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

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Paragraph-level year-over-year comparison of Option Care 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.

+168 added−158 removedSource: 10-K (2024-02-22) vs 10-K (2023-02-23)

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

168 paragraphs added · 158 removed · 123 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

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Biggest changeThe Company relies on our ability to attract and retain nursing staff, pharmacists and other professionals who possess the skills, experience and licenses necessary to meet the requirements of their job responsibilities. The Company’s ability to attract and retain personnel depends on several factors, including the ability to provide them with engaging assignments and competitive salaries and benefits.
Biggest changeThe Company leverages meaningful metrics to evaluate the effectiveness of our DE&I initiatives, including our efforts to eliminate bias in decision-making and build a diverse pipeline of leaders. 11 Table of Contents The Company relies on its ability to attract and retain nursing staff, pharmacists and other professionals who possess the skills, experience and licenses necessary to meet the requirements of their job responsibilities.
We provide home infusion services consisting of anti-infectives, nutrition support, chronic inflammatory disorders and neurological disorders, immunoglobulin therapy, and other therapies for chronic and acute conditions. The Company operates in one segment, infusion services. The Company’s operating model enables it to provide favorable outcomes to its stakeholders as follows: • Patients .
We provide home infusion services consisting of anti-infectives, nutrition support, chronic inflammatory disorders, neurological disorders, immunoglobulin therapy, and other therapies for chronic and acute conditions. The Company operates in one segment, infusion services. The Company’s operating model enables it to provide favorable outcomes to its stakeholders as follows: • Patients.
On March 14, 2019, HC I and HC II entered into a definitive agreement (the “Merger Agreement”) to merge with and into a wholly-owned subsidiary of BioScrip, Inc. (“BioScrip”) (the “Merger”), a national provider of infusion and home care management solutions, which was completed on August 6, 2019 (the “Merger Date”).
On March 14, 2019, HC I and HC II entered into a definitive agreement to merge with and into a wholly-owned subsidiary of BioScrip, Inc. (“BioScrip”) (the “Merger”), a national provider of infusion and home care management solutions, which was completed on August 6, 2019 (the “Merger Date”).
Intellectual Property The Company owns a variety of trademarks, licenses, and service marks, including but not limited to: “Option Care Health”, “Option Care”, “Critical Care Systems”, “Clinical Specialties”, “BioScrip”, “BioScrip Infusion Services”, “BioScrip Nursing Services”, “BioScrip Pharmacy Services”, “CarePoint Partners”, “HomeChoice Partners”, “InfuScience”, “InfusionCare”, “Infusion Partners”, “Infusion Solutions”, “New England Home Therapies”, “Option Health”, “Professional Home Care Services”, “Wilcox Home Infusion”, “Home Solutions”, as well as several others. 7 Table of Contents Suppliers The Company purchases pharmaceuticals and medical supplies through pharmaceutical manufacturers, distributors and group purchasing organizations.
Intellectual Property The Company owns a variety of trademarks, licenses, and service marks, including but not limited to: “Option Care Health”, “Option Care”, “Critical Care Systems”, “Clinical Specialties”, “BioScrip”, “BioScrip Infusion Services”, “BioScrip Nursing Services”, “BioScrip Pharmacy Services”, “CarePoint Partners”, “HomeChoice Partners”, “InfuScience”, “InfusionCare”, “Infusion Partners”, “Infusion Solutions”, “New England Home Therapies”, “Option Health”, “Professional Home Care Services”, “Wilcox Home Infusion”, “Home Solutions”, as well as several others. 7 Table of Contents Suppliers The Company purchases pharmaceuticals and medical supplies directly through pharmaceutical manufacturers, authorized distributors and group purchasing organizations.
The Company also provides nursing services to support the above therapies, comprised of its nursing team of approximately 3,100 employees, and through its network of sub-contracted nursing agencies. 6 Table of Contents Sales and Marketing The Company’s sales and marketing efforts focus on three primary objectives: (1) building new relationships and expanding existing contracts with managed care organizations; (2) establishing, maintaining and strengthening relationships with local and regional patient referral sources; and (3) maintaining existing and developing new relationships with pharmaceutical manufacturers to gain distribution access as they release new products.
The Company also provides nursing services to support the above therapies, comprised of its nursing team of approximately 2,800 employees, and through its network of sub-contracted nursing agencies. 6 Table of Contents Sales and Marketing The Company’s sales and marketing efforts focus on three primary objectives: (1) building new relationships and expanding existing contracts with managed care organizations; (2) establishing, maintaining and strengthening relationships with local and regional patient referral sources; and (3) maintaining existing and developing new relationships with pharmaceutical manufacturers to gain distribution access as they release new products.
Nursing services are typically billed separately, while other patient support services, such as pharmacy compounding service, delivery service and ancillary medical supplies are reimbursed either separately or on a per diem basis, as applicable. The Company’s largest payer represented approximately 14% of its revenue for the year ended December 31, 2022.
Nursing services are typically billed separately, while other patient support services, such as pharmacy compounding service, delivery service and ancillary medical supplies are reimbursed either separately or on a per diem basis, as applicable. The Company’s largest payer represented approximately 14% of its revenue for the year ended December 31, 2023.
No other single payer represented more than 10% of its revenue. The Company also provides services that are directly reimbursable through government healthcare programs such as Medicare and state Medicaid programs. For the year ended December 31, 2022, approximately 12% of the Company’s revenue was reimbursable through direct governmental programs, such as Medicare and Medicaid.
No other single payer represented more than 10% of its revenue. The Company also provides services that are directly reimbursable through government healthcare programs such as Medicare and state Medicaid programs. For the year ended December 31, 2023, approximately 12% of the Company’s revenue was reimbursable through direct governmental programs, such as Medicare and Medicaid.
The majority of the Company’s infusion pharmacy revenue consists of reimbursement for both the cost of the pharmaceuticals sold and the cost of services provided. Pharmaceuticals are typically reimbursed on a percentage discount from the published average wholesale price (“AWP”) of each drug or on a percentage premium to average sales price (“ASP”).
The majority of the Company’s infusion pharmacy revenue consists of reimbursements for both the cost of the pharmaceuticals sold and the cost of services provided. Pharmaceuticals are typically reimbursed on a percentage discount from the published average wholesale price (“AWP”) of each drug or on a percentage premium to average sales price (“ASP”).
Option Care Health’s infusion services include the clinical management of infusion therapy, nursing support and care coordination. Option Care Health’s multidisciplinary team of more than 4,500 clinicians, including pharmacists, pharmacy technicians, nurses and dietitians, are able to provide infusion service coverage for nearly all patients across the United States needing treatment for complex and chronic medical conditions.
Option Care Health’s infusion services include the clinical management of infusion therapy, nursing support and care coordination. Option Care Health’s multidisciplinary team of more than 4,500 clinicians, including pharmacists, pharmacy technicians, nurses and dietitians, are able to provide infusion service coverage for nearly all patients across the United States (“U.S.”) needing treatment for complex and chronic medical conditions.
The Office of the Inspector General (“OIG”) could also seek Civil Monetary Penalties (“CMP”) or exclusion against individuals or entities who knowingly and willfully: (1) offer or pay remuneration, directly or indirectly, to induce referrals of government health care program business; or (2) solicit or receive remuneration, directly or indirectly, in return for referrals of government health care program business.
The Office of the Inspector General (“OIG”) could also seek Civil Monetary Penalties (“CMP”) or exclusion against individuals or entities who knowingly and willfully: (1) offer or pay remuneration, directly or indirectly, to induce referrals of government healthcare program business; or (2) solicit or receive remuneration, directly or indirectly, in return for referrals of government healthcare program business.
Item 1. Business Overview Option Care Health, Inc. (“Option Care Health”, “we”, “us”, “our”, or the “Company”) is the largest independent provider of home and alternate site infusion services through its national network of 163 locations in 44 states. Option Care Health draws on over 40 years of clinical care experience to offer patient-centered, cost-effective infusion therapy.
Item 1. Business Overview Option Care Health, Inc. (“Option Care Health”, “we”, “us”, “our”, or the “Company”) is the largest independent provider of home and alternate site infusion services through its national network of 177 locations in 43 states. Option Care Health draws on over 40 years of clinical care experience to offer patient-centered, cost-effective infusion therapy.
The SEC maintains a website that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC at www.sec.gov. 11 Table of Contents
The SEC maintains a website that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC at www.sec.gov. 12 Table of Contents
Matters Affecting Drug Prices Pricing benchmarks in the pharmacy industry are periodically published by third parties such as First DataBank, Medi-Span, RJ Health, and the Centers for Medicare & Medicaid Services (“CMS”), and the benchmark reimbursement varies by payer contract. The most commonly used benchmarks are AWP and ASP.
Matters Affecting Drug Prices Pricing benchmarks in the pharmacy industry are periodically published by third parties such as Red Book, Medi-Span, RJ Health, and the Centers for Medicare & Medicaid Services (“CMS”), and the benchmark reimbursement varies by payer contract. The most commonly used benchmarks are AWP and ASP.
The federal privacy regulations (the “Privacy Regulations”) are designed to protect health-related information that could be used to identify an individual’s protected health information.
The federal privacy regulations are designed to protect health-related information that could be used to identify an individual’s protected health information.
For the year ended December 31, 2022, approximately 73% of the Company’s pharmaceutical and medical supply purchases were from four vendors. Although there are a limited number of suppliers, the Company believes that other vendors could provide similar products on comparable terms.
For the year ended December 31, 2023, approximately 72% of the Company’s pharmaceutical and medical supply purchases were from four vendors. Although there are a limited number of suppliers, the Company believes that other vendors could provide similar products on comparable terms.
Under the False Claims Act, the government and private plaintiffs, if any, may recover monetary penalties in the amount of $13,508 to $27,018 per false claim, as well as an amount equal to three times the amount of damages sustained by the government as a result of the false claim.
Under the False Claims Act, the government and private plaintiffs, if any, may recover monetary penalties in the amount of $13,946 to $27,894 per false claim, as well as an amount equal to three times the amount of damages sustained by the government as a result of the false claim.
The Company provides a broad therapy portfolio through its network of 96 full-service pharmacies and 67 stand-alone ambulatory infusion suites.
The Company provides a broad therapy portfolio through its network of 93 full-service pharmacies and 84 stand-alone ambulatory infusion suites.
The Company receives fees, which it records as revenue, from certain biotech manufacturers for providing them with clinical outcomes data. The Company’s continued growth will be dependent on maintaining its existing relationships with manufacturers and establishing new relationships with additional manufacturers as the Company launches new products.
The Company may also receive fees, which it records as revenue, from certain biotech manufacturers for providing them with bona fide services often focused around clinical outcomes/data. The Company’s continued growth will be dependent on maintaining its existing relationships with manufacturers and establishing new relationships with additional manufacturers as the Company launches new products.
Competition The Company competes in the large and highly fragmented home infusion market for contracts with managed care organizations and other third-party payers to receive referrals from physicians, case managers and hospital discharge planners. Competition in the home infusion market is based on quality of care, clinical outcomes, pricing and cost of service, reputation, and reliability of service.
Competition The Company competes in the large and highly fragmented home and alternative site infusion market for contracts with managed care organizations and other third-party payers to receive referrals from physicians, case managers and hospital discharge planners.
Such shortages can result in cost increases or hamper the Company’s ability to obtain sufficient quantities to meet the needs of its patients. The Company actively manages its relationships with direct manufacturers and distributors for consistent supply and cost-effective procurement. These relationships provide the Company the opportunity to become a selected partner in the launch of their new products.
The Company actively manages its relationships with direct manufacturers and distributors to provide differentiated access and service to ensure consistent supply and cost-effective procurement. These relationships provide the Company the opportunity to become a selected partner in the launch of their new products.
The Company also provides valuable clinical information in the form of outcomes and compliance data to manufacturers to aid in their evaluation of the efficacy of their products. • Health Systems.
The Company also provides valuable clinical information in the form of outcomes and compliance data to manufacturers to aid in their evaluation of the efficacy of their products. • Health Systems. The Company partners with health systems across the country to provide seamless transitional care within an effective post-acute care network to manage patients across the continuum of care.
However, some drugs are only available through the manufacturer and may be subject to limits on distribution. In such cases, it is important that the Company establishes and maintains good working relations with the manufacturer to secure a sufficient supply to meet its patients’ needs. Additionally, certain drugs may become subject to supply shortages.
In such cases, it is important that the Company establishes and maintains good working relationships with the manufacturer to secure a sufficient supply to meet its patients’ needs. Additionally, certain drugs may become subject to supply shortages. Such shortages can result in cost increases or hamper the Company’s ability to obtain sufficient quantities to meet the needs of its patients.
Human Capital Resources As of December 31, 2022, the Company employed 5,597 persons on a full-time basis and 2,461 persons on a part-time basis. The majority of its part-time employees are clinicians due to the nature and timing of the services the Company provides.
As of December 31, 2023, the Company employed 5,809 persons on a full-time basis and 1,993 persons on a part-time basis. The majority of its part-time employees are clinicians due to the nature and timing of the services the Company provides. Attracting and retaining a highly skilled and diverse team to deliver extraordinary care is a top priority.
The information contained on its website is not incorporated by reference into this Annual Report and should not be considered part of this Annual Report.
Available Information The Company’s corporate headquarters is located at 3000 Lakeside Drive, Suite 300N, Bannockburn, IL 60015. The Company maintains a website at www.optioncarehealth.com. The information contained on its website is not incorporated by reference into this Annual Report and should not be considered part of this Annual Report.
The Company partners with health systems across the country to provide an effective post-acute care network to manage patients across the continuum of care. 4 Table of Contents Quality Quality is at the core of the Company’s mission as it strives to deliver quality healthcare, leading to favorable outcomes and more cost-effective care.
The Company assists partnered health systems in monitoring key metrics that tie back to what most payers monitor in their value based contracts. 4 Table of Contents Quality Quality is at the core of the Company’s mission as it strives to deliver quality healthcare, leading to favorable outcomes and more cost-effective care.
Through the coverage and clinical expertise of its 96 full-service pharmacies, the Company provides pharmaceutical manufacturers with a broad distribution channel for its existing pharmaceutical products. Many of the pharmaceuticals that the Company purchases are available from multiple sources and are available in sufficient quantities to meet its needs and the needs of its patients.
As a national pharmacy provider with broad coverage and clinical expertise of its 93 full-service pharmacies, the Company provides pharmaceutical manufacturers with an extensive distribution channel for its existing and prospective pharmaceutical products.
The Company works with medical specialists across the country to offer access to all approved factor products, a full range of therapies, and dedicated support services. Hemophilia is one of the most costly diseases to treat. The treatment goal is to raise the level of the deficient clotting factor and maintain it to stop the bleeding.
The Company works with medical specialists across the country to offer access to all approved factor products, a full range of therapies, and dedicated support services. • Women’s Health. The Company offers therapies that women need to survive and thrive through high-risk pregnancies.
Its competitors within the home infusion market include Coram CVS/specialty infusion services (a division of CVS Health), Accredo Health Group, Inc. (a unit of Cigna), Briova (a subsidiary of OptumRx, which is a unit of the United Healthcare Insurance Company) and various regional and local providers.
The Company’s competitors within the home infusion market include Optum Infusion Pharmacy (a unit of the United Healthcare Insurance Company), Coram CVS/specialty infusion services (a division of CVS Health), Amerita Specialty Pharmacy (a division of BrightSpring Health), KabaFusion, Soleo Health and many smaller regional and local home infusion companies, ambulatory infusion centers, or specialty pharmacies including Accredo, CVS Caremark, Optum Rx, and Orsini.
Removed
Treatments include infusion of the clotting factor products and other biologic prescription drugs. The length of treatment depends on the severity of the bleeding episode, and the need for treatment continues throughout the life of the patient. • Women’s Health. The Company offers therapies that women need to survive and thrive through high-risk pregnancies.
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Competition in the home infusion market is based on quality of care, clinical outcomes, pricing and cost of service, reputation, and reliability of service.
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The Company is committed to empowering our people through specific initiatives in talent development, employee engagement, health and well-being, and diversity, equity and inclusion. Available Information The Company’s corporate headquarters is located at 3000 Lakeside Drive, Suite 300N, Bannockburn, IL 60015. The Company maintains a website at www.optioncarehealth.com.
Added
Many of the pharmaceuticals that the Company purchases are available from multiple sources and are available in sufficient quantities to meet the needs of the Company and its patients. However, some drugs are only available through sole distribution sources and/or limited distribution models from the manufacturer that may be subject to limits on distribution.
Added
Human Capital Resources The Company’s mission is to transform healthcare by providing innovative services that improve outcomes, reduce costs and deliver hope for patients and their families. The values we embody support each of our team members as they deliver life-changing, extraordinary care.
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The Company’s strategy includes four distinct areas to empower our people so that they remain focused on providing extraordinary care that changes lives: • Talent Development.
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The Company strives to empower our team members by giving them the tools and resources to strengthen and expand their knowledge and skills and advance their careers through training, leadership development programs, continuing functional education and other professional development opportunities.
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The Company also focuses on performance management, 360 degree feedback, and succession planning through calibration assessments on each team leader’s potential, performance and readiness for advancement. • Employee Engagement. The Company believes that highly engaged team members deliver a better patient experience.
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The foundation of our engagement strategy is a culture that connects our team members to our mission and values while promoting a sense of community, while also aligning behind business priorities. Our approach to employee engagement is to cultivate our culture and build relationships across geographically distributed team members.
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The Company promotes employee engagement with engagement surveys, an internal social media platform, quarterly and annual peer recognition programs, and company newsletters. • Health and Well being.
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The Company provides a holistic range of resources and programs to our team members to address each person’s unique needs, including physical, mental and financial health and well-being with programs to support healthy lifestyles, specialized programs to help manage chronic conditions, behavioral health education, coaching, and counseling, and financial wellness resources. • Diversity, Equity, and Inclusion.
Added
The Company believes that diversity, equity and inclusion (“DE&I”) makes us stronger, more innovative and better able to serve our patients. This requires people with different talents, backgrounds and perspectives, reflective of the communities we serve. The Company strives to develop a culture where everyone feels a sense of belonging and empowerment to share their experiences and ideas.
Added
The Company’s ability to attract and retain personnel depends on several factors, including the ability to provide them with engaging assignments and competitive salaries and benefits. The Company is committed to empowering our people through specific initiatives in talent development, employee engagement, health and well-being, and DE&I.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

44 edited+14 added−14 removed130 unchanged
Biggest changeA successful product or professional liability claim in excess of our insurance coverage could harm our consolidated financial statements. Various aspects of our business may subject us to litigation and liability for damages. For example, a prescription drug dispensing error could result in a patient receiving the wrong or incorrect amount of medication, leading to personal injury or death.
Biggest changeFor example, a prescription drug dispensing error could result in a patient receiving the wrong or incorrect amount of medication, leading to personal injury or death. Our business and consolidated financial statements could suffer if we pay damages or defense costs in connection with a claim that is outside the scope of any applicable contractual indemnity or insurance coverage.
Introduction of new drugs or accelerated adoption of existing lower margin drugs could adversely affect our revenues and profitability when prescribers prescribe these drugs for their patients or they are mandated by Third-Party Payers. The pharmaceutical industry pipeline of new drugs includes many drugs that over the long term may replace older, more expensive therapies.
Introduction of new drugs, accelerated adoption of existing lower margin drugs or withdrawal of existing drugs could adversely affect our revenues and profitability when prescribers prescribe these drugs for their patients or they are mandated by Third-Party Payers. The pharmaceutical industry pipeline of new drugs includes many drugs that over the long term may replace older, more expensive therapies.
These regulatory measures, future FDA DSCSA regulatory measures and the potential for increased FDA DSCSA enforcement could increase pharmacy costs. Noncompliance with these regulations could have an adverse impact on our reputation and profitability.
These regulatory measures, future DSCSA regulatory measures and the potential for increased DSCSA enforcement by the FDA could increase pharmacy costs. Noncompliance with these regulations could have an adverse impact on our reputation and profitability.
For the year ended December 31, 2022, 88% of our revenue came from MCOs and other non-governmental payers, including Medicare Advantage plans, Managed Medicaid plans, pharmacy benefit managers (“PBMs”), and self-pay patients. Many payers seek to limit the number of providers that supply pharmaceuticals to their enrollees in order to build volume that justifies their discounted pricing.
For the year ended December 31, 2023, 88% of our revenue came from MCOs and other non-governmental payers, including Medicare Advantage plans, Managed Medicaid plans, pharmacy benefit managers (“PBMs”), and self-pay patients. Many payers seek to limit the number of providers that supply pharmaceuticals to their enrollees in order to build volume that justifies their discounted pricing.
In addition, our competitive position could be adversely affected by any inability to obtain access to new biotech pharmaceutical products. 12 Table of Contents If we are unable to maintain relationships with existing patient referral sources, our business and consolidated financial condition, results of operations, and cash flows could be materially adversely affected.
In addition, our competitive position could be adversely affected by any inability to obtain access to new biotech pharmaceutical products. 13 Table of Contents If we are unable to maintain relationships with existing patient referral sources, our business and consolidated financial condition, results of operations, and cash flows could be materially adversely affected.
Because of the significance of our goodwill, any future impairment could result in material non-cash charges to our results of operations, which could have an adverse effect on our financial condition and results of operations. 14 Table of Contents A significant change in, or noncompliance with, governmental regulations and other legal requirements could have a material adverse effect on our reputation and profitability.
Because of the significance of our goodwill, any future impairment could result in material non-cash charges to our results of operations, which could have an adverse effect on our financial condition and results of operations. 15 Table of Contents A significant change in, or noncompliance with, governmental regulations and other legal requirements could have a material adverse effect on our reputation and profitability.
If our cash flows and capital resources are insufficient to fund our debt service obligations, we may be required to reduce or delay capital expenditures, sell assets, seek additional capital or seek to restructure or refinance our indebtedness. Any refinancing of our indebtedness could be at higher interest rates and may require us to comply with more onerous covenants.
If our cash flow and capital resources are insufficient to fund our debt service obligations, we may be required to reduce or delay capital expenditures, sell assets, seek additional capital or seek to restructure or refinance our indebtedness. Any refinancing of our indebtedness could be at higher interest rates and may require us to comply with more onerous covenants.
Untimely, our noncompliance with applicable laws and regulations could result in the imposition of civil and criminal penalties that could adversely affect the continued operation of our business, including: suspension of payments from government programs; loss of required government certifications; loss of authorizations to participate in or exclusion from government programs, including the Medicare and Medicaid programs; loss of licenses; and significant fines or monetary penalties.
Ultimately, our noncompliance with applicable laws and regulations could result in the imposition of civil and criminal penalties that could adversely affect the continued operation of our business, including: suspension of payments from government programs; loss of required government certifications; loss of authorizations to participate in or exclusion from government programs, including the Medicare and Medicaid programs; loss of licenses; and significant fines or monetary penalties.
Adding additional debt to current debt levels could exacerbate the leverage-related risks described above. 18 Table of Contents We may not be able to generate sufficient cash flow to service all of our indebtedness and may be forced to take other actions to satisfy our obligations under such indebtedness, which may not be successful.
Adding additional debt to current debt levels could exacerbate the leverage-related risks described above. 20 Table of Contents We may not be able to generate sufficient cash flow to service all of our indebtedness and may be forced to take other actions to satisfy our obligations under such indebtedness, which may not be successful.
These requirements included a ten-year timeline culminating in the building of "an electronic, interoperable system to identify and trace certain prescription drugs as they are distributed in the United States.” The law’s track and trace requirements are applicable to manufacturers, wholesalers, repackagers and dispensers (e.g., pharmacies) of prescription drugs.
These requirements included a 10-year timeline culminating in the building of "an electronic, interoperable system to identify and trace certain prescription drugs as they are distributed in the United States.” The law’s track and trace requirements are applicable to manufacturers, wholesalers, repackagers and dispensers (e.g., pharmacies) of prescription drugs.
The regulatory environment surrounding information security and privacy is increasingly demanding, with the frequent imposition of new and changing requirements. Compliance with changes in privacy and information security laws and with rapidly evolving industry standards may result in our incurring significant expense due to increased investment in technology and the development of new operational processes.
The regulatory environment surrounding information security and privacy is increasingly demanding, with the frequent imposition of new and changing requirements. Compliance with changes in privacy and information security laws and with rapidly evolving industry standards may result in the Company incurring significant expense due to increased investment in technology and the development of new operational processes.
A rapid concentration of revenue derived from individual managed care payers could harm our business. 16 Table of Contents We face periodic reviews and billing audits by governmental and private payers, which could result in adverse findings that may negatively impact our business.
A rapid concentration of revenue derived from individual managed care payers could harm our business. 17 Table of Contents We face periodic reviews and billing audits by governmental and private payers, which could result in adverse findings that may negatively impact our business.
In addition, a security breach of our information technology systems could damage our reputation, subject us to liability claims or regulatory penalties for compromised personal information and could have a material adverse effect on our business, financial condition, and results of operations. Our business is dependent on the services provided by third-party information technology vendors.
In addition, a security breach of our information technology systems could damage our reputation, subject us to liability claims or regulatory penalties for compromised personal information and could have a material adverse effect on our business, financial condition, and results of operations. 25 Table of Contents Our business is dependent on the services provided by third-party information technology vendors.
In addition, developments in tax policy, such as the disallowance of tax deductions for interest paid on outstanding indebtedness, could have an adverse effect on our liquidity and our business, financial conditions and results of operations.
In addition, developments in tax policy, such as the disallowance of tax deductions for interest paid on outstanding indebtedness, could have an adverse effect on our liquidity and our business, financial condition and results of operations.
In either case, such circumstances could cause operating costs to increase and our profitability to decline.
In either case, such circumstances cause operating costs to increase and our profitability to decline.
Furthermore, we cannot predict the overall impact of increased scrutiny on compounding pharmacies. 17 Table of Contents Risks Relating to Our Indebtedness Our existing indebtedness could adversely affect our business and growth prospects.
Furthermore, we cannot predict the overall impact of increased scrutiny on compounding pharmacies. 19 Table of Contents Risks Relating to Our Indebtedness Our existing indebtedness could adversely affect our business and growth prospects.
Any of the foregoing could also cause investors to lose confidence in our reported financial information and in us and would likely result in a decline in the market price of our stock and in our ability to raise additional financing if needed in the future. 24 Table of Contents Acts of God such as major weather disturbances could disrupt our business.
Any of the foregoing could also cause investors to lose confidence in our reported financial information and in us and would likely result in a decline in the market price of our stock and in our ability to raise additional financing if needed in the future. Acts of God, such as major weather disturbances, could disrupt our business.
Any termination of one or more of our pharmacies from the Medicare program for failure to satisfy the Medicare supplier standards could adversely affect our consolidated financial statements. We cannot predict the impact of changing requirements on compounding pharmacies. Compounding pharmacies are closely monitored by federal and state governmental agencies.
Any termination of one or more of our pharmacies from the Medicare program for failure to satisfy the Medicare supplier standards could adversely affect our consolidated financial statements. 18 Table of Contents We cannot predict the impact of changing requirements on compounding pharmacies. Compounding pharmacies are closely monitored by federal and state governmental agencies.
The general levels of inflation and specific inflationary pressures that we have experienced in areas such as labor, transportation and medical supplies may continue to persist due to events outside of our control, for example, COVID-19, supply chain disruptions, and the broader macro-economic environment.
The general levels of inflation and specific inflationary pressures that we have experienced in areas such as labor, transportation and medical supplies may continue to persist due to events outside of our control, for example, the COVID-19 pandemic and other potential pandemic events, supply chain disruptions, and the broader macro-economic environment.
The financing documents governing our First Lien Term Loan, ABL Facility (as defined herein) and our Senior Notes restrict our ability to conduct asset sales and/or use the proceeds from asset sales.
The financing documents governing our First Lien Term Loan, Revolver Facility (as defined herein) and our Senior Notes restrict our ability to conduct asset sales and/or use the proceeds from asset sales.
In recent years, Congress has passed legislation reducing payments to health-care providers. The Budget Control Act of 2011, as amended, requires automatic spending reductions to reduce the federal deficit, including Medicare spending reductions of up to 2% per fiscal year that extend through 2027.
In recent years, Congress has passed legislation reducing payments to healthcare providers. The Budget Control Act of 2011, as amended, requires automatic spending reductions to reduce the federal deficit, including Medicare spending reductions of up to 2% per fiscal year that extend through 2027.
During economic downturns and periods of stagnant or slow economic growth, federal and state budgets are typically negatively affected, resulting in reduced reimbursements or delayed payments by the federal and state government health-care coverage programs in which we participate, including Medicare, Medicaid, and other federal or state assistance plans.
During economic downturns and periods of stagnant or slow economic growth, federal and state budgets are typically negatively affected, resulting in reduced reimbursements or delayed payments by the federal and state government healthcare coverage programs in which we participate, including Medicare, Medicaid, and other federal or state assistance plans.
In addition, acts of God and other force majeure events may cause a reduction in our business or increased costs, such as increased costs in our operations as we incur overtime charges or redirect services to other locations, delays in our ability to work with payers, hospitals, physicians and other strategic partners on new business initiatives, and disruption to referral patterns as patients are moved out of facilities affected by such events or are unable to return to sites of service in patients’ homes.
In addition, acts of God and other force majeure events may cause a reduction in our business or increased costs, such as increased costs in our operations as we incur overtime charges or redirect services to other locations, delays in our ability to work with payers, hospitals, physicians and other strategic partners on new business initiatives, and disruption to referral patterns as patients are moved out of facilities affected by such events or are unable to return to sites of service in patients’ homes. 26 Table of Contents Item 1B.
For the year ended December 31, 2022, approximately 73% of our pharmaceutical and medical supply purchases were from four vendors. Most of the pharmaceuticals that we purchase are available from multiple sources, and we believe they are available in sufficient quantities to meet our needs and the needs of our patients.
For the year ended December 31, 2023, approximately 72% of our pharmaceutical and medical supply purchases were from four vendors. Most of the pharmaceuticals that we purchase are available from multiple sources, and we believe they are available in sufficient quantities to meet our needs and the needs of our patients.
These relationships may be important to our business and growth prospects. However, we may not be able to maintain these relationships or develop new strategic alliances. 23 Table of Contents Cybersecurity risks could compromise our information and expose us to liability, which may harm our ability to operate effectively and may cause harm to our business and reputation.
These relationships may be important to our business and growth prospects. However, we may not be able to maintain these relationships or develop new strategic alliances. Cybersecurity risks could compromise our information and expose us to liability, which may harm our ability to operate effectively and may cause harm to our business and reputation.
In addition, from time to time, CMS revises the reimbursement systems used to reimburse health care providers, which may result in reduced Medicare payments. 15 Table of Contents For the year ended December 31, 2022, 12% of our revenue was derived from reimbursement by direct federal and state programs such as Medicare and Medicaid.
In addition, from time to time, CMS revises the reimbursement systems used to reimburse healthcare providers, which may result in reduced Medicare payments. 16 Table of Contents For the year ended December 31, 2023, 12% of our revenue was derived from reimbursement by direct federal and state programs such as Medicare and Medicaid.
As of December 31, 2022, we had $1,094.0 million of outstanding borrowings, including (i) $594.0 million under our First Lien Term Loan (as defined herein) and (ii) $500.0 million under our 4.375% Senior Unsecured Notes due 2029 (the “Senior Notes”).
As of December 31, 2023, we had $1,088.0 million of outstanding borrowings, including (i) $588.0 million under our First Lien Term Loan (as defined herein) and (ii) $500.0 million under our 4.375% Senior Unsecured Notes due 2029 (the “Senior Notes”).
In addition, where labor shortages arise in markets in which we operate, we have faced higher costs to attract personnel and we may have to provide them with more attractive benefit packages than originally anticipated or are being paid in other markets where such shortages do not exist at the time.
We may not be successful in any of these areas. 14 Table of Contents In addition, where labor shortages arise in markets in which we operate, we have faced higher costs to attract personnel and we have had to provide them with more attractive benefit packages than originally anticipated or are being paid in other markets where such shortages do not exist at the time.
Higher unemployment rates and significant employment layoffs and downsizings may lead to lower numbers of patients enrolled in employer-provided plans. Adverse economic conditions could also cause employers to stop offering, or limit, healthcare coverage, or modify program designs, shifting more costs to the individual and exposing us to greater credit risk from patients or the discontinuance of therapy.
Adverse economic conditions could also cause employers to stop offering, or limit, healthcare coverage, or modify program designs, shifting more costs to the individual and exposing us to greater credit risk from patients or the discontinuance of therapy.
However, an adverse outcome in one or more of these proceedings may have a material adverse effect on our consolidated results of operations, consolidated financial position, and/or consolidated cash flow from operations, or may require us to make material changes to our business practices. 22 Table of Contents We may be subject to liability claims for damages and other expenses that are not covered by insurance.
However, an adverse outcome in one or more of these proceedings may have a material adverse effect on our consolidated results of operations, consolidated financial position, and/or consolidated cash flow from operations, or may require us to make material changes to our business practices.
As a result of operating in the home infusion industry, our business is subject to inherent risk of claims, losses and potential lawsuits alleging incidents involving our employees that are likely to occur in a patient’s home. We maintain professional liability insurance to provide coverage to us and our subsidiaries against these risks.
We may be subject to liability claims for damages and other expenses that are not covered by insurance. As a result of operating in the home infusion industry, our business is subject to inherent risk of claims, losses and potential lawsuits alleging incidents involving our employees that are likely to occur in a patient’s home.
We rely on our information systems to provide security for processing, transmission and storage of confidential information about our patients, customers and personnel, such as names, addresses and other individually identifiable information protected by HIPAA and other privacy laws. Cyber incidents can result from deliberate attacks or unintentional events. Cyber-attacks are increasingly more common, including in the health care industry.
The Company relies on its information systems to provide security for processing, transmitting, and storing confidential information about patients, customers, and personnel, such as names, addresses and other individually identifiable information protected by HIPAA and other privacy laws. Cyber incidents can result from deliberate attacks or unintentional events.
Provisions of our corporate governance documents could make an acquisition of us more difficult and may prevent attempts by our stockholders to replace or remove our current management, even if beneficial to our stockholders.
In such an event, we may not have sufficient assets to repay all of our indebtedness. 21 Table of Contents Risks Relating to Our Common Stock Provisions of our corporate governance documents could make an acquisition of us more difficult and may prevent attempts by our stockholders to replace or remove our current management, even if beneficial to our stockholders.
The Company is currently materially compliant with DSCSA, and intends to be materially compliant with the final milestone requirement of receiving or exchanging transaction information (with specific product identifiers for each package) and transaction statements electronically by the effective date in November 2023.
The Company is currently materially compliant with the DSCSA provisions currently in effect. The Company also expects to be materially compliant with the additional provisions of DSCSA, which requires the electronic receipt and exchange of transaction information (with specific product identifiers for each package) and transaction statements, by the November 2023 effective date.
The forum selection clause in our third amended and restated certificate of incorporation may have the effect of discouraging lawsuits against us or our directors and officers and may limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us. 20 Table of Contents We may issue shares of preferred stock in the future, which could make it difficult for another company to acquire us or could otherwise adversely affect holders of our common stock, which could depress the price of our common stock.
The forum selection clause in our third amended and restated certificate of incorporation may have the effect of discouraging lawsuits against us or our directors and officers and may limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us.
A shortage of qualified registered nursing staff, pharmacists and other professionals could adversely affect our ability to attract, train and retain qualified personnel and could increase operating costs. 13 Table of Contents Our business relies on our ability to attract, train and retain nursing staff, pharmacists and other professionals who possess the skills, experience and licenses necessary to meet the requirements of their job responsibilities.
A shortage of qualified registered nursing staff, pharmacists and other professionals could adversely affect our ability to attract, train and retain qualified personnel and could increase operating costs.
We are subject to risks relating to asserted claims, litigation and other proceedings in connection with our operations.
We are subject to liability for negligent acts, omissions, or injuries occurring at any of our clinics or caused by any of our employees. We are subject to risks relating to asserted claims, litigation and other proceedings in connection with our operations.
Our ability to attract, train and retain personnel depends on several factors, including our ability to provide them with engaging assignments and competitive salaries and benefits. We may not be successful in any of these areas.
As a result, we are often required to compete for personnel with other healthcare systems and our competitors. Our ability to attract, train and retain personnel depends on several factors, including our ability to provide them with engaging assignments and competitive salaries and benefits.
The potential issuance of preferred stock may delay or prevent a change in control, discouraging bids for our common stock at a premium to the market price, and materially and adversely affecting the market price and the voting and other rights of the holders of our common stock. 21 Table of Contents General Risk Factors The COVID-19 pandemic and other potential pandemic events could adversely impact our business, results of operations, cash flows and financial position.
The potential issuance of preferred stock may delay or prevent a change in control, discouraging bids for our common stock at a premium to the market price, and materially and adversely affecting the market price and the voting and other rights of the holders of our common stock. 22 Table of Contents We cannot guarantee that our stock repurchase program will be fully implemented or that it will enhance long-term stockholder value.
Government programs could also slow or temporarily suspend payments, negatively impacting our cash flow and increasing our working capital needs and interest payments. We have seen, and believe we will continue to see, Medicare and state Medicaid programs institute measures aimed at controlling spending growth, including reductions in reimbursement rates.
Government programs could also slow or temporarily suspend payments, negatively impacting our cash flow and increasing our working capital needs and interest payments.
Our third amended and restated certificate of incorporation authorizes us to issue one or more series of preferred stock.
We may issue shares of preferred stock in the future, which could make it difficult for another company to acquire us or could otherwise adversely affect holders of our common stock, which could depress the price of our common stock. Our third amended and restated certificate of incorporation authorizes us to issue one or more series of preferred stock.
From time to time, and particularly in recent years, there have been shortages of nursing staff, pharmacists and other professionals in certain local and regional markets. As a result, we are often required to compete for personnel with other healthcare systems and our competitors.
Our business relies on our ability to attract, train and retain nursing staff, pharmacists and other professionals who possess the skills, experience and licenses necessary to meet the requirements of their job responsibilities. From time to time, and particularly in recent years, there have been shortages of nursing staff, pharmacists and other professionals in certain local and regional markets.
Pending and future litigation could subject us to significant monetary damages and/or require us to change our business practices. We employ pharmacists, dieticians, nurses and other health care professionals. We are subject to liability for negligent acts, omissions, or injuries occurring at any of our clinics or caused by any of our employees.
The repurchase program may be suspended or terminated at any time and, even if fully implemented, may not enhance long-term stockholder value. 23 Table of Contents General Risk Factors Pending and future litigation could subject us to significant monetary damages and/or require us to change our business practices. We employ pharmacists, dieticians, nurses and other healthcare professionals.
Our business and consolidated financial statements could suffer if we pay damages or defense costs in connection with a claim that is outside the scope of any applicable contractual indemnity or insurance coverage. Our insurance coverage also includes fire, property damage and general liability with varying limits.
Any claims made against us, regardless of their merit or eventual outcome, could damage our reputation and business. Our insurance coverage also includes fire, property damage and general liability with varying limits.
Removed
The COVID-19 pandemic has led to a constrained supply environment, which could result in higher costs to procure, and the potential unavailability of, critical personal protection equipment, pharmaceuticals and medical supplies. As of December 31, 2022, we have not experienced a significant impact in the availability of supplies due to the COVID-19 pandemic.
Added
We have experienced a decrease in revenue and net income as a result of the withdrawal from the market of a drug related to the treatment of pre-term labor and the introduction of an oral alternative drug related to the treatment of ALS.
Removed
In such an event, we may not have sufficient assets to repay all of our indebtedness. 19 Table of Contents Risks Relating to Our Common Stock As of December 31, 2022, Walgreens Boots Alliance, Inc. (“Walgreens”) is our largest stockholder and has the ability to exercise influence over decisions requiring our stockholders’ approval.
Added
We cannot guarantee that our stock repurchase program will be fully implemented or that it will enhance long-term stockholder value. In February 2023, the Board of Directors approved a new stock repurchase program authorizing the repurchase of up to $250 million of our common stock.
Removed
On December 17, 2021, Madison Dearborn Partners transferred control of HC I to Walgreens. As of December 31, 2022, Walgreens controls approximately 14.4% of our common stock through its control of HC I.
Added
In December 2023, the Board of Directors approved an increase to its stock repurchase program authorization from $250 million to $500 million. The repurchase program does not have an expiration date, and we are not obligated to repurchase a specified number or dollar value of shares, on any particular timetable or at all.
Removed
As a result, Walgreens has the ability to exercise influence over decisions requiring approval of our stockholders, including the election of directors, amendments to our certificate of incorporation and approval of significant corporate transactions, such as a merger or change in control of the Company.
Added
There can be no assurance that we will repurchase stock at favorable prices.
Removed
The COVID-19 pandemic has significantly impacted, and may continue to severely impact, the global economy. COVID-19 has persisted as a significant public health concern and impacted the general economy and consumer behaviors. The impacts of the pandemic are unpredictable and volatile, with varying impacts to business operations.
Added
We maintain professional liability insurance to provide coverage to us and our subsidiaries against these risks. A successful product or professional liability claim in excess of our insurance coverage could harm our consolidated financial statements. Various aspects of our business may subject us to litigation and liability for damages.
Removed
We are closely monitoring the impact of the COVID-19 pandemic on all aspects of our business, including how it is impacting our patients, workforce, suppliers, vendors, referral sources, and Third-Party Payers. The Company has been disrupted by both positive and negative referral patterns and experienced challenges in our staffing and our ability to procure personal protection equipment and key drugs.
Added
Our insurance coverage also includes property liability, cyber liability, clinical trials liability, crime liability, auto liability, workers’ compensation, employers’ liability, executive liability policies (employment practices liability, fiduciary liability, directors’ and officers’ liability), umbrella/excess liability and general liability with varying limits.
Removed
The COVID-19 pandemic has caused significant volatility, uncertainty and economic disruption, which may adversely affect our business operations and may materially and adversely affect our results of operations, cash flow and financial position.
Added
We cannot assure that the insurance we maintain will satisfy claims made against us or that insurance coverage will continue to be available to us at commercially reasonable rates, in adequate amounts or on satisfactory terms or at all. Claims made against us will be subject to the terms, conditions and exclusions of the insurance policies we maintain.
Removed
The situation is changing rapidly considering the impacts of new variants of the COVID-19 virus, public health guidance, and regulatory mandates and additional consequences may arise for which we are not currently aware.
Added
We have seen, and believe we will continue to see, Medicare and state Medicaid programs institute measures aimed at controlling spending growth, including reductions in reimbursement rates. 24 Table of Contents Higher unemployment rates and significant employment layoffs and downsizings may lead to lower numbers of patients enrolled in employer-provided plans.
Removed
The extent to which the COVID-19 pandemic impacts us will depend on numerous evolving factors and future developments that we are not able to predict, including: the severity and duration of the pandemic; the potential of new virus variants; governmental, business and other actions; the promotion of social distancing and the adoption of shelter-in-place orders affecting our referral sources; the impacts of the pandemic on our supply chain; the impact of the pandemic on economic activity; the health of, and the effect of the pandemic on, our workforce; any impairment in value of our tangible or intangible assets that could be recorded as a result of a weaker economic condition; and the effect on our internal controls including those over financial reporting.
Added
We use, and may continue to expand our use of, machine learning and artificial intelligence (“AI”) technologies to deliver our services and operate our business.
Removed
In addition, if the pandemic continues to create disruptions or turmoil in the credit or financial markets, or impacts our credit ratings or stock price, it could adversely affect our ability to access capital on favorable terms and continue to meet our liquidity needs, all of which are highly uncertain and cannot be predicted.
Added
If we fail to successfully integrate AI into our platform and business processes, or if we fail to keep pace with rapidly evolving AI technological developments, including attracting and retaining talented AI developers and programmers, we may face a competitive disadvantage.
Removed
Other factors including reduced employment pools, federal subsidies offered in response to the COVID-19 pandemic and other government regulations exacerbated staffing challenges, and created increased labor shortages. An overall or prolonged labor shortage, lack of skilled labor, increased turnover or continued labor inflation could have a material adverse impact on our business, results of operations, liquidity or cash flow.
Added
At the same time, the use or offering of AI technologies may result in new or expanded risks and liabilities, including enhanced government or regulatory scrutiny, litigation, compliance issues, ethical concerns, confidentiality, reputational harm and security risks.
Removed
In addition, we cannot predict the impact that COVID-19 or other potential pandemic events will have on our patients, suppliers, vendors, and Third-Party Payers and on each of their financial conditions; however, any material effect on these parties could adversely impact our business.
Added
It is not possible to predict all of the risks related to the use of AI and changes in laws, rules, directives, and regulations governing the use of AI may adversely affect our ability to develop and use AI or subject us to legal liability.
Removed
The impact of COVID-19 or other potential pandemic events may also exacerbate other risks, any of which could have a material effect on us. The situation continues to be uncertain and additional impacts may arise for which we are not currently aware.
Added
The cost of complying with laws and regulations governing AI could be significant and would increase our operating expenses, which could adversely affect our business, financial condition and results of operations. Further, market demand and acceptance of AI technologies are uncertain, and we may be unsuccessful in efforts to further incorporate AI into our processes.
Removed
Item 1B. Unresolved Staff Comments None. 25 Table of Contents
Added
Climate change, or legal, regulatory or market measures to address climate change, could adversely affect our business and results of operations.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeOur other properties mainly consist of infusion pharmacies equipped with clean room and compounding capabilities. Some infusion pharmacies are co-located with an ambulatory infusion center where patients receive infusion treatments. As of December 31, 2022, we have 96 pharmacies and 67 stand-alone ambulatory infusion suites that support our infusion services business in 44 states.
Biggest changeOur other properties mainly consist of infusion pharmacies equipped with clean room and compounding capabilities. Some infusion pharmacies are co-located with an ambulatory infusion center where patients receive infusion treatments. As of December 31, 2023, we have 93 pharmacies and 84 stand-alone ambulatory infusion suites that support our infusion services business in 43 states.
Item 2. Properties We currently lease all of our properties from third parties under various lease terms expiring over periods extending through 2035, in addition to a number of non-material, month-to-month leases. Our corporate headquarters is located at 3000 Lakeside Drive, Suite 300N, Bannockburn, IL 60015.
Item 2. Properties We currently lease all of our properties from third parties under various lease terms expiring over periods extending through 2038, in addition to a number of non-material month-to-month leases. Our corporate headquarters is located at 3000 Lakeside Drive, Suite 300N, Bannockburn, IL 60015.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeItem 3. Legal Proceedings For a summary of material legal proceedings, if any, refer to Note 14, Commitments and Contingencies , of the consolidated financial statements included in Item 8 of this Annual Report. Item 4. Mine Safety Disclosures Item not applicable. 26 Table of Contents PART II
Biggest changeItem 3. Legal Proceedings For a summary of material legal proceedings, if any, refer to Note 14, Commitments and Contingencies , of the consolidated financial statements included in Item 8 of this Annual Report. Item 4. Mine Safety Disclosures Item not applicable. 28 Table of Contents PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

3 edited+4 added−3 removed0 unchanged
Biggest changeThe Company may consider transitioning away from the use of the Nasdaq Health Services Index as a comparative index in future Annual Reports. The graph shows the performance of a $100 investment in our Common Stock and each index as of December 31, 2017.
Biggest changeThe graph shows the performance of a $100 investment in our Common Stock and each index as of December 31, 2018. * $100 invested on December 31, 2018 in stock or index, including reinvestment of dividends.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Common Stock Our Common Stock, par value $0.0001 per share, is traded on the Nasdaq Global Select Market under the symbol “OPCH”. Holders of Record As of February 20, 2023, there were 118 stockholders of record of our Common Stock.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Common Stock Our Common Stock, par value $0.0001 per share, is traded on the Nasdaq Global Select Market under the symbol “OPCH”. Holders of Record As of February 19, 2024, there were 96 stockholders of record of our Common Stock.
Dividend Policy We have never paid cash dividends on our Common Stock and do not anticipate doing so in the foreseeable future. Securities Authorized for Issuance under Equity Compensation Plans See Item 12.
Dividend Policy We have never paid cash dividends on our Common Stock and do not anticipate doing so in the foreseeable future. Securities Authorized for Issuance under Equity Compensation Plans See Item 12. “Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters” of this Annual Report.
Removed
“Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.” Recent Sale of Unregistered Securities and Use of Proceeds None. 27 Table of Contents Stock Performance Graph The following graph compares the total cumulative returns of BioScrip through August 6, 2019 and Option Care Health from August 7, 2019 through December 31, 2022 with the total cumulative returns of the Nasdaq Composite Index, Nasdaq Health Services Index, and the S&P Health Care Services Select Industry Index for the five-year period from December 31, 2017 through December 31, 2022.
Added
Recent Sale of Unregistered Securities and Use of Proceeds Issuer Purchases of Equity Securities On February 20, 2023, the Company’s Board of Directors approved a share repurchase program of up to an aggregate $250.0 million of common stock of the Company.
Removed
The Company included the S&P Health Care Services Select Industry Index as an industry benchmark comparison for the year ended December 31, 2022 as it more accurately represents a true benchmark of the Company’s peer group and will align to our definitive proxy statement to be filed with the SEC no later than 120 days after December 31, 2022.
Added
On December 6, 2023, the Company’s Board of Directors approved an increase to its stock repurchase program authorization from $250.0 million to $500 million. This program has no specified expiration date.
Removed
Year Ended December 31, 2017 2018 2019 2020 2021 2022 Option Care Health, Inc. $ 100.00 $ 122.68 $ 128.18 $ 134.36 $ 244.33 $ 258.51 Nasdaq Composite Index $ 100.00 $ 96.12 $ 129.97 $ 186.69 $ 226.63 $ 151.61 Nasdaq Health Services Index $ 100.00 $ 95.83 $ 120.59 $ 156.81 $ 151.25 $ 120.35 S&P Health Care Services Select Industry Index $ 100.00 $ 102.35 $ 121.19 $ 161.19 $ 176.41 $ 141.01 * $100 invested on December 31, 2017 in stock or index, including reinvestment of dividends. 28 Table of Contents Item 6.
Added
The following table provides certain information with respect to the Company’s repurchases of common stock from October 1, 2023 through December 31, 2023: Period Total Number of Shares Purchased 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 Plans or Programs October 1, 2023 - October 31, 2023 — $ — — $ 75,000,067 November 1, 2023 - November 30, 2023 1,620,021 28.78 1,620,021 28,368,824 December 1, 2023 - December 31, 2023 937,594 30.26 937,594 250,000,103 2,557,615 $ 29.32 2,557,615 $ 250,000,103 29 Table of Contents Stock Performance Graph The following graph compares the total cumulative returns of BioScrip through August 6, 2019 and Option Care Health from August 7, 2019 through December 31, 2023 with the total cumulative returns of the Nasdaq Composite Index and the S&P Health Care Services Select Industry Index for the five-year period from December 31, 2018 through December 31, 2023.
Added
Year Ended December 31, 2018 2019 2020 2021 2022 2023 Option Care Health, Inc. $ 100.00 $ 104.48 $ 109.52 $ 199.16 $ 210.71 $ 235.92 Nasdaq Composite Index $ 100.00 $ 135.23 $ 194.24 $ 235.78 $ 157.74 $ 226.24 S&P Health Care Services Select Industry Index $ 100.00 $ 118.40 $ 157.48 $ 172.35 $ 137.77 $ 144.10 30 Table of Contents Item 6.

Item 7. Management's Discussion & Analysis

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

41 edited+16 added−16 removed23 unchanged
Biggest changeYear Ended December 31, 2022 2021 Amount % of Revenue Amount % of Revenue NET REVENUE $ 3,944,735 100.0 % $ 3,438,640 100.0 % COST OF REVENUE 3,077,817 78.0 % 2,659,034 77.3 % GROSS PROFIT 866,918 22.0 % 779,606 22.7 % OPERATING COSTS AND EXPENSES: Selling, general and administrative expenses 566,122 14.4 % 525,707 15.3 % Depreciation and amortization expense 60,565 1.5 % 63,058 1.8 % Total operating expenses 626,687 15.9 % 588,765 17.1 % OPERATING INCOME 240,231 6.1 % 190,841 5.5 % OTHER INCOME (EXPENSE): Interest expense, net (53,806) (1.4) % (67,003) (1.9) % Equity in earnings of joint ventures 5,125 0.1 % 6,030 0.2 % Other, net 14,218 0.4 % (13,374) (0.4) % Total other expense (34,463) (0.9) % (74,347) (2.2) % INCOME BEFORE INCOME TAXES 205,768 5.2 % 116,494 3.4 % INCOME TAX EXPENSE (BENEFIT) 55,212 1.4 % (23,404) (0.7) % NET INCOME $ 150,556 3.8 % $ 139,898 4.1 % OTHER COMPREHENSIVE INCOME, NET OF TAX: Change in unrealized gains (losses) on cash flow hedges, net of income taxes of $7,259 and $0, respectively 21,610 0.5 % 10,721 0.3 % OTHER COMPREHENSIVE INCOME 21,610 0.5 % 10,721 0.3 % NET COMPREHENSIVE INCOME $ 172,166 4.4 % $ 150,619 4.4 % Year Ended December 31, 2022 Compared to Year Ended December 31, 2021 The following tables present selected consolidated comparative results of operations for the years ended December 31, 2022 and 2021: Gross Profit Year Ended December 31, 2022 2021 Variance (in thousands, except for percentages) Net revenue $ 3,944,735 $ 3,438,640 $ 506,095 14.7 % Cost of revenue 3,077,817 2,659,034 418,783 15.7 % Gross profit $ 866,918 $ 779,606 $ 87,312 11.2 % Gross profit margin 22.0% 22.7% 33 Table of Contents The 14.7% increase in net revenue was primarily driven by organic growth in the Company’s portfolio of therapies, consisting of mid-single-digit acute revenue growth relative to the prior year while chronic revenue grew in the mid-teens.
Biggest changeYear Ended December 31, 2023 2022 Amount % of Revenue Amount % of Revenue NET REVENUE $ 4,302,324 100.0 % $ 3,944,735 100.0 % COST OF REVENUE 3,321,101 77.2 % 3,077,817 78.0 % GROSS PROFIT 981,223 22.8 % 866,918 22.0 % OPERATING COSTS AND EXPENSES: Selling, general and administrative expenses 607,427 14.1 % 566,122 14.4 % Depreciation and amortization expense 59,201 1.4 % 60,565 1.5 % Total operating expenses 666,628 15.5 % 626,687 15.9 % OPERATING INCOME 314,595 7.3 % 240,231 6.1 % OTHER INCOME (EXPENSE): Interest expense, net (51,248) (1.2) % (53,806) (1.4) % Equity in earnings of joint ventures 5,530 0.1 % 5,125 0.1 % Other, net 89,865 2.1 % 14,218 0.4 % Total other income (expense) 44,147 1.0 % (34,463) (0.9) % INCOME BEFORE INCOME TAXES 358,742 8.3 % 205,768 5.2 % INCOME TAX EXPENSE 91,652 2.1 % 55,212 1.4 % NET INCOME $ 267,090 6.2 % $ 150,556 3.8 % OTHER COMPREHENSIVE (LOSS) INCOME, NET OF TAX: Change in unrealized (loss) gain on cash flow hedge, net of income tax benefit (expense) of $2,158 and $(7,259), respectively (6,181) (0.1) % 21,610 0.5 % OTHER COMPREHENSIVE (LOSS) INCOME (6,181) (0.1) % 21,610 0.5 % NET COMPREHENSIVE INCOME $ 260,909 6.1 % $ 172,166 4.4 % 34 Table of Contents Year Ended December 31, 2023 Compared to Year Ended December 31, 2022 The following table presents selected consolidated comparative results of operations for the years ended December 31, 2023 and 2022: Gross Profit Year Ended December 31, 2023 2022 Variance (in thousands, except for percentages) Net revenue $ 4,302,324 $ 3,944,735 $ 357,589 9.1 % Cost of revenue 3,321,101 3,077,817 243,284 7.9 % Gross profit $ 981,223 $ 866,918 $ 114,305 13.2 % Gross profit margin 22.8% 22.0% The increase in net revenue during the year ended December 31, 2023 was primarily driven by organic growth in the Company’s portfolio of therapies, consisting of acute revenue that had mid-single-digit growth relative to the prior year while chronic revenue grew in the low-double-digits.
The principal balance of the First Lien Term Loan is repayable in quarterly installments of $1.5 million plus interest, with a final payment of all remaining outstanding principal due on October 27, 2028. The quarterly principal payments commenced in March of 2022.
The principal balance of the First Lien Term Loan is repayable in quarterly installments of $1.5 million plus interest, with a final payment of all remaining outstanding principal due on October 27, 2028. The quarterly principal payments commenced in March 2022.
Contractual allowance estimates are adjusted to actual amounts as cash is received and claims are settled. 38 Table of Contents Business Acquisitions The Company accounts for business acquisitions in accordance with ASC Topic 805, Business Combinations (“ASC 805”), with assets and liabilities being recorded at their acquisition date fair values and goodwill being calculated as the purchase price in excess of the net identifiable assets.
Contractual allowance estimates are adjusted to actual amounts as cash is received and claims are settled. 40 Table of Contents Business Acquisitions The Company accounts for business acquisitions in accordance with ASC Topic 805, Business Combinations (“ASC 805”), with assets and liabilities being recorded at their acquisition date fair values and goodwill being calculated as the purchase price in excess of the net identifiable assets.
Short-Term and Long-Term Liquidity Requirements Our ability to make principal and interest payments on any borrowings under our credit facilities and our ability to fund planned capital expenditures will depend on our ability to generate cash in the future, which, to a certain extent, is subject to general economic, financial, competitive, regulatory and other conditions.
Short-Term and Long-Term Liquidity Requirements The Company’s ability to make principal and interest payments on any borrowings under our credit facilities and our ability to fund planned capital expenditures will depend on our ability to generate cash and cash equivalents in the future, which to a certain extent, is subject to general economic, financial, competitive, regulatory and other conditions.
Based on our current level of operations and planned capital expenditures, we believe that our existing cash balances and expected cash flows generated from operations will be sufficient to meet our operating requirements for at least the next 12 months.
Based on our current level of operations and planned capital expenditures, we believe that our existing cash and cash equivalents balances and expected cash flows generated from operations will be sufficient to meet our operating requirements for at least the next 12 months and beyond.
After applying the criteria from ASC 606, an allowance for doubtful accounts is established only as a result of an adverse change in the payers’ ability to pay outstanding billings. As of December 31, 2022 and 2021, the Company had no allowance for doubtful accounts.
After applying the criteria from ASC 606, an allowance for doubtful accounts is established only as a result of an adverse change in the payers’ ability to pay outstanding billings. As of December 31, 2023 and 2022, the Company had no allowance for doubtful accounts.
The majority of accounts receivable are due from private insurance carriers and governmental health care programs, such as Medicare and Medicaid. Price concessions may result from patient hardships, patient uncollectible accounts sent to collection agencies, lack of recovery due to not receiving prior authorization, differing interpretations of covered therapies in payer contracts, different pricing methodologies, or various other reasons.
The majority of accounts receivable are due from private insurance carriers and governmental healthcare programs, such as Medicare and Medicaid. Price concessions may result from patient hardships, patient uncollectible accounts sent to collection agencies, lack of recovery due to not receiving prior authorization, differing interpretations of covered therapies in payer contracts, different pricing methodologies, or various other reasons.
The Company contracts with managed care organizations, third-party payers, hospitals, physicians, and other referral sources to provide pharmaceuticals and complex compounded solutions to patients for intravenous delivery in the patients’ homes or other nonhospital settings. Our services are provided in coordination with, and under the direction of, the patient’s physician.
The Company contracts with managed care organizations, third-party payers, hospitals, physicians, and other referral sources to provide pharmaceuticals and complex compounded solutions to patients for intravenous delivery in the patients’ homes or other non-hospital settings. Our services are provided in coordination with, and under the direction of, the patient’s physician.
Gross Profit Gross profit represents our net revenue less cost of revenue. Net Revenue . Infusion and related health care services revenue is reported at the estimated net realizable amounts from third-party payers and patients for goods sold and services rendered. When pharmaceuticals are provided to a patient, revenue is recognized upon delivery of the goods.
Gross Profit Gross profit represents our net revenue less cost of revenue. Net Revenue . Infusion and related healthcare services revenue is reported at the estimated net realizable amounts from third-party payers and patients for goods sold and services rendered. When pharmaceuticals are provided to a patient, revenue is recognized upon delivery of the goods.
When nursing services are provided, revenue is recognized when the services are rendered. Due to the nature of the health care industry and the reimbursement environment in which the Company operates, certain estimates are required to record revenue and accounts receivable at their net realizable values at the time goods or services are provided.
When nursing services are provided, revenue is recognized when the services are rendered. Due to the nature of the healthcare industry and the reimbursement environment in which the Company operates, certain estimates are required to record revenue and accounts receivable at their net realizable values at the time goods or services are provided.
Refer to the “Liquidity and Capital Resources” section below for further discussion of these outstanding borrowings. Equity in Earnings of Joint Ventures . Equity in earnings of joint ventures consists of our proportionate share of equity earnings or losses from equity investments in two infusion joint ventures with health systems. 31 Table of Contents Other, Net .
Refer to the “Liquidity and Capital Resources” section below for further discussion of these outstanding borrowings. Equity in Earnings of Joint Ventures . Equity in earnings of joint ventures consists of our proportionate share of equity earnings or losses from equity investments in two infusion joint ventures with health systems. Other, Net .
The Company’s primary uses of cash include supporting our ongoing business activities, investment in capital expenditures in both facilities and technology, and the pursuit of acquisitions. Ongoing operating cash outflows are associated with procuring and dispensing drugs, personnel and other costs associated with servicing patients, as well as paying cash for interest on the outstanding debt and for income taxes.
The Company’s primary uses of cash include supporting our ongoing business activities, investment in capital expenditures in both facilities and technology, and the pursuit of acquisitions and share repurchases. Ongoing operating cash outflows are associated with procuring and dispensing drugs, personnel and other costs associated with servicing patients, as well as paying cash interest on outstanding debt and cash taxes.
Due to the nature of the health care industry and the reimbursement environment in which the Company operates, certain estimates are required to record revenue and accounts receivable at their net realizable values at the time goods or services are provided.
Due to the nature of the healthcare industry and the reimbursement environment in which the Company operates, certain estimates are required to record revenue and accounts receivable at their net realizable values at the time goods or services are provided.
Business Overview Option Care Health and its wholly-owned subsidiaries provide infusion therapy and other ancillary health care services through a national network of 163 locations around the United States.
Business Overview Option Care Health and its wholly-owned subsidiaries provide infusion therapy and other ancillary healthcare services through a national network of 177 locations around the United States.
See Note 3, Business Acquisitions and Divestitures , for further discussion of business acquisitions. 39 Table of Contents
See Note 3, Business Acquisitions and Divestitures , for further discussion of business acquisitions. 41 Table of Contents
The ABL Facility bears interest at a rate equal to, at the Company’s election, either (i) a base rate determined in accordance with the ABL Credit Agreement plus an applicable margin, which is equal to between 0.25% and 0.75% based on the historical excess availability as a percentage of the Line Cap (as such term is defined in the ABL Credit Agreement) and (ii) London Interbank offered Rate (“LIBOR”) (or a comparable successor rate, with a floor of 0.00% per annum) plus an applicable margin, which is equal to between 1.25% and 1.75% based on the historical excess availability as a percentage of the Line Cap.
The ABL Facility bore interest at a rate equal to, at the Company’s election, either (i) a base rate determined in accordance with the ABL Credit Agreement plus an applicable margin, which is equal to between 0.25% and 0.75% based on the historical excess availability as a percentage of the Line Cap (as such term is defined in the ABL Credit Agreement) and (ii) SOFR (with a floor of 0.00% per annum) plus an applicable margin, which is equal to between 1.25% and 1.75% based on the historical excess availability as a percentage of the Line Cap.
Interest on the First Lien Term Loan is payable monthly on either (i) LIBOR (or a comparable successor rate, with a floor of 0.50% per annum) plus an applicable margin of 2.75% for Eurocurrency Rate Loans (as defined in the First Lien Term Loan agreement) and (ii) a base rate determined in accordance with the new First Lien Term Loan agreement, plus 1.75% for Base Rate Loans (as defined in the First Lien Term Loan agreement).
Interest on the First Lien Term Loan is payable monthly on either (i) SOFR (with a floor of 0.50% per annum) plus an applicable margin of 2.75% for Term SOFR Loans (as such term is defined in the First Lien Credit Agreement Amendment); or (ii) a base rate determined in accordance with the new First Lien Credit Agreement Amendment, plus 1.75% for Base Rate Loans (as such term is defined in the First Lien Credit Agreement Amendment).
Effective January 13, 2023, the Company entered into an agreement to amend the ABL Facility and increase the amount of borrowing availability by $50.0 million to $225.0 million total borrowing availability. As a result of the amended agreement, Secured Overnight Financing Rate (“SOFR”) was established as the new reference rate, replacing LIBOR.
As of December 31, 2023, the Company’s ABL Facility was terminated. Effective January 13, 2023, the Company entered into an agreement to amend the ABL Facility and increase the amount of borrowing availability by $50.0 million to $225.0 million total borrowing availability. As a result of the amended agreement, SOFR was established as the new reference rate, replacing LIBOR.
During the years ended December 31, 2022 and 2021, the Company’s positive cash flows from operations have enabled investments in pharmacy and information technology infrastructure to support growth and create additional capacity in the future, as well as the pursuit of acquisitions.
During the years ended December 31, 2023 and 2022, the Company’s positive cash flows from operations have enabled investments in pharmacy, infusion suites, and information technology infrastructure to support growth and create additional capacity in the future, as well as to pursue acquisitions and share repurchases.
The Company had $6.7 million of undrawn letters of credit issued and outstanding, resulting in net borrowing availability under the ABL Facility of $168.3 million as of December 31, 2022.
As of December 31, 2023, the Company had $5.3 million of undrawn letters of credit issued and outstanding, resulting in net borrowing availability under the Revolver Facility of $394.7 million.
It is impossible to predict the amount of capital that may be required for acquisitions, and there is no assurance that sufficient financing for these activities will be available on acceptable terms.
The Company may require additional capital in excess of current availability in order to complete future acquisitions. It is impossible to predict the amount of capital that may be required for acquisitions, and there is no assurance that sufficient financing for these activities will be available on acceptable terms.
Change in unrealized gains (losses) on cash flow hedges, net of income taxes, consists of the gains (losses) associated with the changes in the fair value of hedging instruments related to the interest rate caps and interest rate swaps, net of income taxes. 32 Table of Contents Results of Operations The following table presents Option Care Health’s consolidated results of operations for the years ended December 31, 2022 and 2021 (in thousands, except for percentages).
Change in unrealized gain (loss) on cash flow hedge, net of income tax benefit (expense), consists of the gain (loss) associated with the changes in the fair value of hedging instruments related to the interest rate cap, net of income taxes. 33 Table of Contents Results of Operations The following table presents Option Care Health’s consolidated results of operations for the years ended December 31, 2023 and 2022 (in thousands, except for percentages).
Ongoing investing cash flows are primarily associated with capital projects related to business acquisitions, the improvement and maintenance of our pharmacy facilities and investment in our information technology systems. Ongoing financing cash flows are primarily associated with the quarterly principal payments on our outstanding debt. Our business strategy includes the deployment of capital to pursue acquisitions that complement our operations.
Ongoing investing cash flows are primarily associated with capital projects and business acquisitions, the improvement and maintenance of our pharmacy facilities and investment in our information technology systems. Ongoing financing cash flows are primarily associated with the quarterly principal payments on our outstanding debt, along with potential future share repurchases.
The Senior Notes mature on October 31, 2029. Interest payments over the course of long-term debt obligations total an estimated $383.8 million based on final maturity dates of the Company’s credit facilities. Interest payments are calculated based on the LIBOR rate as of December 31, 2022.
Interest payments over the course of long-term debt obligations total an estimated $359.8 million based on final maturity dates of the Company’s credit facilities. Interest payments are calculated based on current rates as of December 31, 2023.
Depreciation of revenue-generating assets, such as infusion pumps, is included in cost of revenue. Other Income (Expense) Interest Expense, Net . Interest expense consists principally of interest payments on the Company’s outstanding borrowings under the ABL Facility, First Lien Term Loan, Senior Notes, amortization of discount and deferred financing fees, and payments associated with the interest rate cap.
Interest expense consists principally of interest payments on the Company’s outstanding borrowings under the ABL Facility, First Lien Term Loan, Revolver Facility, Senior Notes, amortization of discount and deferred financing fees, and payments associated with the interest rate cap, and interest income earned on cash and cash equivalents.
For the year ended December 31, 2022, the change in unrealized gains on cash flow hedges, net of income taxes, was related to the increase in fair market value of the $300.0 million interest rate cap hedge.
There was no comparable activity during the year ended December 31, 2022. For the year ended December 31, 2023, the change in unrealized (loss) gain on cash flow hedge, net of income tax benefit (expense) was related to the change in fair market value of the $300.0 million interest rate cap hedge executed in October 2021.
The First Lien Term Loan agreement addresses reference rate reform and established SOFR as the benchmark replacement when LIBOR ceases to exist. The Senior Notes bear interest at a rate of 4.375% per annum, which are payable semi-annually in arrears on October 31 and April 30 of each year, and which began on April 30, 2022.
The Senior Notes bear interest at a rate of 4.375% per annum, which are payable semi-annually in arrears on October 31 and April 30 of each year, and which began on April 30, 2022. The Senior Notes mature on October 31, 2029.
Additionally, the cash used in financing activities for the year ended December 31, 2021, is related to the January and October 2021 debt refinancing activities, with no comparable activity during the year ended December 31, 2022. 37 Table of Contents Critical Accounting Estimates The Company prepares its consolidated financial statements in accordance with United States generally accepted accounting principles (“GAAP”), which requires the Company to make estimates and assumptions.
Cash Flows from Financing Activities The cash used in financing activities is primarily related to the Company’s repurchase of common stock during the year ended December 31, 2023, whereas the cash provided by financing activities in the year ended December 31, 2022 was primarily related to the proceeds of warrant exercises. 39 Table of Contents Critical Accounting Estimates The Company prepares its consolidated financial statements in accordance with United States generally accepted accounting principles (“GAAP”), which requires the Company to make estimates and assumptions.
We continue to evaluate acquisition opportunities and view acquisitions as a key part of our growth strategy. The Company historically has funded its acquisitions with cash with the exception of the Merger. The Company may require additional capital in excess of current availability in order to complete future acquisitions.
Our business strategy includes the deployment of capital to pursue acquisitions that complement our existing operations. We continue to evaluate acquisition opportunities and view acquisitions as a key part of our growth strategy. The Company historically has funded its acquisitions with cash and cash equivalents with the exception of the Merger.
Cash Flows from Investing Activities The decrease in cash flows used in investing activities is primarily due to the inflow from the Respiratory Therapy Asset Sale and partially offset by various acquisitions made within the year ended December 31, 2022, which are described in Note 3, Business Acquisitions and Divestitures , of the consolidated financial statements, as compared to various acquisitions during the year ended December 31, 2021.
Cash Flows from Investing Activities The decrease in cash used in investing activities during the year ended December 31, 2023 is primarily due to a decrease in acquisition activity as compared to the year ended December 31, 2022. See Note 3, Business Acquisitions and Divestitures , of the consolidated financial statements for more information.
For discussion of Option Care Health’s consolidated results of operations for the year ended December 31, 2021 compared to 2020, refer to Part II, Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our 2021 Annual Report on Form 10-K filed with the Securities and Exchange Commission on February 23, 2022.
“Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our 2022 Annual Report on Form 10-K filed with the Securities and Exchange Commission on February 23, 2023.
Our multidisciplinary team of clinicians, including pharmacists, nurses, dietitians and respiratory therapists, work with the physician to develop a plan of care suited to each patient’s specific needs. We provide home infusion services consisting of anti-infectives, nutrition support, therapies for chronic inflammatory disorders and neurological disorders, immunoglobulin therapy, and other therapies for chronic and acute conditions.
Our multidisciplinary team of clinicians, including pharmacists, nurses, dietitians and respiratory therapists, work with the physician to develop a plan of care suited to each patient’s specific needs.
Actual payments are based on changes in LIBOR and exclude the interest rate cap derivative instrument. 36 Table of Contents Cash Flows Year Ended December 31, 2022 Compared to Year Ended December 31, 2021 The following table presents selected data from Option Care Health’s consolidated statements of cash flows for the years ended December 31, 2022 and 2021: Year Ended December 31, 2022 2021 Variance (in thousands) Net cash provided by operating activities $ 267,547 $ 208,569 $ 58,978 Net cash used in investing activities (108,052) (111,541) 3,489 Net cash provided by (used in) financing activities 15,268 (76,870) 92,138 Net increase in cash and cash equivalents 174,763 20,158 154,605 Cash and cash equivalents - beginning of period 119,423 99,265 20,158 Cash and cash equivalents - end of period $ 294,186 $ 119,423 $ 174,763 Cash Flows from Operating Activities The increase in cash flows provided by operating activities is primarily due to higher net income, decrease in interest expense due to the January and October 2021 debt refinancings, timing of vendor payments and deferred income taxes, which were partially offset by changes in inventory and accounts receivable during the year ended December 31, 2022, as compared to the year ended December 31, 2021.
Actual payments are based on changes in SOFR and exclude the interest rate cap derivative instrument. 38 Table of Contents Cash Flows Year Ended December 31, 2023 Compared to Year Ended December 31, 2022 The following table presents selected data from Option Care Health’s consolidated statements of cash flows for the years ended December 31, 2023 and 2022: Year Ended December 31, 2023 2022 Variance (in thousands) Net cash provided by operating activities $ 371,295 $ 267,547 $ 103,748 Net cash used in investing activities (56,506) (108,052) 51,546 Net cash (used in) provided by financing activities (265,126) 15,268 (280,394) Net increase in cash and cash equivalents 49,663 174,763 (125,100) Cash and cash equivalents - beginning of period 294,186 119,423 174,763 Cash and cash equivalents - end of period $ 343,849 $ 294,186 $ 49,663 Cash Flows from Operating Activities The increase in cash provided by operating activities is primarily due to higher net income, the Termination Fee received under the terms of the Mutual Termination Agreement, net of merger-related expenses and taxes, stock-based incentive compensation expense, changes in accrued compensation and employee benefits, timing of collections on accounts receivable, partially offset by cash paid for taxes, changes in inventory, and certain accruals and timing of vendor payments during the year ended December 31, 2023 as compared to the year ended December 31, 2022.
We may require additional borrowings under our credit facilities and alternative forms of financings or investments to achieve our longer-term strategic plans. 35 Table of Contents Credit Facilities As of December 31, 2022, the Company’s asset-based-lending revolving credit facility provided for borrowings up to $175.0 million, which matures on October 27, 2026 (the “ABL Facility”).
We may require additional borrowings under our credit facilities and alternative forms of financings or investments to achieve our longer-term strategic plans. 37 Table of Contents Credit Facilities On December 7, 2023, the Company amended its First Lien Credit Agreement to, among other things, create a Revolver Facility which provides for borrowings up to $400.0 million.
The variance in the Company’s effective tax rate of 26.8% and negative 20.1% is primarily attributable to the release of the Company’s federal valuation allowance for the year ended December 31, 2021.
The variance in the Company’s effective tax rate of 25.5% and 26.8% for the years ended December 31, 2023 and 2022, respectively, is primarily attributable to the difference in state taxes, various non-deductible expenses, and a change in state valuation allowance.
The Company is subject to taxation in the United States and various states. The Company’s income tax expense is reflective of the current federal and state tax rates. Change in Unrealized Gains (Losses) on Cash Flow Hedges, Net of Income Tax Expense .
During the year ended December 31, 2022, other income (expense) primarily includes the gain on the sale of respiratory therapy assets, which closed in December 2022. Income Tax Benefit Expense . The Company is subject to taxation in the United States and various states. The Company’s income tax expense is reflective of the current federal and state tax rates.
Liquidity and Capital Resources For the years ended December 31, 2022 and 2021, the Company’s primary sources of liquidity were cash on hand of $294.2 million and $119.4 million, respectively. As of December 31, 2022, $168.3 million of borrowings available under its credit facilities (net of $6.7 million undrawn letters of credit issued and outstanding), described further below.
As of December 31, 2023, the Company had $394.7 million of borrowings available under its credit facilities (net of $5.3 million undrawn letters of credit issued and outstanding), described further below.
See Note 11, Indebtedness , of the consolidated financial statements for more information. During the year ended December 31, 2022, the change in other, net is primarily due to a $10.3 million pre-tax gain from the sale of respiratory therapy assets that were previously held for sale (“Respiratory Therapy Asset Sale”), which closed in December 2022.
During the year ended December 31, 2022, the change in other, net is primarily due to a $10.3 million pre-tax gain from the sale of respiratory therapy assets (“Respiratory Therapy Asset Sale”), which closed in December 2022. 35 Table of Contents Income Tax Expense Year Ended December 31, 2023 2022 Variance (in thousands, except for percentages) Income tax expense $ 91,652 $ 55,212 $ 36,440 66.0 % The Company recorded income tax expense of $91.7 million and $55.2 million, which represents an effective tax rate of 25.5% and 26.8% for the years ended December 31, 2023 and 2022, respectively.
Year Ended December 31, 2022 2021 Variance (in thousands, except for percentages) Selling, general and administrative expenses $ 566,122 $ 525,707 $ 40,415 7.7 % Depreciation and amortization expense 60,565 63,058 (2,493) (4.0) % Total operating expenses $ 626,687 $ 588,765 $ 37,922 6.4 % Selling, general and administrative expenses increased for the year ended December 31, 2022 primarily due to salaries, benefits and inflationary pressures, but has decreased as a percentage of revenue to 14.4% for the year ended December 31, 2022 as compared to 15.3% for the year ended December 31, 2021, as our revenue has grown at a faster pace than our selling, general and administrative expenses as the Company’s scaled enterprise partially mitigated the inflationary impacts.
Operating Expenses Year Ended December 31, 2023 2022 Variance (in thousands, except for percentages) Selling, general and administrative expenses $ 607,427 $ 566,122 $ 41,305 7.3 % Depreciation and amortization expense 59,201 60,565 (1,364) (2.3) % Total operating expenses $ 666,628 $ 626,687 $ 39,941 6.4 % The increase in selling, general and administrative expenses during the year ended December 31, 2023 is primarily due to an increase in salaries, benefits, and equity compensation as a result of expansion of team members to adjust to current volumes, however, these expenses have remained relatively consistent as a percentage of revenue at 14.1% and 14.4% for the years ended December 31, 2023 and 2022, respectively, due to the Company’s focus on controlling spending leverage.
Other Income (Expense) Year Ended December 31, 2022 2021 Variance (in thousands, except for percentages) Interest expense, net $ (53,806) $ (67,003) $ 13,197 (19.7) % Equity in earnings of joint ventures 5,125 6,030 (905) (15.0) % Other, net 14,218 (13,374) 27,592 206.3 % Total other expense $ (34,463) $ (74,347) $ 39,884 (53.6) % The decrease in interest expense for the year ended December 31, 2022 was primarily attributable to the debt refinancing of the First Lien Term Loan and issuance of the Senior Notes in October 2021.
Other Income (Expense) Year Ended December 31, 2023 2022 Variance (in thousands, except for percentages) Interest expense, net $ (51,248) $ (53,806) $ 2,558 (4.8) % Equity in earnings of joint ventures 5,530 5,125 405 7.9 % Other, net 89,865 14,218 75,647 532.1 % Total other income (expense) $ 44,147 $ (34,463) $ 78,610 (228.1) % The decrease in interest expense, net during the year ended December 31, 2023 was primarily attributable to an increase in interest income generated from our cash and cash equivalents, partially offset by increases in the First Lien Term Loan’s variable interest rate compared to the year ended December 31, 2022.
The variance in the Company’s effective tax rate of 26.8% for the year ended December 31, 2022 compared to the federal statutory rate of 21% is primarily attributable to the difference between federal and state tax rates, as well as various non-deductible expenses. 34 Table of Contents Net Income and Other Comprehensive Income Year Ended December 31, 2022 2021 Variance (in thousands, except for percentages) Net income $ 150,556 $ 139,898 $ 10,658 7.6 % Other comprehensive income, net of tax: Changes in unrealized gains on cash flow hedges, net of income taxes 21,610 10,721 10,889 101.6 % Other comprehensive income 21,610 10,721 10,889 101.6 % Net comprehensive income $ 172,166 $ 150,619 $ 21,547 14.3 % The change in net income was primarily attributable to organic growth from additional revenue related to the factors described in the above sections, in addition to the $10.3 million pre-tax gain from the Respiratory Therapy Asset Sale for the year ended December 31, 2022.
Net Income and Other Comprehensive (Loss) Income Year Ended December 31, 2023 2022 Variance (in thousands, except for percentages) Net income $ 267,090 $ 150,556 $ 116,534 77.4 % Other comprehensive (loss) income, net of tax: Change in unrealized (loss) gain on cash flow hedge, net of income tax benefit (expense) (6,181) 21,610 (27,791) (128.6) % Other comprehensive (loss) income (6,181) 21,610 (27,791) (128.6) % Net comprehensive income $ 260,909 $ 172,166 $ 88,743 51.5 % The change in net income for the year ended December 31, 2023 was attributable to organic growth from additional revenue related to the factors described in the above sections and the Termination Fee received under the terms of the Mutual Termination Agreement, net of merger-related expenses.
Removed
On April 7, 2015, HC I and HC II collectively acquired Walgreens Infusion Services, Inc. and its subsidiaries from Walgreen Co., and the business was rebranded as Option Care.
Added
We provide home infusion services consisting of anti-infectives, nutrition support, therapies for chronic inflammatory disorders and neurological disorders, immunoglobulin therapy, and other therapies for chronic and acute conditions. 31 Table of Contents Composition of Results of Operations The following results of operations include the accounts of Option Care Health and our subsidiaries for the years ended December 31, 2023 and 2022.
Removed
On March 14, 2019, HC I and HC II entered into the Merger Agreement to merge with and into a wholly-owned subsidiary of BioScrip, a national provider of infusion and home care management solutions, which was completed on August 6, 2019.
Added
Depreciation of revenue-generating assets, such as infusion pumps, is included in cost of revenue. 32 Table of Contents Other Income (Expense) Interest Expense, Net .
Removed
Following the close of the Merger, BioScrip was rebranded as Option Care Health. 30 Table of Contents Update on the Impact of the COVID-19 Pandemic The primary operations of the Company focus on providing infusion therapy services and, based on the recent impact of the pandemic across the healthcare ecosystem, the Company began experiencing a related impact across a number of facets beginning in March 2020.
Added
On May 3, 2023, the Company entered into a definitive merger agreement (the “Amedisys Merger Agreement”) with Amedisys, Inc. (“Amedisys”), a leading provider of healthcare in home health and hospice settings. On June 26, 2023, the Company entered into an agreement to terminate the Amedisys Merger Agreement (the “Mutual Termination Agreement”).
Removed
The Company has been disrupted by both positive and negative referral patterns and experienced challenges in our staffing and our ability to procure personal protection equipment and key drugs.
Added
Under the terms of the Mutual Termination Agreement, the Company received a payment of $106.0 million in cash on behalf of Amedisys (the “Termination Fee”). Other income (expense) primarily includes the termination fee, net of merger-related expenses, received on behalf of Amedisys during the year ended December 31, 2023.
Removed
The Company anticipates that the pandemic could affect its operations for an extended period; however, at this time it cannot confidently forecast the duration nor the ultimate financial impact on its operations. See Item 1A.
Added
Change in Unrealized Gain (Loss) on Cash Flow Hedge, Net of Income Tax Benefit (Expense) .
Removed
“Risk Factors” under the caption “The COVID-19 pandemic and other potential pandemic events could adversely impact our business, results of operations, cash flows and financial position” for further discussion of risks. Composition of Results of Operations The following results of operations include the accounts of Option Care Health and our subsidiaries for the years ended December 31, 2022 and 2021.
Added
For a discussion of Option Care Health’s consolidated results of operations for the year ended December 31, 2022 compared to the year ended December 31, 2021, refer to Part II, Item 7.
Removed
Other income (expense) primarily includes prior year loss on extinguishment of debt incurred in connection with 2021 debt refinancings and miscellaneous non-operating expenses. Current year other income (expense) primarily includes the gain on sale of respiratory therapy assets, which closed in December 2022. Income Tax Expense (Benefit) .
Added
The increase in net revenue was partially offset by the divestiture of respiratory therapy assets in December 2022 as well as therapies related to the treatment of ALS and pre-term labor.
Removed
Acute growth was driven primarily due to collaborating with referral sources, which increased the volume of patient service. Acquisition related growth accounted for approximately 2% and 3% of the increase in net revenue and gross profit, respectively. The increase in cost of revenue and gross profit was primarily driven by the growth in revenue.
Added
The increase in cost of revenue and gross profit was primarily driven by the growth in revenue, which outpaced the increase in cost of revenue primarily due to our disciplined procurement strategies, certain temporary favorable therapy pricing dynamics that emerged due to the timing in variances in reference prices that affects our costs relative to reimbursement, and efficient utilization of our clinical workforce and infusion suite network.
Removed
The decrease in gross margin percent was primarily driven by therapy mix and also impacted by inflationary pressures including labor, transportation, and medical supplies costs.
Added
The increase in other, net during the year ended December 31, 2023 is primarily attributable to the receipt of the Termination Fee, net of merger-related expenses.
Removed
The decrease in depreciation and amortization expense is primarily attributed to certain intangible assets whose useful life expired partially offset by additional intangible assets due to acquisitions.
Added
The income tax expense for the year ended December 31, 2023 includes $21.8 million of tax expense related to the Termination Fee received, under the terms of the Mutual Termination Agreement, net of merger-related expenses, and the release of $5.8 million of state valuation allowance in September 2023.
Removed
In addition, a loss on extinguishment of debt incurred in conjunction with the January and October 2021 debt refinancing was included in the results for the year ended December 31, 2021. There was no comparable activity during the year ended December 31, 2022.
Added
The variance in the Company’s effective tax rate of 25.5% for the year ended December 31, 2023, compared to the federal statutory rate of 21%, is also primarily attributable to state taxes, various non-deductible expenses, and a change in state valuation allowance.
Removed
Income Tax Expense (Benefit) Year Ended December 31, 2022 2021 Variance (in thousands, except for percentages) Income tax expense (benefit) $ 55,212 $ (23,404) $ 78,616 335.9 % The Company recorded income tax expense of $55.2 million and an income tax benefit of $23.4 million, which represents an effective tax rate of 26.8% and negative 20.1% for the years ended December 31, 2022 and 2021, respectively.
Added
Net comprehensive income increased to $260.9 million for the year ended December 31, 2023, compared to net comprehensive income of $172.2 million for the year ended December 31, 2022, primarily as a result of the changes in net income discussed above, partially offset by the impact of the change in fair market value of the interest rate cap hedge discussed above. 36 Table of Contents Liquidity and Capital Resources For the years ended December 31, 2023 and 2022, the Company’s primary sources of liquidity were cash on hand of $343.8 million and $294.2 million, respectively.
Removed
In addition, the 2021 release of the Company’s valuation allowance as referenced in the Income Tax (Benefit) Expense section above was included in the results for the year ended December 31, 2021. There was no comparable activity during the year ended December 31, 2022.
Added
The Revolver Facility matures on the date that is the earlier of (i) December 7, 2028 and (ii) the date that is 91 days prior to the stated maturity date applicable to any Term B Loans.
Removed
For the year ended December 31, 2021, the change in unrealized gains on cash flow hedges, net of income taxes, primarily related to the increase in fair value on the $925.0 million notional swap; the swap expired in August 2021.
Added
Borrowings under the Revolver Facility will bear interest at a rate equal to, at the option of the Company, either (i) the Term Secured Overnight Financing Rate (“SOFR”) applicable thereto plus the Applicable Rate or (ii) the then-applicable Base Rate plus the Applicable Rate, which Applicable Rate shall be, subject to certain caveats thereto, as follows (i) until delivery of financial statements and related Compliance Certificate for the first full fiscal quarter ending after the effective date of the Amendment, (A) for Term SOFR Loans, 1.75%, (B) for Base Rate Loans, 0.75% and (ii) thereafter, the following percentages per annum, based upon the Total Net Leverage Ratio as set forth in the most recent compliance certificate received by the Administrative Agent pursuant to the terms of the Credit Agreement.
Removed
The change in net comprehensive income was the result of the changes in net income, described above, further increased by the impact of the fair value of the interest rate cap hedge.
Added
The table below illustrates the aforementioned interest rate terms: Pricing Level Total Net Leverage Ratio Applicable Rate for Term SOFR Loans Applicable Rate for Base Rate Loans I Greater than or equal to 3.00x 2.25% 1.25% II Less than 3.00x, but greater than or equal to 2.25x 2.00% 1.00% III Less than 2.25x, but greater than or equal to 1.50x 1.75% 0.75% IV Less than 1.50x, but greater than or equal to 1.00x 1.50% 0.50% V Less than 1.00x 1.25% 0.25% Concurrently with the creation of the Revolver Facility, the Company terminated the asset-based-lending revolving credit facility, which provided for borrowings up to $225.0 million with a maturity date of October 27, 2026 (the “ABL Facility”).
Removed
Cash Flows from Financing Activities The increase in cash flows provided by financing activities is primarily related to the proceeds from warrant exercises during the year ended December 31, 2022, with no comparable activity during the year ended December 31, 2021.
Added
Effective June 30, 2023, the Company entered into an agreement, dated as of June 8, 2023, to amend the First Lien Term Loan to replace LIBOR and related definitions and provisions with SOFR as the new reference rate.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

4 edited+0 added−0 removed0 unchanged
Biggest changeTo reduce interest rate risk, the Company has utilized an interest rate derivative contract to hedge against fluctuations in LIBOR rates on the First Lien Term Loan. In conjunction with the October 2021 debt refinancing, the Company entered into an interest rate cap hedge with a notional amount of $300.0 million for a 5-year term effective on November 30, 2021.
Biggest changeTo reduce interest rate risk, the Company has utilized an interest rate derivative contract to hedge against fluctuations in SOFR rates on the First Lien Term Loan. In conjunction with the October 2021 debt refinancing, the Company entered into an interest rate cap hedge with a notional amount of $300.0 million for a five-year term, effective on November 30, 2021.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk Interest Rate Risk The Company’s primary market risk exposure is changing LIBOR‑based interest rates. Interest rate risk is highly sensitive due to many factors, including U.S. monetary and tax policies, U.S. and international economic factors and other factors beyond our control.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk Interest Rate Risk The Company’s primary market risk exposure is changing SOFR‑based interest rates. Interest rate risk is highly sensitive due to many factors, including U.S. monetary and tax policies, U.S. and international economic factors and other factors beyond our control.
At December 31, 2022, we had outstanding debt of $594.0 million under our First Lien Term Loan with a variable interest rate component. See Note 11, Indebtedness , of the consolidated financial statements for more information.
At December 31, 2023, we had outstanding debt of $588.0 million under our First Lien Term Loan with a variable interest rate component. See Note 11, Indebtedness , of the consolidated financial statements for more information.
See Note 12, Derivative Instruments , of the consolidated financial statements for more information. A hypothetical 100-basis point increase or decrease in market interest rates associated with the unhedged variable-rate debt over a twelve-month period would result in a change to interest expense of approximately $3.0 million. 40 Table of Contents
See Note 12, Derivative Instruments , of the consolidated financial statements for more information. A hypothetical 100-basis point increase or decrease in market interest rates associated with the unhedged variable-rate debt over a 12-month period would result in a change to interest expense of approximately $2.9 million. 42 Table of Contents

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