Company”) held of record by the undersigned on March 22, 2023 at the Annual Meeting of Stockholders to be held at 10:00 a.m. on Wednesday, May 17, 2023, virtually via live audio webcast available at www.meetnow.global/MRVPLHZ and at any adjournment thereof. To participate at the Annual Meeting online, please visit www.meetnow.global/MRVPLHZ. Any and all proxies heretofore given are hereby revoked. Important Notice Regarding Availability of Proxy Materials for the Stockholder Meeting to be held on Wednesday, May 17, 2023. The Proxy Statement and Annual Report to Stockholders are available at www.edocumentview.com/uhs THIS PROXY IS CONTINUED ON THE REVERSE SIDE. PLEASE SIGN ON THE REVERSE SIDE AND RETURN PROMPTLY. |
PLEASE MARK YOUR CHOICE LIKE THIS IN BLUE OR BLACK INK ☐ ACCOUNT NUMBER CLASS A COMMON CLASS C COMMON | | | | | | | | | | | ☐ | | | | | | | | | | | | | ACCOUNT NUMBER | | | | CLASS A COMMON | | | | CLASS C COMMON |
| | | | | The Board of Directors recommends a vote FOR the nominee listed in Proposal 1, and FOR Proposals 2 and 4 and for 3 and 4.YEARS in Proposal 3. 1. The Election of Alan B. Miller ☐ For ☐ Withhold Authority Proposal to approve the Company’s 2020 Omnibus Stock and Incentive Plan. ☐ For ☐ Against ☐ Abstain 2. Advisory (nonbinding) vote to approve named executive officer compensation. ☐ For ☐ Against ☐ Abstain 3. Advisory (nonbinding) vote on the frequency of an advisory stockholder vote to approve named executive officer compensation. ☐ 1 Year ☐ 2 Years ☐ 3 Years ☐ Abstain 4. To ratify the selection of PricewaterhouseCoopers LLP, as the company’s independent registered public accounting firm for the fiscal year ending December 31, 2020. 2023. ☐ For ☐ Against ☐ Abstain | | Discretionary authority is hereby granted with respect to such other matters as may properly come before the meeting. DATED: SIGNATURE: SIGNATURE: �� IMPORTANT: Please sign exactly as name appears at the left. Each joint owner shall sign. Executors, administrators, trustees, etc. should give full title. The above-signed acknowledges receipt of the Notice of Annual Meeting of Stockholders. | |
| | WHEN PROPERLY EXECUTED, THIS PROXY WILL BE VOTED AS DESIGNATED. IF NO CHOICE IS SPECIFIED, THE PROXY WILL BE VOTED FOR THE ELECTION OF ALAN B. MILLER AS A DIRECTOR, FOR THE ADVISORY (NONBINDING) VOTE TO APPROVE NAMED EXECUTIVE OFFICER COMPENSATION, FOR THREE YEARS ON THE ADVISORY (NONBINDING) VOTE ON THE FREQUENCY OF AN ADVISORY STOCKHOLDER VOTE TO APPROVE NAMED EXECUTIVE OFFICER COMPENSATION, AND FOR THE RATIFICATION OF THE SELECTION OF PRICEWATERHOUSECOOPERS LLP, AS THE COMPANY’S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE FISCAL YEAR ENDING DECEMBER 31, 2023 AND AS SAID PROXIES DEEM ADVISABLE ON SUCH OTHER MATTERS AS MAY PROPERLY COME BEFORE THE MEETING. |
WHEN PROPERLY EXECUTED, THIS PROXY WILL BE VOTED AS DESIGNATED. IF NO CHOICE IS SPECIFIED, THE PROXY WILL BE VOTED FOR THE ELECTION OF ALAN B. MILLER AS DIRECTOR, FOR THE APPROVAL OF THE COMPANY’S 2020 OMNIBUS STOCK AND INCENTIVE PLAN, FOR THE APPROVAL OF OUR NAMED EXECUTIVE OFFICER COMPENSATION, AND FOR THE RATIFICATION OF THE SELECTION OF PRICEWATERHOUSECOOPERS LLP, AS THE COMPANY’S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE FISCAL YEAR ENDING DECEMBER 31, 2020.
Universal Health Services, Inc.UNIVERSAL HEALTH SERVICES, INC. Using a black ink pen, mark your votes with an X as shown in this example. Please do not write outside the designated areas. Your vote matters – here’s- here's how to vote! You may vote online or by phone instead of mailing this card. Online Go to www.envisionreports.com/UHS or scan the QR code — login-login details are located in the shaded bar below. Phone Call toll free 1-800-652-VOTE (8683) within the USA, US territories and Canada Save paper, time and money! Sign up for electronic delivery at www.envisionreports.com/UHS Annual Meeting Proxy Card • IF VOTING BY MAIL, SIGN, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE. •A Proposals —- The Board of Directors recommends a vote FOR the nominee listed in Proposal 1, and FOR Proposals 2 and 4, and for 3 and 4. AYEARS on Proposal 3. 1. Nominee: + 01. Election of Director:Directors: 01 - Nina Chen-Langenmayr For Withhold 01 - Lawrence S. Gibbs For Against Abstain For Against Abstain 2. Proposal to approve the Company’s 2020 Omnibus Stock and 3. Advisoryconduct an advisory (nonbinding) vote to approve named executive Incentive Plan officer compensation. For Against Abstain 4. Proposal to ratify the selection of PricewaterhouseCoopers LLP as the Company’sCompany's independent registered public accounting firm for the fiscal year ending December 31, 2020. WHEN PROPERLY EXECUTED, THIS PROXY WILL BE VOTED AS DESIGNATED. IF NO CHOICE IS SPECIFIED, THE PROXY WILL BE VOTED FOR THE NOMINEE LISTED IN PROPOSAL2023. 3. Proposal to conduct an advisory (nonbinding) vote on the frequency of an advisoy stockholder vote to approve name executive officer compensation. Discretionary authority is hereby granted with respect to such other matters as may properly come before the meeting. 1 AND FOR PROPOSALSyear 2 Years 3 AND 4.Years Abstain B Authorized Signatures —- This section must be completed for your vote to be counted. —- Date and Sign Below B Please sign exactly as name(s) appears hereon. Joint owners should each sign. When signing as attorney, executor, administrator, corporate officer, trustee, guardian, or custodian, please give full title. Date (mm/dd/yyyy) —- Please print date below. Signature 1 —- Please keep signature within the box. Signature 2 —- Please keep signature within the box. 1UPX1 U P X 03LSOD + 037FVF
The 20202023 Annual Meeting of Stockholders of Universal Health Services, Inc. will be held on May 20, 2020,17, 2023, at 10:00 a.m. EDT virtually via live webcast at www.meetingcenter.io/266493346www.meetnow.global/MRYPLHZ To access the virtual meeting, you will need the 15-digit control number that is printed in the shaded bar located on the reverse side of this form. The password for the meeting is UHS2020. Important Notice Regarding the Availability of Proxy Materials for the Stockholder Meeting to be held on Wednesday, May 20, 2020:17, 2023: The Proxy Statement and Annual Report to Stockholders are available at http://www.envisionreports.com/UHS Small steps make an impact. Help the environment by consenting to receive electronic delivery, sign up at www.envisionreports.com/UHS • IF VOTING BY MAIL, SIGN, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE. • Proxy —- UNIVERSAL HEALTH SERVICES, INC. + UNIVERSAL HEALTH SERVICES, INC. This Proxy Solicited By The Board Of Directors For The Annual Meeting Of Stockholders To Be Held On May 20, 202017, 2023 Alan B. Miller and Steve Filton and each of them, as the true and lawful attorneys, agents and proxies of the undersigned, with full power of substitution, are hereby authorized to represent and to vote, as designated below, all shares of Class B Common Stock and Class D Common Stock of Universal Health Services, Inc. held of record by the undersigned on March 24, 202022, 2023 at the Annual Meeting of Stockholders to be held at 10:00 a.m. on Wednesday, May 20, 2020,17, 2023, virtually via live audio webcast available at www.meetingcenter.io/266493346,www.meetnow.global/MRYPLHZ, and at any adjournment thereof. Any and all proxies heretofore given are hereby revoked. WHEN PROPERLY EXECUTED, THIS PROXY WILL BE VOTED AS DESIGNATED. IF NO CHOICE IS SPECIFIED. THE PROXY WILL BE VOTED FOR PROPOSALS 1, 2 AND 4 AND FOR 3 YEARS ON PROPOSAL 3 AND AS SAID PROXIES DEEM ADVISABLE ON SUCH OTHER MATTERS AS MAY PROPERLY COME BEFORE THE MEETING. THIS PROXY IS CONTINUED ON THE REVERSE SIDE. PLEASE SIGN ON THE REVERSE SIDE AND RETURN PROMPTLY. C Non-Voting Items C Change of Address — Please-Please print new address below. Comments —- Please print your comments below. Meeting Attendance Mark box to the right if you plan to attend the Annual Meeting. + |
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