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What changed in Oncology Institute, Inc.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Oncology Institute, 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.

+235 added−243 removedSource: 10-K (2024-03-28) vs 10-K (2023-03-16)

Top changes in Oncology Institute, Inc.'s 2023 10-K

235 paragraphs added · 243 removed · 196 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

33 edited+3 added−7 removed115 unchanged
Biggest changeGenerally, our leases are “net” leases, which require us to pay all of the cost of insurance, taxes, maintenance and utilities. We generally cannot cancel these leases at our option. Availability of Information We were originally incorporated in Delaware on November 19, 2019 as a special purpose acquisition company (f/k/a DFP Healthcare Acquisition Corp.).
Biggest changeAvailability of Information We were originally incorporated in Delaware on November 19, 2019 as a special purpose acquisition company (f/k/a DFP Healthcare Acquisition Corp.). In November 2021, we consummated our business combination with TOI Parent, Inc. (the “Business Combination”).
Further, state regulatory stances regarding downstream risk-sharing arrangements can change rapidly and codified provisions may not keep pace with evolving risk-sharing mechanisms and other new value-based reimbursement models. Certain of the states where we currently operate or may choose to operate in the future regulate the operations and financial condition of RBOs like the us and our affiliated providers.
Further, state regulatory stances regarding downstream risk-sharing arrangements can change rapidly and codified provisions may not keep pace with evolving risk-sharing mechanisms and other new value-based reimbursement models. Certain of the states where we currently operate or may choose to operate in the future regulate the operations and financial condition of RBOs like us and our affiliated providers.
We compete with large and medium-sized local and national providers of cancer care services, such as health system affiliated practices, for, among other things, contracts with payors, recruitment of physicians and other medical and non-medical personnel and patients. The closest competitors are traditional oncology physician practices, such as American Oncology Network, LLC, Florida Cancer Specialists & Research Institute, LLC, U.S.
We compete with large and medium-sized local and national providers of cancer care services, such as health system affiliated practices, for, among other things, contracts with payors, recruitment of physicians and other medical and non-medical personnel and patients. The closest competitors are traditional oncology physician practices, such as American Oncology Network, Inc., Florida Cancer Specialists & Research Institute, LLC, U.S.
We define value-based care as care that focuses on providing optimal health outcomes and healthcare affordability and a value-based contract as any contract that removes the incentive to drive up cost of care or overutilization, while rewarding better clinical outcomes, cost and quality.
We define value-based care as care that focuses on providing optimal health outcomes and healthcare 6 affordability and a value-based contract as any contract that removes the incentive to drive up cost of care or overutilization, while rewarding better clinical outcomes, cost and quality.
These laws include, but are not limited to, federal and state anti- kickback, false claims, self-referral and other healthcare fraud and abuse laws. 12 The federal Anti-Kickback Statute, or AKS, prohibits, among other things, knowingly and willfully offering, paying, soliciting or receiving remuneration, directly or indirectly, in cash or kind, to induce or reward either the referral of an individual for, or the purchase, order or recommendation of, any good or service, for which payment may be made under federal and state healthcare programs such as Medicare and Medicaid.
These laws include, but are not limited to, federal and state anti- kickback, false claims, self-referral and other healthcare fraud and abuse laws. 13 The federal Anti-Kickback Statute, or AKS, prohibits, among other things, knowingly and willfully offering, paying, soliciting or receiving remuneration, directly or indirectly, in cash or kind, to induce or reward either the referral of an individual for, or the purchase, order or recommendation of, any good or service, for which payment may be made under federal and state healthcare programs such as Medicare and Medicaid.
The non-medical functions and services 6 we provide under the management services agreements include practice management services and non-clinical operational assistance for all TOI PC clinic locations, assistance with provider and payor contract negotiations and administration, billing and collection services, financial and accounting services, electronic medical records and practice management technology solutions, assistance in maintaining licensure, permits and other credentialing requirements for the TOI PCs, risk management services, non-clinical personnel services, provider recruitment services and other administrative services required for the day-to-day operations of the clinics and TOI PCs.
The non-medical functions and services we provide under the management services agreements include practice management services and non-clinical operational assistance for all TOI PC clinic locations, assistance with provider and payor contract negotiations and administration, billing 7 and collection services, financial and accounting services, electronic medical records and practice management technology solutions, assistance in maintaining licensure, permits and other credentialing requirements for the TOI PCs, risk management services, non-clinical personnel services, provider recruitment services and other administrative services required for the day-to-day operations of the clinics and TOI PCs.
In 2023, we are continuing to evolve the way we structure our value-based arrangements, particularly in areas of the country where there are limits on medical group delegation, or an increased desire from groups to incentivize TOI for cost of care that extends beyond medical oncology and includes elements such as management of acute care utilization and/or management of non-employed oncologists.
In 2023, we continued to evolve the way we structure our value-based arrangements, particularly in areas of the country where there are limits on medical group delegation, or an increased desire from groups to incentivize TOI for cost of care that extends beyond medical oncology and includes elements such as management of acute care utilization and/or management of non-employed oncologists.
We file or furnish annual, quarterly and current 15 reports, proxy statements and other documents with the Securities and Exchange Commission (the “SEC”) under the Securities Exchange Act of 1934 (as amended, the "Exchange Act").
We file or furnish annual, quarterly and current reports, proxy statements and other documents with the Securities and Exchange Commission (the “SEC”) under the Securities Exchange Act of 1934 (as amended, the "Exchange Act").
We are continuously improving and innovating our care model, using the clinical data from the HVCC program to develop evidence-based care and treatment protocols for all patients. 8 Our Value Proposition and Differentiated Care Model Our managed clinics primarily serve adult and senior cancer patients in markets that have MA plans and primary care medical groups reimbursed on a capitated basis.
We are continuously improving and innovating our care model, using the clinical data from the HVCC program to develop evidence-based care and treatment protocols for all patients. 9 Our Value Proposition and Differentiated Care Model Our managed clinics primarily serve adult and senior cancer patients in markets that have MA plans and primary care medical groups reimbursed on a capitated basis.
We give patients the education and tools to make their own decisions about when the right time is to choose palliative care or hospice. 7 While the TOI PCs treat patients under both value-based and FFS contracts, our affiliated providers’ approach to care focuses on achieving the best outcomes at the lowest cost, regardless of the reimbursement methodology.
We give patients the education and tools to make their own decisions about when the right time is to choose palliative care or hospice. 8 While the TOI PCs treat patients under both value-based and FFS contracts, our affiliated providers’ approach to care focuses on achieving the best outcomes at the lowest cost, regardless of the reimbursement methodology.
In the United States, numerous federal and state laws and regulations, including data breach notification laws, health information privacy and security laws, including HIPAA, and federal and state consumer protection laws and regulations (e.g., Section 5 of 14 the Federal Trade Commission ["FTC"] Act), that govern the collection, use, disclosure, and protection of health-related and other personal information could apply to our operations or the operations of the TOI PCs.
In the United States, numerous federal and state laws and regulations, including data breach notification laws, health information privacy and security laws, including HIPAA, and federal and state consumer protection laws and regulations (e.g., Section 5 of 15 the Federal Trade Commission ["FTC"] Act), that govern the collection, use, disclosure, and protection of health-related and other personal information could apply to our operations or the operations of the TOI PCs.
We have flexibility around clinic size to allow us to establish smaller clinics and part time staffing in areas where needed to ensure the 11 TOI PCs can meet network adequacy under existing payor contracts. We group our managed clinics in a similar geographic area into pods, with multiple pods in each market.
We have flexibility around clinic size to allow us to establish smaller clinics and part time staffing in areas where needed to ensure the 12 TOI PCs can meet network adequacy under existing payor contracts. We group our managed clinics in a similar geographic area into pods, with multiple pods in each market.
The executive order also instructed certain governmental agencies to review and reconsider their existing policies and rules that limit access to healthcare. It is unclear how other 13 healthcare reform measures of the Biden administration or other efforts, if any, to challenge, repeal or replace the ACA will impact the ACA or our business.
The executive order also instructed certain governmental agencies to review and reconsider their existing policies and rules that limit access to healthcare. It is unclear how other 14 healthcare reform measures of the Biden administration or other efforts, if any, to challenge, repeal or replace the ACA will impact the ACA or our business.
Many of the patients that we manage under value-based arrangements are referred to as “capitated” populations, however our affiliated providers also provide care to patients outside of these arrangements under traditional FFS arrangements as well as other types of value-based contract. As of December 31, 2022, we were active in 15 markets in five states.
Many of the patients that we manage under value-based arrangements are referred to as “capitated” populations, however our affiliated providers also provide care to patients outside of these arrangements under traditional FFS arrangements as well as other types of value-based contract. As of December 31, 2023, we were active in 15 markets in five states.
Our high priority markets have attractive market dynamics due to the high cost of oncology care in these geographies, the prevalence of risk-bearing organizations, and the presence of national payor partners who we collaborate with in existing markets.
Our high priority markets have attractive market dynamics due to the high cost of oncology care in these geographies, the prevalence of risk-bearing organizations, and the presence of national payor partners with whom we collaborate in existing markets.
Once payors and risk-bearing providers in these new markets become comfortable with our ability to generate savings and better outcomes, we believe these contracts will shift to capitation. • M&A Opportunities : Leveraging our existing pipeline and mergers and acquisition expertise can help us facilitate growth in both existing and new markets, allowing us to rapidly establish market presence.
Once payors and risk-bearing providers in these new markets become comfortable with our ability to generate savings and better outcomes, we believe these contracts are likely to shift to capitation. • M&A Opportunities : Leveraging our existing pipeline and mergers and acquisition expertise can help us facilitate growth in both existing and new markets, allowing us to rapidly establish market presence.
Item 1. Business Overview The Oncology Institute, Inc. ("TOI", the "Company", "we", or "our) is a leading value-based oncology company that manages community-based oncology practices that serve patients at 76 clinic locations across 15 markets and five states throughout the United States.
Item 1. Business Overview The Oncology Institute, Inc. ("TOI", the "Company", "we", or "our) is a leading value-based oncology company that manages community-based oncology practices which serve patients at 83 clinic locations across 15 markets and five states throughout the United States.
In 2022, we generated more than 50% of our revenue from patients who are covered by value-based contracts. Historically, our value-based contracts have predominately taken the form of capitated contracts. Our capitated contracts remove incentives to drive up costs, and they also have incentives for meeting or exceeding certain quality metrics.
In 2023, we generated more than 47% of our revenue from patients who are covered by value-based contracts. Historically, our value-based contracts have predominately taken the form of capitated contracts. Our capitated contracts remove incentives to drive up costs, and they also have incentives for meeting or exceeding certain quality metrics.
For example, in 2016, CMS initiated the Oncology Care Model demonstration, which continues into 2022 and provides participating physician practices, including the TOI PCs that participate in this program, with performance-based financial incentives that aim to manage or reduce Medicare costs without negatively affecting the efficacy of care.
For example, in 2016, CMS initiated the Oncology Care Model demonstration, which continued throughout 2023, and provides participating physician practices, including the TOI PCs that participate in this program, with performance-based financial incentives that aim to manage or reduce Medicare costs without negatively affecting the efficacy of care.
Employees and Human Capital Resources As of December 31, 2022, we and TOI PCs collectively had approximately 750 employees, including approximately 101 oncologists and advanced practice providers. We consider our relationship with our employees to be good. None of our employees are represented by a labor union or party to a collective bargaining agreement.
Employees and Human Capital Resources As of December 31, 2023, we and TOI PCs collectively had approximately 800 employees, including approximately 119 oncologists and advanced practice providers. We consider our relationship with our employees to be good. None of our employees are represented by a labor union or party to a collective bargaining agreement.
Growth Strategy and Opportunities To date, revenue has grown at a roughly 30% CAGR from 2016 to 2022, driven by robust growth in capitated lives under value-based contracts.
Growth Strategy and Opportunities To date, revenue has grown at a roughly 26% CAGR from 2016 to 2023, driven by robust growth in capitated lives under value-based contracts.
In November 2021, we consummated our business combination with TOI Parent, Inc. (the “Business Combination”). In connection with the closing of the Business Combination, TOI Parent, Inc. became our wholly owned subsidiary and we changed our name to The Oncology Institute, Inc.
In connection with the closing of the Business Combination, TOI Parent, Inc. became our wholly owned subsidiary and we changed our name to The Oncology Institute, Inc.
Our footprint as of December 31, 2022 spanned five states and is growing rapidly. 9 California Arizona Nevada Florida Texas Markets 7 1 1 5 1 Managed and Affiliated Clinics (1) 57 4 5 8 2 Providers 84 5 4 15 4 (1) 62 clinics operated under the TOI PCs, whereby we receive a percentage of revenues under our MSAs and are consolidated; and 14 independent oncology practice locations that are under MSAs for limited management and administrative services but do not bear any direct operating costs.
Our footprint as of December 31, 2023 spanned five states and is growing rapidly. 10 California Arizona Nevada Florida Texas Markets 7 1 1 5 1 Managed and Affiliated Clinics (1) 62 4 4 11 2 Providers 99 5 4 21 2 (1) 69 clinics operated under the TOI PCs, whereby we receive a percentage of revenues under our management services agreements, or MSAs and are consolidated; and 14 independent oncology practice locations that are under MSAs for limited management and administrative services but do not bear any direct operating costs.
Our community-based oncology practices are staffed with 112 oncologists and advanced practice providers. 62 of these clinics are staffed with 101 providers employed by our affiliated physician-owned professional corporations, referred to as the "TOI PCs", which provided care for more than 64,000 patients in 2022 and managed a population of approximately 1.7 million patients under value-based agreements as of December 31, 2022.
Our community-based oncology practices are staffed with 130 oncologists and advanced practice providers. 69 of these clinics are staffed with 119 providers employed by our affiliated physician-owned professional corporations, referred to as the "TOI PCs", which provided care for more than 72,000 patients in 2023 and managed a population of approximately 1.8 million patients under value-based agreements as of December 31, 2023.
Although the Radiation Oncology Model was originally intended to begin on January 1, 2022, recent legislation delayed its implementation until January 1, 2023. There likely will continue to be regulatory proposals directed at containing or lowering the cost of healthcare.
Although the Radiation Oncology Model was originally intended to begin on January 1, 2022, recent legislation delayed its implementation until July 1, 2023 and therefore, the impact of this new model has yet to determined. There likely will continue to be regulatory proposals directed at containing or lowering the cost of healthcare.
More than half of our revenue in 2022 was generated from value-based contracts where payors have made our affiliated providers their preferred or exclusive oncology group. While our relationships with payors are very strong, we believe we have limited concentration risk as our largest customer by revenue in 2022 represented less than 20% of our revenue.
More than half of our revenue in 2023 was generated from value-based contracts where payors have made our affiliated providers their preferred or exclusive oncology group. While our relationships with payors are long-standing, we believe we have limited concentration risk as our largest customer by revenue in 2023 represented approximately 15% of our revenue.
Oncology Network, Inc., and OneOncology, Inc. These organizations are predominantly reimbursed via FFS contracts, which we believe can often lead to over utilization of treatments that may be medically appropriate but often results in higher costs. Secondary competitors may include specialty benefit managers. These include companies such as AIM Specialty Health, eviCore Healthcare, Magellan Health, New Century Health, and OncoHealth.
Oncology Network, Inc., and OneOncology, Inc. These organizations are predominantly reimbursed via FFS contracts, which we believe can often lead to over utilization of treatments that may be medically appropriate but often results in higher costs. Secondary competitors may include specialty benefit managers.
We also provide management services to 14 clinic locations owned by independent oncology practices. Our mission is to heal and empower cancer patients through compassion, innovation, and state-of-the-art medical care.
We also provide management services to 14 clinic locations owned by independent oncology practices. Our mission is to heal and empower cancer patients through compassion, innovation, and state-of-the-art medical care. Our managed clinics provide a range of medical oncology services, including physician services, in-house infusion and dispensary, radiation, innovative programs like outpatient blood product transfusions, along with 24/7 patient support.
Furthermore, the benefit manager model frequently results in an antagonistic relationship with physicians who are operating in a traditional FFS-based practice.
The benefit manager model can produce incremental improvement in utilization, but the benefit managers are often unable to achieve results comparable to managed healthcare practices like ours. Furthermore, the benefit manager model frequently results in an antagonistic relationship with physicians who are operating in a traditional FFS-based practice.
We have the potential to scale significantly faster with additional capital via 10 new oncologist on-boarding and training, further technology investments, investments in ancillaries, and strategic acquisitions. In Q4 2021, we acquired our first radiation oncology practice, adding a new service line to our business.
We have the potential to scale significantly faster with additional capital via 11 new oncologist on-boarding and training, further technology investments, investments in ancillaries, and strategic acquisitions. In Q4 2023, we opened our California-based pharmacy for specialty medication fills.
With this shift, it is increasingly important for high-quality, high-value cancer care to be available in a local community setting to all patients in need. 5 As a value-based oncology company, we seek to deliver better quality care while managing costs for patients and payors that we serve.
As a value-based oncology company, we seek to deliver better quality care while managing costs for patients and payors that we serve.
Many of our services, such as managing clinical trials and palliative care programs, are traditionally accessed through academic and tertiary care settings, while the TOI PCs bring these services to patients in a community setting. As scientific research progresses and more treatment options become available, cancer care is shifting from acute care episodes to chronic disease management.
Many of our services, such as managing clinical trials and palliative care programs, are traditionally accessed through academic and tertiary care settings, while the TOI PCs bring these services to patients in a community setting, by which we mean, providing care in our convenient clinic locations rather than academic or tertiary care settings.
Our care model is designed to remove physicians’ incentives to over-prescribe or prescribe high-cost chemotherapy that is of limited clinical utility to patients. We invest in nurse practitioners to help with advanced care planning and palliative care discussions with patients.
We invest in nurse practitioners to help with advanced care planning and palliative care discussions with patients.
Removed
Our managed clinics provide a range of medical oncology services, including physician services, in-house infusion and dispensary, clinical trial services, radiation, innovative programs like outpatient blood product transfusions, along with 24/7 patient support.
Added
As scientific research progresses and more treatment options become available, cancer care is shifting from acute care episodes to chronic disease management. With this shift, it is increasingly important for high-quality, high-value cancer care to be available in a local community setting to all patients in need.
Removed
These benefit managers seek to change provider behavior by reviewing and authorizing treatment requests. The benefit manager model can produce incremental improvement in utilization, but the benefit managers are often unable to achieve results comparable to managed healthcare practices like ours.
Added
Our care model is designed to remove physicians’ incentives to over-prescribe or prescribe high-cost chemotherapy that is of limited clinical utility to patients, but rather focus on NCCN guideline adherence and, when possible, choose clinically equivalent but lower-cost therapeutics to benefit patients and our payor partners.
Removed
Legal Proceedings From time to time, we may be involved in various legal proceedings and subject to claims that arise in the ordinary course of business.
Added
These include companies such as AIM Specialty Health, eviCore Healthcare, Magellan Health, New Century Health, One Oncology, Thyme Care, and OncoHealth. These benefit managers seek to change provider behavior by reviewing and authorizing treatment requests.
Removed
Although the results of litigation and claims are inherently unpredictable and uncertain, we are not currently a party to any legal proceedings the outcome of which, if determined adversely to us, are believed to, either individually or taken together, have a material adverse effect on our business, operating results, cash flows or financial condition.
Removed
Regardless of the outcome, litigation has the potential to have an adverse impact on us because of defense and settlement costs, diversion of management resources, and other factors.
Removed
Properties Our principal executive offices are located in Cerritos, California where we occupy a suite under a lease that expires in 2026. We use this facility for administration, billing and collections, technology and development and professional services. We intend to procure additional space as we add team members and expand geographically.
Removed
We believe that our facilities are adequate to meet our needs for the immediate future, and that, should it be needed, suitable additional space will be available to accommodate any such expansion of our operations. As of December 31, 2022, we have leases for 62 clinics located in California, Arizona, Nevada, Florida and Texas.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

93 edited+27 added−16 removed348 unchanged
Biggest changeThe number of shares reserved for future issuance under the 2021 Incentive Plan is equal to the sum of (i) 7% of the aggregate number of shares of DFP Class A and DFP Class B Common Stock outstanding on a fully diluted basis as of the effective date of the 2021 Plan; (ii) up to 634,067 shares of Common Stock which are subject to options outstanding under the Prior Plan; (iii) an annual increase on January 1 of each calendar year (commencing January 1, 2022 and ending on and including January 1, 2031) equal to a number of shares of Common Stock equal to 4% of the aggregate shares of Common Stock outstanding on a fully diluted basis as of December 31 of the immediately preceding calendar year (or such lesser number of shares as is determined by the Board), subject to adjustment by the plan administrator in the event of certain changes in our corporate 38 structure, as described below, and (iv) up to 1,178,065 option holder earnout shares or stockholder earnout shares which may become available for issuance under the 2021 Plan.
Biggest changeAs of December 31, 2023, we have 6,008,329 shares available for issuance under the 2021 Plan, which amount will automatically increase on January 1 of each successive year through and including January 1, 2031 in amount equal to 4% of the fully diluted shares outstanding as of the preceding December 31 or such lesser amount as is determined by the Board.
A pandemic, epidemic or outbreak of an infectious disease in the United States or worldwide, including the current COVID-19 pandemic, could adversely affect our business. A pandemic, epidemic or outbreak of an infectious disease, including the current COVID-19 pandemic, that occurs in the United States or worldwide, may adversely affect our business.
A pandemic, epidemic or outbreak of an infectious disease in the United States or worldwide, including the COVID-19 pandemic, could adversely affect our business. A pandemic, epidemic or outbreak of an infectious disease, including the current COVID-19 pandemic, that occurs in the United States or worldwide, may adversely affect our business.
With respect to MA plans, the TOI PCs submit claims and encounter data to applicable MA plans that are used to establish the annual, average Medicare Risk Adjustment Factor, or RAF, scores attributable to each TOI PC’s MA population.
With respect to MA plans, the TOI PCs submit claims and encounter data applicable to MA plans that are used to establish the annual, average Medicare Risk Adjustment Factor, or RAF, scores attributable to each TOI PC’s MA population.
If we fail to perform our clinical trial services in accordance with contractual requirements, government regulat ions and ethical considerations, we could be subject to significant costs or liability and our reputation could be adversely affected. • We are dependent on our relationships with the TOI PCs, which are affiliated professional entities that we do not own, to provide healthcare services, and our business would be harmed if those relationships were disrupted or if our arrangements with the TOI PCs become subject to legal challenges. • Our managed clinics and the TOI PCs providing professional services at such clinics may become subject to medical liability claims, which could have a material adverse impact on our business. • If there is a change in accounting standards by the Financial Accounting Standards Board or the interpretation thereof affecting consolidation of entities, it could have a material advers e effect on our consolidation of total revenues derived from the TOI PCs. • Our managed clinics and the TOI PCs may be subject to thi rd-party payor audits, which, if adversely determined against us or the TOI PCs, may have a material effect on our results of operations and financial condition. • We are subject to extensive fraud, waste, and abuse laws that may give rise to federal and state audits, investigations, lawsuits and claims against us, the outcome of which may have a material adverse effect on our business . • If any of our managed clinics or TOI PCs lose their regulatory licenses, permits and/or accreditation status, or become ineligible to receive reimbursement under Medicare or Medicaid or other third-party payors, there may be a material adverse effect on our business, financial conditions, cash flows or results of operations. • If we or the TOI PCs fail to comply with applicable data interoperability and information blocking rules, our consolidated results of operations could be adversely affected. • Actual or perceived failures to comply with applicable data protection, privacy and security, advertising and consumer protection laws, regulations, standards and other requirements could adversely affect our business, financial condition and results of operations. • We and our TOI PCs are subject to federal, state and local laws and regulations that govern our business. • We may not be able to utilize a portion of our net operating loss carry forwards (“NOLs”) to offset future taxable income for U.S. federal income tax purposes, which could adversely affect our net income and cash flows. 17 • Future changes to applicable tax laws and regulations and/or their interpretations may have an adverse effect on our business, financial condition and results of operations.
If we fail to perform our clinical trial services in accordance with contractual requirements, government regulat ions and ethical considerations, we could be subject to significant costs or liability and our reputation could be adversely affected. • We are dependent on our relationships with the TOI PCs, which are affiliated professional entities that we do not own, to provide healthcare services, and our business would be harmed if those relationships were disrupted or if our arrangements with the TOI PCs become subject to legal challenges. • Our managed clinics and the TOI PCs providing professional services at such clinics may become subject to medical liability claims, which could have a material adverse impact on our business. • If there is a change in accounting standards by the Financial Accounting Standards Board or the interpretation thereof affecting consolidation of entities, it could have a material advers e effect on our consolidation of total revenues derived from the TOI PCs. • Our managed clinics and the TOI PCs may be subject to thi rd-party payor audits, which, if adversely determined against us or the TOI PCs, may have a material effect on our results of operations and financial condition. • We are subject to extensive fraud, waste, and abuse laws that may give rise to federal and state audits, investigations, lawsuits and claims against us, the outcome of which may have a material adverse effect on our business . • If any of our managed clinics or TOI PCs lose their regulatory licenses, permits and/or accreditation status, or become ineligible to receive reimbursement under Medicare or Medicaid or other third-party payors, there may be a material adverse effect on our business, financial conditions, cash flows or results of operations. • If we or the TOI PCs fail to comply with applicable data interoperability and information blocking rules, our consolidated results of operations could be adversely affected. • Actual or perceived failures to comply with applicable data protection, privacy and security, advertising and consumer protection laws, regulations, standards and other requirements could adversely affect our business, financial condition and results of operations. • We and our TOI PCs are subject to federal, state and local laws and regulations that govern our business. • We may not be able to utilize a portion of our net operating loss carry forwards (“NOLs”) to offset future taxable income for U.S. federal income tax purposes, which could adversely affect our net income and cash flows. • Future changes to applicable tax laws and regulations and/or their interpretations may have an adverse effect on our business, financial condition and results of operations.
Our failure to adequately compete could adversely affect our business . • Competition for physicians and clinical personnel, including nurses, shortages of qualified personnel or other factors could increase our labor costs and adversely affect our revenue, growth rate, profitability and cash flows. • Because competition for qualified personnel is intense, we may not be able to attract and retain the highly skilled employees we need to execute our business strategies and growth plans. • If we are unable to provide consistently high quality of care, o ur business will be adversely impacted. • If certain of our suppliers do not meet our needs, if there are material price increases on supplies, if we are not reimbursed or adequately reimbursed for drugs we purcha se or if we are unable to effectively access new technology or superior products, it could negatively impact our ability to effectively provide the services we offer and could have a material adverse effect on our business, results of operations, financial condition and cash flows. • We depend on our information technology systems, and those of our third-party vendors, contractors and consultants, and any failure or significant disruptions of these systems, security breaches or loss of data could materially adversely affect our business, financial condition and results of operations. • We may be subject to legal proceedings and litig ation, including intellectual property and privacy disputes, which are costly to defend and could materially harm our business and results of operations. • Some jurisdictions preclude the TOI PCs from e ntering into non-compete agreements with our physicians, and other non-compete agreements and restrictive covenants applicable to certain physicians and other clinical employees may not be enforceable. • Current and future acquisitions may use significant resources, may be unsuccessful, and could expose us to unforeseen liabilities. • We conduct some clinical trials in contract with TOI Clinical Research, LLC ("TCR") .
Our failure to adequately compete could adversely affect our business . • Competition for physicians and clinical personnel, including nurses, shortages of qualified personnel or other factors could increase our labor costs and adversely affect our revenue, growth rate, profitability and cash flows. • Because competition for qualified personnel is intense, we may not be able to attract and retain the highly skilled employees we need to execute our business strategies and growth plans. • If we are unable to provide consistently high quality of care, o ur business will be adversely impacted. • If certain of our suppliers do not meet our needs, if there are material price increases on supplies, if we are not reimbursed or adequately reimbursed for drugs we purcha se or if we are unable to effectively access new technology or superior products, it could negatively impact our ability to effectively provide the services we offer and could have a material adverse effect on our business, results of operations, financial condition and cash flows. 17 • We depend on our information technology systems, and those of our third-party vendors, contractors and consultants, and any failure or significant disruptions of these systems, security breaches or loss of data could materially adversely affect our business, financial condition and results of operations. • We may be subject to legal proceedings and litig ation, including intellectual property and privacy disputes, which are costly to defend and could materially harm our business and results of operations. • Some jurisdictions preclude the TOI PCs from e ntering into non-compete agreements with our physicians, and other non-compete agreements and restrictive covenants applicable to certain physicians and other clinical employees may not be enforceable. • Current and future acquisitions may use significant resources, may be unsuccessful, and could expose us to unforeseen liabilities. • We conduct some clinical trials in contract with TOI Clinical Research, LLC ("TCR") .
Factors that may cause medical expenses to exceed estimates include: • the health status of patients; • changes to oncology treatment guidelines which our affiliated providers follow; • higher than expected utilization of new or existing healthcare services, drugs or technologies; • an increase in the cost of healthcare services and supplies, whether as a result of inflation or otherwise; • changes to mandated benefits or other changes in healthcare laws, regulations and practices; • increased costs attributable to provider and support staff compensation or providers with which the TOI PCs contract to provide care to patients; • changes in the demographics of our patients and medical trends; 21 • contractual or claims disputes with providers, hospitals or other service providers within and outside a health plan’s network; and • the occurrence of catastrophes, major epidemics or acts of terrorism.
Factors that may cause medical expenses to exceed estimates include: • the health status of patients; • changes to oncology treatment guidelines which our affiliated providers follow; • higher than expected utilization of new or existing healthcare services, drugs or technologies; • an increase in the cost of healthcare services and supplies, whether as a result of inflation or otherwise; • changes to mandated benefits or other changes in healthcare laws, regulations and practices; • increased costs attributable to provider and support staff compensation or providers with which the TOI PCs contract to provide care to patients; • changes in the demographics of our patients and medical trends; • contractual or claims disputes with providers, hospitals or other service providers within and outside a health plan’s network; and • the occurrence of catastrophes, major epidemics or acts of terrorism.
To the extent the COVID-19 pandemic, or another pandemic, epidemic or outbreak of an infectious disease occurs in the United States or worldwide, adversely affects our business and financial results, it may also have the effect of heightening many of the other risks described in this “Risk Factors” section, including but not limited to those relating to cyberattacks and security vulnerabilities, interruptions or delays due to third-parties, or our ability to raise additional capital or generate sufficient cash flows necessary to fulfill our obligations under our existing indebtedness or to expand our operations.
To the extent the COVID-19 pandemic, or another pandemic, epidemic or outbreak of an infectious disease occurs in the United States or worldwide, adversely affects our business and financial results, it may also have the effect of heightening many 20 of the other risks described in this “Risk Factors” section, including but not limited to those relating to cyberattacks and security vulnerabilities, interruptions or delays due to third-parties, or our ability to raise additional capital or generate sufficient cash flows necessary to fulfill our obligations under our existing indebtedness or to expand our operations.
If our data were found to be inaccurate or unreliable due to fraud or other error, or if we, or any of the third-party service providers we engage, were to fail to maintain information systems and data integrity effectively, we could experience operational disruptions that may impact our patients and care teams and hinder our ability to provide services, establish appropriate pricing for services, retain and attract patients, manage our patient risk profiles, establish reserves, report financial results timely and accurately and maintain regulatory compliance, among other things.
If our data were found to be inaccurate or unreliable due to fraud or other error, or if we, or any of the third-party service providers we engage, were to fail to maintain information systems and data integrity effectively, we could experience operational disruptions that may impact our patients and care teams and hinder our ability to provide services, establish appropriate pricing for services, 28 retain and attract patients, manage our patient risk profiles, establish reserves, report financial results timely and accurately and maintain regulatory compliance, among other things.
Any future determination related to our dividend policy will be made at the discretion of our board of directors after considering our business prospects, results of operations, financial condition, cash requirements and availability, debt repayment obligations, capital expenditure needs, contractual restrictions, covenants in the agreements governing current and future indebtedness, industry trends, the provisions of Delaware law 41 affecting the payment of dividends and distributions to stockholders and any other factors or considerations the board of directors deems relevant.
Any future determination related to our dividend policy will be made at the discretion of our board of directors after considering our business prospects, results of operations, financial condition, cash requirements and availability, debt repayment obligations, capital expenditure needs, contractual restrictions, covenants in the agreements governing current and future indebtedness, industry trends, the provisions of Delaware law affecting the payment of dividends and distributions to stockholders and any other factors or considerations the board of directors deems relevant.
In addition, the Facility Agreement restricts our and the guarantors’ ability to, among other things, (i) merge, consolidate, dissolve or liquidate into or convey, transfer, lease or dispose of all or substantially all of its assets (other than into another Loan Party or if the Company determines in good faith in the best interest of a subsidiary and not materially disadvantageous), (ii) create or incur any lien on our assets beyond those outstanding on the date 42 of the Facility Agreement and certain other permitted liens, (iii) dispose of any assets or property or issue, transfer, or provide a controlling, management, or other interest in certain securities of the Company or its guarantors, (iv) incur any indebtedness not to exceed $1,000 or as otherwise permitted, (v) make any investments other than as otherwise permitted, (vi) amend our organizational documents or any material agreements in a manner that would reasonably be expected to be materially adverse to the rights of the lenders or (vii) change our reporting practices or fiscal year, in each case, subject to exceptions set forth in the Facility Agreement.
In addition, the Facility Agreement restricts our and the guarantors’ ability to, among other things, (i) merge, consolidate, dissolve or liquidate into or convey, transfer, lease or dispose of all or substantially all of its assets (other than into another Loan Party or if the Company determines in good faith in the best interest of a subsidiary and not materially disadvantageous), (ii) create or incur any lien on our assets beyond those outstanding on the date of the Facility Agreement and certain other permitted liens, (iii) dispose of any assets or property or issue, transfer, or provide a controlling, management, or other interest in certain securities of the Company or its guarantors, (iv) incur any indebtedness not to exceed $1,000,000 or as otherwise permitted, (v) 43 make any investments other than as otherwise permitted, (vi) amend our organizational documents or any material agreements in a manner that would reasonably be expected to be materially adverse to the rights of the lenders or (vii) change our reporting practices or fiscal year, in each case, subject to exceptions set forth in the Facility Agreement.
In addition, PBMs could at any time change their contracting and/or credentialing requirements, the effect of which could prohibit the TOI PCs from billing for prescription drugs dispensed by the TOI PCs. If such changes, individually or in the aggregate, are material, they would have an adverse effect on our business, results of operations and financial condition.
In 23 addition, PBMs could at any time change their contracting and/or credentialing requirements, the effect of which could prohibit the TOI PCs from billing for prescription drugs dispensed by the TOI PCs. If such changes, individually or in the aggregate, are material, they would have an adverse effect on our business, results of operations and financial condition.
Although the TOI PCs have long-term contracts with many payors, these contracts may be terminated before their term expires for various reasons, such as changes in the regulatory landscape and poor performance by the TOI PCs and our 22 affiliated providers, subject to certain conditions. Certain of the payor contracts are terminable immediately upon the occurrence of certain events.
Although the TOI PCs have long-term contracts with many payors, these contracts may be terminated before their term expires for various reasons, such as changes in the regulatory landscape and poor performance by the TOI PCs and our affiliated providers, subject to certain conditions. Certain of the payor contracts are terminable immediately upon the occurrence of certain events.
In January 2013, the American Taxpayer Relief Act of 2012 was signed into law, which, among other things, further reduced Medicare payments to several types of providers, including hospitals, imaging centers and cancer treatment centers, and increased the statute of limitations period for the government to recover overpayments 24 to providers from three to five years.
In January 2013, the American Taxpayer Relief Act of 2012 was signed into law, which, among other things, further reduced Medicare payments to several types of providers, including hospitals, imaging centers and cancer treatment centers, and increased the statute of limitations period for the government to recover overpayments to providers from three to five years.
If we are not able to access superior products on a cost-effective basis or if suppliers are not able to fulfill our requirements for such products, we and the 27 TOI PCs could face patient attrition and other negative consequences which could have a material adverse effect on our business, results of operations, financial condition and cash flows.
If we are not able to access superior products on a cost-effective basis or if suppliers are not able to fulfill our requirements for such products, we and the TOI PCs could face patient attrition and other negative consequences which could have a material adverse effect on our business, results of operations, financial condition and cash flows.
For example, although the 23 Congressional Budget Office (“CBO”) predicted in 2010 that Medicare Advantage participation would drop substantially by 2020, the CBO has more recently predicted, without taking into account potential future reforms, that enrollment in Medicare Advantage (and other contracts covering Medicare Parts A and B) could reach 36 million by 2027.
For example, although the Congressional Budget Office (“CBO”) predicted in 2010 that Medicare Advantage participation would drop substantially by 2020, the CBO has more recently predicted, without taking into account potential future reforms, that enrollment in Medicare Advantage (and other contracts covering Medicare Parts A and B) could reach 36 million by 2027.
We may face allegations, lawsuits and regulatory inquiries, audits and investigations regarding data privacy, security, labor and employment, consumer protection and intellectual property 28 infringement, including claims related to privacy, patents, publicity, trademarks, copyrights and other rights. We may also face allegations or litigation related to our acquisitions, securities issuances or business practices, including public disclosures about our business.
We may face allegations, lawsuits and regulatory inquiries, audits and investigations regarding data privacy, security, labor and employment, consumer protection and intellectual property infringement, including claims related to privacy, patents, publicity, trademarks, copyrights and other rights. We may also face allegations or litigation related to our acquisitions, securities issuances or business practices, including public disclosures about our business.
In addition, third-party payors may disallow, in whole or in part, requests for reimbursement based on determinations that the patient is not eligible for coverage, certain amounts are not reimbursable under plan coverage or the services provided that were not medically necessary or additional supporting documentation is necessary. Retroactive adjustments may change amounts 20 realized from third-party payors.
In addition, third-party payors may disallow, in whole or in part, requests for reimbursement based on determinations that the patient is not eligible for coverage, certain amounts are not reimbursable under plan coverage or the services provided that were not medically necessary or additional supporting documentation is necessary. Retroactive adjustments may change amounts realized from third-party payors.
Such difficulties may divert significant financial, operational, and managerial resources from our existing operations and make it more difficult to achieve our operating and strategic objectives. We and the 29 TOI PCs may fail to retain employees or patients acquired through these acquisitions, which may negatively impact the integration efforts.
Such difficulties may divert significant financial, operational, and managerial resources from our existing operations and make it more difficult to achieve our operating and strategic objectives. We and the TOI PCs may fail to retain employees or patients acquired through these acquisitions, which may negatively impact the integration efforts.
If we fail to perform our clinical trial services in accordance with contractual requirements, government regulations and ethical considerations, we could be subject to significant costs or liability and our reputation could be adversely affected. The TCR, contracts with biotechnology and pharmaceutical companies to perform services to assist them in bringing new drugs and biologics to market.
If we fail to perform our clinical trial services in accordance with contractual requirements, government regulations and ethical considerations, we could be subject to significant costs or liability and our reputation could be adversely affected. TCR contracts with biotechnology and pharmaceutical companies to perform services to assist them in bringing new drugs and biologics to market.
Additional risks and uncertainties that we are unaware of, or that we currently believe are not material, may also become important factors that adversely affect our business. If any of the following risks or others not specified below materialize, our business, financial condition and results of operations could be materially adversely affected.
Additional risks and uncertainties that we are unaware of, or that we currently believe are not material, may also become important factors that adversely affect our 16 business. If any of the following risks or others not specified below materialize, our business, financial condition and results of operations could be materially adversely affected.
Those payors could take action to remove, exclude, delay, or otherwise prevent the inclusion of the TOI PCs in their provider networks. • A significant portion of sales are from prescription drug sales reimbursed by a limited number of pharmacy benefit management companies with which TOI PCs contract.
Those payors could take action to remove, exclude, delay, or otherwise prevent the inclusion of the TOI PCs in their provider networks. • A significant portion of sales are from prescription drug sales reimbursed by a number of pharmacy benefit management companies with which TOI PCs contract.
We expect our operating expenses to increase significantly over the next several years as we continue to hire additional personnel, expand our operations and infrastructure, and continue to expand to reach more patients. In addition to the expected costs to grow our business, we also expect to incur additional legal, accounting and other expenses as a newly public company.
We expect our operating expenses to increase significantly over the next several years as we continue to hire additional personnel, expand our operations and infrastructure, and continue to expand to reach more patients. In addition to the expected costs to grow our business, we also expect to incur additional legal, accounting and other expenses as a public company.
In addition, the JOBS Act provides that an emerging growth company can take advantage of an extended transition period for complying with new or revised accounting standards. This allows an emerging growth company to delay the adoption of certain accounting standards until those standards would otherwise apply to private companies.
In addition, the JOBS Act provides that an emerging growth company can take advantage of an extended transition period for complying with new or revised accounting standards. This allows an emerging growth company to delay the adoption of 40 certain accounting standards until those standards would otherwise apply to private companies.
As noted above, our certificate of incorporation and our bylaws provide that the federal district courts of the United States shall have jurisdiction over any action arising under the Securities Act. Accordingly, there is uncertainty as to whether a court would enforce such provision.
As noted above, our certificate of incorporation and our bylaws provide that the federal district courts of the United States shall have jurisdiction 41 over any action arising under the Securities Act. Accordingly, there is uncertainty as to whether a court would enforce such provision.
Revenues associated with Medicare and Medicaid programs are also subject to estimating risk related to the amounts not paid by the primary government payor that will ultimately be collectible from other government programs paying secondary coverage, the patient’s commercial health plan secondary coverage or the patient.
Revenues associated with Medicare and Medicaid programs are also subject to estimating risk related to the amounts not paid by the primary government payor that will ultimately be 22 collectible from other government programs paying secondary coverage, the patient’s commercial health plan secondary coverage or the patient.
If we are unable to successfully address these risks and challenges as we encounter them, our business, results of operations and financial condition would be adversely affected. Our failure to achieve or maintain profitability could negatively impact the value of our Common Stock.
If we are unable to successfully address these risks 19 and challenges as we encounter them, our business, results of operations and financial condition would be adversely affected. Our failure to achieve or maintain profitability could negatively impact the value of our Common Stock.
Negative publicity regarding the managed healthcare industry generally, or the MA program in particular, may result in increased regulation and legislative review of industry practices that further increase our costs of doing business and adversely affect our results of operations or business by: • requiring us to change our products and services; • increasing the regulatory, including compliance, burdens under which we operate, which, in turn, may negatively impact the manner in which the TOI PCs provide services and increase our costs of providing services; 30 • adversely affecting our ability to market the TOI PCs products or services through the imposition of further regulatory restrictions regarding the manner in which plans and providers market to MA enrollees; or • adversely affecting our ability to attract and retain patients.
Negative publicity regarding the managed healthcare industry generally, or the MA program in particular, may result in increased regulation and legislative review of industry practices that further increase our costs of doing business and adversely affect our results of operations or business by: • requiring us to change our products and services; • increasing the regulatory, including compliance, burdens under which we operate, which, in turn, may negatively impact the manner in which the TOI PCs provide services and increase our costs of providing services; 31 • adversely affecting our ability to market the TOI PCs products or services through the imposition of further regulatory restrictions regarding the manner in which plans and providers market to MA enrollees; or • adversely affecting our ability to attract and retain patients.
Litigation and regulatory proceedings may be protracted and expensive, and the results are difficult to predict. Certain of these matters may include speculative claims for substantial or indeterminate amounts of damages and include claims for injunctive relief. Additionally, our litigation costs could be significant.
Litigation and regulatory proceedings may be protracted and expensive, and the results are difficult to predict. Certain of these matters may include speculative claims for substantial or indeterminate amounts of damages and include claims 29 for injunctive relief. Additionally, our litigation costs could be significant.
Our ability to maintain our operations and grow in existing and new markets may require additional capital, particularly if we were to accelerate its acquisition and expansion plans. Financing may not be available or may be available only on terms that are not favorable.
Our ability to maintain our operations and grow in existing and new markets may require additional capital, particularly if we were to accelerate our acquisition and expansion plans. Financing may not be available or may be available only on terms that are not favorable.
Further, because of the breadth of these laws and the narrowness of the statutory exceptions and safe harbors available, it is possible that some of the business activities undertaken by us or the TOI PCs could be subject to challenge under one or more of these laws, including, without limitation, our patient assistance programs that waive or reduce the patient’s obligation to pay copayments, coinsurance or deductible amounts owed for the services we 33 provide to them if they meet certain financial need criteria.
Further, because of the breadth of these laws and the narrowness of the statutory exceptions and safe harbors available, it is possible that some of the business activities undertaken by us or the TOI PCs could be subject to challenge under one or more of these laws, including, without limitation, our patient assistance programs that waive or reduce the patient’s obligation to pay copayments, coinsurance or deductible amounts owed for the services we 34 provide to them if they meet certain financial need criteria.
There are many other companies and individuals currently providing healthcare services, many of which have been in business longer and/or have substantially more resources. Other companies could enter the healthcare industry in the future and divert some or all of our business.
There are many other companies and individuals currently providing healthcare services, many of which have been in business 26 longer and/or have substantially more resources. Other companies could enter the healthcare industry in the future and divert some or all of our business.
Enforcement actions and consequences for noncompliance with such laws, directives and regulations are rising, and the regulatory framework for privacy, data protection and data transfers is complex and rapidly evolving and is likely to remain uncertain for the foreseeable future. 34 In the United States, numerous such federal and state laws and regulations, including data breach notification laws, health information privacy laws, and consumer protection laws and regulations, including those that govern the collection, use, disclosure, and protection of health-related and other personal information, could apply to our operations or the operations of the TOI PCs.
Enforcement actions and consequences for noncompliance with such laws, directives and regulations are rising, and the regulatory framework for privacy, data protection and data transfers is complex and rapidly evolving and is likely to remain uncertain for the foreseeable future. 35 In the United States, numerous such federal and state laws and regulations, including data breach notification laws, health information privacy laws, and consumer protection laws and regulations, including those that govern the collection, use, disclosure, and protection of health-related and other personal information, could apply to our operations or the operations of the TOI PCs.
We may need additional capital to fund its operations and finance its growth, and we may not be able to obtain it on acceptable terms, or at all, which may limit our ability to grow.
We may need additional capital to fund our operations and finance our growth, and we may not be able to obtain it on acceptable terms, or at all, which may limit our ability to grow.
Of particular importance are: • the federal Anti-Kickback Statute, or AKS, which prohibits the knowing and willful offer, payment, solicitation or receipt of any bribe, kickback, rebate or other remuneration for referring an individual, in return for ordering, leasing, purchasing or recommending or arranging for or to induce the referral of an individual or the ordering, purchasing or 32 leasing of items or services covered, in whole or in part, by any federal healthcare program, such as Medicare and Medicaid.
Of particular importance are: • the federal Anti-Kickback Statute, or AKS, which prohibits the knowing and willful offer, payment, solicitation or receipt of any bribe, kickback, rebate or other remuneration for referring an individual, in return for ordering, leasing, purchasing or recommending or arranging for or to induce the referral of an individual or the ordering, purchasing or 33 leasing of items or services covered, in whole or in part, by any federal healthcare program, such as Medicare and Medicaid.
Debt securities convertible into equity could be subject to adjustments in the conversion ratio pursuant to which certain events may increase the number of equity securities issuable upon conversion.
Future Debt securities convertible into equity could be subject to adjustments in the conversion ratio pursuant to which certain events may increase the number of equity securities issuable upon conversion.
Any of these events could materially and adversely affect our business, financial condition and results of operations. 43 The terms of the Senior Secured Convertible Note may have a negative impact on our business and the value of our securities and may result in substantial dilution to our other equity securityholders.
Any of these events could materially and adversely affect our business, financial condition and results of operations. 44 The terms of the Senior Secured Convertible Note may have a negative impact on our business and the value of our securities and may result in substantial dilution to our other equity securityholders.
Our failure to take any steps perceived by the FTC as 35 appropriate to protect consumers’ personal information may result in claims by the FTC that we have engaged in unfair or deceptive acts or practices in violation of Section 5(a) of the FTC Act.
Our failure to take any steps perceived by the FTC as 36 appropriate to protect consumers’ personal information may result in claims by the FTC that we have engaged in unfair or deceptive acts or practices in violation of Section 5(a) of the FTC Act.
If we are unable to obtain funds on acceptable terms, it may have to delay or abandon some or all of its growth strategies. Further, if additional funds are raised through the issuance of additional equity securities, the percentage ownership of our stockholders would be diluted.
If we are unable to obtain funds on acceptable terms, we may have to delay or abandon some or all of our growth strategies. Further, if additional funds are raised through the issuance of additional equity securities, the percentage ownership of our stockholders would be diluted.
You may not be able to resell your shares at an attractive price due to a number of factors such as those listed in this section and the following: • the impact of the COVID-19 pandemic on our financial condition and the results of operations; • our operating and financial performance and prospects; • our quarterly or annual earnings or those of other companies in our industry compared to market expectations; • conditions that impact demand for our products; • future announcements concerning our business, our customers’ businesses or our competitors’ businesses; • the public’s reaction to our press releases, other public announcements and filings with the SEC; • the size of our public float; • coverage by or changes in financial estimates by securities analysts or failure to meet their expectations; • market and industry perception of our success, or lack thereof, in pursuing our growth strategy; • strategic actions by us or our competitors, such as acquisitions or restructurings; • changes in laws or regulations that adversely affect our industry or us; • changes in accounting standards, policies, guidance, interpretations or principles; • changes in senior management or key personnel; • issuances, exchanges or sales, or expected issuances, exchanges or sales, of our capital stock; • changes in our dividend policy; • adverse resolution of new or pending litigation against us; and 40 • changes in general market, economic and political conditions in the United States and global economies or financial markets, including those resulting from natural disasters, terrorist attacks, acts of war and responses to such events.
You may not be able to resell your shares at an attractive price due to a number of factors such as those listed in this section and the following: • the impact of a pandemic, epidemic, or outbreak of an infectious disease in the United States or worldwide on our financial condition and the results of operations; • our operating and financial performance and prospects; • our quarterly or annual earnings or those of other companies in our industry compared to market expectations; • conditions that impact demand for our products; • future announcements concerning our business, our customers’ businesses or our competitors’ businesses; • the public’s reaction to our press releases, other public announcements and filings with the SEC; • the size of our public float; • coverage by or changes in financial estimates by securities analysts or failure to meet their expectations; • market and industry perception of our success, or lack thereof, in pursuing our growth strategy; • strategic actions by us or our competitors, such as acquisitions or restructurings; • changes in laws or regulations that adversely affect our industry or us; • changes in accounting standards, policies, guidance, interpretations or principles; • changes in senior management or key personnel; • issuances, exchanges or sales, or expected issuances, exchanges or sales, of our capital stock; • changes in our dividend policy; • adverse resolution of new or pending litigation against us; and • changes in general market, economic and political conditions in the United States and global economies or financial markets, including those resulting from natural disasters, terrorist attacks, acts of war and responses to such events.
Such consolidation for accounting and/or tax purposes does not, is not intended to, and should not be deemed to, imply or 31 provide us any control over the medical or clinical affairs of the TOI PCs.
Such consolidation for accounting and/or tax purposes does not, is not intended to, and should not be deemed to, imply or 32 provide us any control over the medical or clinical affairs of the TOI PCs.
As of December 31, 2022, the vast majority of the TOI PC members under capitation agreements were residents of California. In addition, during 2022, approximately 85% of our revenues were generated in California.
As of December 31, 2023, the vast majority of the TOI PC members under capitation agreements were residents of California. In addition, during 2023, approximately 85% of our revenues were generated in California.
We have filed one or more registration statements on Form S-8 under the Securities Act to register shares of our Common Stock or securities convertible into or exchangeable for shares of our Common Stock issued pursuant to our equity incentive plans. Such Form S-8 registration statements automatically become effective upon filing.
We have filed multiple registration statements on Form S-8 under the Securities Act to register shares of our Common Stock or securities convertible into or exchangeable for shares of our Common Stock issued pursuant to our equity incentive plans. Such Form S-8 registration statements automatically become effective upon filing.
In 2022, the KFF reported that two payors together accounted for nearly half of Medicare Advantage enrollment and seven firms accounted for nearly 85% of covered lives.
In 2023, the KFF reported that two payors together accounted for nearly half of Medicare Advantage enrollment and seven firms accounted for nearly 85% of covered lives.
Upon the occurrence of a Major Transaction, as defined under the Senior Secured Convertible Note, the holders of the convertible notes may elect to require us to redeem all or any portion of the notes for an amount equal to the principal amount thereof (in addition to accrued and unpaid interest, a make-whole amount and an exit fee, as applicable).
Upon the occurrence of a Major Transaction, as defined under the Senior Secured Convertible Note issued pursuant to the Facility Agreement, the holders of the convertible notes may elect to require us to redeem all or any portion of the notes for an amount equal to the principal amount thereof (in addition to accrued and unpaid interest, a make-whole amount and an exit fee, as applicable).
You should read this summary together with the full and complete discussion of risk factors contained below: • Our growth strategy depends on our ability to build or acquire clinics to service our contracts and treat our patients. • We have experienced, and may continue to experience, rapid growth and organizational change, which has placed, and may continue to place, significant demands on our management and o ur operational and financial resources. • We have identified a material weakness in our internal control over financial reporting that, if not properly corrected, could materially adversely affect our operations and result in material misstatements in our financial statements. • We have a history of net losses, we anticipate increasing expenses in the future, and we may not be able to achieve or maintain profitability. • A pandemic, epidemic or outbreak of an infectious disease in the United States or worldwide, including the current COVID-19 pandemic, could adversely affect our business. • Our services are concentrated in certain geographic areas and popula tions exposing us to unfavorable changes in local benefit costs, reimbursement rates, competition and economic conditions. • If we are unable to attract new patients, our revenue growth will be ad versely affected. • We primarily depend on reimbursement from third-party payors, as well as payments by individuals, which could lead to delays, denials, or uncertainties in the reimbursement process. • With many of our value-based agreements, our consolidating professional corporations ("TOI PCs") assume the risk that the cost of providing services will exceed our compensation.
You should read this summary together with the full and complete discussion of risk factors contained below: • Our growth strategy depends on our ability to build or acquire clinics to service our contracts and treat our patients. • We have experienced, and may continue to experience, rapid growth and organizational change, which has placed, and may continue to place, significant demands on our management and o ur operational and financial resources. • We have a history of net losses, we anticipate increasing expenses in the future, and we may not be able to achieve or maintain profitability. • A pandemic, epidemic or outbreak of an infectious disease in the United States or worldwide, including the current COVID-19 epidemic, could adversely affect our business. • Our services are concentrated in certain geographic areas and popula tions exposing us to unfavorable changes in local benefit costs, reimbursement rates, competition and economic conditions. • If we are unable to attract new patients, our revenue growth will be ad versely affected. • We primarily depend on reimbursement from third-party payors, as well as payments by individuals, which could lead to delays, denials, or uncertainties in the reimbursement process. • With many of our value-based agreements, our consolidating professional corporations ("TOI PCs") assume the risk that the cost of providing services will exceed our compensation.
Reductions in government reimbursement rates or changes in the rules governing government healthcare programs could have a material adverse effect on our financial condition and results of operations. The TOI PCs receive a significant portion of revenue directly from Medicare, which accounted for approximately 16% of our Patient Services revenue in 2022.
Reductions in government reimbursement rates or changes in the rules governing government healthcare programs could have a material adverse effect on our financial condition and results of operations. The TOI PCs receive a significant portion of revenue directly from Medicare, which accounted for approximately 14% of our Patient Services revenue in 2023.
Under a fee-for-service payor arrangement, the TOI PCs collect fees directly from 25 the payor as services are provided. Our Patient Services revenue accounted for approximately 66% of total revenue for the year ended December 31, 2022.
Under a fee-for-service payor arrangement, the TOI PCs collect fees directly from the payor as services are provided. Our Patient Services revenue accounted for approximately 66% of total revenue for the year ended December 31, 2023.
These and other industry standards may legally or contractually apply to us, or we may elect to comply with such standards or to facilitate our customers’ compliance with such standards.
These and other industry standards may legally or contractually apply to us, or we may elect to comply with such standards or to facilitate our payors’ compliance with such standards.
The extent to which a pandemic impacts our business will depend on developments that are highly uncertain and cannot be predicted, including information that may emerge concerning the severity and spread of the pandemic and the actions to contain it or treat its impact, among others.
The extent to which a pandemic, epidemic, or infectious disease outbreak impacts our business will depend on developments that are highly uncertain and cannot be predicted, including information that may emerge concerning the severity and spread of the pandemic and the actions to contain it or treat its impact, among others.
Because of our business model, the full impact of the COVID-19 pandemic may not be fully reflected in our results of operations and overall financial condition until future periods. It is not currently possible to reliably project the direct impact of the COVID-19 pandemic on our operating revenues and expenses.
Because of our business model, the full impact of the ongoing COVID-19 or other pandemic outbreaks may not be fully reflected in our results of operations and overall financial condition until future periods. It is not currently possible to reliably project the direct impact of the COVID-19 pandemic on our operating revenues and expenses.
Goodwill impairment charges of $9,944 and $0 were recorded during the years ended December 31, 2022 and 2021, respectively, based on management's evaluation of the value goodwill. It is not possible at this time, under current market conditions, to determine if there will be any future impairment charge, or if there is, whether such charges would be material.
Goodwill impairment charges of $16,867 and $9,944 were recorded during the years ended December 31, 2023 and 2022, respectively, based on management's evaluation of the value of goodwill. It is not possible at this time, under current market conditions, to determine if there will be any future impairment charge, or if there is, whether such charges would be material.
There is currently significant concentration in the U.S. healthcare industry, and in particular there are a limited number of pharmacy benefit managers, or PBMs, and a limited number of national pharmacy chains. CVS Caremark, OptumRx and Express Scripts together accounted for approximately 85% of our dispensary revenue in 2022.
There is currently significant concentration in the U.S. healthcare industry, and in particular there are a limited number of pharmacy benefit managers, or PBMs, and a limited number of national pharmacy chains. CVS Caremark, OptumRx and Express Scripts together accounted for approximately 77% of our dispensary revenue in 2023.
In addition, the shares of our Common Stock reserved for future issuance under the 2021 Plan will become eligible for sale in the public market once those shares are issued, subject to provisions relating to various vesting agreements, lock-up provisions and, in some cases, limitations on volume and manner of sale applicable to affiliates under Rule 144, as applicable.
In addition, the shares of our Common Stock reserved for future issuance under The Oncology Institute, Inc. 2021 Incentive Award Plan (the "2021 Plan") will become eligible for sale in the public market once those shares are issued, subject to provisions relating to various vesting agreements, lock-up provisions and, in some cases, limitations on volume and manner of sale applicable to affiliates under Rule 144, as applicable.
To increase our revenue, our business strategy is to expand the number of payor contracts entered into by the TOI PCs and clinic locations in our network. In order to support such growth, the TOI PCs must continue to win new contracts and retain or grow existing contracts with payors.
To increase our revenue, our business strategy includes expanding the number of payor contracts entered into by the TOI PCs and clinic locations in our network. In order to support such growth, the TOI PCs must continue to win new contracts and retain or grow existing contracts with payors.
It is unclear which, if any, of these changes will remain in place permanently and which will be rolled-back following the COVID-19 pandemic. If regulations change to restrict the TOI PCs’ or our affiliated providers ability to deliver care through telehealth modalities, our financial condition and results of operations may be adversely affected.
It is 21 unclear which, if any, of these changes will remain in place permanently and which will be rolled-back. If regulations change to restrict the TOI PCs’ or our affiliated providers ability to deliver care through telehealth modalities, our financial condition and results of operations may be adversely affected.
As a result, we will incur increased legal, accounting and other expenses that Legacy TOI did not previously incur. Our entire management team and many of our other employees will need to devote substantial time to compliance and may not effectively or efficiently manage our transition into a public company.
As a result, we have incurred and will continue to incur increased legal, accounting and other expenses that Legacy TOI did not previously incur. Our entire management team and many of our other employees have devoted and will continue to devote substantial time to compliance and may not effectively or efficiently manage our transition into a public company.
See “Description of Capital Stock.” We are an “emerging growth company” and the reduced disclosure requirements applicable to emerging growth companies may make our Common Stock and Warrants less attractive to investors. We are an “emerging growth company,” as defined in the JOBS Act.
We are an “emerging growth company” and the reduced disclosure requirements applicable to emerging growth companies may make our Common Stock and Warrants less attractive to investors. We are an “emerging growth company,” as defined in the JOBS Act.
We are subject to the reporting requirements of the Exchange Act and the Sarbanes-Oxley Act. The Exchange Act requires that we file annual, quarterly and current reports with respect to our business and financial condition. The Sarbanes-Oxley Act requires, among other things, that we establish and maintain effective internal control over financial reporting.
The Exchange Act requires that we file annual, quarterly and current reports with respect to our business and financial condition. The Sarbanes-Oxley Act requires, among other things, that we establish and maintain effective internal control over financial reporting.
Those pharm acy benefit management companies could take action to remove, exclude, delay or otherwise prevent the inclusion of the TOI PCs in their provider networks. 16 • Reductions in Medicare reimbursement rates or changes in the rules gov erning the Medicare program could have a material adverse effect on our financial condition and results of ope rations. • We cannot predict the effect that health care reform and other ch anges in government programs may have on our business, financial condition or results of operations. • The transition from volume to value-based reimbursement models may have a material adverse effect on our operations. • Changes in the payor mix of patients and potential decreases in reimbursement rates as a result of consolidation among our customers could adversely affect our re venues and results of operations. • We face significant competition from other healthcare services providers.
Those pharm acy benefit management companies could take action to remove, exclude, delay or otherwise prevent the inclusion of the TOI PCs in their provider networks. • Reductions in Medicare reimbursement rates or changes in the rules gov erning the Medicare program could have a material adverse effect on our financial condition and results of ope rations. • We cannot predict the effect that health care reform and other ch anges in government programs may have on our business, financial condition or results of operations. • Inflation can adversely affect us by increasing the costs of drugs, clinical trials and research, administration and other costs of doing business. • The transition from volume to value-based reimbursement models may have a material adverse effect on our operations. • Changes in the payor mix of patients and potential decreases in reimbursement rates as a result of consolidation among our customers could adversely affect our re venues and results of operations. • We face significant competition from other healthcare services providers.
Regal Medical Group accounted for a total of approximately 13% of the Patient Services revenue for the year ended December 31, 2022. No other non-government payor accounted for more than 10% of the Patient Services revenue in 2022.
Regal Medical Group accounted for a total of approximately 11% of the Patient Services revenue for the year ended December 31, 2023. No other non-government payor accounted for more than 10% of the Patient Services revenue in 2023.
Approximately 76% of the TOI PCs’ total costs are related to drug purchases, including both oral and chemotherapy drugs, for the year ended December 31, 2022.
Approximately 57% of the TOI PCs’ total costs are related to drug purchases, including both oral and chemotherapy drugs, for the year ended December 31, 2023.
In addition, if our 37 assumptions used in preparing our valuations for purposes of impairment testing differ materially from actual future results, we may record impairment charges in the future and our financial results may be materially adversely affected. We had $21,418 and $26,626 of goodwill recorded on our Consolidated Balance Sheets at December 31, 2022 and 2021, respectively.
In addition, if our 38 assumptions used in preparing our valuations for purposes of impairment testing differ materially from actual future results, we may record impairment charges in the future and our financial results may be materially adversely affected. We had $7,230 and $21,418 of goodwill recorded on our Consolidated Balance Sheets at December 31, 2023 and 2022, respectively.
Approximately 24% of our revenue for 2022 was derived from fixed fees paid by payors under capitation agreements with the TOI PCs.
Approximately 22% of our revenue for 2023 was derived from fixed fees paid by payors under capitation agreements with the TOI PCs.
Although Medicare Advantage enrollment has increased significantly over the past decade, there can be no assurance that this trend will continue. Further, fluctuation in Medicare Advantage payment rates are evidenced by CMS’s annual announcement of the expected average change in revenue from the prior year: for 2021, CMS announced an average increase of 1.66%; and for 2022, 4.08%.
Although Medicare Advantage enrollment has increased significantly over the past decade, there can be no assurance that this trend will continue. Further, fluctuation in Medicare Advantage payment rates are evidenced by CMS’s annual announcement of the expected average change in revenue from the prior year: for 2023, CMS announced an average increase of 4.88%; and for 2024, 2.28%.
Future sales, or the perception of future sales, of our Common Stock and Warrants by us or our existing securityholders in the public market could cause the market price for our Common Stock and Warrants to decline.
Future sales, or the perception of future sales, of our Common Stock and Warrants by us or our existing securityholders in the public market could cause the market price for our Common Stock and Warrants to decline. 39 Our Common Stock and Warrants are traded on The Nasdaq Capital Market.
As of December 31, 2022, we had federal income tax NOLs of approximately $91,435 and state income tax NOLs of approximately $85,733 available to offset our future taxable income, if any, prior to consideration of annual limitations that may be imposed under Section 382 of the Code or otherwise.
As of December 31, 2023, we had federal income tax NOLs of approximately $139,195 and state income tax NOLs of approximately $132,511 available to offset our future taxable income, if any, prior to consideration of annual limitations that may be imposed under Section 382 of the Code or otherwise.
If we and the TOI PCs hire employees from competitors or other companies or healthcare providers, their former employers may attempt to assert that these employees or we have breached certain legal obligations, resulting in a diversion of our time and resources. As we become a more mature company, we may find our recruiting efforts more challenging.
If we and the TOI PCs hire employees from competitors or other companies or healthcare providers, their former employers have attempted and may in the future attempt to assert that these employees or we have breached certain legal obligations, resulting in a diversion of our time and resources.
Adverse market conditions resulting from the spread of COVID-19 could materially adversely affect our business and the value of our Common Stock.
Adverse market conditions resulting from the spread of COVID-19 or other epidemic, pandemic, or infectious disease outbreak could materially adversely affect our business and the value of our Common Stock.
On August 9, 2022, we entered into the Facility Agreement with Deerfield Partners and certain of its affiliates. The Facility Agreement contains various covenants, including a requirement to retain $40,000 in unrestricted cash and cash equivalents, and maintain a minimum revenue of $50,000, $75,000, and $100,000 for each fiscal quarter ending during the fiscal year 2023, 2024, and 2025, respectively.
The Facility Agreement contains various covenants, including a requirement to retain $40,000,000 in unrestricted cash and cash equivalents, and maintain a minimum revenue of $50,000,000, $75,000,000, and $100,000,000 for each fiscal quarter ending during the fiscal year 2023, 2024, and 2025, respectively.
In addition, these acquisitions involve risks that the acquired businesses will not perform in accordance with expectations; that we may become liable for unforeseen financial or business liabilities of the acquires businesses, including liabilities for failure to comply with applicable healthcare regulations; that the expected synergies associated with acquisitions will not be achieved; and that business judgments concerning the value, strengths and weaknesses of businesses acquired will prove incorrect, which could have a material adverse effect on our financial condition and results of operations.
These acquisitions could also have a negative impact on our results of operations if it is subsequently determined that goodwill or other acquired intangible assets are impaired, thus resulting in an impairment charge in a future period. 30 In addition, these acquisitions involve risks that the acquired businesses will not perform in accordance with expectations; that we may become liable for unforeseen financial or business liabilities of the acquires businesses, including liabilities for failure to comply with applicable healthcare regulations; that the expected synergies associated with acquisitions will not be achieved; and that business judgments concerning the value, strengths and weaknesses of businesses acquired will prove incorrect, which could have a material adverse effect on our financial condition and results of operations.
The transition from volume to value-based reimbursement models may have a material adverse effect on our operations. Healthcare reform is causing some payors to transition from volume to value-based reimbursement models, which can include risk-sharing, bundled payment and other innovative approaches.
Healthcare reform is causing some payors to transition from volume to value-based reimbursement models, which can include risk-sharing, bundled payment and other innovative approaches.
To the extent such warrants are exercised, additional shares of our Common Stock will be issued, which will result in dilution to our stockholders and increase the number of shares of Common Stock eligible for resale in the public market.
As of December 31, 2023, there were 3,177,542 private placement warrants outstanding. To the extent such warrants are exercised, additional shares of our Common Stock will be issued, which will result in dilution to our stockholders and increase the number of shares of Common Stock eligible for resale in the public market.
We may not generate positive cash flow from operations or profitability in any given period, and our limited operating history may make it difficult for you to evaluate our current business and our future prospects.
To date, we have financed our operations principally from the sale of our equity, revenue from our patient services and the incurrence of indebtedness. We may not generate positive cash flow from operations or profitability in any given period, and our limited operating history may make it difficult for you to evaluate our current business and our future prospects.
Further, we may face increased competition due to changes to our competitors’ products and services, including modifications to their terms, conditions, and pricing that could materially adversely impact our business, results of operations, and overall financial condition in future periods. 19 The COVID-19 pandemic could also cause our third-party data center hosting facilities and cloud computing platform providers, which are critical to our infrastructure, to shut down their business, experience security incidents that impact our business, delay or disrupt performance or delivery of services, or experience interference with the supply chain of hardware required by their systems and services, any of which could materially adversely affect our business.
The COVID-19 pandemic could also cause our third-party data center hosting facilities and cloud computing platform providers, which are critical to our infrastructure, to shut down their business, experience security incidents that impact our business, delay or disrupt performance or delivery of services, or experience interference with the supply chain of hardware required by their systems and services, any of which could materially adversely affect our business.
Our growth strategy involves a number of risks and uncertainties, including that: • the TOI PCs may not be able to successfully enter into contracts with local payors on terms favorable to us or at all.
If we fail to evaluate and execute new business opportunities properly, we may not achieve anticipated benefits and may incur increased costs. 18 Our growth strategy involves a number of risks and uncertainties, including that: • the TOI PCs may not be able to successfully enter into contracts with local payors on terms favorable to us or at all.
Certain of our management has limited experience in operating a public company. Certain of our executive officers and certain directors have limited experience in the management of a publicly traded company. Our management team may not successfully or effectively manage its transition to a public company that is subject to significant regulatory oversight and reporting obligations under federal securities laws.
Our management team may not successfully or effectively manage its transition to a public company that is subject to significant regulatory oversight and reporting obligations under federal securities laws.
We expect that additional state and federal healthcare reform measures will be adopted in the future, any of which could limit the amounts that federal and state governments and other third party payers will pay for healthcare products and services, which could adversely affect our business, financial condition and results of operations.
We expect that additional state and federal healthcare reform measures will be adopted in the future, any of which could limit the amounts that federal and state governments and other third party payers will pay for healthcare products and services, which could adversely affect our business, financial condition and results of operations. 25 Inflation can adversely affect us by increasing the costs of drugs, clinical trials and research, administration and other costs of doing business Recently, inflation has increased throughout the U.S. economy.
The incentives to attract, retain, and motivate employees provided by our stock options and other equity awards, or by other compensation arrangements, may not be as effective as in the past. As such, we may not be successful in continuing to attract and retain qualified personnel.
As we become a more mature company, we may find our recruiting efforts more challenging. The incentives to attract, retain, and motivate employees provided by our stock options and other equity awards, or by other compensation arrangements, may not be as effective as in the past.
In the ordinary course of business we engage in active discussions and renegotiations with payors in respect of the services the TOI PCs provide and the terms of the TOI PCs’ payor agreements.
The loss of any of the TOI PCs’ payor partners, or the renegotiation of any of the TOI PCs’ payor contracts, could adversely affect our operating results. In the ordinary course of business we engage in active discussions and renegotiations with payors in respect of the services the TOI PCs provide and the terms of the TOI PCs’ payor agreements.
We are 36 in the process of completing an analysis to determine whether the Business Combination resulted in an ownership change to determine if there is a limitation on pre-ownership NOLs. Additionally, we may experience ownership changes in the future as a result of subsequent shifts in our stock ownership, some of which may be outside of our control.
We are in the process of completing an analysis to determine whether there was a change in ownership during the year ended December 31, 2023. Additionally, we may experience ownership changes in the future as a result of subsequent shifts in our stock ownership, some of which may be outside of our control.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeWe believe that our facilities are adequate to meet our needs for the immediate future, and that, should it be needed, suitable additional space will be available to accommodate any such expansion of our operations. As of December 31, 2022, we have leases for 62 clinics located in California, Arizona , Nevada, Florida, and Texas.
Biggest changeWe believe that our facilities are adequate to meet our needs for the immediate future, and that, should it be needed, suitable additional space will be available to accommodate any such expansion of our operations. As of December 31, 2023, we have leases for 69 clinics located in California, Arizona , Nevada, Florida and Texas.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeMine Safety Disclosures Not applicable. 44 Table of Contents PART II
Biggest changeMine Safety Disclosures Not applicable. 46 Table of Contents PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeRecent Sales of Unregistered Securities None Equity Compensation Plan Information See Item 12 - “Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.” Item 6. [ Reserved ] 45 Table of Contents
Biggest changeRecent Sales of Unregistered Securities None Equity Compensation Plan Information See Item 12 - “Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.”
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Stock Price Information Our common stock trades on the Nasdaq under the symbol “TOI.” Our publicly traded warrants trade on Nasdaq under the symbol “TOIIW.” Holders As of March 8, 2023, we had approximately 89 holders of record of our common stock.
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Stock Price Information Our common stock trades on the Nasdaq under the symbol “TOI.” Our publicly traded warrants trade on Nasdaq under the symbol “TOIIW.” Holders As of March 19, 2024, we had approximately 72 holders of record of our common stock.

Item 7. Management's Discussion & Analysis

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

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Biggest changeYear Ended December 31, Change (dollars in thousands) 2022 2021 $ % Net cash, cash equivalents, and restricted cash used in operating activities $ (61,756) $ (32,680) $ (29,076) 89.0 % Net cash, cash equivalents, and restricted cash used in investing activities (131,614) (12,154) (119,460) 982.9 % Net cash, cash equivalents, and restricted cash provided by financing activities 92,206 154,010 (61,804) (40.1) % Net (decrease) increase in cash, cash equivalents, and restricted cash $ (101,164) $ 109,176 $ (210,340) (192.7) % Cash, cash equivalents, and restricted cash at beginning of period 115,174 5,998 109,176 1,820.2 % Cash, cash equivalents, and restricted cash at end of period $ 14,010 $ 115,174 $ (101,164) (87.8) % Operating Activities Significant changes impacting net cash, cash equivalents, and restricted cash used in operating activities for the year ended December 31, 2022 as compared to the year ended December 31, 2021 were as follows: • Net income increased $11,079, primarily as a result of a decrease in the fair value of liabilities of $85,258 for the year ended December 31, 2022 as compared to a decrease in fair value of liabilities of $28,577 during the year ended December 31, 2021; • Cash used by accounts receivable increased $18,090 for the year ended December 31, 2022 as compared to the year ended December 31, 2021 due to the growth in the Company's business; • Cash used by accounts payable, accrued expenses and income taxes payable increased $2,535 for the year ended December 31, 2022 as compared to the year ended December 31, 2021 primarily due to an increase in vendor payables due to the growth in the Company's business; and • Cash used by purchasing inventory decreased $110 for the year ended December 31, 2022 as compared to the year ended December 31, 2021 as a result of an increase in inventory acquired through practice acquisition. • Cash provided by prepaid and other current assets increased $13,373 for the year ended December 31, 2022 as compared to the year ended December 31, 2021 primarily due to the financing of the Company's directors and officers insurance policy that occurred in 2021. 54 Table of Contents Investing Activities Net cash used in investing activities increased $119,460 for the year ended December 31, 2022 as compared to the year ended December 31, 2021 due to purchases of marketable securities of $117,508 that did not occur in the prior year and an increase in cash used for purchases of property and equipment of $2,682 for new clinic builds and clinic remodels, offset by a decrease in cash used for purchases of practice acquisitions and intangibles of $730.
Biggest changeYear Ended December 31, Change (dollars in thousands) 2023 2022 $ % Net cash and cash equivalents used in operating activities $ (36,315) $ (61,756) $ 25,441 (41.2) % Net cash and cash equivalents provided by (used in) investing activities 62,640 (131,614) 194,254 (147.6) % Net cash and cash equivalents provided by (used in) financing activities (6,847) 92,206 (99,053) (107.4) % Net (decrease) increase in cash and cash equivalents $ 19,478 $ (101,164) $ 120,642 (119.3) % Cash and cash equivalents at beginning of period 14,010 115,174 (101,164) (87.8) % Cash and cash equivalents at end of period $ 33,488 $ 14,010 $ 19,478 139.0 % Operating Activities Significant changes impacting net cash and cash equivalents used in operating activities for the year ended December 31, 2023 as compared to the year ended December 31, 2022 were as follows: • Net loss increased to $83,220, primarily as a result of a decrease in the fair value of liabilities of $1,395 for the year ended December 31, 2023 as compared to a decrease in fair value of liabilities of $85,258 during the year ended December 31, 2022; • Share based compensation for the year ended December 31, 2023 decreased by $9,873 as compared to the year ended December 31, 2022; • Cash used by accounts receivable decreased $15,721 for the year ended December 31, 2023 as compared to the year ended December 31, 2022 due to the collection stabilization of the Company's receivables; • Cash provided by accounts payable, accrued expenses and income taxes payable increased $11,874 for the year ended December 31, 2023 as compared to the year ended December 31, 2022 primarily due to an increase in vendor payables resulting from the growth in the Company's business; • Cash used by purchasing inventory increased $2,653 for the year ended December 31, 2023 as compared to the year ended December 31, 2022 as a result of an increase in inventory acquired through practice acquisition; and • Cash provided by prepaid and other current assets decreased $1,154 for the year ended December 31, 2023 as compared to the year ended December 31, 2022 primarily due to the financing of the Company's directors and officers insurance policy that occurred in 2022.
The information in this discussion contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 (as amended, "Securities Act"), as amended, and Section 21E of the Securities and Exchange Act of 1934 (as amended, the "Exchange Act").
The information in this discussion contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 (as amended, "Securities Act"), as amended, and Section 21E of the Securities Exchange Act of 1934 (as amended, the "Exchange Act").
The CODM reviews financial information and allocates resources across three operating segments: dispensary, patient care, and clinical trials & other. Revenue Recognition The Company recognizes consolidated revenue based upon the principle of the transfer of control of our goods and services to customers in an amount that reflects the consideration it expects to be entitled.
The CODM reviews financial information and allocates resources across three operating segments: dispensary, patient services, and clinical trials & other. Revenue Recognition The Company recognizes consolidated revenue based upon the principle of the transfer of control of our goods and services to customers in an amount that reflects the consideration it expects to be entitled.
With this shift, it is increasingly important for high-quality, high-value cancer care to be available in a local community setting to all patients in need. As a value-based oncology company, the Company seeks to deliver both better quality care and lower cost of care.
With this shift, it is increasingly important for high-quality, high-value cancer care to be available in a local community setting to all patients in need. As a value-based oncology company, the Company seeks to deliver both better quality care and lower cost of care for payors and patients.
The Company includes adjusted EBITDA because it is an important measure upon which our management uses to assess the results of operations, to evaluate factors and trends affecting the business, and to plan and forecast future periods.
The Company includes Adjusted EBITDA because it is an important measure which our management uses to assess the results of operations, to evaluate factors and trends affecting the business, and to plan and forecast future periods.
(4) Consulting and legal fees were comprised of a subset of the Company’s total consulting and legal fees during the years ended December 31, 2022 and 2021, and related to certain advisory projects, software implementations, and legal fees for debt financing and predecessor litigation matters.
(4) Consulting and legal fees were comprised of a subset of the Company’s total consulting and legal fees during the years ended December 31, 2023 and 2022, and related to certain advisory projects, software implementations, and legal fees for debt financing and predecessor litigation matters.
The discussion should be read together with the historical audited annual financial statements for the years ended December 31, 2022 and 2021 , and the related notes that are included elsewhere in this Annual Report.
The discussion should be read together with the historical audited annual financial statements for the years ended December 31, 2023 and 2022 , and the related notes that are included elsewhere in this Annual Report.
Selling, general and administrative expense Selling, general and administrative expenses include employee-related expenses, including both clinic and field support staff as well as central administrative and corporate staff. These expenses include salaries and related costs and share-based compensation for our executives and physicians.
Selling, general and administrative expense Selling, general and administrative expenses include employee-related expenses, including both clinic and field support staff as well as central administrative and corporate staff. These expenses include salaries and related costs and stock-based compensation for our executives and physicians.
Additionally, the Company is subject to certain outside claims and litigation arising out of the ordinary course of business, however, no such litigation requires future cash expenditure as of December 31, 2022.
Additionally, the Company is subject to certain outside claims and litigation arising out of the ordinary course of business, however, no such litigation requires future cash expenditure as of December 31, 2023.
Overview The Company is a leading value-based oncology company that manages community-based oncology practices that serve patients at 76 clinic locations across 15 markets and five states throughout the United States.
Overview The Company is a leading value-based oncology company that manages community-based oncology practices that serve patients at 83 clinic locations across 15 markets and five states throughout the United States.
Other, net The change in other, net was primarily due to Provider Relief Funding received under the CARES Act during the year ended December 31, 2021 that did not occur in 2022.
Other, net The change in other, net was primarily due to Provider Relief Funding received under the CARES Act during the year ended December 31, 2022 that did not occur in 2023.
Payments in capitation contracts are variable since they primarily include PMPM fees associated with unspecified membership that fluctuates throughout the term of the contract; however, based on our experience, our total underlying membership generally increases over time as penetration of MA products grows.
Payments in capitation contracts are variable since they primarily include PMPM fees associated with unspecified membership that fluctuates throughout the term of the contract; however, based on our experience, our total underlying membership generally increases over time as penetration of Medicare Advantage products grows.
The Company holds variable interests in the TOI PCs, comprised of The Oncology Institute CA, a Professional Corporation (“TOI 55 Table of Contents CA”) and The Oncology Institute FL, LLC (“TOI FL”) and The Oncology Institute TX, a Professional Association ("TOI TX"), all of which the Company cannot legally own due to jurisdictional laws governing the corporate practice of medicine.
The Company holds variable interests in the TOI PCs, comprised of The Oncology Institute CA, a Professional Corporation (“TOI CA”) and The Oncology Institute FL, LLC (“TOI FL”) and The Oncology Institute TX, a Professional Association ("TOI TX"), all of which the Company cannot legally own due to jurisdictional laws governing the corporate practice of medicine.
Under ASC 350, finite-lived intangible assets are stated at acquisition-date fair value. Intangible assets are amortized using the straight-line method. Finite-lived intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.
Finite-lived intangible assets are stated at acquisition-date fair value. Intangible assets are amortized using the straight-line method. Finite-lived intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.
The Company has the power to control all financial activities of the TOI PCs, the rights to receive substantially all benefits from the VIEs, and consequently consolidates the TOI PCs. Revenues, expenses, and income from the TOI PCs are included in the consolidated amounts as presented on the Consolidated Statements of Operations.
The Company has the power to control all financial activities of the TOI PCs, the rights to receive substantially all benefits from the VIEs, and consequently consolidates the TOI PCs. Revenues, 57 Table of Contents expenses, and income from the TOI PCs are included in the consolidated amounts as presented on the Consolidated Statements of Operations.
The TOI PCs employ physicians and other clinicians in order to provide professional services to patients of our managed clinics, and under substantially similar MSAs, we serve as the exclusive manager and administrator of the TOI PCs’ non-medical functions and services.
The TOI PCs employ physicians and other clinicians in order to provide professional services to patients of our managed clinics, and under substantially similar management services agreements, or MSAs, we serve as the exclusive manager and administrator of the TOI PCs’ non-medical functions and services.
(2) Adjusted EBITDA is a "non-GAAP" financial measure with the meaning of Item 10 of Regulation S-K promulgated by the SEC.
(2) Adjusted EBITDA is a "non-GAAP" financial measure within the meaning of Item 10 of Regulation S-K promulgated by the SEC.
Costs for clinical personnel wages are expensed as incurred and costs for inventory and medical supplies are expensed when used, generally by applying the specific identification method. Goodwill and Intangible Assets The Company accounts for goodwill and intangible assets under Accounting Standards Codification Topic No. 350, Goodwill and Other (“ASC 350”).
Costs for clinical personnel wages are expensed as incurred and costs for inventory and medical supplies are expensed when used, generally by applying the specific identification method. Goodwill and Intangible Assets 59 Table of Contents The Company accounts for goodwill and intangible assets under Accounting Standards Codification Topic No. 350, Goodwill and Other (“ASC 350”).
The Company expects to incur operating losses and generate negative cash flows from operations for the foreseeable future due to the investments management intends to continue to make in expanding operations and sales and marketing and due to 53 Table of Contents additional general and administrative expenses management expects to incur in connection with operating as a public company.
The Company expects to incur operating losses and generate negative cash flows from operations for the foreseeable future due to the investments; management intends to continue to make in expanding operations and sales and marketing and due to additional general and administrative expenses management expects to incur in connection with operating as a public company.
JOBS Act The Company qualifies as an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), and has elected to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies.
(2) Other is comprised of finance leases and D&O financing JOBS Act The Company qualifies as an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), and has elected to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies.
The Company's selling, general and administrative expenses also includes 48 Table of Contents occupancy costs, technology infrastructure, operations, clinical and quality support, finance, legal, human resources, and business development.
The Company's selling, general and administrative expenses also includes occupancy costs, technology infrastructure, operations, clinical and quality support, finance, legal, human resources, and business development.
This may make comparison of our financial statements with another public company that is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used. Critical Accounting Policies The Company prepares its financial statements in accordance with U.S.
This may make comparison of our financial statements with another public company that is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.
The 57 Table of Contents lease term includes any period covered by renewal options available that the Company is reasonably certain to exercise and any options to terminate the lease that the Company is not reasonably certain to exercise.
The lease term includes any period covered by renewal options available that the Company is reasonably certain to exercise and any options to terminate the lease that the Company is not reasonably certain to exercise.
Goodwill represents the excess of the fair value of the consideration conveyed in acquisition over the fair value of net assets acquired. Goodwill is not amortized but is required to be evaluated for impairment at the same time every year. The Company performs annual testing of impairment for goodwill in the fourth quarter of each year.
Goodwill represents the excess of the fair value of the consideration conveyed in acquisition over the fair value of net assets acquired. Goodwill is not amortized but is required to be evaluated for impairment at the same time every year.
Our community-based oncology practices are staffed with 112 oncologists and advanced practice providers. 62 of these clinics are staffed with 101 providers employed by our affiliated physician-owned professional corporations, referred to as the "TOI PCs", which provided care for more than 64,000 patients in 2022 and managed a population of approximately 1.7 million patients under value-based agreements as of December 31, 2022 .
As of December 31, 2023, o ur community-based oncology practices are staffed with 130 oncologists and advanced practice providers. 69 of these clinics are staffed with 119 providers employed by our affiliated physician-owned professional corporations, referred to as the "TOI PCs," which provided care for more than 64,000 and 72,000 patients in 2022 and 2023, respectively, and managed a population of approximately 1.8 million patients under value-based agreements as of December 31, 2023 .
During the year ended December 31, 2021, gain on loan forgiveness of $4,957 was a result of forgiveness of all CARES Act loans, including those obtained through physician practice acquisition.
Gain on loan forgiveness There was no gain on loan forgiveness during the year ended December 31, 2023. During the year ended December 31, 2022, gain on loan forgiveness of $183 was a result of forgiveness of all CARES Act loans, including those obtained through physician practice acquisition.
Clinical trials & other For the year ended December 31, 2022, the decrease in clinical trials and other revenue was primarily due to a decrease in other revenue compared to the prior year.
Clinical trials & other For the year ended December 31, 2023, the increase in clinical trials and other revenue was primarily due to an increase in other revenue compared to the prior year.
The Company's affiliated providers build trusted, professional relationships with these physicians and their associated medical groups, which can lead to recurring FFS volume; however, this volume is subject to numerous factors the Company cannot control and can fluctuate over time.
As specialist providers, our FFS revenue is dependent on referrals from other physicians, such as primary care physicians. The Company's affiliated providers build trusted, professional relationships with these physicians and their associated medical groups, which can lead to recurring FFS volume; however, this volume is subject to numerous factors the Company cannot control and can fluctuate over time.
The Company defines adjusted EBITDA as net income (loss) excluding: • Depreciation and amortization, • Interest expense, net, • Income tax expense, • Non-cash addbacks, • Share-based compensation, • Goodwill impairment charges, • Changes in fair value of liabilities, • Unrealized (gains) losses on investments • Practice acquisition-related costs, • Practice acquisition deferred purchase price, • Consulting and legal fees, • Public company transaction costs, and • Other specific charges.
The Company defines Adjusted EBITDA as net income (loss) adjusting for: • Depreciation and amortization, 53 Table of Contents • Interest expense, net, • Income tax expense, • Non-cash addbacks, • Share-based compensation, • Goodwill impairment charges, • Changes in fair value of liabilities, • Unrealized (gains) losses on investments • Practice acquisition-related costs, • Post combination compensation expense, • Consulting and legal fees, • Infrastructure and workforce costs, and • Transaction costs.
Revenue is recorded on the date the services are rendered based on the information known at the time of entering of such information into our billing systems as well as an estimate of the revenue associated with medical services. When the performance obligation is not satisfied, the billing is recognized as a contract liability.
Revenue is recorded on the date the services are rendered based on the information known at the time of entering of such information into the Company's billing systems as well as an estimate of the revenue associated with medical services.
Change in fair value of liabilities The increase in non-operating (income) expense was primarily due to gains of $59,215 and $24,200, respectively, as a result of decreases in the fair value of earnout liabilities and conversion option derivative liabilities, which were created as part of the Business Combination and the issuance of the Senior Secured Convertible Note, respectively.
Change in fair value of liabilities The decrease in non-operating (income) expense was primarily due to the decrease in gains of $58,412 and $23,322, respectively during the year ended December 31, 2023, as a result of decreases in the fair value of earnout liabilities and conversion option derivative liabilities, which were created as part of the Business Combination and the issuance of the Senior Secured Convertible Note, respectively.
Dispensary The increase in dispensary revenue was primarily due to a 7.5% increase in the average revenue per fill and a 1.7% increase in the number of fills.
Dispensary The increase in dispensary revenue was primarily due to a 31.5% increase in the number of fills offset by 0.5% decrease in the average revenue per fill.
The Company has elected to recognize revenue for clinical trials using the ‘as-invoiced’ practical expedient. The customer is invoiced periodically based on the progress of the trial such that each invoice captures the revenue earned to date based on the state of the trial as established under contract with the customer.
The customer is invoiced periodically based on the progress of the trial such that each invoice captures the revenue earned to date based on the state of the trial as established under contract with the customer.
Year Ended December 31, 2022 2021 Revenue Patient services 66.1 % 61.2 % Dispensary 31.4 % 35.7 % Clinical trials & other 2.5 % 3.1 % Total operating revenue 100.0 % 100.0 % Operating expenses Direct costs – patient services 53.4 % 49.0 % Direct costs – dispensary 25.8 % 30.6 % Direct costs – clinical trials & other 0.2 % 0.3 % Goodwill impairment charges 3.9 % — % Selling, general and administrative expense 47.4 % 41.1 % Depreciation and amortization 1.7 % 1.6 % Total operating expenses 132.4 % 122.6 % Loss from operations (32.4) % (22.6) % Other non-operating expense (income) Interest expense, net 1.6 % 0.2 % Change in fair value of derivative warrant liabilities (0.7) % (1.8) % Change in fair value of earnout liabilities (23.5) % (12.3) % Change in fair value of conversion option derivative liabilities (9.6) % — % Gain on loan forgiveness (0.1) % (2.4) % Other, net (0.1) % (0.5) % Total other non-operating income (32.4) % (16.8) % Loss before provision for income taxes — % (5.8) % Income tax benefit 0.1 % 0.3 % Net income (loss) 0.1 % (5.5) % 49 Table of Contents Comparison of the Years Ended December 31, 2022 and 2021 Revenue Year Ended December 31, Change (dollars in thousands) 2022 2021 $ % Patient services $ 166,785 $ 124,074 $ 42,711 34.4 % Dispensary 79,343 72,550 6,793 9.4 % Clinical trials & other 6,355 6,379 (24) (0.4) % Total operating revenue $ 252,483 $ 203,003 $ 49,480 24.4 % Patient services The increase in patient services revenue was primarily due to a 28.9% increase in FFS revenue as a result of practice acquisitions and an overall increase in clinic count as well as a 5.2% increase in capitation revenue due to new capitation contracts entered into during 2022 and in the latter half of 2021.
The Company’s management is not aware of material events or uncertainties that would cause the financial information below to not be indicative of future operating results or results of future financial condition, although past results should not be relied upon as an indication of future performance or future financial condition. 50 Table of Contents Year Ended December 31, 2023 2022 Revenue Patient services 65.9 % 66.1 % Dispensary 32.0 % 31.4 % Clinical trials & other 2.1 % 2.5 % Total operating revenue 100.0 % 100.0 % Operating expenses Direct costs – patient services 55.8 % 53.4 % Direct costs – dispensary 25.6 % 25.8 % Direct costs – clinical trials & other 0.2 % 0.2 % Goodwill impairment charges 5.2 % 3.9 % Selling, general and administrative expense 35.1 % 47.4 % Depreciation and amortization 1.8 % 1.7 % Total operating expenses 123.7 % 132.4 % Loss from operations (23.7) % (32.4) % Other non-operating expense (income) Interest expense, net 2.1 % 1.6 % Change in fair value of derivative warrant liabilities 0.1 % (0.7) % Change in fair value of earnout liabilities (0.2) % (23.5) % Change in fair value of conversion option derivative liabilities (0.3) % (9.6) % Gain on loan forgiveness — % (0.1) % Other, net 0.3 % (0.1) % Total other non-operating loss expense (income) 2.0 % (32.4) % Loss before provision for income taxes (25.7) % — % Income tax benefit (expense) — % 0.1 % Net income (loss) (25.7) % 0.1 % Comparison of the Years Ended December 31, 2023 and 2022 Revenue Year Ended December 31, Change (dollars in thousands) 2023 2022 $ % Patient services $ 213,504 $ 166,785 $ 46,719 28.0 % Dispensary 103,835 79,343 24,492 30.9 % Clinical trials & other 6,900 6,355 545 8.6 % Total operating revenue $ 324,239 $ 252,483 $ 71,756 28.4 % 51 Table of Contents Patient services The increase in patient services revenue was primarily due to a 22.7% increase in FFS revenue as a result of practice acquisitions and an overall increase in clinic count as well as a 4.5% increase in capitation revenue due to new capitation contracts entered into during 2023 and in the latter half of 2022.
If unable to raise additional capital when desired, or if the Company cannot expand operations or otherwise capitalize on business opportunities because the Company's lack of sufficient capital, the Company's business, results of operations, and financial condition would be adversely affected.
If unable to raise additional capital when desired, or if the Company cannot expand operations or otherwise capitalize on business opportunities because the Company's lack of sufficient capital, the Company's business, results of operations, and financial condition would be adversely affected. 55 Table of Contents Cash Flows The following table presents a summary of the Company's consolidated cash flows from operating, investing, and financing activities for the periods indicated.
Dispensary Dispensed prescriptions that are filled and delivered to the patient are considered a distinct performance obligation. The transaction price for the prescriptions is based on fee schedules set by PBMs and other third-party payors. The fee schedule is often subject to DIR fees, which are based primarily on pre-established metrics.
When the performance obligation is not satisfied, the billing is recognized as a contract liability. Dispensary Dispensed prescriptions that are filled and delivered to the patient are considered a distinct performance obligation. The transaction price for the prescriptions is based on fee schedules set by PBMs and other third-party payors.
Each service constitutes a single performance obligation for which the patient accepts and receives the benefit of the medical services as they are performed. 56 Table of Contents The transaction price from FFS arrangements is variable in nature because fees are based on patient encounters, credits due to patients, and reimbursement of provider costs, all of which can vary from period to period.
The transaction price from FFS arrangements is variable in nature because fees are based on patient encounters, credits due to patients, and reimbursement of provider costs, all of which can vary from period to period.
Operating Expenses Year Ended December 31, Change (dollars in thousands) 2022 2021 $ % Direct costs – patient services $134,761 $ 99,401 $ 35,360 35.6 % Direct costs – dispensary 65,111 62,102 3,009 4.8 % Direct costs – clinical trials & other 518 652 (134) (20.6) % Goodwill impairment charges 9,944 — 9,944 N/A Selling, general and administrative expense 119,689 83,365 36,324 43.6 % Depreciation and amortization 4,411 3,341 1,070 32.0 % Total operating expenses $334,434 $ 248,861 $ 85,573 34.4 % Patient services cost The increase in patient services cost was primarily due to a 21.5% increase in intravenous drug costs, primarily driven by the Company's patient mix and volume, as well as the rising rate of inflation during 2022.
Operating Expenses Year Ended December 31, Change (dollars in thousands) 2023 2022 $ % Direct costs – patient services $181,017 $ 134,761 $ 46,256 34.3 % Direct costs – dispensary 83,071 65,111 17,960 27.6 % Direct costs – clinical trials & other 578 518 60 11.6 % Goodwill impairment charges 16,867 9,944 6,923 N/A Selling, general and administrative expense 113,851 119,689 (5,838) (4.9) % Depreciation and amortization 5,873 4,411 1,462 33.1 % Total operating expenses $401,257 $ 334,434 $ 66,823 20.0 % Patient services cost The increase in patient services cost was primarily due to a 26.1% increase in intravenous drug costs, primarily driven by the Company's patient mix and volume, as well as the rising rate of inflation during 2023.
Revenue for the prescriptions is based on fee schedules set by various PBMs and other third-party payors. The fee schedule is often subject to direct and indirect remuneration (“DIR”) fees, which are based primarily on pre-established metrics. DIR fees may be assessed in the periods after payments are received against future payments.
The fee schedule is often subject to direct and indirect remuneration (“DIR”) fees, which are based primarily on pre-established metrics. DIR fees may be assessed in the periods after payments are received against future payments. The Company recognizes revenue, deducted by estimated DIR fees, at the time the patient takes possession of the oral drug.
The Company recognizes revenue, deducted by estimated DIR fees, at the time the patient takes possession of the oral drug. Clinical trials & other revenue The TOI PCs also enter into contracts to perform clinical research trials. The terms for clinical trial contracts last many months as the clinical research is performed.
Clinical trials & other revenue The TOI PCs also enter into contracts to perform clinical research trials. The terms for clinical trial contracts last many months as the clinical research is performed.
Liquidity and Capital Resources General To date, the Company has financed its operations principally through debt facilities, issuances of equity securities and payments received from various payors.
Liquidity and Capital Resources General To date, the Company has financed its operations principally through debt facilities, issuances of equity securities and payments received from various payors. As of December 31, 2023, the Company had $33,488 of cash and cash equivalents, none of which are restricted cash, as well as $49,367 of current marketable securities.
DIR fees may be assessed in periods after payments are received against future payments. The Company estimates DIR fees to arrive at the transaction price for prescriptions. Revenue is recognized based on the transaction at the time the patient takes possession of the oral drug.
The fee schedule is often subject to DIR fees, which are based primarily on pre-established metrics. DIR fees may be assessed in periods after payments are received against future payments. The Company estimates DIR fees to arrive at the transaction price for prescriptions.
Certain contracts include terms for a capitation deduction where the cost of out-of-network referrals of members are deducted from the future payment.
Certain contracts include terms for a capitation deduction where the cost of out-of-network referrals of members are deducted from the future payment. Revenue is recognized in the month services are rendered on the basis of the transaction price established at that time.
When impairment indicators are identified, the Company compares the reporting unit’s fair value to its carrying amount, including goodwill. An impairment loss is recognized as the difference, if any, between the reporting unit’s carrying amount and its fair value to the extent the difference does not exceed the total amount of goodwill allocated to the reporting unit.
An impairment loss is recognized as the difference, if any, between the reporting unit’s carrying amount and its fair value to the extent the difference does not exceed the total amount of goodwill allocated to the reporting unit. Under ASC 350, finite-lived intangible assets are stated at acquisition-date fair value. Intangible assets are amortized using the straight-line method.
Clinical Research & Other Clinical research contracts represent a single, integrated set of research activities and thus are a single performance obligation. The performance obligation is satisfied over time as the output is captured in data and documentation that is available for the customer to consume over the course of arrangement and furthers progress of the clinical trial.
The performance obligation is satisfied over time as the output is captured in data and documentation that is available for the customer to consume over the course of arrangement and furthers progress of the clinical trial. The Company has elected to recognize revenue for clinical trials using the ‘as-invoiced’ practical expedient.
The terms for FFS contracts are short in duration and only last for the period over which services are rendered (typically, one day). FFS revenue consists of fees for medical services provided to patients. As specialist providers, our FFS revenue is dependent on referrals from other physicians, such as primary care physicians.
Fee-for-service revenue FFS revenue represents revenue earned under contracts in which we bill and collect for specific medical services rendered by the TOI PCs’ employed physicians. The terms for FFS contracts are short in duration and only last for the period over which services are rendered (typically, one day). FFS revenue consists of fees for medical services provided to patients.
Statements that include the words "believes," "anticipates," "plans," "expects." "intends," and similar expressions that convey uncertainty of future events or outcomes are forward-looking statements. In addition, as a result of these and other factors, our past financial performance should not be relied on as an indication of future performance.
In addition, as a result of these and other factors, our past financial performance should not be relied on as an indication of future performance.
(6) Transaction costs incurred related to the issuance of the Senior Secured Convertible Note such as legal, audit, administrative, and registration fees during the year ended December 31, 2022, and related to the Business Combination during the year ended December 31, 2021.
(6) Transaction costs were comprised of consulting, legal, administrative and regulatory fees associated with share repurchases and practice acquisitions during the year ended December 31, 2023, and related to the Senior Secured Convertible Note during the year ended December 31, 2022.
Key Business Metrics In addition to our financial information, the Company's management reviews a number of operating and financial metrics, including the following key metrics, to evaluate our business, measure our performance, identify trends affecting our business, formulate business plans, and make strategic decisions. 51 Table of Contents Year Ended December 31, 2022 2021 Clinics (1) 76 67 Markets 15 10 Lives under value-based contracts (millions) 1.7 1.6 Net income (loss) $ 152 $ (10,927) Adjusted EBITDA (in thousands) (2) $ (23,542) $ (5,377) (1) Includes independent oncology practices to which we provide limited management services, but do not bear the operating costs.
Year Ended December 31, 2023 2022 Clinics (1) 83 76 Markets 15 15 Lives under value-based contracts (millions) 1.8 1.7 Net income (loss) $ (83,068) $ 152 Adjusted EBITDA (in thousands) (2) $ (25,805) $ (23,543) (1) Includes independent oncology practices to which we provide limited management services, but do not bear the operating costs.
Results of Operations The following table sets forth our Consolidated Statements of Operations data expressed as a percentage of total revenues for the periods indicated. The Company’s management is not aware of material events or uncertainties that would cause the financial information below to not be indicative of future operating results or results of future financial condition.
Results of Operations The following table sets forth our Consolidated Statements of Operations data expressed as a percentage of total revenues for the periods indicated.
At these levels, portfolios share the characteristics conducive to ensuring that the results do not materially differ from the standard applied to individual patient contracts related to each medical service provided.
At these levels, portfolios share the characteristics conducive to ensuring that the results do not materially differ from the standard applied to individual patient contracts related to each medical service provided. 58 Table of Contents Revenue is recorded on the date the services are rendered based on the information known at the time of entering of such information into our billing systems as well as an estimate of the revenue associated with medical services.
Management encourages investors and others to review the Company's financial information in its entirety, not to rely on any single financial measure. 52 Table of Contents The following tables provide a reconciliation of net income (loss), the most closely comparable GAAP financial measure, to Adjusted EBITDA: Year Ended December 31, Change (dollars in thousands) 2022 2021 $ % Net income (loss) $ 152 $ (10,927) $ 11,079 (101.4) % Depreciation and amortization 4,411 3,341 1,070 32.0 % Interest expense, net 4,082 320 3,762 1,175.6 % Income tax benefit (243) (671) 428 (63.8) % Non-cash addbacks (1) 1,208 (5,115) 6,323 (123.6) % Share-based compensation 27,683 24,535 3,148 12.8 % Goodwill impairment charges 9,944 — 9,944 N/A Change in fair value of liabilities (85,258) (28,577) (56,681) 198.3 % Unrealized (gains) losses on investments (640) — (640) N/A Practice acquisition-related costs (2) 790 476 314 66.0 % Post-combination compensation expense (3) 2,243 — 2,243 N/A Consulting and legal fees (4) 3,797 1,826 1,971 107.9 % Other, net (5) 5,030 1,692 3,338 197.3 % Transaction costs (6) 3,259 7,723 (4,464) (57.8) % Adjusted EBITDA $ (23,542) $ (5,377) $ (18,165) 337.8 % (1) During the year ended December 31, 2022, non-cash addbacks were primarily comprised of non-cash rent of $711, net bad debt write-offs of $476, and other miscellaneous charges of $22.
The following tables provide a reconciliation of net income (loss), the most closely comparable GAAP financial measure, to Adjusted EBITDA: Year Ended December 31, Change (dollars in thousands) 2023 2022 $ % Net income (loss) $ (83,068) $ 152 $ (83,220) (54,750.0) % Depreciation and amortization 5,873 4,411 1,462 33.1 % Interest expense, net 6,777 4,082 2,695 66.0 % Income tax benefit (36) (243) 207 (85.2) % Non-cash addbacks (1) 2,029 1,208 821 68.0 % Share-based compensation 17,548 27,683 (10,135) (36.6) % Goodwill impairment charges 16,867 9,944 6,923 N/A Change in fair value of liabilities (1,395) (85,258) 83,863 (98.4) % Unrealized (gains) losses on investments (237) (640) 403 N/A Practice acquisition-related costs (2) 113 790 (677) (85.7) % Post-combination compensation expense (3) 2,048 2,243 (195) N/A Consulting and legal fees (4) 1,570 3,797 (2,227) (58.7) % Infrastructure and workforce costs (5) 5,965 5,029 936 18.6 % Transaction costs (6) 141 3,259 (3,118) (95.7) % Adjusted EBITDA $ (25,805) $ (23,543) $ (2,262) 9.6 % 54 Table of Contents (1) During the year ended December 31, 2023, non-cash addbacks were primarily comprised of net bad debt write-offs of $2,020.
(5) Other, net is comprised of severance expenses resulting from cost rationalization programs of $248 and $127, as well as temporary labor of $1,830 and $1,182, recruiting expenses to build out corporate infrastructure of $2,835 and $1,275, and other miscellaneous expense of $117 and $131 during the years ended December 31, 2022 and 2021, respectively.
(5) Infrastructure and workforce costs were comprised of recruiting expenses to build out corporate infrastructure of $2,227 and $2,835, software implementation fees of $105 and $116, severance expenses resulting from cost rationalization programs of $979 and $248, temporary labor of $1,365 and $1,829, and lease terminations, settlements, and penalty addbacks of $1,289 and $0 during the years ended December 31, 2023 and 2022, respectively.
These medical services are distinct since the patient can benefit from the medical services on their own.
These medical services are distinct since the patient can benefit from the medical services on their own. Each service constitutes a single performance obligation for which the patient accepts and receives the benefit of the medical services as they are performed.
Other Non-Operating Expenses (Income) Year Ended December 31, Change (dollars in thousands) 2022 2021 $ % Interest expense, net $ 4,082 $ 320 $ 3,762 1,175.6 % Change in fair value of derivative warrant liabilities (1,843) (3,686) 1,843 (50.0) % Change in fair value of earnout liabilities (59,215) (24,891) (34,324) 137.9 % Change in fair value of conversion option derivative liabilities (24,200) — (24,200) N/A Gain on loan forgiveness (183) (4,957) 4,774 (96.3) % Other, net (501) (1,046) 545 (52.1) % Total other non-operating expense (income) $ (81,860) $ (34,260) $ (47,600) 138.9 % Interest expense The increase in interest expense was primarily the result of interest and amortization related to the Senior Secured Convertible Notes issued during the year ended December 31, 2022.
Selling, general and administrative expense The decrease in selling, general and administrative expense was primarily driven by a 8.5% decrease in share-based compensation expense, a 2.6% decrease in transaction costs and a 1.7% decrease in professional fees offset by 1.9% increase in salaries and benefits due to the growth in the Company's management and corporate team, as well as a 3.1% increase in office expenses, and a 1.4% increase in real estate and equipment expenses. 52 Table of Contents Other Non-Operating Expenses (Income) Year Ended December 31, Change (dollars in thousands) 2023 2022 $ % Interest expense, net $ 6,777 $ 4,082 $ 2,695 66.0 % Change in fair value of derivative warrant liabilities 286 (1,843) 2,129 (115.5) % Change in fair value of earnout liabilities (803) (59,215) 58,412 (98.6) % Change in fair value of conversion option derivative liabilities (878) (24,200) 23,322 N/A Gain on loan forgiveness — (183) 183 (100.0) % Other, net 704 (501) 1,205 (240.5) % Total other non-operating expense (income) $ 6,086 $ (81,860) $ 87,946 (107.4) % Interest expense The increase in interest expense was primarily the result of interest and amortization related to the Senior Secured Convertible Notes issued during the year ended December 31, 2023.
(2) Practice acquisition-related costs were comprised of consulting and legal fees incurred to perform due diligence, execute, and integrate acquisitions of various oncology practices. (3) Deferred consideration payments for practice acquisitions that are contingent upon the seller’s future employment at the Company.
(3) Deferred consideration payments for practice acquisitions that are contingent upon the seller’s future employment at the Company.
See Note 2 and Note 18 in Item. 8 Financial Statements and Supplementary Data for additional detail.
Goodwill impairment charges During the years ended December 31, 2023 and 2022, impairment charges of $16,867 and $9,944 were recorded related to goodwill, respectively. See Note 2 and Note 18 in Item. 8 Financial Statements and Supplementary Data for additional detail.
In addition, clinical payroll costs increased 12.4% from the prior year due to the growth in clinic count.
In addition, clinical payroll costs increased 8.1% from the prior year due to the growth in clinic count. Dispensary cost The increase in dispensary cost was primarily due to a 31.5% increase in the number of prescriptions filled offset by a 3.0% decrease in the average cost of the prescriptions filled.
Material Cash Requirements Due by the Year Ended December 31, (dollars in thousands) 2023 2024-2025 2026-2027 Thereafter Total Convertible note 1 $ 10,666 $ 21,624 $ 127,648 $ — $ 159,938 Operating leases 6,637 11,778 8,711 4,600 31,726 Deferred acquisition and contingent consideration 2,584 525 — — 3,109 Other 2 3,131 119 68 — 3,318 Total material cash requirements $ 23,018 $ 34,046 $ 136,427 $ 4,600 $ 198,091 (1) Includes principal and interest payments due.
Material Cash Requirements Due by the Year Ended December 31, (dollars in thousands) 2024 2025-2026 2027-2028 Thereafter Total Convertible note 1 $ 4,461 $ 8,922 $ 112,664 $ — $ 126,047 Operating leases 8,176 15,128 9,825 6,243 39,372 Deferred acquisition and contingent consideration 2,515 50 — — 2,565 Other 2 1,049 81 29 — 1,159 Total material cash requirements $ 16,201 $ 24,181 $ 122,518 $ 6,243 $ 169,143 (1) Includes principal and interest payments due.
Financing Activities Net cash provided by financing activities decreased $61,804 for the year ended December 31, 2022 as compared to the year ended December 31, 2021 primarily due to cash received in connection with the Business Combination and the issuance of $20,000 of Legacy Preferred Stock during the year ended December 31, 2021, that did not occur in 2022 offset primarily by $110,000 of proceeds from the issuance of the Senior Secured Convertible Note during year ended December 31, 2022.
Financing Activities Net cash provided by financing activities decreased $99,053 for the year ended December 31, 2023 as compared to the year ended December 31, 2022 primarily due to $110,000 of proceeds from the issuance of the Senior Secured Convertible during the year ended December 31, 2022, offset by $7,981 decrease in common stock repurchase, and by deferred cash consideration and finance insurance premium payments of $2,584 and $3,269, respectively, during year ended December 31, 2023. 56 Table of Contents Material Cash Requirements The Company's material cash requirements for the following five years consist of principal and interest due on the convertible note, operating leases and other miscellaneous administrative expenses.
During the year ended December 31, 2021, non-cash addbacks were primarily comprised of a $4,957 gain on loan forgiveness and $417 of net bad debt recoveries, partially offset by deferred rent of $109 and other miscellaneous charges of $150.
During the year ended December 31, 2022, non-cash addbacks were primarily comprised of a $476 of net bad debt write-off, deferred rent of $711, and other miscellaneous charges of $22. (2) Practice acquisition-related costs were comprised of consulting and legal fees incurred to perform due diligence, execute, and integrate acquisitions of various oncology practices.
Revenue is recorded on the date the services are rendered based on the information known at the time of entering of such information into the Company's billing systems as well as an estimate of the revenue associated with medical services. Dispensary Oral prescription drugs prescribed by doctors to their patients are sold directly through the TOI PCs’ dispensaries.
Dispensary and pharmacy Oral prescription drugs prescribed by doctors to their patients are sold directly through the TOI PCs’ dispensaries and our 49 Table of Contents newly-acquired pharmacy. Revenue for the prescriptions is based on fee schedules set by various PBMs and other third-party payors.
Components of Results of Operations Revenue The Company receives payments from the following sources for services rendered: (i) commercial insurers; (ii) pharmacy benefit managers (“PBMs”), (iii) the federal government under the Medicare program administered by the Centers for Medicare and Medicaid Services (“CMS”); (iv) state governments under Medicaid and other programs; (v) other third-party payors and managed care organizations (e.g., risk bearing organizations and independent practice associations (“IPAs”)); and (vi) individual patients and clients.
The Company believes its affiliated providers enjoy the stability and predictability of a large multi-state practice, are not incentivized or pressured to overtreat when it may be inconsistent with a patient’s goals of care, and can focus on practicing outstanding evidence-based medicine, rather than business building. 2023 Highlights • Consolidated revenue of $324.2 million, an increase of 28% compared to the prior year • Gross profit of $59.6 million, an increase of 14% compared to the prior year, and gross margin of 18.4%, a decrease from 20.6% the prior year • Adjusted EBITDA of $(25.8) million compared to $(23.5) million for the prior year 48 Table of Contents • Ended the fiscal year 2023 with $83 million in cash, cash equivalents, and investments • Signed full-risk capitated contract in South Florida, effective January 1, 2024 and have now successful onboarded the membership and the IPA providers. • Successfully acquired and launched our California-based pharmacy in November and have already completed over 1,300 specialty medication fills Components of Results of Operations Revenue The Company receives payments from the following sources for services rendered: (i) commercial insurers; (ii) pharmacy benefit managers (“PBMs”), (iii) the federal government under the Medicare program administered by the Centers for Medicare and Medicaid Services (“CMS”); (iv) state governments under Medicaid and other programs; (v) other third-party payors and managed care organizations (e.g., risk bearing organizations and independent practice associations (“IPAs”)); and (vi) individual patients and clients.
Removed
The Company believes its affiliated providers enjoy the stability and predictability of a large multi-state practice, are not incentivized or pressured to overtreat when it may be inconsistent with a patient’s goals of care, and can focus on practicing outstanding evidence-based medicine, rather than business building. 2022 Highlights • Completed a $110 million strategic investment from Deerfield Management Company, L.P. through secured senior convertible notes on August 9, 2022 • Ended the fiscal year 2022 with $132 million in cash, cash equivalents, and investments • Increased market count to 15 at year-end from 10 at the prior year end, including new markets in California, Florida and Texas • Remediated two of the previously disclosed material weaknesses surrounding controls over review of revenue and segregation of duties within the financial close and reporting process.
Added
Statements that include the words "believes," "anticipates," "plans," "expects." "intends," and similar expressions that convey uncertainty of future events or outcomes are forward-looking statements. Our actual results could differ materially from those discussed or suggested in the forward-looking statements herein.
Removed
For the remaining one, Management has developed and continues to execute a remediation plan to address the previously disclosed material weakness around treatment of complex accounting transactions • Received Agency for Healthcare Research and Quality's ("AHRQ") certification as an accredited Patient Safety Organization • Generated over $1.7 million in savings to patients through the Company's dispensary co-pay assist program 46 Table of Contents • Added 3 new gain share contracts in Florida • Grew Capitated Membership by over 100 thousand lives • Completed 6 practice acquisitions The Business Combination On June 28, 2021, DFP Healthcare Acquisition Corp.
Added
Factors that could cause or contribute to such differences include those described under the heading "Risk Factors" section in this Annual Report on Form 10-K, and in subsequent filings we make with the Securities and Exchange Commission, where we may discuss new risks that have not yet arisen at the time of this Annual Report.
Removed
(" DFPH") , Orion Merger Sub I, Inc. ("First Merger Sub") and Orion Merger Sub II, LLC ("Second Merger Sub") entered into an agreement and plan of merger ("Merger Agreement") with TOI Parent, Inc. ("TOI Parent") (collectively, the "Business Combination").
Added
Unless the context dictates otherwise, references in this Annual Report on Form 10-K to the “Company,” “we,” “us,” “our,” and similar words are references to The Oncology Institute, Inc., a Delaware corporation (“TOI”), and its consolidated subsidiaries and affiliated entities, as appropriate, including its consolidated variable interest entities (“VIEs”).
Removed
In connection with the Business Combination, DFPH entered into subscription agreements with certain investors (the “PIPE Investors”), whereby it issued 17.5 million shares of common stock at $10.00 per share and 100,000 shares of preferred stock at $1,000.00 per share (“PIPE Shares”) for an aggregate investment of $275,000 (“PIPE Investment”), which closed simultaneously with the consummation of the Business Combination.
Added
Key Business Metrics In addition to our financial information, the Company's management reviews a number of operating and financial metrics, including the following key metrics, to evaluate our business, measure our performance, identify trends affecting our business, formulate business plans, and make strategic decisions.
Removed
The Business Combination closed on November 12, 2021 ("Closing Date").
Added
Management encourages investors and others to review the Company's financial information in its entirety, not to rely on any single financial measure.
Removed
On the Closing Date, (i) First Merger Sub merged with and into TOI Parent, with TOI Parent being the surviving corporation and (ii) immediately following, TOI Parent merged with and into Second Merger Sub ("Legacy TOI"), with Second Merger Sub being the surviving entity and a wholly owned subsidiary of DFPH.
Added
Investing Activities Net cash used by investing activities decreased $194,254 for the year ended December 31, 2023 as compared to the year ended December 31, 2022 due to $107,913 reduction in purchases of marketable securities and a decrease in cash used for purchases of property and equipment of $962 for new clinic builds and clinic remodels, and a decrease in cash used for purchases of practice acquisitions and intangibles of $4,121.
Removed
DFPH was renamed “The Oncology Institute, Inc.” and TOI Common Stock and Public Warrants continued to be listed on Nasdaq under the ticker symbols “TOI” and “TOIIW,” respectively.
Added
Critical Accounting Policies The Company prepares its financial statements in accordance with generally accepted accounting principles in the United States ("U.S.
Removed
The total merger consideration on the Closing Date was $762,052, consisting of 51.3 million shares of common stock, valued at $10.00 per share (aggregate $595,468, inclusive of shares of DFPH common stock issuable per restricted stock units and the exercise of Legacy TOI stock options), and $166,584 in cash.
Added
Revenue is recognized based on the transaction at the time the patient takes possession of the oral drug. Clinical Research & Other Clinical research contracts represent a single, integrated set of research activities and thus are a single performance obligation.
Removed
Legacy TOI also issued 12.5 million shares of common stock pursuant to the terms of an earnout (“Earnout Shares”). The earnout shares are allocable to both Legacy TOI stockholders and Legacy TOI option holders.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeInterest Rate Risk We held cash and cash equivalents of $14,010, current marketable securities of $59,796, and noncurrent marketable securities of $58,354 as of December 31, 2022, consisting of bank deposits and Treasury bills. Such interest-earning instruments carry a degree of interest rate risk. The goals of our investment policy are liquidity and capital preservation.
Biggest changeInterest Rate Risk We held cash and cash equivalents of $33,488, current marketable securities of $49,367 as of December 31, 2023, consisting of bank deposits and Treasury bills. Such interest-earning instruments carry a degree of interest rate risk. The goals of our investment policy are liquidity and capital preservation.
To the 58 Table of Contents extent that, among other factors, (i) there is underperformance in one or more reporting units (ii) a potential recession further disrupts the economic environment or (iii) interest rates continue to rise in response to persistent inflation, the fair value of one or more of the reporting units could fall below their carrying value, resulting in a goodwill or intangible impairment charge.
To the extent that, among other factors, (i) there is underperformance in one or more reporting units (ii) a potential recession further disrupts the economic environment or (iii) interest rates continue to rise in response to persistent inflation, the fair value of one or more of the reporting units could fall below their carrying value, resulting in a goodwill or intangible impairment charge.
For the year ended December 31, 2022, the Company recognized an impairment charge of $9,944 to write-down the carrying value of goodwill related to patient services in excess of the fair value. 59 Table of Contents
For the year ended December 31, 2023, the Company recognized an impairment charge of $16,867 to write-down the carrying value of goodwill related to patient services in excess of the fair value. 60 Table of Contents

Other TOIIW 10-K year-over-year comparisons