$6.50
$20.50
bear $6.50
base $13.20
bull $20.50
margin of safety $5.50
market price* $11.95
Ardent Health operates 30 acute care hospitals and more than 280 sites of care in eight mid-sized urban markets across six states: Texas, Oklahoma, New Mexico, New Jersey, Idaho and Kansas. Revenue was about $6.3 billion in 2025, up from $5.4 billion in 2023. A large and growing slice of Ardent's profit comes from government programs whose rules are changing. What we measured. We value the business on the cash it generates for shareholders: operating cash flow, with swings in receivables and payables removed, less stock compensation (a real cost, which rose from $0.9 million in 2023 to $39.3 million in 2025) and the part of capital spending needed just to keep the hospitals running. On that basis earnings per share were about $1.17 in 2023, $2.32 in 2024 and $1.65 in 2025 (about $1.08 in 2022, a year that included repaying $315.9 million of Medicare advance payments). We anchor on the middle of the 2023 to 2025 results, $1.65 per share, the most recent three years. The 2022 year is left out of the anchor because of the one-time Medicare repayment, which distorts it. Depreciation, amortization and other non-cash charges are already excluded from cash flow, so none is deducted again. The key driver. Medicaid supplemental payment programs, which states use to top up hospital payments, produced $402.6 million of revenue in 2023, $530.3 million in 2024 and $707.5 million in 2025. Part of the recent working-capital build was a New Mexico program approved in the fourth quarter of 2024, so that money is earned but collected later. The company says revenue from certain of these programs is expected to fall in 2026 as program changes take effect. The 2025 federal budget law also caps many state directed payments at Medicare rates and requires payments under existing (grandfathered) programs to be reduced beginning January 1, 2028. First-half 2026 net income attributable to Ardent was $56.7 million against $114.3 million a year earlier, and the drop was concentrated in the second quarter ($16.9 million against $72.9 million), which fits that warning. Growth reconciliation. Owner earnings per share fell about 29% in 2025 (from $2.32 to $1.65). Our base case starts 2026 at $1.10, a further decline of about 33%, so it does not assume the slowdown reverses. Base case (about $13.20 per share). Earnings run at about $1.10 in 2026 and 2027, then step down roughly 8% a year from 2028 through 2032 as grandfathered supplemental payments are phased out, reaching about $0.72. After that, the hospitals keep earning that reduced amount with no growth. We credit no growth from new hospitals, acquisitions, volume gains or price increases, because none is contracted or has been shown to repeat on a steady, self-funded basis at a pace we can rely on. Bear case (about $6.50 per share). Supplemental funding falls faster: earnings of $0.80 in 2026 and $0.70 in 2027, then 15% a year lower through 2032 to about $0.31, which then persists. Ardent carries about $764 million of term-loan debt (due September 2032) plus finance leases, which reduces its cushion if earnings fall this far. We do not subtract debt separately; interest is already in the cash flow. Bull case (about $20.50 per share). The second-quarter 2026 weakness proves partly temporary: earnings of $1.40 in 2026 and $1.45 in 2027, then the phase-down proceeds slowly, at about 4% a year through 2032, reaching about $1.18, which persists. What was left out. New facility openings, acquisitions, patient-volume gains and margin expansion are not counted in any case, because none is contracted or a repeating, self-funded process we can rely on. What could make this wrong. The filing says only that grandfathered payments will be reduced beginning January 1, 2028; the size and pace of the 2028-2032 step-downs in each case are our own estimates. Working-capital swings were large in 2022 to 2024, so cash flow can lurch from year to year. We discount all cash flows at a flat 6%. The shares appear to be worth roughly $6.50 (bear), $13.20 (base) and $20.50 (bull). Because a large share of profit depends on program funding that is already declining and that the law says will be cut further, and because of the debt, the margin-of-safety price is set well under the bear case, at about $5.50.