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What changed in Astrana Health, Inc.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Astrana Health, Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+662 added−627 removedSource: 10-K (2024-02-29) vs 10-K (2023-03-01)

Top changes in Astrana Health, Inc.'s 2023 10-K

662 paragraphs added · 627 removed · 431 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

117 edited+57 added−65 removed91 unchanged
Biggest changeACOs An ACO participates in in one or more payment and delivery models sponsored by CMS that provides high-quality and affordable care to Medicare fee-for-service patients. Outpatient Clinics Ambulatory surgery centers and other outpatient clinics are healthcare facilities that specialize in performing outpatient surgeries, ambulatory treatments, and diagnostic and other services in local communities.
Biggest changeThe risk is subject to stop-loss provisions in contracts with HMOs. 6 An ACO participates in in one or more payment and delivery models sponsored by Centers for Medicare & Medicaid Services (“CMS”) that provides high-quality and affordable care to Medicare FFS patients.
The physicians in the IPA are exclusively in control of, and responsible for, all aspects of the practice of medicine for enrolled patients.
The IPA physicians are exclusively in control of, and responsible for, all aspects of the practice of medicine for enrolled patients.
In the healthcare space, more sophisticated technology has been employed, new diagnostics and treatments have been introduced, research and development has expanded, and regulations have multiplied. This expanding complexity drives a growing and continuous need for integrated care delivery systems. Integration of Healthcare Information .
In the healthcare space, more sophisticated technology has been employed, new diagnostics and treatments have been introduced, research and development have expanded, and regulations have multiplied. This expanding complexity drives a growing and continuous need for integrated care delivery systems. Integration of Healthcare Information .
Shared-risk capitation arrangements are entered into with certain health plans, which are administered by the health plan, where we are responsible for rendering professional services, but the health plan does not enter into a capitation arrangement with a hospital and therefore, the health plan retains the institutional risk.
Health plan shared-risk capitation arrangements are entered into with certain health plans, which are administered by the health plan, where we are responsible for rendering professional services, but the health plan does not enter into a capitation arrangement with a hospital and therefore, the health plan retains the institutional risk.
In addition to the provisions of the False Claims Act, which provide for civil enforcement, the federal government also can use several criminal statutes to prosecute persons who are alleged to have submitted false or fraudulent claims to the government for payments. A number of states including California have enacted laws that are similar to the federal False Claims Act.
In addition to the provisions of the False Claims Act, which provide for civil enforcement, the federal government can also use several criminal statutes to prosecute persons who are alleged to have submitted false or fraudulent claims to the government for payments. A number of states, including California, have enacted laws that are similar to the federal False Claims Act.
While PORA also provides certain exemptions from this prohibition, failure to fit within an exemption in violation of PORA can lead to a misdemeanor offense that may subject a physician to civil penalties and disciplinary action by the Medical Board of California.
While PORA also provides certain exemptions from this prohibition, failure to fit within an exemption in violation of PORA can lead to a misdemeanor offense that may subject a physician to civil penalties and disciplinary action by the Medical Board of California.
While our MSOs and their managed medical groups and IPAs are not contractually obligated to pay claims to hospitals or other institutions under these arrangements, if it is determined that our MSOs or the medical groups and IPAs have been inappropriately taking financial risk for institutional and professional services without Knox-Keene license or regulatory exemption as a result of their hospital and physician arrangements, we may be required to obtain a restricted Knox-Keene license to resolve such violations and we could be subject to civil and criminal liability, any of which could have a material adverse effect on our business, financial condition, or results of operations.
While our MSOs and their managed medical groups and IPAs are not contractually obligated to pay claims to hospitals or other institutions under these arrangements, if it is determined that our MSOs or the medical groups and IPAs have been inappropriately taking financial risk for institutional and professional services without a Knox-Keene license or regulatory exemption as a result of their hospital and physician arrangements, we may be required to obtain a restricted Knox-Keene license to resolve such violations and we could be subject to civil and criminal liability, any of which could have a material adverse effect on our business, financial condition, or results of operations.
PHM seeks to improve the health outcomes by monitoring and identifying individual patients, aggregating data, and providing a comprehensive clinical picture of each patient. Using that data, providers can track, and hopefully improve, clinical outcomes while lowering costs. A successful PHM platform requires a robust care and risk management infrastructure, a cohesive delivery system, and a well-managed partnership network.
PHM seeks to improve health outcomes by monitoring and identifying individual patients, aggregating data, and providing a comprehensive clinical picture of each patient. Using that data, providers can track, and hopefully improve, clinical outcomes while lowering costs. A successful PHM platform requires a robust care and risk management infrastructure, a cohesive delivery system, and a well-managed partnership network.
Outpatient Clinics Our outpatient clinics compete with large ambulatory surgery centers and/or diagnostic centers such as RadNet and Envision Healthcare, many of which have greater financial, personnel, and other resources available to them, as well as smaller clinics that have ties to local communities. Optum (f.k.a. HealthCare Partners) also has its own urgent care centers, clinics, and diagnostic centers.
Outpatient Clinics Our outpatient clinics compete with large ambulatory surgery centers and/or diagnostic centers such as RadNet and Envision Healthcare, many of which have greater financial, personnel, and other resources available to them, as well as smaller 15 clinics that have ties to local communities. Optum (f/k/a HealthCare Partners) also has its own urgent care centers, clinics, and diagnostic centers.
Our physicians are required to carry first dollar coverage with limits of liability equal to not less than $1.0 million for claims based on occurrence up to an aggregate of $3.0 million per year. Our IPAs purchase stop-loss insurance, which will reimburse them for claims from service providers on a per enrollee basis.
Our physicians are required to carry first-dollar coverage with limits of liability equal to not less than $1.0 million 21 for claims based on occurrence up to an aggregate of $3.0 million per year. Our IPAs purchase stop-loss insurance, which will reimburse them for claims from service providers on a per-enrollee basis.
Cultural Affinities with Patients 15 In addition to delivering premium healthcare, we believe in the importance of providing services that are sensitive to the needs of local communities, including their cultural affinities. This value is shared by physicians within our affiliated IPAs and medical groups, and promotes patient comfort in communicating with care providers.
Cultural Affinities with Patients In addition to delivering premium healthcare, we believe in the importance of providing services that are sensitive to the needs of local communities, including their cultural affinities. This value is shared by physicians within our affiliated IPAs and medical groups, and promotes patient comfort in communicating with care providers.
A HIPAA-covered entity must also promptly notify affected individuals where a breach affects more than 500 individuals and report annually any breaches affecting fewer than 500 individuals. 20 State attorneys general may bring civil actions on behalf of state residents for violations of the HIPAA privacy and security rules, obtain damages on behalf of state residents, and enjoin further violations.
A HIPAA-covered entity must also promptly notify affected individuals where a breach affects more than 500 individuals and report annually any breaches affecting fewer than 500 individuals. State attorneys general may bring civil actions on behalf of state residents for violations of the HIPAA privacy and security rules, obtain damages on behalf of state residents, and enjoin further violations.
Capitation revenue is typically prepaid monthly to us based on the number of enrollees selecting us as their healthcare provider. Capitation is a fixed payment amount per patient per unit of time paid in advance for the delivery of healthcare services, whereby the service providers are generally liable for excess medical costs.
Capitation revenue is typically prepaid monthly to us based on the number of enrollees selecting us as their healthcare provider. Capitation is a fixed payment amount per patient per unit of time paid in advance for the delivery of healthcare 12 services, whereby the service providers are generally liable for excess medical costs.
Regulatory Matters 16 As a healthcare company, our operations and relationships with healthcare providers, such as hospitals, other healthcare facilities, and healthcare professionals, are subject to extensive and increasing regulation by numerous federal, state, and local government agencies, including the Office of Inspector General, the Department of Justice, CMS, and various state authorities.
Regulatory Matters As a healthcare company, our operations and relationships with healthcare providers, such as hospitals, other healthcare facilities, and healthcare professionals, are subject to extensive and increasing regulation by numerous federal, state, and local government agencies, including the Office of Inspector General, the Department of Justice, CMS, and various state authorities.
Under the Global Risk track, we are responsible for 100% of shared savings or losses up to 25% of the total budgetary benchmark established by CMS, with adjusted risk corridors taking effect for any proportion of shared savings / losses exceeding 25% of the benchmark—for savings/losses of 25-35% of the benchmark, we assume 50% risk responsibility, 14 for savings/losses 35%-50% of the benchmark we assume 25% of the risk responsibility, and for savings/losses exceeding 50% of the benchmark, we assume only 10% of the risk responsibility.
Under the Global Risk track, we are responsible for 100% of shared savings or losses up to 25% of the total budgetary benchmark established by CMS, with adjusted risk corridors taking effect for any proportion of shared savings / losses exceeding 25% of the benchmark—for savings/losses of 25-35% of the benchmark, we assume 50% risk responsibility, for savings/losses 35%-50% of the benchmark we assume 25% of the risk responsibility, and for savings/losses exceeding 50% of the benchmark, we assume only 10% of the risk responsibility.
In addition, pursuant to the changes of the ACA, a claim that includes items or services resulting from a violation of the Anti-Kickback Statute is a false claim for purposes of the False Claims Act. Due to the breadth of the Anti-Kickback Statute’s broad prohibitions, statutory exceptions exist that protect certain arrangements from prosecution.
In addition, pursuant to the changes of the ACA, a claim that includes items or services resulting from a violation of the Anti-Kickback Statute is a false claim for purposes of the False Claims Act. 17 Due to the breadth of the Anti-Kickback Statute’s broad prohibitions, statutory exceptions exist that protect certain arrangements from prosecution.
We have developed expertise in population health management and care coordination, and in proper medical coding, which results in improved Risk Adjustment Factor (“RAF”) scores and higher payments from health plans, and in improving quality metrics in both inpatient and outpatient settings and thus patient satisfaction and CMS scores.
We have developed expertise in population health management and care coordination, and in proper medical coding, which results in improved Risk Adjustment Factor (“RAF”) scores and higher payments from health plans, and in improved quality metrics in both inpatient and outpatient settings and thus patient satisfaction and CMS scores.
A review or action by regulatory authorities or the courts that is negative in nature as to the relationship between us and the physician groups or IPAs which we manage or contract with, could force us to terminate those contractual relationships.
A review or action by regulatory authorities or the courts that is negative in nature as to the relationship between us and the physician groups or IPAs that we manage or contract with, could force us to terminate those contractual relationships.
Some of the relevant laws, regulations, and agency interpretations in California and other states that have corporate practice prohibitions have been subject to limited judicial and regulatory interpretation. Moreover, state laws and regulatory interpretations are subject to change.
Some of the relevant laws, regulations, and agency interpretations in California and other states that have corporate practice prohibitions have been subject to limited judicial and 16 regulatory interpretation. Moreover, state laws and regulatory interpretations are subject to change.
Fee For Service Revenue FFS revenue represents revenue earned under contracts in which we bill and collect the professional component of charges for medical services rendered by our contracted physicians and employed physicians.
Fee For Service (“FFS”) Revenue FFS revenue represents revenue earned under contracts in which we bill and collect the professional component of charges for medical services rendered by our contracted physicians and employed physicians.
In some instances, our affiliated medical groups and IPAs have been paid by their contracting payors or hospitals for the financial outcome of managing the care costs associated with both the professional and institutional services received by patients, and have recognized a percentage of the surplus of institutional revenues less institutional expense as the medical groups’ and IPAs’ net revenues; and, under certain circumstances, may be responsible for a percentage of any shortfall in the event that institutional expenses exceed institutional revenues.
In some instances, our affiliated medical groups and IPAs have been paid by their contracting payers or hospitals for the financial outcome of managing the care costs associated with both the professional and institutional services received by patients, and have recognized a percentage of the surplus of institutional revenues less institutional expense as the medical groups’ and IPAs’ net revenues; and, under certain circumstances, may be responsible for a percentage of any shortfall in the event that institutional expenses exceed institutional revenues.
Other Federal and State Healthcare Laws 21 We are also subject to other federal and state healthcare laws that could have a material adverse effect on our business, financial condition, or results of operations.
Other Federal and State Healthcare Laws We are also subject to other federal and state healthcare laws that could have a material adverse effect on our business, financial condition, or results of operations.
The changes implemented by the final rules went into effect on January 19, 2021. These or other changes implemented by OIG in the future may impact our business, results of operations and financial condition. Some states have enacted statutes and regulations similar to the Anti-Kickback Statute, but which may be applicable regardless of the payor source for the patient.
The changes implemented by the final rules went into effect on January 19, 2021. These or other changes implemented by OIG in the future may impact our business, results of operations and financial condition. Some states have enacted statutes and regulations similar to the Anti-Kickback Statute, but which may be applicable regardless of the payer source for the patient.
Shared-risk deficits, if any, are not payable until and unless (and only to the extent of any) risk-sharing surpluses are generated. At the termination of the HMO contract, any accumulated deficit will be extinguished. In addition to risk-sharing revenues, we also receive incentives under “pay-for-performance” programs for quality medical care, based on various criteria.
Health plan shared-risk deficits, if any, are not payable until and unless (and only to the extent of any) risk-sharing surpluses are generated. At the termination of the HMO contract, any accumulated deficit will be extinguished. In addition to risk-sharing revenues, we also receive incentives under “pay-for-performance” programs for quality medical care, based on various criteria.
Because the Stark Law and implementing regulations continue to evolve and are detailed and complex, while we attempt to structure its relationships to meet an exception to the Stark Law, there can be no assurance that the arrangements entered into by us with affiliated physicians and facilities will be found to be in compliance with the Stark Law, as it ultimately may be implemented or interpreted.
Because the Stark Law and implementing regulations continue to evolve and are detailed and complex, while we attempt to structure our relationships to meet an exception to the Stark Law, there can be no assurance that the arrangements entered into by us with affiliated physicians and facilities will be found to be in compliance with the Stark Law, as it ultimately may be implemented or interpreted.
In accordance with relevant accounting guidance, APC has been determined to be a VIE of NMM, as NMM is its primary beneficiary with the ability, through majority representation on the APC Joint Planning Board and otherwise, to direct the activities (excluding clinical decisions) that most significantly affect APC’s economic performance.
In accordance with relevant accounting guidance, APC has been determined to be a VIE of AHM, as AHM is its primary beneficiary with the ability, through majority representation on the APC Joint Planning Board and otherwise, to direct the activities (excluding clinical decisions) that most significantly affect APC’s economic performance.
IPAs and MSOs An IPA is an association of independent physicians, or other organization that contracts with independent physicians, and provides services to HMOs, which are medical insurance groups that provide health services generally for a fixed annual fee, on a negotiated per capita rate, flat retainer fee, or negotiated FFS basis.
An IPA is an association of independent physicians, or other organization that contracts with independent physicians, and provides services to HMOs, which are medical insurance groups that provide health services generally for a fixed annual fee, on a negotiated per capita rate, flat retainer fee, or negotiated FFS basis.
These services include but are not limited to: • Physician recruiting; • Physician and health plan contracting; • Care management, including utilization management, medical management, and quality management; • Provider relations; • Member services, including annual wellness evaluations; • Pre-negotiating contracts with specialists, labs, imaging centers, nursing homes, and other vendors; and • Revenue cycle management.
These services include but are not limited to: • Physician recruiting; • Physician and health plan contracting; • Care management, including utilization management, medical management, and quality management; • Provider relations; • Member services, including annual wellness evaluations; • Claims processing; • Pre-negotiating contracts with specialists, labs, imaging centers, nursing homes, and other vendors; and • Revenue cycle management.
Through the MSAs and the relationship with the physician owners of our medical affiliates, we have exclusive authority over all non-medical decisions related to the ongoing business operations of those affiliates. Consequently, ApolloMed consolidates the revenue and expenses of such affiliates as their primary beneficiary from the date of execution of the applicable MSA.
Through the MSAs and the relationship with the physician owners of our medical affiliates, we have exclusive authority over all non-medical decisions related to the ongoing business operations of those affiliates. Consequently, Astrana consolidates the revenue and expenses of such affiliates as their primary beneficiary from the date of execution of the applicable MSA.
Each state defines the scope of practice of clinical professionals through legislation and through the respective Boards of Medicine and Nursing. Activities that qualify as professional misconduct under state law may subject our clinical personnel to sanctions, or to even lose their license and could, possibly, subject us to sanctions as well.
Each state defines the scope of practice of clinical professionals through legislation and through the respective Boards of Medicine and Nursing. Activities that qualify as professional misconduct under state law may subject our clinical personnel to sanctions, or to even lose their license and could potentially subject us to sanctions as well.
The specific retention amount per enrollee per policy period is $45,000 to $100,000 for professional coverage. We also maintain workers’ compensation, director and officer, and other third-party insurance coverage subject to deductibles and other restrictions that we believe are in accordance with industry standards.
The specific retention amount per enrollee per policy period is $45,000 to $90,000 for professional coverage. We also maintain workers’ compensation, director and officer, and other third-party insurance coverage subject to deductibles and other restrictions that we believe are in accordance with industry standards.
A violation of this statute may be charged as a felony offense and may result in fines, imprisonment, or both.
A violation of this statute may be charged as a felony offense and may result in fines, imprisonment, or 20 both.
Under the FFS arrangements, we bill, and receive payments from, the hospitals and third-party payors for physician staffing and further bill patients or their third-party payors for patient care services provided. Our Key Payors A limited number of payors represent a significant portion of our net revenue.
Under the FFS arrangements, we bill, and receive payments from, the hospitals and third-party payers for physician staffing and further bill patients or their third-party payers for patient care services provided. Our Key Payers A limited number of payers represent a significant portion of our net revenue.
Licensure, Certification, Accreditation, and Related Laws and Guidelines 22 Our clinical personnel are subject to numerous federal, state, and local licensing laws and regulations, relating to, among other things, professional credentialing and professional ethics. Clinical professionals are also subject to state and federal regulation regarding prescribing medication and controlled substances.
Licensure, Certification, Accreditation, and Related Laws and Guidelines Our clinical personnel are subject to numerous federal, state, and local licensing laws and regulations relating to, among other things, professional credentialing and professional ethics. Clinical professionals are also subject to state and federal regulations regarding prescribing medication and controlled substances.
Other parties, including our affiliated physicians, may assert that, despite these arrangements, ApolloMed and its subsidiaries are engaged in the prohibited corporate practice of medicine or that such arrangements constitute unlawful fee-splitting between physicians and non-physicians.
Other parties, including our affiliated physicians, may assert that, despite these arrangements, Astrana and its subsidiaries are engaged in the prohibited corporate practice of medicine or that such arrangements constitute unlawful fee-splitting between physicians and non-physicians.
We, together with our affiliated physician groups and consolidated entities, provide coordinated outcomes-based medical care primarily serving patients in California, the majority of whom are covered by private or public insurance provided through Medicare, Medicaid, and health maintenance organizations (“HMOs”), with a small portion of our revenue coming from non-insured patients.
We, together with our affiliated physician groups and consolidated entities, provide coordinated outcomes-based medical care serving patients in California, Nevada, and Texas, the majority of whom are covered by private or public insurance provided through Medicare, Medicaid, and health maintenance organizations (“HMOs”), with a small portion of our revenue coming from non-insured patients.
Some states have enacted statutes and regulations against self-referral arrangements similar to the federal Stark Law, but which may be applicable to the referral of patients regardless of their payor source and which may apply to different types of services.
Some states have enacted statutes and regulations against self-referral arrangements similar to the federal Stark Law, but which may be applicable to the referral of patients regardless of their payer source and which may apply to different types of services.
Some of the medical groups and IPAs that have entered into MSAs with our MSOs have historically contracted with health plans and other payors to receive capitation payments and assumed the financial responsibility for professional services.
Some of the medical groups and IPAs that have entered into MSAs with our MSOs have historically contracted with health plans and other payers to receive capitation payments and assumed the financial responsibility for professional services.
In many of these cases, the health plans or other payors separately enter into contracts with hospitals that receive payments and assume some type of contractual financial responsibility for their institutional services.
In many of these cases, the health plans or other payers separately enter into contracts with hospitals that receive payments and assume some type of contractual financial responsibility for their institutional services.
The Health Care Fraud Statute prohibits any person from knowingly and willfully executing, or attempting to execute, a scheme to defraud any healthcare benefit program, which can be either a government or private payor plan.
The Health Care Fraud Statute prohibits any person from knowingly and willfully executing, or attempting to execute, a scheme to defraud any healthcare benefit program, which can be either a government or private payer plan.
The assumptions for medical loss ratios (“MLR”), incurred but not reported (“IBNR”) completion factor and constraint percentages were used by management in applying the most likely amount methodology.
Assumptions for medical loss ratios (“MLR”), incurred but not reported (“IBNR”) completion factors and constraint percentages were used by management in applying the most likely amount methodology.
The incentive programs track specific performance measures and calculate payments to us based on the performance measures. Generally, for the foregoing arrangements, the final settlement is dependent on each distinct day’s performance within the annual measurement period, but cannot be allocated to specific days until the full measurement period has occurred and performance can be assessed.
The incentive programs track specific performance measures and calculate payments to us based on the performance measures. Generally, for the foregoing arrangements, the final settlement is dependent on each distinct day’s performance within the annual measurement period, but cannot be determined until the full measurement period has occurred and performance can be assessed.
Many states also have laws that protect the privacy and security of confidential, personal information, which may be similar to or even more stringent than HIPAA. Where state laws are more protective than HIPAA, we have to comply with the stricter provisions.
Many states also have laws that protect 19 the privacy and security of confidential, personal information, which may be similar to or even more stringent than HIPAA. Where applicable state laws are more protective than HIPAA, we are required to comply with the stricter provisions.
In response, both the public and private sectors are shifting away from the fee-for-service reimbursement model toward value-based, capitated payment models that are designed to incentivize value and quality at an individual patient level. The number of Americans covered by capitated payment programs continues to increase, which drives more coordinated and outcomes-based patient care. Increasingly Patient-Centered .
In response, both the public and private sectors are shifting away from the FFS reimbursement model toward value-based, capitated payment models that are designed to incentivize value and quality at an individual patient level. The number of Americans covered by capitated payment programs continues to increase, which drives more coordinated and outcomes-based patient care. Increasingly Patient-Centered .
As an incentive to control enrollee utilization and to promote quality care, certain HMOs have designed quality incentive programs and commercial generic pharmacy incentive programs to compensate us for our efforts to improve the quality of services and to promote the efficient and effective use of pharmacy supplemental benefits provided to HMO members.
As an incentive to promote quality care, certain HMOs have designed quality incentive programs and commercial generic pharmacy incentive programs to compensate us for our efforts to improve the quality of services and to promote the efficient and effective use of pharmacy supplemental benefits provided to HMO members.
Long-Standing Relationships with Partners We have developed long-standing relationships with and have earned trust from multiple health plans, hospitals, IPAs, and other medical groups that have helped to generate recurring contractual revenue for us. Comprehensive and Effective Healthcare Management Programs We offer comprehensive and effective healthcare management programs to patients.
Long-Standing Relationships with Partners We have developed long-standing relationships with multiple health plans, hospitals, IPAs, and other medical groups that have helped to generate recurring contractual revenue for us. Comprehensive and Effective Healthcare Management Programs We offer comprehensive and effective healthcare management programs to patients.
To address this expected significant rise in healthcare costs, the U.S. healthcare market is seeking more efficient and effective methods of delivering care. The fee-for-service reimbursement model has arguably played a major role in increasing the level and growth rate of healthcare spending.
To address this expected significant rise in healthcare costs, the U.S. healthcare market is seeking more efficient and effective methods of delivering care. The FFS reimbursement model has arguably played a major role in increasing the level and growth rate of healthcare spending.
Pursuant to our risk-share agreement with CMS, we will be eligible to receive the surplus (shared savings) or be liable for the deficit (shared losses) according to the budgetary benchmark established by CMS based on our efficiency or lack thereof, in managing the expenditures associated with beneficiaries aligned to us by CMS.
Pursuant to our risk-share agreement with CMS, we are eligible to receive the surplus (shared savings) or are liable for the deficit (shared losses) according to the budgetary benchmark established by CMS based on our efficiency, or lack thereof, in managing the expenditures associated with our Aligned Beneficiaries.
Under the Risk Adjustment model, capitation is paid on an interim basis based on enrollee data submitted for the preceding year and is adjusted in subsequent periods after the final data is compiled. Per member per month (“PMPM”) managed care contracts generally have a term of one year or longer.
Under the Risk Adjustment model, capitation is paid on an interim basis based on enrollee data submitted for the preceding year and is adjusted in subsequent periods after the final data is compiled. PMPM managed care contracts generally have a term of one year or longer.
The OIG, which has the authority to impose administrative sanctions for violation of the statute, has adopted as its standard for review a judicial interpretation, which concludes that the statute prohibits any arrangement where even one purpose of the remuneration is to induce or reward referrals.
The Office of Inspector General (“OIG”), which has the authority to impose administrative sanctions for violation of the statute, has adopted as its standard for review a judicial interpretation, which concludes that the statute prohibits any arrangement where even one purpose of the remuneration is to induce or reward referrals.
The MSAs typically have an initial term of 1-10 years and are generally not terminable by our affiliated IPAs and medical groups except in the case of bankruptcy, gross negligence, fraud, or other illegal acts by the contracting MSO.
The MSAs typically have an initial term of one to thirty years and are generally not terminable by our affiliated IPAs and medical groups except in the case of bankruptcy, gross negligence, fraud, or other illegal acts by the contracting MSO.
In addition, we bear risk on all Part A and Part B expenditures (both in-network and out-of-network) based on a budgetary benchmark established with CMS. Claims from out-of-network providers are processed and paid by CMS. Our shared savings or losses in managing our beneficiaries are generally determined on an annual basis after reconciliation with CMS.
In 13 addition, we bear risk on all Medicare expenditures (both in-network and out-of-network), excluding drug expenditures covered by Medicare Part D, based on a budgetary benchmark established with CMS. Claims from out-of-network providers are processed and paid by CMS. Our shared savings or losses in managing our beneficiaries are generally determined on an annual basis after reconciliation with CMS.
A Robust Physician Network As of December 31, 2022, our physician network consisted of approximately 11,000 contracted physicians, including primary care physicians, specialist physicians, and hospitalists, through our affiliated physician groups and ACOs.
A Robust Physician Network As of December 31, 2023, our physician network consisted of approximately 10,000 contracted physicians, including primary care physicians, specialist physicians, and hospitalists, through our affiliated physician groups and ACOs.
PORA makes it unlawful for physicians, surgeons, and other licensed professionals to refer a person for certain healthcare services if they have a financial interest with the person or entity that receives the referral.
For example, California has adopted PORA, which makes it unlawful for physicians, surgeons, and other licensed professionals to refer a person for certain healthcare services if they have a financial interest with the person or entity that receives the referral.
Knox-Keene Act and State Insurance Laws The Knox-Keene Health Care Service Plan Act of 1975 (Health and Safety Code Section 1340, et seq.), as amended (the “Knox-Keene Act”), is the California law that regulates managed care plans. Neither our MSOs nor their managed medical groups and IPAs hold a Knox-Keene license.
Knox-Keene Act and State Insurance Laws The Knox-Keene Health Care Service Plan Act of 1975, as amended (the “Knox-Keene Act”), is the California law that regulates managed care plans. Neither our MSOs nor their managed medical groups and IPAs hold a Knox-Keene license.
PMIOC provides comprehensive diagnostic imaging services using state-of-the-art technology. PMIOC offers high-quality diagnostic services, such as MRI/MRA, PET/CT, CT, nuclear medicine, ultrasound, digital x-rays, bone densitometry, and digital mammography, at its facilities. These investments are accounted for under the equity method as the Company has the ability to exercise significant influence, but not control over operations.
PMIOC offers high-quality diagnostic services, such as MRI/MRA, PET/CT, CT, nuclear medicine, ultrasound, digital X-rays, bone densitometry, and digital mammography, at its facilities. These investments are accounted for under the equity method as the Company has the ability to exercise significant influence, but not control over operations.
Medicare spending is expected to have the fastest growth (7.3% per year for 2021-2030) primarily due to the projected enrollment growth. 8 Managed care health plans were developed in the U.S., primarily during the 1980s, in an attempt to mitigate the rising cost of providing healthcare to populations covered by health insurance.
Medicare spending is expected to have the fastest growth (7.5% per year for 2022-2031) primarily due to the projected enrollment growth. Managed care health plans were developed in the U.S., primarily during the 1980s, in an attempt to mitigate the rising cost of providing healthcare to populations covered by health insurance.
In addition to the state laws previously described, we may also be subject to other state fraud and abuse statutes and regulations if we expand our operations beyond California. Many states have adopted a form of anti-kickback law, self-referral prohibition, and false claims and insurance fraud prohibition.
In addition to the state laws previously described, we may also be subject to other state fraud and abuse statutes and regulations as we expand our operations beyond California, including into Nevada and Texas. Many states, such as California, Nevada and Texas, have adopted a form of anti-kickback law, self-referral prohibition, and false claims and insurance fraud prohibition.
Violations of federal or state antitrust laws can result in various sanctions, including criminal and civil penalties. Antitrust enforcement in the health care industry is currently a priority of the Federal Trade Commission and the DOJ.
Violations of federal or state antitrust laws can result in various sanctions, including criminal and civil penalties. Antitrust enforcement in the health care industry is currently a priority of the Federal Trade Commission and the U.S. Department of Justice.
California is a corporate practice of medicine state, and we operate by maintaining long-term MSAs with our affiliated IPAs and medical groups, each of which is owned and operated by physicians only, and employs or contracts with additional physicians to provide medical services.
California, Nevada and Texas are corporate practice of medicine states, and we operate by maintaining long-term MSAs with our affiliated IPAs and medical groups, each of which is owned and operated by physicians only, and employs or contracts with additional physicians to provide medical services.
States that have corporate practice of medicine laws require that only physicians can practice medicine, exercise control over medical decisions, or engage in certain arrangements with other physicians, such as fee-splitting.
States that have corporate practice of medicine laws permit only physicians to practice medicine, exercise control over medical decisions, or engage in certain arrangements, such as fee-splitting, with physicians.
According to the 2021 National Health Expenditure Historical Data prepared by CMS, healthcare spending in the U.S. increased 2.7% to $4.3 trillion in 2021, representing 18.3% of U.S. Gross Domestic Product. CMS projects healthcare spending in the U.S. to increase at an average rate of 5.1% for 2021-2030 and to reach approximately $6.8 trillion by 2030.
According to the 2022 National Health Expenditure Historical Data prepared by CMS, healthcare spending in the U.S. increased by 4.1% to $4.5 trillion in 2022, representing 17.3% of the U.S. Gross Domestic Product. CMS projects healthcare spending in the U.S. to increase at an average rate of 5.4% for 2022-2031 and to reach approximately $7.2 trillion by 2031.
Integrated Medical Systems 9 Integrated medical systems that are able to pool a large number of patients, such as the Company and its affiliated physician groups, are positioned to take advantage of industry trends, meet patient and government demands, and benefit from cost advantages resulting from their scale of operation and integrated approach of care delivery.
Integrated Health Network An integrated health network that is able to pool a large number of patients, such as the Company and its affiliated physician groups, is positioned to take advantage of industry trends, meet patient and government demands, and benefit from cost advantages resulting from their scale of operation and integrated approach of care delivery.
Under capitation arrangements with certain HMOs, we participate in one or more shared-risk arrangements relating to the provision of institutional services to enrollees (shared-risk arrangements) and thus can earn additional revenue or incur losses based upon the enrollee utilization of institutional services.
Under capitation arrangements with certain HMOs, our affiliated IPAs may participate in one or more health plan shared-risk arrangements relating to the provision of institutional services to enrollees (health plan shared-risk arrangements) and thus can earn additional revenue or incur losses based upon the enrollee utilization of institutional services.
Corporate Practice of Medicine Our consolidated financial statements include our subsidiaries and VIEs. Some states have laws that prohibit business entities with non-physician owners, such as ApolloMed and its subsidiaries, from practicing medicine, employing physicians to practice medicine, or exercising control over medical decisions by physicians. These laws are generally referred to as corporate practice of medicine laws.
Some states have laws that prohibit business entities with non-physician owners, such as Astrana and its subsidiaries, from practicing medicine, employing physicians to practice medicine, or exercising control over medical decisions by physicians. These laws are generally referred to as corporate practice of medicine laws.
In addition, integrated medical systems with years of managed care experience can leverage their expertise and sizeable medical data to identify specific treatment strategies and interventions, improve the quality of medical care and lower cost.
In addition, an integrated health network with years of managed care experience can leverage their expertise and sizeable medical data to identify specific treatment strategies and interventions, improve the quality of medical care and lower costs.
As medical care has increasingly been delivered in clinic settings, many integrated medical systems also operate healthcare facilities primarily focused on the diagnosis and/or care of outpatients, including those with chronic conditions such as heart disease and diabetes, to cover the primary healthcare needs of local communities. Hospitalists Hospitalists are doctors specialized in the care of patients in the hospital.
As medical care has increasingly been delivered in clinic settings, many integrated health networks also operate healthcare facilities primarily focused on the diagnosis and/or care of outpatients, including those with chronic conditions such as heart disease and diabetes, to cover the primary healthcare needs of local communities.
HealthCare Partners), a subsidiary of UnitedHealth Group. ACOs APAACO competes with other sophisticated provider groups in the creation, administration, and management of ACOs, many of which have greater financial, personnel, and other resources available to them. Major competitors of APAACO include Privia Health and Aledade.
ACOs Our ACOs competes with other sophisticated provider groups in the creation, administration, and management of ACOs, many of which have greater financial, personnel, and other resources available to them. Major competitors of APAACO include Privia Health and Aledade.
While many companies separately provide clinical, MSO, or technology support services, to our knowledge there are currently very few organizations like us that provide all three types of services to approximately 1.3 million patients as of December 31, 2022.
While many companies separately provide clinical, MSO, or technology support services, to our knowledge, there are currently very few organizations like ours that provide all three types of services to approximately 0.9 million patients as of December 31, 2023.
Many integrated medical systems have also established physician performance metrics that allow them to monitor quality and service outcomes achieved by participating physicians in order to reward efficient, high-quality care delivered to members and initiate improvement efforts for physicians whose performance can be enhanced.
Many integrated health networks, including the Company and its affiliated physician groups, have also established physician performance metrics that allow them to monitor quality and service outcomes achieved by participating physicians in order to reward efficient, high-quality care delivered to members and initiate improvement efforts for physicians whose performance can be enhanced.
As a result, more states are expected to enact laws that are similar to the federal False Claims Act in the future along with a corresponding increase in state false claims enforcement efforts.
As a result, a number of states have adopted, and more states are expected to enact laws that are similar to the federal False Claims Act, along with an expected corresponding increase in state false claims enforcement efforts.
Under the GPDC / ACO REACH Model, we recruit a group of Participant and Preferred (in-network) Providers. Based on the Participant Providers that join our ACO, CMS grants us a pool of Traditional Medicare patients (beneficiaries) to manage. Our beneficiaries will receive services from physicians and other medical service providers that are both in-network and out-of-network.
Based on the Participant Providers that join our ACO, CMS grants us a pool of Traditional Medicare patients (beneficiaries) to manage (the “Aligned Beneficiaries”). Our Aligned Beneficiaries will receive services from physicians and other medical service providers that are both in-network and out-of-network.
Health spending is projected to grow 1.8% faster than the U.S. gross domestic product per year on average over 2021-2030, and as a result, the healthcare share of gross domestic product is expected to stay consistent from 19.7% in 2020 to 19.6% in 2030.
Health spending is projected to grow 0.8% faster than the U.S. gross domestic product per year on average over 2022-2031, and as a result, the healthcare share of gross domestic product is expected to grow from 18.3% in 2021 to 19.6% in 2031.
As a result, we are well-positioned to take advantage of the shift in the U.S. healthcare industry toward providing value-based and results-oriented healthcare with a focus on patient satisfaction, high-quality care, and cost efficiency. In December 2017, ApolloMed merged with NMM, a California corporation formed in 1994 (the “2017 Merger”).
As a result, we believe we are well-positioned to take advantage of the shift in the U.S. healthcare industry toward providing value-based and results-oriented healthcare with a focus on patient satisfaction, high-quality care, and cost efficiency.
Under TCC, CMS estimates an average of in-network monthly expenditures for APAACO’s aligned beneficiaries and pays that projected amount to us in monthly installments. We are then responsible for paying our in-network providers for all Part A and Part B expenditures incurred by our beneficiaries with those providers.
Under TCC, CMS estimates an average of in-network monthly expenditures for our ACO’s Aligned Beneficiaries and pays that projected amount to us in monthly installments. We are then responsible for paying our in-network providers for all Medicare-covered services provided to our Aligned Beneficiaries by those providers.
For the years ended December 31, 2022, 2021 and 2020, four payors accounted for an aggregate of 59.0%, 49.6%, and 53.4% of our total net revenue, respectively.
For the years ended December 31, 2023, 2022 and 2021, four payers accounted for an aggregate of 61.7%, 59.0%, and 49.6% of our total net revenue, respectively.
Led by a management team with several decades of experience, we have built a company and culture that is focused on physicians providing high-quality medical care, population health management, and care coordination for patients.
Astrana’s common stock is listed on The Nasdaq Stock Market LLC (“Nasdaq”) and trades under the symbol “ASTH”. Led by a management team with several decades of experience, we have built a company and culture that is focused on physicians providing high-quality medical care, population health management, and care coordination for patients.
As the amount of healthcare data continues to grow, it becomes increasingly important to connect disparate data and apply insights in a targeted manner in order to better achieve the goals of higher quality and more efficient care.
As the amount of healthcare data continues to grow, it becomes increasingly important to connect disparate data and apply insights in a targeted manner in order to better achieve the goals of higher quality and more efficient care. Our Revenue Streams Our revenue reflected in the accompanying consolidated financial statements includes revenue generated by our subsidiaries and consolidated entities.
The scope and interpretations of these laws vary from state to state and are enforced by state courts and regulatory authorities, each with broad discretion. Generally, state laws reach to all healthcare services and not just those covered under a governmental healthcare program.
Many states have adopted a form of anti-kickback law, self-referral prohibition, and false claims and insurance fraud prohibition. The scope and interpretations of these laws vary from state to state and are enforced by state courts and regulatory authorities, each with broad discretion. Generally, state laws reach all healthcare services and not just those covered under a governmental healthcare program.
Population Health Management Population health management (“PHM”) is a central trend within healthcare delivery, which includes the aggregation of patient data across multiple health information technology resources, the analysis of that data into a single, actionable patient record, and the actions through which care providers can improve both clinical and financial outcomes.
By leveraging our care enablement platform, we believe that providers and payers can improve their ability to deliver high-quality care to their patients and achieve better patient outcomes. 7 Population health management (“PHM”) is a central trend within healthcare delivery, which includes the aggregation of patient data across multiple health information technology resources, the analysis of that data into a single, actionable patient record, and the actions through which care providers can improve both clinical and financial outcomes.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeThe following is a non-exhaustive list of some of the more significant healthcare laws and regulations that could affect us: • The False Claims Act, that provides for penalties against entities and individuals who knowingly or recklessly make claims to Medicare, Medicaid, and other governmental healthcare programs, as well as third-party payors, that contain or are based upon false or fraudulent information; • A provision of the Social Security Act, commonly referred to as the “Anti-Kickback Statute,” that prohibits the knowing and willful offering, payment, solicitation, or receipt of any bribe, kickback, rebate, or other remuneration, in cash or in kind, in return for the referral or recommendation of patients for items and services covered, in or in part, by federal healthcare programs such as Medicare and Medicaid; • A provision of the Social Security Act, commonly referred to as the Stark Law or physician self-referral law, that (subject to limited exceptions) prohibits physicians from referring Medicare patients to an entity for the provision of specific “designated health services” if the physician or a member of such physician’s immediate family has a direct or indirect financial relationship with the entity, and prohibits the entity from billing for services arising out of such prohibited referrals; • A provision of the Social Security Act that provides for criminal penalties on healthcare providers who fail to disclose known overpayments; • A provision of the Social Security Act that provides for civil monetary penalties on healthcare providers who fail to repay known overpayments within 60 days of identification or the date any corresponding cost report was due, if applicable, and also allows improper retention of known overpayments to serve as a basis for False Claims Act violations; 40 • Provisions of the Social Security Act (emanating from the DRA) that require entities that make or receive annual Medicaid payments of $5 million or more from a single Medicaid program to provide its employees, contractors, and agents with written policies and employee handbook materials on federal and state false claims acts and related statutes, that establish a new Medicaid Integrity Program designed to enhance federal and state efforts to detect Medicaid fraud, waste, and abuse, and that increase financial incentives for both states and individuals to bring fraud and abuse claims against healthcare companies; • State law provisions pertaining to anti-kickback, self-referral, and false claims issues; • Provisions of, and regulations relating to, HIPAA that provide penalties for knowingly and willfully executing a scheme or artifice to defraud a healthcare benefit program or falsifying, concealing, or covering up a material fact or making any material false, fictitious, or fraudulent statement in connection with the delivery of or payment for healthcare benefits, items, or services; • Provisions of HIPAA and the Health Information Technology for Economic and Clinical Health Act of 2009 (“HITECH”) limiting how covered entities, business associates, and business associate sub-contractors may use and disclose PHI and the security measures that must be taken in connection with protecting that information and related systems, as well as similar or more stringent state laws; • Federal and state laws that provide penalties for providers for billing and receiving payments from a governmental healthcare program for services unless the services are medically necessary and reasonable, adequately and accurately documented, and billed using codes that accurately reflect the type and level of services rendered; • State laws that provide for financial solvency requirements relating to risk-bearing organizations (“RBOs”), plan operations, plan-affiliate operations and transactions, plan-provider contractual relationships, and provider-affiliate operations and transactions, such as California Business & Professions Code Section 1375.4 (§ 1375.4; Cal.
Biggest changeThe following is a non-exhaustive list of some of the more significant healthcare laws and regulations that could affect us: • The False Claims Act, which provides for penalties against entities and individuals who knowingly or recklessly make claims to Medicare, Medicaid, and other governmental healthcare programs, as well as third-party payers, that contain or are based upon false or fraudulent information; • A provision of the Social Security Act, commonly referred to as the “Anti-Kickback Statute,” that prohibits the knowing and willful offering, payment, solicitation, or receipt of any bribe, kickback, rebate, or other remuneration, in cash or in kind, in return for the referral or recommendation of patients for items and services covered, in or in part, by federal healthcare programs such as Medicare and Medicaid; • A provision of the Social Security Act, commonly referred to as the Stark Law or physician self-referral law (subject to limited exceptions), prohibits physicians from referring Medicare patients to an entity for the provision of specific “designated health services” if the physician or a member of such physician’s immediate family has a direct or indirect financial relationship with the entity, and prohibits the entity from billing for services arising out of such prohibited referrals; • A provision of the Social Security Act that provides for criminal penalties on healthcare providers who fail to disclose known overpayments; • A provision of the Social Security Act that provides for civil monetary penalties on healthcare providers who fail to repay known overpayments within 60 days of identification or the date any corresponding cost report was due, if applicable, and also allows improper retention of known overpayments to serve as a basis for False Claims Act violations; • Provisions of the Social Security Act (emanating from the DRA) require entities that make or receive annual Medicaid payments of $5 million or more from a single Medicaid program to provide its employees, contractors, and agents with written policies and employee handbook materials on federal and state false claims acts and related statutes, that establish a Medicaid Integrity Program designed to enhance federal and state efforts to detect Medicaid fraud, waste, and abuse, and that increase financial incentives for both states and individuals to bring fraud and abuse claims against healthcare companies; • State law provisions pertaining to anti-kickback, self-referral, and false claims issues; 39 • Provisions of, and regulations relating to, HIPAA that provide penalties for knowingly and willfully executing a scheme or artifice to defraud a healthcare benefit program or falsifying, concealing, or covering up a material fact or making any materially false, fictitious, or fraudulent statement in connection with the delivery of or payment for healthcare benefits, items, or services; • Provisions of HIPAA and the Health Information Technology for Economic and Clinical Health Act of 2009 (“HITECH”) limiting how covered entities, business associates, and business associate sub-contractors may use and disclose PHI and the security measures that must be taken in connection with protecting that information and related systems, as well as similar or more stringent state laws; • Federal and state laws provide penalties for providers for billing and receiving payments from a governmental healthcare program for services unless the services are medically necessary and reasonable, adequately and accurately documented, and billed using codes that accurately reflect the type and level of services rendered; • State laws that provide for financial solvency requirements relating to risk-bearing organizations (“RBOs”), plan operations, plan-affiliate operations and transactions, plan-provider contractual relationships, and provider-affiliate operations and transactions, such as California Business & Professions Code Section 1375.4; • Federal laws that provide for administrative sanctions, including civil monetary penalties for, among other violations, inappropriate billing of services to federal healthcare programs, payments by hospitals to physicians for reducing or limiting services to Medicare or Medicaid patients, or employing or contracting with individuals or entities who/which are excluded from participation in federal healthcare programs; • Federal and state laws and policies require healthcare providers to enroll in the Medicare and Medicaid programs before submitting any claims for services, to promptly report certain changes in their operations to the agencies that administer these programs, and to re-enroll in these programs when changes in direct or indirect ownership occur or in response to revalidation requests from Medicare and Medicaid; • State laws that prohibit general business entities from practicing medicine, controlling physicians’ medical decisions or engaging in certain practices, such as splitting fees with physicians; • State laws that require timely payment of claims, including §1371.38, et al., of the California Health & Safety Code, which imposes time limits for the payment of uncontested covered claims and requires healthcare service plans to pay interest on uncontested claims not paid promptly within the required time period; • Laws in some states that prohibit non-domiciled entities from owning and operating medical practices in such states; • Federal and state laws and regulations restricting the techniques that may be used to collect past due accounts from consumers, such as our patients, for services provided to the consumer; and • State laws that require healthcare providers that assume professional and institutional risk (i.e., full risk) to either obtain a license under the Knox-Keene Health Care Service Plan Act of 1975 or receive an exemption from the California Department of Managed Healthcare (“DMHC”) for the contract(s) under which the entity assumes full risk.
In general, an ownership change occurs if there is a cumulative change in the corporation’s equity ownership by certain stockholders that exceeds 50 percentage points over a rolling three-year period. Similar rules may apply under state tax laws. Additional ownership changes in the future could result in additional limitations on our net operating loss carryforwards.
In general, an ownership change occurs if there is a cumulative change in the corporation’s equity ownership by certain stockholders that exceeds 50 percentage points over a rolling three-year period. Similar rules may apply under state tax laws. Ownership changes in the future could result in additional limitations on our net operating loss carryforwards.
If our management spends too much time on assessing potential opportunities, completing strategic transactions, and integrating strategic relationships, our management may not have sufficient time to focus on our existing operations. This diversion of attention could have material and adverse consequences on our operations and profitability.
If our management spends too much time assessing potential opportunities, completing strategic transactions, and integrating strategic relationships, our management may not have sufficient time to focus on our existing operations. This diversion of attention could have material and adverse consequences on our operations and profitability.
The arrangements we have with our VIEs are not as secure as direct ownership of such entities. Because of corporate practice of medicine laws, we entered into contractual arrangements to manage certain affiliated physician practice groups, which allow us to consolidate those groups for financial reporting purposes.
The arrangements we have with our VIEs are not as secure as direct ownership of such entities. Because of corporate practice of medicine laws, we have entered into contractual arrangements to manage certain affiliated physician practice groups, which allow us to consolidate those groups for financial reporting purposes.
We cannot predict whether a federal, state, or local government will determine that we are not operating in accordance with law, or whether, when or how the laws will change in the future and impact our business.
We cannot predict whether a federal, state, or local government will determine that we are not operating in accordance with the law, or whether, when or how the laws will change in the future and impact our business.
Any changes in healthcare laws or regulations that reduce, curtail, or eliminate payments, government-subsidized programs, government-sponsored programs, and/or the expansion of Medicare or Medicaid, among other actions, could have a material adverse effect on our business, results of operations, and financial condition. For example, the ACA dramatically changed how healthcare services are covered, delivered, and reimbursed.
Any changes in healthcare laws or regulations that reduce, curtail, or eliminate payments, government-subsidized programs, government-sponsored programs, and/or the expansion of Medicare or Medicaid, among other actions, could have a material adverse effect on our business, results of operations, and financial condition. 40 For example, the ACA dramatically changed how healthcare services are covered, delivered, and reimbursed.
Competitors have initiated lawsuits against us alleging in part interference with such exclusivity arrangements, and may do so again in the future. An adverse outcome from any such lawsuit could adversely affect our business, cash flows, and financial condition. If we inadvertently employ or contract with an excluded person, we may face government sanctions.
Competitors have, in the past, initiated lawsuits against us alleging in part interference with such exclusivity arrangements, and may do so again in the future. An adverse outcome from any such lawsuit could adversely affect our business, cash flows, and financial condition. If we inadvertently employ or contract with an excluded person, we may face government sanctions.
The existing federal deficit and continued deficit spending by the federal government can lead to reduced government expenditures, including for government-funded programs in which we participate such as Medicare. An economic downturn and sustained unemployment may also impact the number of enrollees in managed care programs and the profitability of managed care companies, which could result in reduced reimbursement rates.
The existing federal deficit and continued deficit spending by the federal government could lead to reduced government expenditures, including for government-funded programs in which we participate, such as Medicare. An economic downturn and sustained unemployment may also impact the number of enrollees in managed care programs and the profitability of managed care companies, which could result in reduced reimbursement rates.
Federal and state government agencies have active civil and criminal enforcement efforts against healthcare companies, and their executives and managers. The DRA, which provides a financial incentive to states to enact their own false claims acts, and similar laws encourage investigations against healthcare companies by different agencies. These investigations could also be initiated by private whistleblowers.
Federal and state government agencies have active civil and criminal enforcement efforts against healthcare companies and their executives and managers. The DRA, provides a financial incentive to states to enact their own false claims acts, and similar laws encourage investigations against healthcare companies by different agencies. These investigations could also be initiated by private whistleblowers.
If enacted, such a system could adversely affect our business. Consolidation in the healthcare industry could have a material adverse effect on our business, financial condition, and results of operations. 36 Many healthcare industry participants and payers are consolidating to create larger and more integrated healthcare delivery systems with greater market power.
If enacted, such a system could adversely affect our business. Consolidation in the healthcare industry could have a material adverse effect on our business, financial condition, and results of operations. Many healthcare industry participants and payers are consolidating to create larger and more integrated healthcare delivery systems with greater market power.
Finally, consolidation may also result in the acquisition or future development by our partners of products and services that compete with our products and services. Any of these potential results of consolidation could have a material adverse effect on our business, financial condition and results of operations. Risks Relating to GPDC/ACO REACH.
Finally, consolidation may also result in the acquisition or future development by our partners of products and services that compete with our products and services. Any of these potential results of consolidation could have a material adverse effect on our business, financial condition and results of operations. Risks Relating to ACO REACH.
A Knox-Keene Act license is required to operate a healthcare service plan, e.g., an HMO, or an organization that accepts global risk, i.e., accepts full risk for a patient population, including risk related to institutional services, e.g., hospital, and professional services. Applying for and obtaining such a license is a time-consuming and detail-oriented undertaking.
A Knox-Keene Act license is required to operate a healthcare service plan, e.g., an HMO, or an organization that accepts full risk, i.e., accepts full risk for a patient population, including risk related to institutional services, e.g., hospital and professional services. Applying for and obtaining such a license is a time-consuming and detail-oriented undertaking.
Consequently, we may not be able to utilize a material portion of our net operating loss carryforwards and other tax attributes, to offset our tax liabilities, which could have a material adverse effect on our cash flows and results of operations. Uncertain or adverse economic conditions could adversely impact us.
Consequently, we may not be able to utilize a material portion of our net operating loss carryforwards and other tax attributes to offset our tax liabilities, which could have a material adverse effect on our cash flows and results of operations. 24 Uncertain or adverse economic conditions could adversely impact us.
CMS relies on various third parties to effect the GPDC / ACO REACH program, including other departments of the U.S. government, such as Centers for Medicare & Medicaid Services Innovation Center (“CMMI”). CMS also relies on multiple third-party contractors to manage the GPDC / ACO REACH Model program, including claims and auditing.
CMS relies on various third parties to effect the ACO REACH program, including other departments of the U.S. government, such as Centers for Medicare & Medicaid Services Innovation Center (“CMMI”). CMS also relies on multiple third-party contractors to manage the ACO REACH Model program, including claims and auditing.
As CMS is implementing extensive reporting protocols for the GPDC / ACO REACH Model, CMS has indicated that because of inherent biases in reporting the results, its initial financial reports under the GPDC / ACO REACH Model may not be indicative of final results of actual risk sharing and revenues that we receive.
As CMS is implementing extensive reporting protocols for the ACO REACH Model, CMS has indicated that because of inherent biases in reporting the results, its initial financial reports under the ACO REACH Model may not be indicative of final results of actual risk sharing and revenues that we receive.
As a result, we may not be able to generate savings through our participation in the GPDC / ACO REACH Model to cover our administrative and care coordination operating costs, and any savings generated, if at all, will be earned in arrears and uncertain in both timing and amount.
As a result, we may not be able to generate savings through our participation in the ACO REACH Model to cover our administrative and care coordination operating costs, and any savings generated, if at all, will be earned in arrears and uncertain in both timing and amount.
Compliance with federal and state privacy and data security laws is expensive, and we may be subject to government or private actions due to privacy and security breaches. 44 We must comply with various federal and state laws and regulations governing the collection, dissemination, access, use, security, and confidentiality of PHI, including HIPAA and HITECH.
Compliance with federal and state privacy and data security laws is expensive, and we may be subject to government or private actions due to privacy and security breaches. We must comply with various federal and state laws and regulations governing the collection, dissemination, access, use, security, and confidentiality of PHI, including HIPAA and HITECH.
The cost of such litigation could also be significant and unrecoverable, which may also deter us from aggressively pursuing even legitimate claims. 45 We currently maintain malpractice liability insurance coverage to cover professional liability and other claims for certain hospitalists and clinic physicians.
The cost of such litigation could also be significant and unrecoverable, which may also deter us from aggressively pursuing even legitimate claims. We currently maintain malpractice liability insurance coverage to cover professional liability and other claims for certain hospitalists and clinic physicians.
Such accounting rules require that, under some circumstances, the VIE consolidation model be applied when a reporting enterprise holds a variable interest (e.g., equity interests, debt obligations, certain management, and service contracts) in a legal entity.
Such accounting rules require that, 25 under some circumstances, the VIE consolidation model be applied when a reporting enterprise holds a variable interest (e.g., equity interests, debt obligations, certain management, and service contracts) in a legal entity.
Many of our agreements with hospitals and medical groups have limited durations, may be terminated without cause by them, and prohibit us from acquiring physicians or patients from or competing with them. Many of our agreements with hospitals and medical groups are limited in their terms or may be terminated without cause by providing advance notice.
Many of our agreements with hospitals and medical groups have limited durations, may be terminated without cause by them, and prohibit us from acquiring physicians or patients from or competing with them. 32 Many of our agreements with hospitals and medical groups are limited in their terms or may be terminated without cause by providing advance notice.
Any violation or alleged violation of any of these laws or regulations by us or our affiliates could have a material adverse effect on our business, financial condition and results of operations. 41 Changes in healthcare laws could create an uncertain environment and materially impact us.
Any violation or alleged violation of any of these laws or regulations by us or our affiliates could have a material adverse effect on our business, financial condition and results of operations. Changes in healthcare laws could create an uncertain environment and materially impact us.
Medicare beneficiaries in the GPDC / ACO REACH Model are not required to receive care from a specified network of contracted providers and facilities, which could make it difficult for us to control the financial risks of those beneficiaries.
Medicare beneficiaries in the ACO REACH Model are not required to receive care from a specified network of contracted providers and facilities, which could make it difficult for us to control the financial risks of those beneficiaries.
If the entity is a VIE, the consolidation framework next identifies the party, if one exists, that possesses a controlling financial interest in the VIE, and then requires that party to consolidate as the primary beneficiary.
If the entity is a VIE, the consolidation framework next identifies the party, if one exists, that possesses a controlling financial interest in the VIE, and then requires that party to consolidate the VIE as it is the primary beneficiary.
Also, depending on the location of the strategic transactions, we may be required to comply with laws and regulations that may differ from those of California, the state in which we currently operate. • We may form strategic relationships with medical practices that operate with lower profit margins as compared with ours or which have a different payor mix than our other practice groups, which would reduce our overall profit margin.
Also, depending on the location of the strategic transactions, we may be required to comply with laws and regulations that may differ from those of California, the state in which we currently operate. • We may form strategic relationships with medical practices that operate with lower profit margins as compared with ours or that have a different payer mix than our other practice groups, which would reduce our overall profit margin.
If we are subject to an audit or investigation, a finding could be made that we or our affiliates erroneously billed or were incorrectly reimbursed, and we may be required to repay such agencies or payors, may be subjected to pre-payment reviews, which can be time-consuming and result in non-payment or delayed payments for the services we or our affiliates provide, and may be subject to financial sanctions or required to modify our operations.
If we are subject to an audit or investigation, a finding could be made that we or our affiliates erroneously billed or were incorrectly reimbursed, and we may be required to repay such agencies or payers, may be subjected to pre-payment reviews, which can be time-consuming and result in non-payment or delayed payments for the services we or our affiliates provide, and may be subject to financial sanctions or required to modify our operations.
If we are unable to manage our growth effectively, it will have a material adverse effect on its business, results of operations, and financial condition.
If we are unable to manage our growth effectively, it will have a material adverse effect on our business, results of operations, and financial condition.
The ACA requires insurers to accept all applicants, regardless of pre-existing conditions, cover an extensive list of conditions and treatments, and charge the same rates, regardless of pre-existing condition or gender.
The ACA requires insurers to accept all applicants, regardless of pre-existing conditions, cover an extensive list of conditions and treatments, and charge the same rates, regardless of pre-existing conditions or gender.
In addition, compliance with these standards could limit our ability to offer services, thereby negatively impacting the business opportunities available to us. Despite our efforts to prevent privacy and security breaches, it may still occur. If any non-compliance with such laws and regulations results in privacy or security breaches, we could be subject to monetary fines, suits, penalties, or sanctions.
In addition, compliance with these standards could limit our ability to offer services, thereby negatively impacting the business opportunities available to us. Despite our efforts to prevent privacy and security breaches, they may still occur. If any non-compliance with such laws and regulations results in privacy or security breaches, we could be subject to monetary fines, suits, penalties, or sanctions.
The evolving nature of our business and rapid changes in the healthcare industry makes it difficult to anticipate the nature and amount of medical reimbursements, third-party private payments, and participation in certain government programs and thus to reliably predict our future growth and operating results. We could experience significant losses under capitation contracts if our expenses exceed revenues.
The evolving nature of our business and rapid changes in the healthcare industry make it difficult to anticipate the nature and amount of medical reimbursements, third-party private payments, and participation in certain government programs and thus to reliably predict our future growth and operating results. We could experience significant losses under capitation contracts if our expenses exceed revenues.
The implementation of these systems upgrades, and conversions is a complex and time-consuming project involving substantial expenditures for implementation activities, consultants, system hardware and software, often requires transforming our current business and processes to conform to new systems, and therefore, may take longer, be more disruptive, and cost more than forecast and may not be successful.
The implementation of these systems upgrades and conversions is a complex and time-consuming project involving substantial expenditures for implementation activities, consultants, system hardware and software, so it often requires transforming our current business and processes to conform to new systems, and therefore, may take longer, be more disruptive, and cost more than forecast and may not be successful.
In addition, cost containment measures in non-governmental insurance plans have generally restricted our ability to recover, or shift to non-governmental payors, these increased costs. In attempts to limit federal and state spending, there have been, and we expect that there will continue to be, a number of proposals to limit or reduce Medicare reimbursement for various services.
In addition, cost containment measures in non-governmental insurance plans have generally restricted our ability to recover, or shift to non-governmental payers, these increased costs. In attempts to limit federal and state spending, there have been, and we expect that there will continue to be, a number of proposals to limit or reduce Medicare reimbursement for various services.
A decrease in these referrals due to competition, concerns about our services and other factors could result in a significant decrease in our revenues and adversely impact our financial condition. Similarly, we cannot assure that we will be able to obtain or maintain preferred provider status with significant third-party payors in the communities where we operate.
A decrease in these referrals due to competition, concerns about our services and other factors could result in a significant decrease in our revenues and adversely impact our financial condition. Similarly, we cannot assure that we will be able to obtain or maintain preferred provider status with significant third-party payers in the communities where we operate.
There is no assurance that government or other third-party payors will continue to pay for the services provided by our affiliated medical groups. Furthermore, there has been, and continues to be, a great deal of discussion and debate about the repeal and replacement of existing government reimbursement programs, such as the ACA.
There is no assurance that government or other third-party payers will continue to pay for the services provided by our affiliated medical groups. Furthermore, there has been, and continues to be, a great deal of discussion and debate about the repeal and replacement of existing government reimbursement programs, such as the ACA.
The ACA potentially expands the use of prepayment review by Medicare contractors by eliminating statutory restrictions on its use, and, as a result, efforts to impose more stringent cost controls are expected to continue. Utilization review is also a requirement of most non-governmental managed care organizations and other third-party payors.
The ACA potentially expands the use of prepayment review by Medicare contractors by eliminating statutory restrictions on its use, and, as a result, efforts to impose more stringent cost controls are expected to continue. Utilization review is also a requirement of most non-governmental managed care organizations and other third-party payers.
For example, the Medicare Access and CHIP Reauthorization Act of 2015 made numerous changes to Medicare, Medicaid, and other healthcare-related programs, including new systems for establishing annual updates to Medicare rates for physicians’ services. We may have difficulty collecting payments from third-party payors in a timely manner.
For example, the Medicare Access and CHIP Reauthorization Act of 2015 made numerous changes to Medicare, Medicaid, and other healthcare-related programs, including new systems for establishing annual updates to Medicare rates for physicians’ services. We may have difficulty collecting payments from third-party payers in a timely manner.
We believe that a majority of our revenues will continue to be derived from a limited number of key payors, which may terminate their contracts with us, or our physicians credentialed by them, upon the occurrence of certain events. They may also amend the material terms of the contracts under certain circumstances.
We believe that a majority of our revenues will continue to be derived from a limited number of key payers, which may terminate their contracts with us, or our physicians credentialed by them, upon the occurrence of certain events. They may also amend the material terms of the contracts under certain circumstances.
If actual claims exceed our estimated reserves, we may be required to increase reserves, which would lead to a reduction in our assets or net income. Competition for qualified physicians, employees, and management personnel is intense in the healthcare industry, and we may not be able to hire and retain qualified physicians and other personnel.
If actual claims exceed our estimated reserves, we may be required to increase reserves, which would lead to a reduction in our assets or net income. Competition for qualified physicians, employees, and management personnel is intense in the healthcare industry, and we may not be able to hire and retain or contract with qualified physicians and other personnel.
In response to the ruling, a number of state governors opposed its state’s participation in the expanded Medicaid program, which resulted in the ACA not providing coverage to some low-income persons in those states. In addition, several bills have been, and are continuing to be, introduced in U.S.
In response to the ruling, a number of state governors opposed their state’s participation in the expanded Medicaid program, which resulted in the ACA not providing coverage to some low-income persons in those states. In addition, several bills have been, and are continuing to be, introduced in U.S.
The healthcare industry is intensely regulated at the federal, state, and local levels, and government authorities may determine that we fail to comply with applicable laws or regulations and take actions against us. As a company involved in providing healthcare services, we are subject to numerous federal, state, and local laws and regulations.
The healthcare industry is intensely regulated at the federal, state, and local levels, and government authorities may determine that we fail to comply with applicable laws or regulations and take action against us. As a company involved in providing healthcare services, we are subject to numerous federal, state, and local laws and regulations.
Additionally, ApolloMed’s charter and bylaws contain additional provisions, such as the authorization for its board of directors to issue one or more classes of preferred stock and determine the rights, preferences, and privileges of the preferred stock, which could cause substantial dilution to a person or group that attempts to acquire ApolloMed on terms not approved by the board, and the ownership requirement for ApolloMed’s stockholders to call special meetings, that could deter, discourage, or make it more difficult for a change in control of ApolloMed or for a third party to acquire ApolloMed, even if such a change in control could be deemed in the interest of ApolloMed’s stockholders, or if such an acquisition would provide ApolloMed’s stockholders with a substantial premium for their shares over the market price of ApolloMed’s common stock.
Additionally, Astrana’s charter and bylaws contain additional provisions, such as the authorization for its board of directors to issue one or more classes of preferred stock and determine the rights, preferences, and privileges of the preferred stock, which could cause substantial dilution to a person or group that attempts to acquire Astrana on terms not approved by the board, and the ownership requirement for Astrana’s stockholders to call special meetings, that could deter, discourage, or make it more difficult for a change in control of Astrana or for a third party to acquire Astrana, even if such a change in control could be deemed in the interest of Astrana’s stockholders, or if such an acquisition would provide Astrana’s stockholders with a substantial premium for their shares over the market price of Astrana’s common stock.
A lack of an active market may contribute to stock price volatility or supply/demand imbalances, make an investment in ApolloMed’s common stock less attractive to certain investors, and/or impair the ability of ApolloMed’s stockholders to sell shares at the time they desire or at a price that they consider favorable.
A lack of an active market may contribute to stock price volatility or supply/demand imbalances, make an investment in Astrana’s common stock less attractive to certain investors, and/or impair the ability of Astrana’s stockholders to sell shares at the time they desire or at a price that they consider favorable.
Section 404 also requires our independent registered public accounting firm to attest to, and report on, management’s assessment of our internal controls over financial reporting. Our management, including our principal executive officer and principal financial officer, does not expect that our internal controls over financial reporting will prevent all errors and all fraud.
Section 404 also requires our independent registered public accounting firm to attest to, and report on, management’s assessment of our internal control over financial reporting. Our management, including our principal executive officer and principal financial officer, does not expect that our internal control over financial reporting will prevent all errors and fraud.
If these arrangements were held to be invalid under applicable laws, which may change from time to time, a significant portion of our consolidated revenues would be affected, which may result in a material adverse effect on our results of operations and financial condition. Similarly, if Dr.
If these arrangements were held to be invalid under applicable laws, which may change from time to time, a significant portion of our consolidated revenues would be affected, which may result in a material adverse effect on our results of operations and financial condition.
The continuation or recurrence of any of these conditions may adversely affect our cash flows, results of operations, and financial condition. As economic uncertainty may continue in future periods, our patients, private payors, and government payors may alter their purchasing activities of healthcare services.
The continuation or recurrence of any of these conditions may adversely affect our cash flows, results of operations, and financial condition. As economic uncertainty may continue in future periods, our patients, private payers, and government payers may alter their purchasing activities of healthcare services.
If we are unable to maintain our referral base or our preferred provider status with significant third-party payors, it may negatively impact our revenues and financial performance. Partner facilities may terminate agreements with our affiliated physician groups or reduce their fees.
If we are unable to maintain our referral base or our preferred provider status with significant third-party payers, it may negatively impact our revenues and financial performance. Partner facilities may terminate agreements with our affiliated physician groups or reduce their fees.
Congress to amend all or significant provisions of the ACA, or repeal and replace the ACA with another law. In December 2017, the individual mandate was repealed via the Tax Cuts and Jobs Act of 2017. Afterwards, legal and political challenges as to the constitutionality of the remaining provisions of the ACA resumed.
Congress to amend all or significant provisions of the ACA, or repeal and replace the ACA with another law. In December 2017, the individual mandate was repealed via the Tax Cuts and Jobs Act of 2017. Afterward, legal and political challenges as to the constitutionality of the remaining provisions of the ACA resumed.
The lack of an active market may also reduce the fair market value of ApolloMed’s common stock, impair our ability to raise capital by selling shares of ApolloMed’s common stock, or use such stock as consideration to attract and retain talent or engage in business transactions.
The lack of an active market may also reduce the fair market value of Astrana’s common stock, impair our ability to raise capital by selling shares of Astrana’s common stock, or use such stock as consideration to attract and retain talent or engage in business transactions.
Our operations and performance depend primarily on California and U.S. economic conditions and their impact on purchases of, or capitated rates for, our healthcare services, and our business is significantly exposed to risks associated with government spending and private payor reimbursement rates.
Our operations and performance depend primarily on California and U.S. economic conditions and their impact on purchases of, or capitated rates for, our healthcare services, and our business is significantly exposed to risks associated with government spending and private payer reimbursement rates.
Our financial statements are consolidated and include the accounts of our majority-owned subsidiaries and various non-owned affiliated physician groups that are VIEs, which consolidation is effectuated in accordance with applicable accounting rules promulgated by the Financial Accounting Standards Board (“FASB”).
Our financial statements are consolidated and include the accounts of our majority-owned subsidiaries and various non-owned affiliated physician groups that are VIEs, whose consolidation is effectuated in accordance with applicable accounting rules promulgated by the Financial Accounting Standards Board (“FASB”).
Due to our and our affiliates’ participation in government and private healthcare programs, we are from time to time involved in inquiries, reviews, audits, and investigations by governmental agencies and private payors of our business practices, including assessments of our compliance with coding, billing, and documentation requirements.
Due to our and our affiliates’ participation in government and private healthcare programs, we are from time to time involved in inquiries, reviews, audits, and investigations by governmental agencies and private payers of our business practices, including assessments of our compliance with coding, billing, and documentation requirements.
Inpatient utilization, average lengths of stay and occupancy rates continue to be negatively affected by payor-required pre-admission authorization and utilization review and by third-party payor pressure to maximize outpatient and alternative healthcare delivery services for less acutely ill patients.
Inpatient utilization, average lengths of stay and occupancy rates continue to be negatively affected by payer-required pre-admission authorization and utilization review and by third-party payer pressure to maximize outpatient and alternative healthcare delivery services for less acutely ill patients.
We derive significant revenue from third-party payors, and delays in payment or refunds to payors may adversely impact our net revenue. We assume the financial risks relating to uncollectible and delayed payments. In particular, we rely on some key governmental payors.
We derive significant revenue from third-party payers, and delays in payment or refunds to payers may adversely impact our net revenue. We assume the financial risks relating to uncollectible and delayed payments. In particular, we rely on some key governmental payers.
Failure to maintain such contracts on favorable terms, or at all, would materially and adversely affect our results of operations and financial condition. An exodus of our patients could have a material adverse effect on our results of operations. We may also be impacted by a shift in payor mix, including eligibility changes to government and private insurance programs.
Failure to maintain such contracts on favorable terms, or at all, would materially and adversely affect our results of operations and financial condition. 31 An exodus of our patients could have a material adverse effect on our results of operations. We may also be impacted by a shift in payer mix, including eligibility changes to government and private insurance programs.
We may encounter difficulties in managing our growth, and the nature of our business and rapid changes in the healthcare industry makes it difficult to reliably predict future growth and operating results. We may not be able to successfully grow and expand.
We may encounter difficulties in managing our growth, and the nature of our business and rapid changes in the healthcare industry make it difficult to reliably predict future growth and operating results. We may not be able to successfully grow and expand.
In addition, third-party payors may disallow, in whole or in part, requests for reimbursement based on determinations that certain amounts are not covered, services provided were not medically necessary, or supporting documentation was not adequate. Retroactive adjustments may change amounts realized from third-party payors and result in recoupments or refund demands, affecting revenue already received.
In addition, third-party payers may disallow, in whole or in part, requests for reimbursement based on determinations that certain amounts are not covered, services provided 42 were not medically necessary, or supporting documentation was not adequate. Retroactive adjustments may change amounts realized from third-party payers and result in recoupments or refund demands, affecting revenue already received.
The price at which ApolloMed’s common stock trades could be subject to significant fluctuation and may be affected by a variety of factors, including the trading volume, our results of operations, the announcement and consummation of certain transactions, our ability or inability to raise additional capital and the terms thereof, and therefore could fluctuate, and decline, significantly.
The price at which Astrana’s common stock trades could be subject to significant fluctuation and may be affected by a variety of factors, including the trading volume, our results of operations, the announcement and consummation of certain transactions, and our ability or inability to raise additional capital and the terms thereof, and therefore could fluctuate, and potentially decline, significantly.
It is possible that the changes to the Medicare, Medicaid, or other governmental healthcare program reimbursements may serve as precedent to possible changes in other payors’ reimbursement policies in a manner adverse to us.
It is possible that the changes to Medicare, Medicaid, or other governmental healthcare program reimbursements may serve as precedent to possible changes in other payers’ reimbursement policies in a manner adverse to us.
In California, we operate by maintaining contracts with our affiliated physician groups, which are each owned and operated by physicians, and which employ or contract with additional physicians to provide physician services.
In California, Nevada, and Texas, we operate by maintaining contracts with our affiliated physician groups, which are each owned and operated by physicians, and which employ or contract with additional physicians to provide physician services.
Our patients may scale back healthcare spending, and private and government payors may reduce reimbursement rates, which may also cause delay or cancellation of consumer spending for discretionary and non-reimbursed healthcare.
Our patients may scale back healthcare spending, and private and government payers may reduce reimbursement rates, which may also cause delay or cancellation of consumer spending for discretionary and non-reimbursed healthcare.
ApolloMed may also issue additional shares of its common stock or other securities that are convertible into or exercisable for common stock in connection with future acquisitions or for other business purposes.
Astrana may also issue additional shares of its common stock or other securities that are convertible into or exercisable for common stock in connection with future acquisitions or for other business purposes.
If one or more of these analysts cease coverage of us, we could lose market visibility, which in turn could cause ApolloMed’s stock price to decline.
If one or more of these analysts cease coverage of us, we could lose market visibility, which in turn could cause Astrana’s stock price to decline.
In addition, the exercise or conversion of outstanding options or warrants to purchase shares of ApolloMed’s stock may result in dilution to its existing stockholders upon any such exercise or conversion.
In addition, the exercise or conversion of outstanding options or warrants to purchase shares of Astrana’s stock may result in dilution to its existing stockholders upon any such exercise or conversion.
Controls designed to reduce inpatient services and associated costs may reduce our revenues. 42 Controls imposed by Medicare, Medicaid, and private payors designed to reduce admissions and lengths of stay, commonly referred to as “utilization review,” have affected and are expected to continue to affect our operations.
Controls imposed by Medicare, Medicaid, and private payers designed to reduce inpatient services and associated costs may reduce our revenues. Controls imposed by Medicare, Medicaid, and private payers designed to reduce admissions and lengths of stay, commonly referred to as “utilization review,” have affected and are expected to continue to affect our operations.
If analysts do not report about us, or negatively evaluate us, ApolloMed’s stock price could decline. The trading market for ApolloMed’s common stock will rely in part on the availability of research and reports that third-party analysts publish about us.
If analysts do not report about us, or negatively evaluate us, Astrana’s stock price could decline. 45 The trading market for Astrana’s common stock will rely in part on the availability of research and reports that third-party analysts publish about us.
As a result, if one provider is found liable for medical malpractice for the provision of care to a particular patient, all other providers who furnished care to that same patient, including possibly us and our affiliated physicians, may also share in the liability, which could be substantial individually or in aggregate.
As a result, if one provider is found liable for medical malpractice for the provision of care to a particular patient, all other providers who furnished care to that same patient, which could potentially include us and our affiliated physicians, may also share in the liability, which could be substantial individually or in aggregate.
Governmental payors typically pay on a more extended payment cycle, which could require us to incur substantial expenses prior to receiving corresponding payments.
Governmental payers typically pay on a more extended payment cycle, which could require us to incur substantial expenses prior to receiving corresponding payments.
As part of our medical record keeping, third-party billing, and other services, we collect and maintain PHI in paper and electronic format. Privacy and data security laws and regulations thus could have a significant effect on the manner in which we handle healthcare-related data and communicates with payors.
As part of our medical record keeping, third-party billing, and other services, we collect and maintain PHI in paper and electronic format. Privacy and data security laws and regulations thus could have a significant effect on the manner in which we handle healthcare-related data and communicate with payers.
If a regulator were to take the position that such loans were covered by the California Finance Lenders Law, we could be subject to regulatory action that could impair our ability to continue to operate and may have a material adverse effect on our profitability and business as we currently do not hold a CFLL licensure.
If a regulator were to take the position that such loans were covered by the CFLL, we could be subject to regulatory action that could impair our ability to continue to operate and may have a material adverse effect on our profitability and business as we currently do not hold a CFLL licensure.
These provisions may also limit the ability of ApolloMed’s stockholders to approve transactions that they may deem to be in their best interests.
These provisions may also limit the ability of Astrana’s stockholders to approve transactions that they may deem to be in their best interests.
The continued implementation of provisions of the ACA, the adoption of new regulations thereunder and ongoing challenges thereto, also added uncertainty about the current state of U.S. healthcare laws and could negatively impact our business, results of operations, and financial condition. Healthcare providers could be subject to federal and state investigations and payor audits.
The continued implementation of provisions of the ACA, the adoption of new regulations thereunder and ongoing challenges thereto, also add uncertainty about the current state of U.S. healthcare laws and could negatively impact our business, results of operations, and financial condition. Healthcare providers could be subject to federal and state investigations and payer audits.
However, even in such instances, such equity interests cannot be transferred to or held by us or by any non-professional organization. Accordingly, we do not directly own any equity interests in any affiliated physician groups in California.
However, even in such instances, such equity interests cannot be transferred to or held by us or by any non-professional organization. Accordingly, we do not directly own any equity interests in any affiliated physician groups in California, Nevada, and Texas.
If having our key management personnel serving as nominee equity holders of our VIEs is invalid under applicable laws, or if we lost the services of key management personnel for any reason, it could have a material adverse impact on our results of operations and financial condition.
If having our key personnel serving as nominee equity holders of our VIEs is deemed invalid under applicable laws, or if we lose the services of key personnel for any reason, it could have a material adverse impact on our results of operations and financial condition.
Just as the fate of the ACA is uncertain, so is the future of care organizations established under the ACA such as ACOs and NGACOs. Under its NGACO Participation Agreement with CMS, our operations are always subject to the nation’s healthcare laws, as amended, repealed, or replaced from time to time.
Just as the fate of the ACA is uncertain, so is the future of care organizations established under the ACA, such as ACOs and ACO REACH. Under its ACO REACH Participation Agreement with CMS, our operations are always subject to the nation’s healthcare laws, as amended, repealed, or replaced from time to time.
There are many large companies active in the healthcare industry, which make it more difficult for us to receive widespread coverage. Furthermore, if one or more of the analysts who do cover us downgrade ApolloMed’s common stock, its price would likely decline.
There are many large companies active in the healthcare industry, which makes it more difficult for us to receive widespread coverage. Furthermore, if one or more of the analysts who do cover us downgrade Astrana’s common stock, its price would likely decline.
Other factors that may cause the market price of ApolloMed’s common stock to fluctuate include: • Variations in our operating results, such as actual or anticipated quarterly and annual increases or decreases in revenue, gross margin or earnings; • Changes in our business, operations, or prospects, including announcements relating to strategic relationships, mergers, acquisitions, partnerships, collaborations, joint ventures, capital commitments, or other events by us or our competitors; • Announcements of acquisitions, dispositions, and other corporate transactions, as well as financings and other capital-raising transactions; • Developments, conditions, or trends in the healthcare industry; • Changes in the economic performance or market valuations of other healthcare-related companies; • General market conditions or domestic or international macroeconomic and geopolitical factors unrelated to our performance or financial condition, including economic or political instability, wars, civil unrest, terrorism, epidemics (including COVID-19), outbreak, and natural disasters; 46 • Sales of stock by ApolloMed’s stockholders generally and ApolloMed’s larger stockholders, including insiders, in particular, including sale or distributions of large blocks of common stock by our executives and directors; • Volatility and limitations in trading volumes of ApolloMed’s common stock and the stock market; • Approval, maintenance, and withdrawal of our and our affiliates’ certificates, permits, registration, licensure, certification, and accreditation by the applicable regulatory or other oversight bodies; • Our financing activities, including our ability to obtain financings and prices that we sell our equity securities, including notes convertible to and warrants to purchase shares of ApolloMed’s common stock; • Failures to meet external expectations or management guidance; • Changes in our capital structure and cash position; • Analyst research reports on ApolloMed’s common stock, including analysts’ recommendations and changes in recommendations, price targets, and withdrawals of coverage; • Departures and additions of our key personnel, including our officers or directors; • Disputes and litigations related to intellectual properties, proprietary rights, and contractual obligations; • Changes in applicable laws, rules, regulations, or accounting practices and other dynamics; and • Other events or factors, many of which may be out of our control.
Other factors that may cause the market price of Astrana’s common stock to fluctuate include: • Variations in our operating results, such as actual or anticipated quarterly and annual increases or decreases in revenue, gross margin or earnings; • Changes in our business, operations, or prospects, including announcements relating to strategic relationships, mergers, acquisitions, partnerships, collaborations, joint ventures, dispositions, other corporate transactions, financings, capital commitments, or other events by us or our competitors; • Developments, conditions, or trends in the healthcare industry; • Changes in the economic performance or market valuations of other healthcare-related companies; • General market conditions or domestic or international macroeconomic and geopolitical factors unrelated to our performance or financial condition, including economic or political instability, inflation, wars, civil unrest, terrorism, public health crises, and natural disasters; • Sales of stock by Astrana’s stockholders generally and Astrana’s larger stockholders, including insiders, in particular, including sale or distributions of large blocks of common stock by our executives and directors or large stockholders; • Volatility and limitations in trading volumes of Astrana’s common stock and the stock market; • Approval, maintenance, and withdrawal of our and our affiliates’ certificates, permits, registration, licensure, certification, and accreditation by the applicable regulatory or other oversight bodies; • Our financing activities, including our ability to obtain financings and prices at which we sell our equity securities, including securities convertible to or exercisable for shares of Astrana’s common stock; • Failures to meet external expectations or management guidance; • Changes in our capital structure and cash position; • Analyst research reports on Astrana’s common stock, including analysts’ recommendations and changes in recommendations, price targets, and withdrawals of coverage; • Departures and additions of our key personnel, including our officers or directors; • Disputes and litigations related to intellectual properties, proprietary rights, and contractual obligations; • Changes in applicable laws, rules, regulations, or accounting practices and other dynamics; and • Other events or factors, many of which may be out of our control.
Risks Relating to Our General Business and Operations. In 2019, the Company, AP-AMH, and APC consummated a series of interrelated transactions that may expose the Company and its subsidiaries and VIEs to additional risks, including the inability to repay a significant loan made in connection with such transactions.
Risks Relating to Our General Business and Operations. In 2019, the Company, Astrana Medical, and APC consummated a series of interrelated transactions that may expose the Company and its subsidiaries and VIEs to additional risks, including the inability to repay a significant loan made in connection with such transactions.
The terms of our credit agreements and other indebtedness from time to time require us to comply with a number of financial and other obligations, which may include maintaining debt service coverage and leverage ratios and maintaining insurance coverage, that impose significant operating and financial restrictions on us, including restrictions on our ability to take actions that may be in our interests.
The terms of our Amended Credit Agreement and other indebtedness we may incur from time to time require us to comply with a number of financial and other obligations, which may include maintaining debt service coverage and leverage ratios and maintaining insurance coverage, that impose significant operating and financial restrictions on us, including restrictions on our ability to take actions that may be in our interests.
The process of integrating strategic relationships also involves significant risks, including: • difficulties in coping with demands on management related to the increased size of our business; • difficulties in not diverting management’s attention from our daily operations; • difficulties in assimilating different corporate cultures and business practices; • difficulties in converting other entities’ books and records and conforming their practices to ours; 30 • difficulties in integrating operating, accounting, and information technology systems of other entities with ours and in maintaining uniform procedures, policies, and standards such as internal accounting controls; • difficulties in retaining employees who may be vital to the integration of the acquired entities; and • difficulties in maintaining contracts and relationships with payors of other entities.
The process of integrating strategic relationships also involves significant risks, including: • difficulties in coping with demands on management related to the increased size of our business; • difficulties resulting from the diversion of management’s attention from our daily operations; • difficulties in assimilating different corporate cultures and business practices; • difficulties in converting other entities’ books and records and conforming their practices to ours; • difficulties in integrating operating, accounting, and information technology systems of other entities with ours and in maintaining uniform procedures, policies, and standards such as internal accounting controls; 29 • difficulties in retaining employees who may be vital to the integration of the acquired entities; and • difficulties in maintaining contracts and relationships with payers of other entities.
Such events could have a material adverse effect on our business, results of operations and financial condition. Our future growth could be harmed if we lose the services of our key management personnel. 32 Our success depends to a significant extent on the continued contributions of our key management personnel, particularly our Co-Chief Executive Officer and President, Dr.
Such events could have a material adverse effect on our business, results of operations and financial condition. Our future growth could be harmed if we lose the services of our key management personnel. Our success depends to a significant extent on the continued contributions of our key management personnel, particularly our Chief Executive Officer and President Brandon K.
If these agreements and arrangements were held to be invalid under laws prohibiting the corporate practice of medicine and other laws or if there are new laws that prohibit such agreements or arrangements, a significant portion of our revenues will be lost, resulting in a material adverse effect on our results of operations and financial condition.
If these agreements and arrangements are held to be invalid under laws prohibiting the corporate practice of medicine and other laws or new laws are adopted that prohibit such agreements or arrangements, a significant portion of our revenues would be lost, resulting in a material adverse effect on our results of operations and financial condition.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeThese leases require monthly rental payments ranging from approximately $1,000 to $34,000 and have terms that expire between January 2024, subject to options to extend provided thereunder, and August 2035. We believe our existing facilities are in good condition and are suitable and adequate for our current requirements.
Biggest changeWe lease other offices and medical spaces located in Los Angeles, Riverside, and San Mateo County in California. We also maintain offices and medical spaces in Nevada, Texas and New York. Monthly rental payments range from approximately $1,000 to $42,000 and have terms that expire between January 2024 and, subject to options to extend provided thereunder, January 2041.
Based on current information and subject to future events and circumstances, we anticipate that we may extend leases on our various facilities as necessary, as they expire, and lease additional facilities to accommodate possible future growth.
We believe our existing facilities are in good condition and are suitable and adequate for our current requirements. Based on current information and subject to future events and circumstances, we anticipate that we may extend leases on our various facilities as necessary, as they expire, and lease additional facilities to accommodate possible future growth.
Item 2. Properties Our corporate headquarters are located in Alhambra, California, where we lease approximately 35,000 square feet of office spaces in two adjacent buildings from an entity that is wholly owned and consolidated by APC as a result of an acquisition that occurred on December 31, 2020.
Item 2. Properties Our corporate headquarters are located in Alhambra, California, where we lease approximately 35,000 square feet of office space in two adjacent buildings from a related party. We also lease approximately 47,500 square feet of office space in Monterey Park, California, from a related party.
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We also lease approximately 47,500 square feet of office space in Monterey Park, California, from an entity that is partially owned by APC. We maintain other offices and medical spaces located in Monterey Park, Alhambra, City of Industry, Arcadia, Glendale, Daly City, San Gabriel, Pasadena, and El Monte, California. We also maintain offices and medical spaces in Nevada and Texas.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeItem 3. Legal Proceedings Certain of the pending or threatened legal proceedings or claims in which we are involved are discussed under Note 14 - “Commitments and Contingencies,” to our consolidated financial statements in this Annual Report on Form 10-K, which disclosure is incorporated by reference herein. 48
Biggest changeCertain of the pending or threatened legal proceedings or claims in which we are involved are discussed under Note 14 - “Commitments and Contingencies,” to our consolidated financial statements in this Annual Report on Form 10-K, which disclosure is incorporated by reference herein.
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Item 3. Legal Proceedings We are, from time to time, party to lawsuits, threatened lawsuits, disputes and other claims arising in the normal course of business. We assess our liabilities and contingencies in connection with outstanding legal proceedings utilizing the latest information available.
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Where it is probable that we will incur a loss and the amount of the loss can be reasonably estimated, we record a liability in our consolidated financial statements. These legal accruals may be increased or decreased to reflect any relevant developments on a quarterly basis.
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Where a loss is not probable or the amount of the loss is not estimable, we do not record an accrual, consistent with applicable accounting guidance.
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In the opinion of management, while the outcome of such claims and disputes cannot be predicted with certainty, our ultimate liability in connection with these matters is not expected to have a material adverse effect on our results of operations, financial position or cash flows, and the amounts accrued for any individual matter are not material.
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However, legal proceedings are inherently uncertain. As a result, the outcome of a particular matter or a combination of matters may be material to our results of operations for a particular period, depending upon the size of the loss or our income for that particular period.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeApolloMed’s common stock is listed on the NASDAQ Capital Market, under the symbol, “AMEH.” Record Holders As of February 16, 2023, there were approximately 562 holders of record of ApolloMed’s common stock based on our transfer agent’s report.
Biggest changeMarket for Registrant’s Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities Market Information Astrana’s common stock is listed on Nasdaq under the symbol “ASTH.” Prior to the Company’s rebranding in February 2024, the Company’s common stock was listed on Nasdaq under the symbol “AMEH.” Record Holders As of February 22, 2024, there were approximately 599 holders of record of Astrana’s common stock based on our transfer agent’s report.
We believe the Russell 3000 Index is an appropriate independent broad market index, because it measures the performance of similar-sized companies in numerous sectors. In addition, we believe the S&P 500 Healthcare Index is an appropriate third-party published industry index because it measures the performance of healthcare companies.
We believe the Russell 3000 Index is an appropriate independent broad market index because it measures the performance of similar-sized companies in numerous sectors. In addition, we believe the S&P 500 Health Care Index is an appropriate third-party published industry index because it measures the performance of healthcare companies.
Because many shares of ApolloMed’s common stock are held by brokers and other nominees on behalf of stockholders, including in trust, we are unable to estimate the total number of stockholders represented by these record holders.
Because many shares of Astrana’s common stock are held by brokers and other nominees on behalf of stockholders, including in trust, we are unable to estimate the total number of stockholders represented by these record-holders.
Purchases of Equity Securities by the Issuer and Affiliated Purchasers None. 50 Performance Measurement Comparison The following chart compares the cumulative total return of our common stock with the cumulative total return of the Russell 3000 Index and the S&P 500 Healthcare Index, from December 31, 2017 to December 31, 2022.
Performance Measurement Comparison The following chart compares the cumulative total return of our common stock with the cumulative total return of the Russell 3000 Index and the S&P 500 Healthcare Index from December 31, 2018 to December 31, 2023.
Dividends To date, we have not paid any cash dividends on ApolloMed’s common stock, and we do not contemplate the payment of cash dividends thereon in the foreseeable future. Our future dividend policy will depend on our earnings, capital requirements, financial condition, and other factors relevant to our ability to pay dividends. Recent Sales of Unregistered Securities None.
Our future dividend policy will depend on our earnings, capital requirements, financial condition, and other factors relevant to our ability to pay dividends, including any contractual restrictions contained in our Amended Credit Agreement. Recent Sales of Unregistered Securities None.
Indexed Returns for the Years Ended Company/Index Base Period 12/31/2017 12/31/2018 12/31/2019 12/31/2020 12/31/2021 12/31/2022 ApolloMed 1.00 (0.17) (0.23) (0.24) 2.06 0.23 Russell 3000 Index 1.00 (0.05) 0.24 0.50 0.89 0.52 S&P 500 Healthcare 1.00 0.06 0.29 0.46 0.84 0.12
Indexed Returns for the Years Ended Company/Index Base Period 12/31/2018 12/31/2019 12/31/2020 12/31/2021 12/31/2022 12/31/2023 Astrana $ 100.00 $ 92.75 $ 92.04 $ 370.18 $ 149.07 $ 192.95 Russell 3000 Index 100.00 131.02 158.39 199.03 160.80 202.54 S&P 500 Healthcare 100.00 118.68 132.24 164.20 158.37 158.85 50
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Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities Market Information The information presented below is our historical data and not necessarily indicative of our future financial condition or results of operations.
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Dividends To date, we have not paid any cash dividends on Astrana’s common stock, and we do not contemplate the payment of cash dividends thereon in the foreseeable future.
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Purchases of Equity Securities by the Issuer and Affiliated Purchasers During the three months ended December 31, 2023, no shares were repurchased under the Company’s share repurchase plan.
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In December 2022, Astrana’s Board of Directors approved a share repurchase plan authorizing the Company to repurchase up to $50.0 million of its shares of common stock on the open market and through privately negotiated transactions. This share repurchase plan does not have an expiration date. The Board may suspend or discontinue the repurchase program at any time.
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This repurchase program does not obligate the Company to make additional repurchases at any specific time or in any specific situation. As of December 31, 2023, $40.5 million remained available for repurchase under the repurchase plan.
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The following table provides information about purchases made by the Company of shares of the Company's common stock during the three months ended December 31, 2023.
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Period Total Number of Shares Purchased (1) Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Approximate Dollar Value of Shares that May Yet be Purchased Under the Program (in thousands) October 1- October 31 1,375 $ 32.20 — $ 40,461 November 1 - November 30 3,170,770 (2) $ 31.58 — $ 40,461 December 1 - December 31 15,993 (3) $ 33.51 — $ 40,461 Total 3,188,138 $ 33.51 — $ 40,461 (1) Includes shares repurchased to satisfy tax withholding obligations due upon the vesting of restricted stock held by certain employees.
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We did not pay cash to repurchase these shares, nor were these repurchases part of a publicly announced plan or program. 49 (2) Includes 3,166,561 shares of common stock repurchased from APC on November 14, 2023, pursuant to a stock repurchase agreement with APC entered into on November 6, 2023.
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The Company’s Board of Directors and the Audit Committee of the Board of Directors approved the repurchase. (3) Includes 15,000 shares of common stock repurchased from two members of the Board of Directors on December 6, 2023.
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The annual changes for the five-year period shown in the graph are based on the assumption that $100 was invested in our common stock and each index on December 31, 2018, and that all dividends were reinvested. The stock price performance included in the line graph below is not necessarily indicative of future stock price performance.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

110 edited+77 added−60 removed42 unchanged
Biggest changeExcluded Assets consisted of the following (in thousands): 62 December 31, 2022 December 31, 2021 Cash and cash equivalents $ 30,163 $ 62,540 Investment in marketable securities 4,543 49,066 Land, property and equipment, net 101,349 42,114 Loan receivable – related parties — 4,000 Investments in other entities – equity method 27,561 24,969 Other receivable and assets 3,907 936 Other liabilities (4,754) (1,178) Long-term debt (27,264) (7,645) Total Excluded Assets $ 135,505 $ 174,802 Years ended December 31, 2022 2021 2020 Total operating expenses $ 2,351 $ 2,588 $ 2,089 Total other (expense) income, net $ (10,309) $ (10,854) $ 102,951 Excluded Assets net (loss) income $ (18,380) $ (13,461) $ 100,862 Credit Facilities The Company’s debt balance consisted of the following (in thousands): December 31, 2022 Revolver Loan $ 180,000 Real Estate Loans 23,168 Construction Loan 4,159 Total debt 207,327 Less: Current portion of debt (619) Less: Unamortized financing costs (3,319) Long-term debt $ 203,389 The following are the future commitments of the Company’s debt for the years ending December 31 (in thousands): 63 Amount 2023 $ 619 2024 4,800 2025 7,184 2026 454 2027 180,472 Thereafter 13,798 Total $ 207,327 Credit Agreement On June 16, 2021, the Company entered into an amended and restated credit agreement (the “Amended Credit Agreement” and the credit facility thereunder, the “Amended Credit Facility”) with Truist Bank, in its capacities as administrative agent for the lenders (in such capacity, the “Agent”), issuing bank, swingline lender and a lender, Truist Securities, Inc., JPMorgan Chase Bank, N.A., MUFG Union Bank, N.A., Preferred Bank, Royal Bank of Canada, and Fifth Third Bank, National Association, in their capacities as joint lead arrangers and/or lenders (the “Lenders”), and Bank of the West, The Toronto-Dominion Bank, New York Branch, Well Fargo, National Association, and City National Bank in their capacities as Lenders, to, among other things, amend and restate that certain credit agreement, dated September 11, 2019, by and among the Company, certain Lenders and the Agent (the credit facility thereunder, the “Credit Facility”), in its entirety.
Biggest changeNet loss from Excluded Assets for the year ended December 26, 2023 and years ended December 31, 2022 and 2021 consisted of the following (in thousands): Year ended December 26, Years ended December 31, 2023 2022 2021 Total operating expenses $ 18,127 $ 2,351 $ 2,588 Total other income (expense), net $ 3,917 $ (15,242) $ (10,854) Excluded Assets net loss $ (16,667) $ (23,314) $ (13,461) Credit Facilities The Company’s debt balance consisted of the following (in thousands): 64 December 31, 2023 Term Loan $ 280,000 Promissory Note Payable 2,000 Total debt 282,000 Less: Current portion of debt (19,500) Less: Unamortized financing costs (3,561) Long-term debt $ 258,939 The following are the future commitments of the Company’s debt for the years ending December 31 (in thousands): Amount 2024 $ 19,500 2025 15,750 2026 21,000 2027 22,750 2028 203,000 Total $ 282,000 Amended Credit Agreement On June 16, 2021, the Company entered into an amended and restated credit agreement (as subsequently amended as described below, the “Amended Credit Agreement”) with Truist Bank, in its capacity as administrative agent for the lenders, issuing bank, swingline lender and lender, and the banks and other financial institutions from time to time party thereto, to, among other things, amend and restate that certain credit agreement, dated September 11, 2019, by and among the Company, Truist Bank, and certain lenders thereto, in its entirety.
The Amended Credit Agreement provides for a five-year revolving credit facility (“Revolver Loan”) to the Company of $400.0 million, which includes a letter of credit sub-facility of up to $25.0 million and a swingline loan sub-facility of $25.0 million.
The Amended Credit Agreement provides for a five-year revolving credit facility to the Company of $400.0 million (“Revolver Loan”), which includes a letter of credit sub-facility of up to $25.0 million and a swingline loan sub-facility of $25.0 million.
Receivables and Receivables – Related Parties The Company’s receivables are comprised of accounts receivable, capitation and claims receivable, risk pool settlements and incentive receivables, management fee income, and other receivables. Accounts receivable are recorded and stated at the amount expected to be collected.
Receivables and Receivables – Related Parties The Company’s receivables are comprised of accounts receivable, capitation and claims receivable, risk pool settlements, incentive receivables, management fee income, and other receivables. Accounts receivables are recorded and stated at the amount expected to be collected. The Company’s receivables – related parties are comprised of risk pool settlements, management fee income, and other receivables.
Shared-risk capitation arrangements are entered into with certain health plans, which are administered by the health plan, where the IPA is responsible for rendering professional services, but the health plan does not enter into a capitation arrangement with a hospital and therefore the health plan retains the institutional risk.
Health plan shared-risk arrangements are entered into with certain health plans, which are administered by the health plan, where the IPA is responsible for rendering professional services, but the health plan does not enter into a capitation arrangement with a hospital and therefore the health plan retains the institutional risk.
Tax provisions include amounts that are currently payable, changes in deferred tax assets and liabilities that arise because of temporary differences between the timing of when items of income and expense are recognized for financial reporting and income tax purposes, changes in the recognition of tax positions, and any changes in the valuation allowance caused by a change in judgment about the realizability of the related deferred tax assets.
Tax provisions include amounts that are currently payable, changes in deferred tax assets and liabilities that arise because of temporary differences between the timing of when items of income and expense are recognized for financial reporting and income tax purposes, changes in recognition of tax positions, and any changes in the valuation allowance caused by a change in judgment about the realizability of the related deferred tax assets.
ASC 820 establishes a fair value hierarchy for disclosures of the inputs to valuations used to measure fair value. This hierarchy prioritizes the inputs into three broad levels as follows: 67 Level 1—Inputs are unadjusted quoted prices in active markets for identical assets or liabilities that can be accessed at the measurement date.
ASC 820 establishes a fair value hierarchy for disclosures of the inputs to valuations used to measure fair value. This hierarchy prioritizes the inputs into three broad levels as follows: Level 1—Inputs are unadjusted quoted prices in active markets for identical assets or liabilities that can be accessed at the measurement date.
As such, this is a form of variable consideration estimated at contract inception and updated through the measurement period (i.e., the contract year), to the extent the risk of reversal does not exist, and the consideration is not constrained. 69 Share-Based Compensation The Company maintains a stock-based compensation program for employees, non-employees, directors, and consultants.
As such, this is a form of variable consideration estimated at contract inception and updated through the measurement period (i.e., the contract year), to the extent the risk of reversal does not exist and the consideration is not constrained. Share-Based Compensation The Company maintains a stock-based compensation program for employees, non-employees, directors, and consultants.
General and Administrative Expenses General and administrative expenses in 2022 were $77.7 million, as compared to $62.1 million in 2021, an increase of $15.6 million or 25%. This increase was primarily due to an $14.8 million increase in personnel-related costs to support the continued growth in the depth and breadth of our operations.
General and Administrative Expenses General and administrative expenses in 2022 were $77.7 million, as compared to $62.1 million in 2021, an increase of $15.6 million or 25%. This increase was primarily due to a $14.8 million increase in personnel-related costs to support the continued growth in the depth and breadth of our operations.
This was offset by non-recurring income recognized for the year ended December 31, 2021 relating to $2.8 million income from consolidating an equity method investment, $5.3 million income from the stock purchase agreement with Nutex, and $1.7 million income in stimulus checks.
This was partially offset by non-recurring income recognized for the year ended December 31, 2021 relating to $2.8 million income from consolidating an equity method investment, $5.3 million income from the stock purchase agreement with Nutex, and $1.7 million income in stimulus checks.
However, as the Company does not have sufficient insight from the health plans on the amount and timing of the shared-risk pool and incentive payments these amounts are considered to be fully constrained and only recorded when such payments are known and/or received.
However, as the Company does not have sufficient insight from the health plans on the amount and timing of the health plan shared-risk pool and incentive payments, these amounts are considered to be fully constrained and only recorded when such payments are known and/or received.
This decrease further limited the purpose of the indebtedness under APC Business Loan Agreement to the issuance of standby letters of credit, and added as a permitted lien the security interest in all of its assets granted by APC in favor of NMM under a Security Agreement dated on or about September 11, 2019 securing APC’s obligations to NMM under, and as required pursuant to, that certain Management Services Agreement dated as of July 1, 1999, as amended.
This decrease further limited the purpose of the indebtedness under the APC Business Loan Agreement to the issuance of standby letters of credit, and added as a permitted lien the security interest in all of its assets granted by APC in favor of AHM under a Security Agreement dated on or about September 11, 2019 securing APC’s obligations to AHM under, and as required pursuant to, that certain Management Services Agreement dated as of July 1, 1999, as amended.
This was offset by proceeds from the exercise of options and warrants of $8.6 million, borrowings from the Construction Loan of $3.6 million and proceeds from sale of non-controlling interest of $0.4 million.
This was partially offset by proceeds from the exercise of options and warrants of $8.6 million, borrowings from the Construction Loan of $3.6 million and proceeds from the sale of non-controlling interest of $0.4 million.
Leveraging its proprietary population health management and healthcare delivery platform, ApolloMed operates an integrated, value-based healthcare model, which aims to empower the providers in its network to deliver the highest quality of care to its patients in a cost-effective manner. We, together with our affiliated physician groups and consolidated entities, provide coordinated outcomes-based medical care in a cost-effective manner.
Leveraging its proprietary population health management and healthcare delivery platform, Astrana operates an integrated, value-based healthcare model, which aims to empower the providers in its network to deliver the highest quality of care to its patients in a cost-effective manner. We, together with our affiliated physician groups and consolidated entities, provide coordinated outcomes-based medical care in a cost-effective manner.
Such estimates are developed using actuarial methods and are based on numerous variables, including the utilization of healthcare services, historical payment patterns, cost trends, product mix, seasonality, changes in membership, and other factors. The estimation methods and the resulting accrual are periodically reviewed and updated.
Such estimates are developed using actuarial methods and are based on numerous variables, including the utilization of healthcare services, historical payment patterns, cost trends, product mix, seasonality, changes in membership, and other factors. The estimation methods and the resulting reserves are periodically reviewed and updated.
Lines of Credit – Related Party On September 10, 2019, APC amended its promissory note agreement with Preferred Bank (“APC Business Loan Agreement”), which is affiliated with one of the Company’s board members, to modify loan availability to $4.1 million.
Lines of Credit On September 10, 2019, APC amended its promissory note agreement with Preferred Bank (“APC Business Loan Agreement”), which is affiliated with one of the Company’s board members, to modify loan availability to $4.1 million.
Intangible Assets and Long-Lived Assets Intangible assets with finite lives include network-payor relationships, management contracts, and member relationships and are stated at cost, less accumulated amortization and impairment losses. These intangible assets are amortized on the accelerated method using the discounted cash flow rate.
Intangible Assets and Long-Lived Assets Intangible assets with finite lives include network-payer relationships, management contracts, and member relationships and are stated at cost, less accumulated amortization and impairment losses. These intangible assets are amortized on the accelerated method using the discounted cash flow rate.
Compensation expense for time-based awards are recognized on a cumulative straight-line basis over the vesting period of the awards. Share-based awards with performance conditions are recognized to the extent the performance conditions are probable of being achieved. Compensation expense for performance-based awards are recognized on an accelerated attribution method.
Compensation expenses for time-based awards are recognized on a cumulative straight-line basis over the vesting period of the awards. Share-based awards with performance conditions are recognized to the extent the performance conditions are probable of being achieved. Compensation expenses for performance-based awards are recognized on an accelerated attribution method.
From time to time, the Company issues shares of its common stock to its employees, directors, and consultants, which shares may be subject to the Company’s repurchase right (but not obligation), that lapses based on time-based and performance-based vesting schedules. The value of share-based awards is recognized as compensation expense and adjusted for forfeitures as they occur.
From time to time, the Company issues shares of its common stock to its employees, directors, and consultants, which shares may be subject to the Company’s repurchase right (but not obligation), that vests based on time-based and/or performance-based vesting schedules. The value of share-based awards is recognized as compensation expense and adjusted for forfeitures as they occur.
Shared-risk deficits, if any, are not payable until and unless (and only to the extent of any) risk-sharing surpluses are generated. At the termination of the HMO contract, any accumulated deficit will be extinguished.
Health plan shared-risk deficits, if any, are not payable until and unless (and only to the extent) risk-sharing surpluses are generated. At the termination of the HMO contract, any accumulated deficit will be extinguished.
When GAAP financial measures are viewed in conjunction with non-GAAP financial measures, investors are provided with a more meaningful understanding of ApolloMed’s ongoing operating performance. In addition, these non-GAAP financial measures are among those indicators the Company uses as a basis for evaluating operational performance, allocating resources, and planning and forecasting future periods.
When GAAP financial measures are viewed in conjunction with non-GAAP financial measures, investors are provided with a more meaningful understanding of the Company’s ongoing operating performance. In addition, these non-GAAP financial measures are among those indicators 62 the Company uses as a basis for evaluating operational performance, allocating resources, and planning and forecasting future periods.
On December 20, 2022, an amendment was made to the Amended Credit Facility, in which all amounts borrowed under the Amended Credit Agreement as of the effective date shall be automatically converted from LIBOR Loans to SOFR Loans with an initial interest period of one month on and as of the amendment effective date.
On December 20, 2022, an amendment was made to the Amended Credit Facility, in which all amounts borrowed under the Amended Credit Agreement as of the effective date were automatically converted from LIBOR Loans to SOFR Loans with an initial interest period of one month on and as of the amendment effective date.
Depreciation and Amortization Depreciation and amortization expense was $17.5 million and $17.5 million for the years ended December 31, 2022 and 2021, respectively. These amounts included depreciation of property and equipment and the amortization of intangible assets.
Depreciation and Amortization Depreciation and amortization expense were $17.5 million and $17.5 million for the years ended December 31, 2022 and 2021, respectively. These amounts included depreciation of property and equipment and the amortization of intangible assets.
Under a full-risk pool-sharing agreement, the IPA generally receives a percentage of the net surplus from the affiliated hospital’s risk pools with HMOs after deductions for the affiliated hospital’s costs. Advance settlement payments are typically made quarterly in arrears if there is a surplus.
Under a hospital shared-risk pool-sharing agreement, the IPA generally receives a percentage of the net surplus from the affiliated hospital’s risk pools with HMOs after deductions for the affiliated hospital’s costs. Advance settlement payments are typically made quarterly in arrears if there is a surplus.
Unrealized Loss on Investments 55 Unrealized loss on investments in 2022 was $21.3 million, as compared to an unrealized loss on investments of $10.7 million in 2021, an increase of $10.5 million. The increase in unrealized loss on investments was primarily driven by a decrease in the stock price of a payor partner in which we hold shares and Nutex.
Unrealized Loss on Investments Unrealized loss on investments in 2022 was $21.3 million, as compared to an unrealized loss on investments of $10.7 million in 2021, an increase of $10.5 million. The increase in unrealized loss on investments was primarily driven by a decrease in the stock price of a payer partner in which we hold shares and Nutex.
APC’s shares were not redeemable, and it was not probable that the shares would become redeemable as of December 31, 2022 and 2021. Income Taxes Federal and state income taxes are computed at currently enacted tax rates less tax credits using the asset and liability method.
APC’s shares were not redeemable, and it was not probable that the shares would become redeemable as of December 31, 2023 and 2022. Income Taxes 71 Federal and state income taxes are computed at currently enacted tax rates less tax credits using the asset and liability method.
As an incentive to control enrollee utilization and to promote quality care, certain HMOs have designed quality incentive programs and commercial generic pharmacy incentive programs to compensate the Company for its efforts to improve the quality of services and efficient and effective use of pharmacy supplemental benefits provided to HMO members.
As an incentive to promote quality care, certain HMOs have designed quality incentive programs and commercial generic pharmacy incentive programs to compensate the Company for its efforts to improve the quality of services and efficient and effective use of pharmacy supplemental benefits provided to HMO members.
Risk pool settlements and incentive receivables mainly consist of the Company’s full-risk pool receivable that is recorded quarterly based on reports received from our hospital partners and management’s estimate of the Company’s portion of the estimated risk pool surplus for open performance years.
Risk pool settlements and incentive receivables mainly consist of the Company’s hospital shared-risk pool receivable that is recorded quarterly based on reports received from the Company’s hospital partners and management’s estimate of the Company’s portion of the estimated risk pool surplus for open performance years.
These guidance assumptions are based on the Company's existing business, current view of existing market conditions and assumptions for the year ending December 31, 2023.
These guidance assumptions are based on the Company's existing business, current view of existing market conditions and assumptions for the year ending December 31, 2024.
The assumptions for historical MLR, IBNR completion factors, and constraint percentages were used by management in applying the most likely amount methodology.
The assumptions for historical margin, IBNR completion factors, and constraint percentages were used by management in applying the most likely amount methodology.
Under the equity method of accounting, the investment, originally recorded at cost, is adjusted to recognize our share of net earnings or losses of the investee and is recognized in the consolidated statements of income under “Income from equity method investments” and also is adjusted by contributions to and distributions from the investee.
Under the equity method of accounting, the investment, originally recorded at cost, is adjusted to recognize the Company’s share of net earnings or losses of the investee and is recognized in the accompanying consolidated statements of income under “Income (loss) from equity method investments” and also is adjusted by contributions to and distributions from the investee.
The overall increase was primarily due to expected return to pre-COVID-19 medical expense run rates, participation in a value-based Medicare fee-for-service model and growth in membership, which was commensurate to our increase in revenue.
The overall increase was primarily due to the expected return to pre-COVID-19 medical expense run rates, participation in a value-based Medicare FFS model and growth in membership, which was commensurate to our increase in revenue.
Settlement of risk pool surplus or deficits occurs approximately 18 months after the risk pool performance year is completed. Other receivables include FFS reimbursement for patient care, certain expense reimbursements, and stop-loss insurance premium reimbursements from IPAs. The Company maintains reserves for potential credit losses on accounts receivable.
Settlement of risk pool surplus or deficits occurs approximately 18 months after the risk pool performance year is completed. Other 67 receivables consist of receivables from FFS reimbursement for patient care, certain expense reimbursements, transportation reimbursements from the hospitals, and stop-loss insurance premium reimbursements. The Company maintains reserves for potential credit losses on accounts receivable.
Effect of New Accounting Standards Refer to “Recent Accounting Pronouncements” under Note 2 — “Basis of Presentation and Summary of Significant Accounting Policies” to our consolidated financial statements under Item 8 in this Annual Report on Form 10-K for additional information.
Effect of New Accounting Standards Refer to “Recent Accounting Pronouncements Not Yet Adopted” under Note 2 — “Basis of Presentation and Summary of Significant Accounting Policies” to our consolidated financial statements under Item 8 in this Annual Report on Form 10-K for additional information.
Risk pools for the prior contract years are generally fully settled in the third or fourth quarter of the following year. In addition to risk-sharing revenues, the Company also receives incentives under “pay-for-performance” programs for quality medical care, based on various criteria.
Final settlement of risk pools for prior contract years generally occurs in the third or fourth quarter of the following year. In addition to risk-sharing revenues, the Company also receives incentives under “pay-for-performance” programs for quality medical care, based on various criteria.
Refer to Note 10 – “Credit Facility, Bank Loans, and Lines of Credit” to our consolidated financial statements under Item 8 in this Annual Report on Form 10-K for additional information.
Refer to Note 10 – “Credit Facility, Bank Loans, and Lines of Credit” to our consolidated financial statements under Item 8 in this Annual Report on Form 10-K for additional information on the Real Estate Loans and the Construction Loan.
The decrease in gain on sale of equity method investment is due to APC-LSMA selling 21.25% of its interest in LMA back to Dr. Arteaga for the year end December 31, 2021. There was no sale of our equity method investment for the year ended December 31, 2022.
The decrease in gain on the sale of equity method investment is due to APC selling 21.25% of its interest in one if its equity method investments back to Dr. Arteaga for the year ended December 31, 2021. There was no sale of our equity method investment for the year ended December 31, 2022.
The consolidated IPAs and APAACO provide integrated care to HMOs, Medicare and Medi-Cal enrollees through a network of contracted providers under sub-capitation and direct patient service arrangements. Medical costs for professional and institutional services rendered by contracted providers are recorded as cost of services, excluding depreciation and amortization, expense in the accompanying consolidated statements of income.
The Company’s Care Partners segment provides integrated care to HMOs, Medicare, and Medi-Cal enrollees through a network of contracted providers under sub-capitation and direct patient service arrangements. Medical costs for professional and institutional services rendered by contracted providers are recorded as cost of services, excluding depreciation and amortization, in the accompanying consolidated statements of income.
Excluded Assets In September 2019, APC and AP-AMH entered into the Second Amendment to Series A Preferred Stock Purchase Agreement clarifying the term Excluded Assets.
Excluded Assets In September 2019, APC and Astrana Medical entered into the Second Amendment to Series A Preferred Stock Purchase Agreement, clarifying the term Excluded Assets.
Cash used in financing activities during the year ended December 31, 2022 was primarily attributable dividend payments of $14.0 million, repurchase of common shares of $9.3 million, purchase of non-controlling interest of $5.0 million, repayment of debt of $3.9 million, and repayment of finance lease obligations of $0.6 million.
Cash used in financing activities for the year ended December 31, 2022 was $20.1 million, which was attributable to dividend payments of $14.0 million, repurchase of common shares of $9.3 million, purchase of non-controlling interest of $5.0 million, repayment of debt of $3.9 million, and repayment of finance lease obligations of $0.6 million.
The FASB ASC 820, Fair Value Measurement (“ASC 820”), applies to all financial assets and financial liabilities that are measured and reported on a fair value basis and requires disclosure that establishes a framework for measuring fair value and expands disclosure about fair value measurements.
The FASB’s Accounting Standards Codification 820, Fair Value Measurement (“ASC 820”), applies to all financial assets and financial liabilities that are measured and reported on a fair value basis and requires disclosure that establishes a framework for measuring fair value and expands disclosure about fair value measurements.
“Excluded Assets” means (i) assets received from the sale of shares of the Series A Preferred equal to the Series A Purchase Price, (ii) the assets of the Company that are not Healthcare Services Assets, including the Company’s equity interests in Universal Care, Inc., Apollo Medical Holdings, Inc., and any entity that is primarily engaged in the business of owning, leasing, developing, or otherwise operating real estate, (iii) any assets acquired with the proceeds of the sale, assignment, or other disposition of any of the assets described in clauses (i) or (ii), and (iv) any proceeds of the assets described in clauses (i), (ii), and (iii).
“Excluded Assets” means (i) assets received from the sale of shares of the Series A Preferred equal to the Series A purchase price, (ii) the assets of APC that are not Healthcare Services Assets, including the APC’s equity interests in Astrana Health, Inc., and any entity that is primarily engaged in the business of owning, leasing, developing, or otherwise operating real estate, (iii) any assets acquired with the proceeds of the sale, assignment, or other disposition of any of the assets described in clauses (i) or (ii), and (iv) any proceeds of the assets described in clauses (i), (ii), and (iii).
These measures are not in accordance with, or an alternative to, U.S. GAAP, and may be different from other non-GAAP financial measures used by other companies. The Company uses adjusted EBITDA as a supplemental performance measure of our operations, for financial and operational decision-making, and as a supplemental means of evaluating period-to-period comparisons on a consistent basis.
These measures are not in accordance with, or alternatives to GAAP, and may be calculated differently from similar non-GAAP financial measures used by other companies. The Company uses Adjusted EBITDA as a supplemental performance measure of our operations for financial and operational decision-making, and as a supplemental means of evaluating period-to-period comparisons on a consistent basis.
Under capitated arrangements with certain HMOs APC, Accountable, and Alpha Care participate in one or more shared-risk arrangements relating to the provision of institutional services to enrollees (shared-risk arrangements) and thus can earn additional revenue or incur losses based upon the enrollee utilization of institutional services.
Under capitated arrangements with certain HMOs, certain IPAs participate in one or more health plan shared-risk arrangements relating to the provision of institutional services to enrollees and thus can earn additional revenue or incur losses based upon the enrollee utilization of institutional services.
Significant items subject to such estimates and assumptions include collectability of receivables, recoverability of long-lived and intangible assets, business combination and goodwill valuation and impairment, accrual of medical liabilities (IBNR claims), determination of full-risk and shared-risk revenue and receivables (including constraints, completion factors and historical margins), income tax valuation allowance, share-based compensation, and right-of-use assets and lease liabilities.
Significant items subject to such estimates and assumptions include collectability of receivables, recoverability of long-lived and intangible assets, business combination and goodwill valuation and impairment, accrual of medical liabilities (incurred but not reported (“IBNR”) claims), determination of hospital shared-risk and health plan shared-risk revenue and receivables (including constraints, completion factors and historical margins), income tax-valuation allowance, share-based compensation, and right-of-use assets and lease liabilities.
Operating Expenses Our largest expenses consist of the cost of: (i) patient care paid to contracted providers; (ii) information technology equipment and software; and (iii) hiring staff to provide management and administrative support services to our affiliated physician groups, as further described in the following sections.
Operating Expenses Our largest expenses consist of the cost of: (i) patient care paid to contracted providers; (ii) information technology equipment and software; and (iii) hiring staff to provide management and administrative support services to our affiliated physician groups, as further described in the following sections. These services include claims processing, utilization management, contracting, accounting, credentialing, and administrative oversight.
Through our accountable care organization and our network of IPAs we were responsible for coordinating the care for approximately 1.3 million patients primarily in California as of December 31, 2022.
Through our accountable care organization and our network of IPAs we were responsible for coordinating the care for approximately 0.9 million patients, primarily in California, as of December 31, 2023.
Leases The Company determines if an arrangement is a lease at its inception. The expected term of the lease used for computing the lease liability and right-of-use asset and determining the classification of the lease as operating or financing may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option.
The expected term of the lease used for computing the lease liability and right-of-use asset and determining the classification of the lease as operating or financing may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option.
In addition, the Company recognized a $2.3 million gain on sale of equity securities for the year ended December 31, 2022. Provision for Income Taxes Provision for income taxes was $36.1 million in 2022, as compared to $28.5 million in 2021, an increase of $7.6 million or 27%.
In addition, the Company recognized a $2.3 million gain on sale of equity securities for the year ended December 31, 2022. Provision for Income Taxes Provision for income taxes was $40.9 million in 2022, as compared to $31.7 million in 2021, an increase of $9.2 million or 29%.
We consolidate VIEs whenever it is determined that we are the primary beneficiary. Investment in Other Entities - Equity Method We account for certain investments using the equity method of accounting when it is determined that the investment provides us the ability to exercise significant influence, but not control, over the investee.
The Company consolidates VIEs whenever it is determined that the Company is the primary beneficiary. Investment in Other Entities - Equity Method The Company accounts for certain investments using the equity method of accounting when it is determined that the investment provides the Company with the ability to exercise significant influence, but not control, over the investee.
Given the lack of access to the health plans’ data and control over the members assigned to APC, the adjustments and/or the withheld amounts are unpredictable and as such APC, Accountable Health Care, and Alpha Care’s risk-share revenue is deemed to be fully constrained until they are notified of the amount by the health plan.
Given the lack of access to the health plans’ data and control over the members assigned to the IPA, the adjustments and/or the withheld amounts are unpredictable and as such the IPAs risk-share revenues are deemed to be fully constrained until they are notified of the amount by the health plan.
This was primarily attributable to an increase in pre-tax income in 2022, as compared to 2021, due to the factors described above. Net Income (Loss) Attributable to Noncontrolling Interests Net income attributable to non-controlling interests was $1.5 million in 2022, as compared to net loss of $24.6 million in 2021, an increase of $26.0 million.
This was primarily attributable to an increase in pre-tax income in 2022, as compared to 2021, due to the factors described above. Net Income (Loss) Attributable to Noncontrolling Interests Net income attributable to non-controlling interests was $0.6 million in 2022, as compared to a net loss of $22.9 million in 2021, an increase of $23.4 million.
We consolidate a VIE if both power and benefits belong to us – that is, we (i) have the power to direct the activities of a VIE that most significantly influence the VIE’s economic performance (power), and (ii) have the obligation to absorb losses of, or the right to receive benefits from, the VIE that could potentially be significant to the VIE (benefits).
The Company consolidates a VIE if both power and benefits belong to the Company – that is, the Company has: • The power to direct the activities of a VIE that most significantly influence the VIE’s economic performance (power), and • The obligation to absorb losses of, or the right to receive benefits from, the VIE that could potentially be significant to the VIE (economics).
Management’s Discussion and Analysis of Financial Condition and Results of Operations The following management’s discussion and analysis should be read in conjunction with the audited consolidated financial statements and the notes thereto included in Part II, Item 8, “Financial Statements and Supplementary Data” of this Annual Report on Form 10-K. 51 In this section, “we,” “our,” “ours,” and “us” refer to Apollo Medical Holdings, Inc.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations The following management’s discussion and analysis should be read in conjunction with the audited consolidated financial statements and the notes thereto included in Part II, Item 8, “Financial Statements and Supplementary Data” of this Annual Report on Form 10-K.
Cash used in financing activities during the year ended December 31, 2022 was $20.1 million, as compared to cash used in financing activities of $47.7 million for the year ended December 31, 2021.
Cash provided by financing activities during the year ended December 31, 2023 was $3.4 million, as compared to cash used in financing activities of $20.1 million for the year ended December 31, 2022.
The Company elected practical expedients for ongoing accounting that is provided by the new standard comprised of the following: (1) the election for classes of underlying asset to not separate non-lease components from lease components, and (2) the election for short-term lease recognition exemption for all leases under 12 months term.
The Company elected practical expedients for ongoing accounting that were provided by the new standard comprised of the following: • The election for classes of underlying assets to not separate non-lease components from lease components, and • The election for short-term lease recognition exemption for all leases with an under twelve-month terms.
Intangible assets with finite lives also include a patient management platform, as well as trade names and trademarks, whose valuations were determined using the cost to recreate method and the relief from royalty method, respectively. These assets are stated at cost, less accumulated amortization and impairment losses, and are amortized using the straight-line method.
Intangible assets with finite lives also include a patient management platform, as well as trade names and trademarks, whose valuations were determined using the cost to recreate method and the relief from royalty method, respectively.
Consolidated Statements of Income (in thousands) Years Ended December 31, 2022 2021 $ Change % Change Revenue Capitation, net $ 930,131 $ 593,224 $ 336,907 57 % Risk pool settlements and incentives 117,254 111,627 5,627 5 % Management fee income 41,094 35,959 5,135 14 % Fee-for-services, net 49,517 26,564 22,953 86 % Other income 6,167 6,541 (374) (6) % Total revenue 1,144,163 773,915 370,248 48 % Operating expenses Cost of services, excluding depreciation and amortization 944,685 596,142 348,543 58 % General and administrative expenses 77,670 62,077 15,593 25 % Depreciation and amortization 17,543 17,517 26 0 % Total expenses 1,039,898 675,736 364,162 54 % Income from operations 104,265 98,179 6,086 6 % Other (expense) income Income (loss) from equity method investments 5,622 (4,306) 9,928 (231) % Gain on sale of equity method investment — 2,193 (2,193) (100) % Interest expense (7,920) (5,394) (2,526) 47 % Interest income 1,976 1,571 405 26 % Unrealized loss on investments (21,271) (10,745) (10,526) 98 % Other income (expense) 3,944 (3,750) 7,694 (205) % Total other (expense) income, net (17,649) (20,431) 2,782 (14) % Income before provision for income taxes 86,616 77,748 8,868 11 % Provision for income taxes 36,085 28,454 7,631 27 % Net income $ 50,531 $ 49,294 $ 1,237 3 % Net income (loss) attributable to noncontrolling interests 1,482 (24,564) 26,046 (106) % Net income attributable to Apollo Medical Holdings, Inc. $ 49,049 $ 73,858 $ (24,809) (34) % Net Income Our net income in 2022 was $50.5 million, as compared to $49.3 million in 2021, an increase of $1.2 million or 3%.
Consolidated Statements of Income (in thousands) Years Ended December 31, 2022 2021 $ Change % Change Revenue Capitation, net $ 930,131 $ 593,224 $ 336,907 57 % Risk pool settlements and incentives 117,254 111,627 5,627 5 % Management fee income 41,094 35,959 5,135 14 % Fee-for-service, net 49,517 26,564 22,953 86 % Other revenue 6,167 6,541 (374) (6) % Total revenue 1,144,163 773,915 370,248 48 % Operating expenses Cost of services, excluding depreciation and amortization 944,685 596,142 348,543 58 % General and administrative expenses 77,670 62,077 15,593 25 % Depreciation and amortization 17,543 17,517 26 0 % Total expenses 1,039,898 675,736 364,162 54 % Income from operations 104,265 98,179 6,086 6 % Other income (expense) Income (loss) from equity method investments 5,622 (4,306) 9,928 (231) % Gain on sale of equity method investment — 2,193 (2,193) (100) % Interest expense (7,920) (5,394) (2,526) 47 % Interest income 1,976 1,571 405 26 % Unrealized loss on investments (21,271) (10,745) (10,526) 98 % Other income (expense) 3,944 (3,750) 7,694 (205) % Total other expense, net (17,649) (20,431) 2,782 (14) % Income before provision for income taxes 86,616 77,748 8,868 11 % Provision for income taxes 40,875 31,693 9,182 29 % Net income $ 45,741 $ 46,055 $ (314) (1) % Net income (loss) attributable to noncontrolling interests 570 (22,868) 23,438 (102) % Net income attributable to Astrana Health, Inc. $ 45,171 $ 68,923 $ (23,752) (34) % Physician Groups and Patients As of December 31, 2022 and 2021, the total number of affiliated physician groups we managed were 14 groups and 12 groups, respectively, and the total number of patients for whom we managed the delivery of healthcare services was approximately 1.3 million and 1.2 million, respectively.
(2) Other, net for the year ended December 31, 2021 relates to stimulus checks received in 2021. Use of Non-GAAP Financial Measures This Annual Report on Form 10-K contains the non-GAAP financial measures EBITDA and adjusted EBITDA, of which the most directly comparable financial measure presented in accordance with generally accepted accounting principles (“GAAP”) is net income.
Use of Non-GAAP Financial Measures This Annual Report on Form 10-K contains the non-GAAP financial measures EBITDA, Adjusted EBITDA, and Adjusted EBITDA margin, of which the most directly comparable financial measure presented in accordance with U.S. generally accepted accounting principles (“GAAP”) is net income.
Refer to Note 10 – “Credit Facility, Bank Loans, and Lines of Credit” to our consolidated financial statements under Item 8 in this Annual Report on Form 10-K for additional information. Construction Loans In April 2021, Tag 8 entered into a construction loan agreement with MUFG Union Bank N.A.
Refer to Note 10 – “Credit Facility, Bank Loans, and Lines of Credit” to our consolidated financial statements under Item 8 in this Annual Report on Form 10-K for additional information on the Amended Credit Agreement. Promissory Note Payable 65 In May 2021, FYB entered into a promissory note agreement with CCHCA.
The Company’s receivables – related parties are comprised of risk pool settlements and incentive receivables, management fee income, and other receivables. Receivables – related parties are recorded and stated at the amount expected to be collected. Capitation and claims receivable relate to each health plan’s capitation, which is received by the Company in the month following the month of service.
Receivables – related parties are recorded and stated at the amount expected to be collected. Capitation and claims receivables relate to each health plan’s capitation and are received by the Company in the month following the month of service.
As a result of the purchase, these entities will become consolidated entities of AP-AMH 2. Key Financial Measures and Indicators Operating Revenues Our revenue, which is recorded in the period in which services are rendered and earned, primarily consists of capitation revenue, risk pool settlements and incentives, GPDC revenue, management fee income, and fee-for-services (“FFS”) revenue.
Key Financial Measures and Indicators Operating Revenues Our revenue, which is recorded in the period in which services are rendered and earned, primarily consists of capitation revenue, risk pool settlements and incentives, ACO REACH capitation revenue, management fee income, and fee-for-services (“FFS”) revenue.
Finite-lived intangibles and long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.
These assets are stated at cost, less accumulated amortization and impairment losses, and are amortized using the straight-line method. 68 Finite-lived intangibles and long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.
Risk Pool Settlements and Incentives APC and Accountable Health Care enter into full-risk capitation arrangements with certain health plans and local hospitals, which are administered by a third party, where the hospital is responsible for providing, arranging and paying for institutional risk and IPA is responsible for providing, arranging and paying for professional risk.
Risk Pool Settlements and Incentives 69 Certain IPAs enter into hospital shared-risk capitation arrangements with certain health plans and local hospitals, where the hospital is responsible for providing, arranging and paying for institutional risk and the IPA is responsible for providing, arranging, and paying for professional risk.
The increase in total revenue was primarily attributable to the following: (i) An overall increase of $336.9 million in capitation revenue primarily driven by organic membership growth in our core IPAs and participation in a value-based Medicare fee-for-service model.
The increase in total revenue was primarily attributable to the following: (i) An overall increase of $336.9 million in capitation revenue primarily driven by organic membership growth in our core IPAs and participation in a value-based Medicare FFS model. 57 (ii) An increase of $23.0 million in FFS revenue attributable to fees generated from Astrana primary, multi-specialty, and ancillary care delivery entities.
APC established irrevocable standby letters of credit with a financial institution for a total of $0.3 million for the benefit of certain health plans.
Certain IPAs consolidated by the Company established irrevocable standby letters of credit with a financial institution for a total of $3.9 million for the benefit of certain health plans as of December 31, 2023.
(“ApolloMed”) and its consolidated subsidiaries and affiliated entities, as appropriate, including its consolidated variable interest entities ( “ VIEs ” ). Overview Apollo Medical Holdings, Inc. is a leading physician-centric, technology-powered, risk-bearing healthcare management company.
In this section, “we,” “our,” “ours,” and “us” refer to Astrana Health, Inc. (“Astrana”) and its consolidated subsidiaries and affiliated entities, as appropriate, including its consolidated variable interest entities ( “ VIEs ” ). Overview Astrana Health, Inc. is a leading physician-centric, technology-powered, risk-bearing healthcare management company.
Working capital for the year ended December 31, 2022, decreased operating cash flow by $9.6 million, compared to a $20.1 million decrease in operating cash flow at December 31, 2021.
Working capital for the year ended December 31, 2023, decreased operating cash flow by $23.4 million, compared to a $2.0 million increase in operating cash flow at December 31, 2022.
For the year ended December 31, 2022, net income exclusive of depreciation and amortization, amortization of debt issuance costs, share-based compensation, impairments, gains or losses from sale of investments, unrealized gains or losses, income or loss from equity method investments, and deferred tax was $91.7 million compared to $90.5 million for the year ended December 31, 2021.
For the year ended December 31, 2023, net income exclusive of depreciation and amortization, amortization of debt issuance costs, share-based compensation, non-cash lease expense, income from equity method investments, gains or losses on investments and contingent liabilities, deferred tax, and gains or losses from distribution or consolidation of investments was $91.6 million compared to $84.1 million for the year ended December 31, 2022.
Cost of Services, Excluding Depreciation and Amortization Expenses related to cost of services, excluding depreciation and amortization, in 2021 were $596.1 million, as compared to $539.2 million in 2020, an increase of $56.9 million or 11%.
Cost of Services, Excluding Depreciation and Amortization Expenses related to the cost of services, excluding depreciation and amortization, in 2022 were $944.7 million, as compared to $596.1 million in 2021, an increase of $348.5 million or 58%.
The amount of net income attributable to non-controlling interests is disclosed in the consolidated statements of income. Mezzanine Equity 70 Based on the shareholder agreements for APC, in the event of a disqualifying event, as defined in the agreements, APC could be required to repurchase the shares from their respective shareholders based on certain triggers outlined in the shareholder agreements.
Mezzanine Equity Pursuant to APC’s shareholder agreements, in the event of a disqualifying event, as defined in the agreements, APC could be required to repurchase its shares from the respective shareholders based on certain triggers outlined in the shareholder agreements.
Revenue 57 Our total revenue in 2021 was $773.9 million, as compared to $687.2 million in 2020, an increase of $86.7 million or 13%.
Revenue Our total revenue in 2022 was $1,144.2 million, as compared to $773.9 million in 2021, an increase of $370.2 million or 48%.
Standby Letters of Credit Under the Amended Credit Agreement, the Company established irrevocable standby letters of credit with Truist Bank for a total of $21.1 million for the benefit of CMS.
Standby Letters of Credit 66 Under the Amended Credit Agreement, the Company established irrevocable standby letters of credit with Truist Bank for a total of $36.5 million for the benefit of CMS and certain health plans as of December 31, 2023.
(“Construction Loan”) that allows Tag 8 to borrow up to $10.7 million. Tag 8 is a VIE consolidated by the Company. Refer to Note 10 – “Credit Facility, Bank Loans, and Lines of Credit” to our consolidated financial statements under Item 8 in this Annual Report on Form 10-K for additional information.
The principal on the promissory note is $2.0 million with a maturity date of May 9, 2024. Refer to Note 10 – “Credit Facility, Bank Loans, and Lines of Credit” to our consolidated financial statements under Item 8 in this Annual Report on Form 10-K for additional information on the Promissory Note Payable.
The fair value of options granted are determined using the Black-Scholes option pricing model and include several assumptions, including expected term, expected volatility, expected dividends, and risk-free rates. The expected term is presumed to be the midpoint between the vesting date and the end of the contractual term.
The grant date fair value of the restricted stock awards is the grant date’s closing market price of the Company’s common stock. The fair value of options granted is determined using the Black-Scholes option pricing model and include several assumptions, including expected term, expected volatility, expected dividends, and risk-free rates.
The expected stock price volatility is determined based on an average of historical volatility. The expected dividend yield is based on the Company’s expected dividend payouts. The risk-free interest rate is based on the U.S. Constant Maturity curve over the expected term of the option at the time of grant.
The expected term is presumed to be the midpoint between the vesting date and the end of the contractual term. The expected stock price volatility is determined based on an average of historical volatility. The expected dividend yield is based on the Company’s expected dividend payouts. The risk-free interest rate is based on the U.S.
($ in millions, except per share amounts) 2023 Guidance Range Low High Total revenue $ 1,300.0 $ 1,500.0 Net income $ 49.5 $ 71.5 EBITDA $ 89.5 $ 129.5 Adjusted EBITDA $ 120.0 $ 160.0 Earnings per share – diluted $ 0.95 $ 1.20 See “Guidance Reconciliation of Net Income to EBITDA and Adjusted EBITDA” and “Use of Non-GAAP Financial Measures” below for additional information.
($ in millions, except per share amounts) 2024 Guidance Range Low High Total revenue $ 1,650.0 $ 1,850.0 Net income attributable to Astrana Health, Inc. $ 61.0 $ 73.0 Adjusted EBITDA $ 165.0 $ 185.0 EPS – diluted $ 1.28 $ 1.52 See “Guidance Reconciliation of Net Income to EBITDA and Adjusted EBITDA” and “Use of Non-GAAP Financial Measures” below for additional information.
Interest expense in the consolidated statements of income included amortization of deferred debt issuance costs for the years ended December 31, 2022, 2021, and 2020 of $0.9 million, $1.2 million, and $1.4 million, respectively. Real Estate Loans 64 On December 31, 2020, using cash comprised solely of Excluded Assets, APC purchased a 100% interest in MPP, AMG Properties, and ZLL.
Interest expense in the consolidated statements of income included amortization of deferred debt issuance costs for the years ended December 31, 2023, 2022, and 2021 of $1.1 million, $0.9 million, and $1.2 million, respectively.
Depreciation and Amortization Depreciation and amortization expense was $17.5 million and $18.4 million for the years ended December 31, 2021 and 2020, respectively. These amounts included depreciation of property and equipment and the amortization of intangible assets.
Depreciation and Amortization Depreciation and amortization expense were $17.7 million and $17.5 million for the years ended December 31, 2023 and 2022, respectively. This amount includes depreciation of property and equipment and the amortization of intangible assets.
Goodwill and Intangible Assets Under FASB ASC 350, Intangibles – Goodwill and Other (“ASC 350”), goodwill and indefinite-lived intangible assets are reviewed at least annually for impairment.
Goodwill and Intangible Assets Under ASC 350, Intangibles – Goodwill and Other, goodwill and indefinite-lived intangible assets are reviewed at least annually for impairment under a two step process. • Step 1— Under a qualitative assessment, determine if there are indicators of impairment.
The remaining unamortized deferred financing costs related to the Credit Facility and the new costs related to the Amended Credit Facility are amortized over the life of the Amended Credit Facility. Effective Interest Rate The Company’s average effective interest rate on its total debt during the years ended December 31, 2022, 2021, and 2020 was 3.22%, 2.06%, and 3.48%, respectively.
Effective Interest Rate The Company’s average effective interest rate on its total debt during the years ended December 31, 2023, 2022, and 2021 was 6.19%, 3.22%, and 2.06%, respectively.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeGovernment Securities Business Days prior to the first day of such interest period, as such rate is published by the Term SOFR Administrator (Federal Reserve Bank of New York), adjusted for any Term SOFR Adjustment, plus a spread of from 1.25% to 2.50% , as determined on a quarterly basis based on the Company’s leverage ratio, or (b) a base rate, plus a spread of 0.25% to 1.50% , as determined on a quarterly basis based on the Company’s leverage ratio.
Biggest changeThe Term Loan bears interest at an annual rate equal to either, at the Company’s option, (a) the Term SOFR Reference Rate (as defined in the Amended Credit Agreement), adjusted for any Term SOFR Adjustment (as defined in the Amended Credit Agreement ), plus a spread from 1.50% to 2.75%, as determined on a quarterly basis based on the Company’s Consolidated Total Net Leverage Ratio, or (b) a base rate, plus a spread of 0.50% to 1.75%, as determined on a quarterly basis based on the Company’s Consolidated Total Net Leverage Ratio.
The principal objective of these contracts is to eliminate or reduce the variability of the cash flows in interest payments associated with the Company’s floating-rate debt, thus reducing the impact of interest rate changes on future interest payment cash flows.
The principal objective of the collar agreement is to eliminate or reduce the variability of the cash flows in interest payments associated with the Company’s floating-rate debt, thus reducing the impact of interest rate changes on future interest payment cash flows.
A hypothetical 1% change in our interest rates for our outstanding borrowings under our Credit Agreement, Construction Loans, and Real Estate Loans would have increased or decreased our interest expense for the year ended December 31, 2022, by $1.7 million. 71
A hypothetical 1% change in our interest rates for our outstanding borrowings under our Credit Agreement would have increased or decreased our interest expense for the year ended December 31, 2023, by $2.8 million. 72
The Company has entered into interest rate swap agreements for certain of these agreements to effectively convert its floating-rate debt to a fixed-rate basis.
The Company has entered into a collar agreement for its Revolver Loan to effectively convert its floating-rate debt to a fixed-rate basis.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk Interest Rate Risk Borrowings under our Amended Credit Agreement exposed us to interest rate risk. As of December 31, 2022, we had $180.0 million in outstanding borrowings under our Amended Credit Agreement.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk Interest Rate Risk Borrowings under the Term Loan provided for under our Amended Credit Agreement, as of December 31, 2023, were $280.0 million.
Removed
The amount borrowed under the Amended Credit Agreement bears interest at an annual rate equal to either, at the Company’s option, (a) the Term SOFR Reference Rate, calculated two U.S.
Added
As of December 31, 2023, there were no borrowings under the Revolver Loan.
Removed
In addition, as of December 31, 2022, Tag 8, a VIE consolidated by the Company, had $4.2 million in outstanding borrowings for the Construction Loan. Interest rate on the “Construction Loan” is equal to an index rate determined by the bank.
Added
The Revolver Loan bears interest at an annual rate equal to either, at the Company’s option, (a) the Term SOFR Reference Rate (as defined in the Amended Credit Agreement ), adjusted for any Term SOFR Adjustment (as defined in the Amended Credit Agreement) plus a spread ranging from 1.25% to 2.50%, as determined on a quarterly basis based on the Company’s Consolidated Total Net Leverage Ratio (as defined in the Amended Credit Agreement), or (b) a base rate, plus a spread ranging from 0.25% to 1.50%, as determined on a quarterly basis based on the Company’s Consolidated Total Net Leverage Ratio.
Removed
Furthermore, as of December 31, 2022, APC had $23.2 million in outstanding borrowings for real estate loans related to ZLL, MPP, AMG Properties, and 120 Hellman (“Real Estate Loans”).
Added
Borrowings under the Promissory Note Payable, as of December 31, 2023, was $2.0 million. The interest rate is defined as the prime rate plus 1.0%. The prime rate is updated annually on the effective date of the note and published by the Wall Street Journal.
Removed
Each agreement bears interest that is subject to change from time to time based on changes in an independent index, which is the daily Wall Street Journal “Prime Rate”, as quoted in the “Money Rates” column of The Wall Street Journal (Western edition) as determined by the Lender (the “Index”).
Removed
On the dates of the agreement, the Index is 3.25% per annum. Under no circumstances will the interest rate on this loan be less than 3.50% per annum or more than the maximum rate allowed by applicable law.

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