In connection with the advisory agreement with a wholly-owned subsidiary of UHS, as discussed herein, we utilize certain of UHS' information technology ("IT") applications, consisting primarily of financial data applications. In addition, UHS and our third-party property managers rely extensively on IT systems to, as applicable, manage clinical and financial data, communicate with patients, tenants, payers, vendors and other third parties; and to summarize and analyze operating results. These various IT systems, and the networks and information systems of third parties that we, UHS and our third-party property managers rely on, are subject to damage or interruption from power outages, facility damage, computer and telecommunications failures, computer viruses, security breaches including credit card or personally identifiable information breaches, vandalism, theft, natural disasters, catastrophic events, human error and potential cyber threats, including malicious codes, worms, phishing attacks, denial of service attacks, ransomware and other sophisticated cyber-attacks, and our disaster recovery planning cannot account for all eventualities. These systems, in turn, interface with, and rely on, third-party systems that we do not control. Third parties to whom we outsource certain of our functions, or with whom our systems interface and who may, in some instances, store our sensitive and confidential data, are also subject to the risks outlined above and may not have or use controls effective to protect such information. An attack, breach or other system disruption affecting any of these third parties could similarly harm our business.

Cybersecurity Risk Management and Strategy

As cyber criminals continue to become more sophisticated through evolution of their tactics, techniques and procedures, we, UHS and our third-party property managers have taken, and will continue to take, additional preventive measures to strengthen the cyber defenses of the collective networks and data. Protecting data, which includes information related to clinical and financial data, and communications with patients, tenants, payers, vendors and other third parties is a primary area of focus for us, UHS, and our third-party property managers. Given the critical nature of this information, certain cybersecurity risk management programs were implemented to assess, identify, and manage risks associated with cybersecurity threats as identified in Item 106(a) of Regulation S-K.

UHS has a multi-tier risk management structure that includes regular reviews of laws, policies, vulnerabilities, and resource levels to address risks facing our organization. Such risks include operational, intellectual property theft, fraud, risks that have potential unfavorable impacts on our employees and/or patients, and violation of data privacy or security laws. To address cybersecurity risks facing UHS, and in turn us, to the degree applicable, UHS has adopted a “continuous risk assessment” process. UHS, through a third party, conducts a bi-annual National Institute of Technology-Cyber Security Framework assessment to determine the maturity of its program and related controls. The results of that assessment are shared with management of UHS, which drives prioritization and investment in resources to address those risks. Likewise, annual penetration tests occur to review the efficacy of technical controls, results which are reviewed by management of UHS and resolved in a timely manner. Other factors that feed into UHS' risk management practices are also operational events and incidents, which can lead to controls being reviewed and enhanced.

UHS also has a mature incident response process in place in the event a cybersecurity incident occurs. This process defines roles, responsibilities and action plans designed to contain, eradicate, and restore systems in the event of a major disruption. Regularly, UHS conducts tabletop exercises to simulate responses to an incident and implement any insight gained from those exercises to improve recovery practices. As part of these processes, UHS regularly engages with assessors, consultants, auditors, and other third parties to review UHS’ cybersecurity program to help identify areas for continued focus, improvement, and compliance.

For our the third-party property managers that manage a significant portion of our properties, we conduct periodic reviews of the policies and procedures they have established to detect, contain, eradicate, and restore systems in the event of a major disruption.

Based on the information available as of the date of this Form 10-K, during our fiscal year 2023 and through the date of this filing, we did not identify any risks from cybersecurity threats, including as a result of any previous cybersecurity incidents, that have materially affected or are reasonably likely to materially affect us, including our business strategy, results of operations or financial condition. For more information on risks to us from cybersecurity threats, see “Risks Related to Business Operations - A cyber security incident could cause a violation of HIPAA, breach of member privacy, or other negative impacts.” under “Item 1A. Risk Factors.”

Governance of Cybersecurity

The Audit Committee of our Board of Trustees is responsible for the oversight of risks from cybersecurity threats. Members of the Audit Committee receive updates, as warranted, regarding matters of cybersecurity, including review of significant issues encountered by us, UHS or our third-party managers.

UHS' cybersecurity risk management and strategy processes are overseen by leaders from their Information Security, Compliance, Legal and Internal Auditing teams. Such individuals have an average of over 20 years of prior work experience in various roles involving information technology, including security, auditing, compliance, systems and programming. These individuals monitor the prevention, mitigation, detection and remediation of cybersecurity incidents through their management of, and participation in, the cybersecurity risk management and strategy processes described above, including the operation of our incident response plan.