The medical sector took a beating in 2024, leaving many battered and trading near 52-week lows heading into 2025. While the landscape of rising medical costs and acute care utilization continues to trend higher, many of these stocks are in deep oversold territory, presenting opportunities for value investors to pick up shares on the cheap. Here are 3 beaten-up healthcare stocks starting to recover in 2025.1. CVS Health: Medicare Advantage Ballooning MBR Offset By Pharmacy BusinessShares of CVS Health Corp (NYSE:CVS) fell 40% in 2025. Rising utilization rates torpedoed its ambitious plans for creating an integrated health system in its health insurance arm, Aetna. The medical benefits ratio (MBR) is the percentage of insurance premiums that are used to pay for medical care. The higher an insurer’s MBR, the smaller their profits get and vice versa. CVS’s Q4 2024 MBR ballooned from 85% to 94.8%, driven by its Medicaid and Medicare Advantage (MA) population. However, its latest earnings report helped launch shares higher to start 2025 off with a 41.41% YTD gain as of Feb 21, 2025.Q4 2024 Could Have Sparked a TurnaroundCVS reported its fourth quarter of 2024 EPS of $1.19, beating consensus estimates by 28 cents. Revenues also showed growth of 4.2% YoY to $97.71 billion, beating consensus estimates for $97.09 billion. Its MBR ratio grew to 94.8%, up from 88.5% last year, which chopped its EPS to collapse 44% YoY. Its Health Care Benefits (insurance) segment posted an operating loss of $439 million due to an increase in medical utilization (more medical services), unfavorable MA star rating and higher acuity (more severe and complex health conditions) among its Medicaid members.On the bright side, its Pharmacy and Consumer Wellness segment saw 8% YoY revenue growth to $4.5 billion, filling 445.9 million prescriptions. Its Health Services segment saw a $47 billion top line, down 4% YoY, stemming from a loss of a major client and improving pharmacy client prices.Uplifting Full Year 2025 GuidanceManagement provided full-year guidance upside with EPS of $5.75 to $6.00 versus $5.86 consensus estimates. It expects an operating cash flow of around $6.5 billion. Not only was this upside guidance, but they actually issued guidance, which they didn’t do in its previous “kitchen sink” quarter. The new CEO, David Joyner, prioritized four strategic areas to focus on in 2025, including turning around its Aetna health insurance business to 3-5% target margins.This will require the company to shrink its MA membership by high single-digits, making healthcare more affordable and investing in technology like AI. Lastly, CVS will stay disciplined with its capital, emphasizing a stronger balanced sheet. The company will continue to maintain its current 4.2% annual dividend.Cutting Down Medicare Advantage Members to Boost MBR to 91.5%Management noted that its MA population could shed 800,000 members and overall MA membership to end the year down high single digits over 2024.CFO Tom Cowey commented on MBR, stating their plans to trim it, "We expect to generate healthcare benefits revenue of approximately $132 billion as membership declines in Medicare Advantage and individual exchange are offset by Medicare programming changes and growth in other products.At the low end of our healthcare benefits adjusted operating income guidance range, we project our medical benefit ratio will improve by 100 basis points over 2024, yielding an MBR of approximately 91.5%. Outperformance on this ratio is one of the largest potential factors that could drive us higher in our adjusted EPS guidance range.”2. Ardent Health Partners: Cutting Debt and Acquiring More Urgent Care ClinicsHospital and urgent care clinic operator Ardent Health Partners LLC (NYSE:ARDT) went public in July 2024. Its network consists of 30 hospitals and 4287 licensed beds. On Jan 3, 2025, the company acquired 18 more urgent care clinics in Oklahoma and New Mexico from NextCare Urgent Care. Six urgent cares in New Mexico and 12 clinics in Oklahoma will join its Lovelace Health System and Hillcrest HealthCare System.Ardent operates five hospitals and 25 sites in New Mexico and eight hospitals and 57 sites of care in Oklahoma. In 2024, Ardent acquired nine urgent care centers in East Texas and Topeka, Kansas.A Strong Second-Half of 2024 ReportedArdent Health saw steady YoY growth of inpatient and outpatient surgeries and admissions, which accelerated since 1H 2024. In its third quarter of 2025, the company reported EPS of 24 cents, missing consensus estimates by 5 cents. Revenues rose to $1.45 billion, missing estimates by 2.68 million. Adjusted EBITDA was $98 million, up 50 bps YoY, and operating cash flow was $90 million.The company guided the full-year 2024 adjusted EBITDAR to $138 million. Admissions grew 6.4% YoY to 39,568. Emergency room visits rose 2.6% YoY to 161,343. Net patient service revenue rose 0.9% YoY to $16,312, with an average length of stay at 4.6 days.CEO Marty Bonick stated, “We've continued our service line optimization initiatives, enhanced supply chain efficiencies, and furthered our technological drive through the deployment of new AI initiatives aimed at supporting our caregivers, driving efficiencies, and elevating clinical outcomes. Collectively our strategic initiatives are driving value, positioning us strongly for continued growth."3. Universal Health Services: Acute Care and Behavior Health ServicesNot to be confused with UnitedHealthcare Group Inc., Universal Health Services Inc. (NYSE:UHS) operates acute care hospitals and behavioral healthcare facilities. The company operates 27 acute care hospitals and 333 inpatient behavioral health facilities. The average length of stay is 4.8 days for acute care and 13.5 days for behavioral health.Shares were heavily downgraded across the board after the November 2024 elections, as the 50% chance of ACA marketplace subsidies expiring on Dec0% 31, 2025, is 10. A Republican sweep means that ACA cuts and the expiration of many subsidies in the American Rescue Plan could drop health insurance coverage for 4 million people in 2026.Margins Started to Expand Again in Q3In its Q3 2024 earnings report, Universal Health saw revenue rise to $3.96 billion, beating consensus estimates by $60 million. EBITDA was $528.6 million, leading to an EBITDA margin improvement of 13.3%, up from 11.5% in the year-ago period. Its adjusted diluted EPS rose 45% YoY to 3.71. Acute care generated 56% of total revenue, while 44% came from behavioral health.Scrutiny Over the 2-Midnite RuleThe 2-midnight rule is a Medicare policy that determines whether a hospital stay is billed as inpatient or outpatient. Inpatient is much more expensive and profitable for the hospital. If a patient stays for more than 2 midnights, then it's inpatient, and Medicare Part A coverage takes over, while less than 2 midnight triggers Medicare Part B, which is less reimbursement. Hospitals must prove medical necessity upfront. The difference is a $10k to $15k bill for inpatient versus a $1,000 to $3,000 bill for outpatient.CFO Steve Filton commented, “The other issue which I kind of alluded to earlier is I think a number of acute care hospitals are anticipating a fairly significant benefit from the two-midnight rule change and a consequent change in the way they're coding these things, etcetera. As I've indicated, again, I think pretty clearly and consistently for a while now. We think we've been focused on that issue for several years now and, as a consequence, don't necessarily anticipate an incremental benefit from that.”Original Post