10q10k10q10k.net

What changed in AdaptHealth Corp.'s 10-K — 2022 vs 2023

vs

Paragraph-level year-over-year comparison of AdaptHealth Corp.'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.

+406 added−491 removedSource: 10-K (2024-02-27) vs 10-K (2023-02-28)

Top changes in AdaptHealth Corp.'s 2023 10-K

406 paragraphs added · 491 removed · 249 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

40 edited+10 added−22 removed55 unchanged
Biggest changeSimilarly, government agencies and their contractors periodically open investigations and obtain information from healthcare providers pursuant to the legal process. Violations of federal and state regulations can result in severe criminal, civil and administrative penalties and sanctions, including disqualification from Medicare and other reimbursement programs, which could have a material adverse effect on AdaptHealth’s financial condition and results of operations.
Biggest changeViolations of federal and state regulations can result in severe criminal, civil and administrative penalties and sanctions, including disqualification from Medicare and other reimbursement programs, which could have a material adverse effect on AdaptHealth’s financial condition and results of operations. 8 Table of Con t ents Numerous federal and state laws and regulations, including HIPAA and the HITECH Act, govern the collection, dissemination, security, use and confidentiality of patient-identifiable health information or personal information.
AdaptHealth has formed close relationships with its third-party software providers, including Brightree, Snapworx, LLC and Parachute Health, to optimize its HME workflow. An example of this optimization is AdaptHealth’s automated point-of-delivery technology, which tracks AdaptHealth’s drivers and produces paperless, secure delivery tickets which are uploaded directly to the patient’s file and available immediately on an enterprise-wide basis.
AdaptHealth has formed close relationships with its third-party software providers, including Brightree LLC, Snapworx, LLC and Parachute Health LLC, to optimize its HME workflow. An example of this optimization is AdaptHealth’s automated point-of-delivery technology, which tracks AdaptHealth’s drivers and produces paperless, secure delivery tickets which are uploaded directly to the patient’s file and available immediately on an enterprise-wide basis.
If treating physicians do not adequately document, among other things, their diagnoses and plans of care, the risks that AdaptHealth will be subject to audits and payment denials are likely to increase. Moreover, auditors’ interpretations of these policies are inconsistent and subject to individual interpretation, leading to significant increases in individual supplier and industry-wide perceived error rates.
If treating physicians do not adequately document, among other things, their diagnoses and plans of care, the risks that AdaptHealth will be subject to audits and payment denials may increase. Moreover, auditors’ interpretations of these policies are inconsistent and subject to individual interpretation, leading to significant increases in individual supplier and industry-wide perceived error rates.
AdaptHealth believes that its relationships with its referral sources are strong and that these entities will continue to be a source of non-acquired growth through new patients. While AdaptHealth views its referral sources as fundamental to its business, no single referral source accounted for a material amount of its annual net revenue as of December 31, 2022.
AdaptHealth believes that its relationships with its referral sources are strong and that these entities will continue to be a source of non-acquired growth through new patients. While AdaptHealth views its referral sources as fundamental to its business, no single referral source accounted for a material amount of its annual net revenue as of December 31, 2023.
We focus primarily on providing (i) sleep therapy equipment, supplies and related services (including CPAP and bi PAP services) to individuals suffering from obstructive sleep apnea (“OSA”), (ii) medical devices and supplies to patients for the treatment of diabetes (including continuous glucose monitors (“CGM”) and insulin pumps), (iii) home medical equipment to patients discharged from acute care and other facilities, (iv) oxygen and related chronic therapy services in the home, and (v) other HME devices and supplies on behalf of chronically ill patients with wound care, urological, incontinence, ostomy and nutritional supply needs.
The Company focuses primarily on providing (i) sleep therapy equipment, supplies and related services (including CPAP and bi PAP services) to individuals suffering from obstructive sleep apnea (“OSA”), (ii) medical devices and supplies to patients for the treatment of diabetes (including continuous glucose monitors (“CGM”) and insulin pumps), (iii) home medical equipment to patients discharged from acute care and other facilities, (iv) oxygen and related chronic therapy services in the home, and (v) other HME devices and supplies on behalf of chronically ill patients with wound care, urological, incontinence, ostomy and nutritional supply needs.
For the years ended December 31, 2022, 2021 and 2020, net revenue generated with respect to providing OTS knee and back braces (excluding amounts generated in non-rural and rural non-bid areas) were not material.
For the years ended December 31, 2023, 2022 and 2021, net revenue generated with respect to providing OTS knee and back braces (excluding amounts generated in non-rural and rural non-bid areas) were not material.
Providers of home oxygen and other respiratory therapy services and equipment have historically been heavily dependent on Medicare reimbursement due to the high proportion of elderly persons suffering from respiratory disease utilizing Medicare benefits. Durable medical equipment, including oxygen equipment, is traditionally reimbursed by Medicare based on fixed fee schedules. Impact of the ACA and MIPPA.
Providers of home oxygen and other respiratory therapy services and equipment have historically been heavily dependent on Medicare reimbursement due to the high proportion of elderly persons suffering from respiratory disease utilizing Medicare benefits. Durable medical equipment, including oxygen equipment, is traditionally reimbursed by Medicare based on fixed fee schedules. Impact of the MMA.
AdaptHealth is often paid a fixed monthly amount for certain HME products as designated by the Centers for Medicare & Medicaid Services (“CMS”) or commercial insurance payors, such as CPAP equipment, wheelchairs, hospital beds, oxygen concentrators, insulin pumps and other similar products. These sales accounted for approximately 32% of AdaptHealth’s net revenue for the year ended December 31, 2022.
AdaptHealth is often paid a fixed monthly amount for certain HME products as designated by the Centers for Medicare & Medicaid Services (“CMS”) or commercial insurance payors, such as CPAP equipment, wheelchairs, hospital beds, oxygen concentrators, insulin pumps and other similar products. These sales accounted for approximately 33% of AdaptHealth’s net revenue for the year ended December 31, 2023.
The MMA established a Recovery Audit Contractors ("RAC") program, which implemented a new method for recovery of Medicare overpayments by utilizing private companies operating on a contingent fee basis to identify and recoup Medicare overpayments, and implemented quality standards and accreditation requirements for DME suppliers.
The MMA established a Recovery Audit Contractors ("RAC") program, which implemented a new method for recovery of Medicare overpayments by utilizing private companies operating on a contingent fee basis to identify and recoup Medicare overpayments, and implemented quality standards and accreditation requirements for Durable Medical Equipment ("DME") suppliers.
These products, which include CPAP masks and related supplies, diabetes management supplies, CGMs, wound care supplies, wheelchair cushions accessories, orthopedic bracing, breast pumps and supplies, walkers, commodes and canes, nutritional supplies and incontinence supplies, accounted for approxima t ely 68% of AdaptHealth’s net revenue for the year ended December 31, 2022. Supply Chain.
These products, which include CPAP masks and related supplies, diabetes management supplies, CGMs, wound care supplies, wheelchair cushions accessories, orthopedic bracing, breast pumps and supplies, walkers, commodes and canes, nutritional supplies and incontinence supplies, accounted for approxima t ely 67% of AdaptHealth’s net revenue for the year ended December 31, 2023. Supply Chain.
Outsourced Providers AdaptHealth contracts with business process outsourcing providers to provide certain billing, accounts payable and administrative functions. These providers are based in India and the Philippines and provide AdaptHealth with the ability to scale its workforce in a cost-effective manner. As of December 31, 2022, approximately 4,200 full-time equivalent personnel were provided to AdaptHealth under such arrangements.
Outsourced Providers AdaptHealth contracts with business process outsourcing providers to provide certain billing, accounts payable and administrative functions. These providers are primarily based in India and the Philippines and provide AdaptHealth with the ability to scale its workforce in a cost-effective manner. As of December 31, 2023, approximately 4,500 full-time equivalent personnel were provided to AdaptHealth under such arrangements.
Communications with AdaptHealth’s patients are also subject to laws and regulations governing communications, including the Telephone Consumer Protection Act of 1991 ("TCPA"), the Controlling the Assault of Non-Solicited Pornography And Marketing ("CAN-SPAM") Act, additional fax regulations under the Junk Fax Act and the Telemarketing Sales Rule and Medicare regulations. 9 Ta bl e of Contents Healthcare is an area of rapid regulatory change.
Communications with AdaptHealth’s patients are also subject to laws and regulations governing communications, including the Telephone Consumer Protection Act of 1991 ("TCPA"), the Controlling the Assault of Non-Solicited Pornography And Marketing ("CAN-SPAM") Act, additional fax regulations under the Junk Fax Act and the Telemarketing Sales Rule and Medicare regulations. Healthcare is an area of rapid regulatory change.
For example, certain provisions under CMS guidance manuals, local coverage determinations, and the DME Medicare Administrative Contractors (“MAC”) Supplier Manuals provide that clinical information from the “patient’s medical record” is required to justify the initial and ongoing medical necessity for the 11 Ta bl e of Contents provision of DME.
For example, certain provisions under CMS guidance manuals, local coverage determinations, and the DME Medicare Administrative Contractors (“MAC”) Supplier Manuals provide that clinical information from the “patient’s medical record” is required to justify the initial and ongoing medical necessity for the provision of DME.
AdaptHealth focuses on regional management to respond promptly and effectively to local market demands and opportunities. AdaptHealth’s regional managers are responsible and accountable for maintaining and developing relationships with referral sources, customer service for non-CPAP supply product lines and logistics for non-drop-shipped products. 5 Ta bl e of Contents IT.
AdaptHealth focuses on regional management to respond promptly and effectively to local market demands and opportunities. AdaptHealth’s regional managers are responsible and accountable for maintaining and developing relationships with referral sources, customer service for non-CPAP supply product lines and logistics for non-drop-shipped products. 5 Table of Con t ents IT.
Sales and Marketing Sales activities are generally carried out by AdaptHealth’s full-time sales representatives with assistance from on-site liaisons in certain markets who interact directly with hospital discharge coordinators and patients. AdaptHealth’s sales team works closely with AdaptHealth’s trained respiratory therapists in carrying out their daily sales activities. AdaptHealth primarily acquires new patients through referrals.
Sales and Marketing Sales activities are generally carried out by AdaptHealth’s full-time sales representatives with assistance from on-site liaisons in certain markets who interact directly with hospital discharge coordinators and patients. AdaptHealth’s sales team works in close alignment with AdaptHealth’s trained clinical team as part of their respiratory sales activities. AdaptHealth primarily acquires new patients through referrals.
Acquisitions Continuing to grow through accretive acquisitions is a key element of AdaptHealth’s growth strategy, and AdaptHealth continuously reviews its pipeline of potential acquisition candidates.
Acquisitions Continuing to grow through accretive acquisitions remains an element of AdaptHealth’s growth strategy, and AdaptHealth continuously reviews its pipeline of potential acquisition candidates.
Among other effects, healthcare regulations substantially increase the time, difficulty and costs incurred in obtaining and maintaining approval to market newly developed and existing products. AdaptHealth believes it is in material compliance with all statutes and regulations applicable to its operations.
Compliance with such laws and regulations is costly and may materially affect AdaptHealth's business and results of operations. Among other effects, healthcare regulations substantially increase the time, difficulty and costs incurred in obtaining and maintaining approval to market newly developed and existing products. AdaptHealth believes it is in material compliance with all statutes and regulations applicable to its operations.
As of December 31, 2022, AdaptHealth serviced approximately 3.9 million patients annually across all 50 states, and, during the year ended December 31, 2022, performed an average of approximately 36,000 equipment and supply deliveries a day through its network of approximately 725 locations in 47 states.
As of December 31, 2023, AdaptHealth serviced approximately 4.1 million patients annually across all 50 states through its network of approximately 680 locations in 47 states. During the year ended December 31, 2023, AdaptHealth performed an average of approximately 38,000 equipment and supply deliveries a day.
CMS’s decision to cancel the 2021 competitive bidding program was a significant development for AdaptHealth. On December 28, 2021, CMS permanently finalized the higher blended rates in rural and noncontiguous non-competitive bidding areas.
CMS’s decision to cancel the 2021 competitive bidding program was a significant development for AdaptHealth. On December 28, 2021, CMS permanently finalized the higher blended rates in rural and noncontiguous non-competitive bidding areas. Congress further extended a blended higher Medicare reimbursement rate in non-competitive bidding/non-rural areas through December 31, 2023.
We service beneficiaries of Medicare, Medicaid and commercial insurance payors. As of December 31, 2022, we serviced approximately 3.9 million patients annually in all 50 states through our network of approximately 725 locations in 47 states. Our principal executive offices are located at 220 West Germantown Pike, Suite 250, Plymouth Meeting, Pennsylvania 19462. Company Operations Product Offering .
The Company services beneficiaries of Medicare, Medicaid and commercial insurance payors. As of December 31, 2023, AdaptHealth serviced approximately 4.1 million patients annually in all 50 states through our network of approximately 680 locations in 47 states. The Company's principal executive offices are located at 220 West Germantown Pike, Suite 250, Plymouth Meeting, Pennsylvania 19462. Company Operations Product Offering .
We also make available free of charge through our website, https://www.adapthealth.com/investor-relations, electronic copies of certain documents that we file with the SEC, including our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC.
The SEC maintains an internet website at www.sec.gov that contains reports, proxy and information statements and other information regarding issuers, including us, that file electronically with the SEC. 11 Table of Con t ents We also make available free of charge through our website, https://adapthealth.com/investorrelations, electronic copies of certain documents that we file with the SEC, including our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC.
Item 1. Business We are a national leader in providing patient-centered, healthcare-at-home solutions including home medical equipment (“HME”), medical supplies, and related services.
Item 1. Business AdaptHealth Corp. and subsidiaries ("AdaptHealth" or "the Company") is a national leader in providing patient-centered, healthcare-at-home solutions including home medical equipment (“HME”), medical supplies, and related services.
Durable Medical Equipment Medicare Administrative Contractor. In order to ensure that Medicare beneficiaries only receive medically necessary and appropriate items and services, the Medicare program has adopted a number of documentation requirements.
After December 31, 2023, the reimbursement rate has reverted to 100% of the Medicare fee schedule, adjusted to inflation. Durable Medical Equipment Medicare Administrative Contractor. In order to ensure that Medicare beneficiaries only receive medically necessary and appropriate items and services, the Medicare program has adopted a number of documentation requirements.
Compliance with climate-related laws may be further complicated by disparate regulatory approaches in various jurisdictions. New or expanded climate-related laws could impose substantial costs on AdaptHealth. At the present time, we cannot predict their potential effect on AdaptHealth's capital expenditures or results of operations. Compliance with such laws and regulations is costly and may materially affect AdaptHealth's business.
Both California laws require initial disclosures in 2026. Compliance with climate-related laws may be further complicated by disparate regulatory approaches in various 9 Table of Con t ents jurisdictions. New or expanded climate-related laws could impose substantial costs on AdaptHealth. At the present time, we cannot predict their potential effect on AdaptHealth's capital expenditures or results of operations.
Department of Health and Human Services ("HHS"), and provides ongoing compliance training designed to keep AdaptHealth’s officers, directors and employees well-educated and up-to-date regarding developments on relevant topics and to emphasize AdaptHealth’s policy of strict compliance.
AdaptHealth maintains a Compliance Program that is designed to meet the guidelines set forth by the U.S. Department of Health and Human Services ("HHS"), and provides ongoing compliance training designed to keep AdaptHealth’s officers, directors and employees well-educated and up-to-date regarding developments on relevant topics and to emphasize AdaptHealth’s policy of strict compliance.
In addition, AdaptHealth competes with non-HME providers, including CVS and Amazon. Consolidation of the HME market is a continuing trend, as required technology investments and reduced reimbursements put financial pressure on smaller providers. Larger HME providers with integrated technology and automated processes are generally better positioned to gain market share and more attractive vendor pricing.
In addition, AdaptHealth competes with non-HME providers, including CVS and Amazon. Consolidation of the HME market is a continuing trend, as required technology investments and reduced reimbursements put financial pressure on smaller providers.
The Medicare Durable Medical Equipment, Prosthetics, Orthotics, & Supplies (“DMEPOS”) Competitive Bidding Program also emphasizes the importance of relationships with both the payors and referral sources. Because payors typically select a limited number of exclusive suppliers, and physicians typically refer based on timely delivery and consistency, relationships with both are critical to success in the market.
Because payors typically select a limited number of exclusive suppliers, and physicians typically refer based on timely delivery and consistency, relationships with both are critical to success in the market.
AdaptHealth’s human capital resources objectives and compensation program include attracting and retaining highly motivated, well-qualified employees and executives. AdaptHealth uses a mix of competitive salaries and other benefits to attract and retain employees and executives.
AdaptHealth believes that these facilities are adequate to meet its current needs. Human Capital Resources As of December 31, 2023, AdaptHealth had approximately 10,700 employees. AdaptHealth’s human capital resources objectives and compensation program include attracting and retaining highly motivated, well-qualified employees and executives. AdaptHealth uses a mix of competitive salaries and other benefits to attract and retain employees and executives.
AdaptHealth’s sleep therapy equipment and supplies are primarily provided by three suppliers, its mobility and home services products (such as hospital beds, wheelchairs, walkers and commodes) are principally supplied by two suppliers and its diabetes services products/CGM products are primarily provided by two suppliers.
AdaptHealth purchases these items primarily from two to three suppliers for each of its product categories, including its sleep therapy equipment and supplies, its mobility and home services products (such as hospital beds, wheelchairs, walkers and commodes) and its diabetes services products/CGM products.
AdaptHealth believes that relations between its management and employees are good, and it is committed to inclusion and policies and procedures to maintain a safe work environment. The health and safety of AdaptHealth’s employees, patients and customers are of primary concern.
AdaptHealth believes that relations between its management and employees are good, and it is committed to inclusion and policies and procedures to maintain a safe work environment. AdaptHealth is committed to its DIRECT Value Statements: Diversity and Inclusion, Integrity, Respect, Excellence, Compassion and Teamwork.
AdaptHealth places a high value on inclusion-building initiatives that create opportunities around cultural awareness and social learnings; this is largely accomplished through engaging employees in its Diversity and Inclusion Council, which is supported by employees with diverse backgrounds and experiences who share a common interest in professional development and improving corporate culture.
AdaptHealth places a high value on inclusion-building initiatives that create opportunities around cultural awareness and social learnings; this is largely accomplished through engaging employees in its Employee Resource Groups that are a subset of the Diversity and Inclusion Council.
In particular, AdaptHealth’s operations are subject to federal laws that regulate the reimbursement 8 Ta bl e of Contents of its products and services under various government programs and that are designed to prevent fraud and abuse.
In particular, AdaptHealth’s operations are subject to federal laws that regulate the reimbursement of its products and services under various government programs and that are designed to prevent fraud and abuse. AdaptHealth’s operations are also subject to state laws governing, among other things, pharmacies, nursing services, medical equipment suppliers and certain types of home health activities.
AdaptHealth’s operations are also subject to state laws governing, among other things, pharmacies, nursing services, medical equipment suppliers and certain types of home health activities. State regulators may also determine that telephone marketing of AdaptHealth products and services to patients fall within state regulation of telemarketing.
State regulators may also determine that telephone marketing of AdaptHealth products and services to patients fall within state regulation of telemarketing. Certain of AdaptHealth’s employees are subject to state laws and regulations governing the licensure and professional practice of respiratory therapy, pharmacy and nursing.
AdaptHealth has obtained contracts for OTS knee and back braces, and does not expect the single payment amounts imposed by CMS under such contracts to have a material impact on AdaptHealth.
AdaptHealth has obtained contracts for OTS knee and back braces, and does not expect the single payment amounts imposed by CMS under such contracts to have a material impact on AdaptHealth. 10 Table of Con t ents On May 25, 2023, CMS announced a temporary gap period for the CBP starting January 1, 2024, following the expiration of all Round 2021 contracts for OTS knee and back braces on December 31, 2023.
In addition, various federal and state legislative and regulatory bodies, or self-regulatory organizations, may expand current laws or regulations, enact new laws or regulations or issue revised rules or guidance regarding privacy, data protection and consumer protection. For instance, the California Consumer Privacy Act ("CCPA") became effective on January 1, 2020.
As part of AdaptHealth’s provision of, and billing for, healthcare equipment and services, AdaptHealth is required to collect and maintain patient-identifiable health information. In addition, various federal and state legislative and regulatory bodies, or self-regulatory organizations, may expand current laws or regulations, enact new laws or regulations or issue revised rules or guidance regarding privacy, data protection and consumer protection.
Talent Development and Retention Building and strengthening AdaptHealth’s talent pipeline is imperative to its success. AdaptHealth's management team has implemented various talent development initiatives.
These activities are supported by employees with diverse backgrounds and experiences who share a common interest in professional development and improving corporate culture. Talent Development and Retention Building and strengthening AdaptHealth’s talent pipeline is imperative to its success. AdaptHealth's management team has implemented various talent development initiatives.
Strategic key initiatives include the formation of AdaptHealth’s Diversity and Inclusion Council, learning and development opportunities around the concepts of leading inclusively, 7 Ta bl e of Contents inclusion in the workforce and unconscious bias.
AdaptHealth has a Diversity and Inclusion Council that leads learning activities around the concepts of leading inclusively, inclusion in the workforce and unconscious bias.
AdaptHealth maintains an M&A integration team and leverages its scalable front-end and back-office technology platform to facilitate acquisition integration to help realize short-term cost saving synergies and longer-term revenue growth synergies. 6 Ta bl e of Contents During the year ended December 31, 2022, AdaptHealth completed acquisitions involving eight companies for aggregate consideration of approximately $17.6 million.
AdaptHealth leverages its scalable front-end and back-office technology platform to facilitate acquisition integration to help realize short-term cost saving synergies and longer-term revenue growth synergies. 6 Table of Con t ents Suppliers AdaptHealth purchases home healthcare equipment, medical devices and supplies from a variety of suppliers.
On February 1, 2021, AdaptHealth acquired AeroCare Holdings, Inc. (“AeroCare”). Subsequent to the acquisition of AeroCare, AdaptHealth replaced its mobile delivery software technology provided by a third party with AeroCare’s proprietary mobile delivery technology called OTL. This technology has allowed AdaptHealth to add many features to its existing technology, such as delivery notification, patient satisfaction applications and referral source notifications.
AdaptHealth utilizes a proprietary mobile delivery technology called OTL. This technology has many features, including delivery notification, patient satisfaction applications and referral source notifications.
In addition, to address ongoing and growing threats related to cyberattacks, AdaptHealth continues to deploy market leading defense tools to protect and secure its networks and data. Revenue Cycle Management. AdaptHealth’s revenue cycle management and billing processes have both manual and computerized elements that are designed to maintain the integrity of revenue and accounts receivable.
See Item 1 C , " Cybersecurity ", of this Annual Report on Form 10-K, for discussion of AdaptHealth's risk management and strategy and governance relating to cybersecurity. Revenue Cycle Management. AdaptHealth’s revenue cycle management and billing processes have both manual and computerized elements that are designed to maintain the integrity of revenue and accounts receivable.
Removed
During the year ended December 31, 2021, AdaptHealth completed acquisitions involving 23 companies for aggregate consideration of approximately $2.9 billion (excluding amounts related to contingent consideration), primarily from the acquisition of AeroCare, which had aggregate consideration of approximately $2.4 billion. Suppliers AdaptHealth purchases home healthcare equipment, medical devices and supplies from a variety of suppliers.
Added
See Item 1A , Risk Factors - "Reliance on relatively few suppliers for the majority of AdaptHealth's patient service equipment and supplies could adversely affect its ability to operate." Facilities AdaptHealth does not own any properties and leases its operating locations.
Removed
As discussed in more detail in Item 1A , Risk Factors , on June 14, 2021, AdaptHealth received notice from Philips Respironics (“Philips”) that certain ventilator, BiPAP, and CPAP devices would be included in a Philips voluntary recall due to potential health risks to patients.
Added
Diversity and Inclusion AdaptHealth’s value of Diversity and Inclusion recognizes that our differences make us stronger, and encourages the sharing of different ideas. This value helps AdaptHealth to unlock the strengths of its employees to transform healthcare and improve lives.
Removed
It was not possible to purchase these products from Philips, which led to shortages in the supply chain, and other suppliers were unable to meet the strong patient demand for these products, which materially affected AdaptHealth’s ability to service patient demand for these devices during the year ended December 31, 2021.
Added
For example, AdaptHealth has developed a Leadership Development curriculum for its managers and provides regular feedback conversations about performance goals with its employees. This encourages a high-performance culture and creates an environment dedicated to caring for patients, while achieving company goals. Competition The HME market is fragmented and highly competitive.
Removed
During 2022, there was improved ability to purchase these products from alternative suppliers but continued shortages in the supply chain materially impacted AdaptHealth's ability to service patient demand for these devices. This recall may cause AdaptHealth to incur significant costs, some or all of which may not be recoverable from the product manufacturer.
Added
Larger HME providers with integrated technology and 7 Table of Con t ents automated processes are generally better positioned to gain market share and more attractive vendor pricing. The Medicare Durable Medical Equipment, Prosthetics, Orthotics, & Supplies (“DMEPOS”) Competitive Bidding Program also emphasizes the importance of relationships with both the payors and referral sources.
Removed
The recall has, and may continue to, materially negatively affect AdaptHealth’s business and results of operations as a result of patients not using their impacted devices, current shortages in the availability of both replacement devices for impacted patients and new devices for new patients, patient hesitancy to use respiratory devices generally or other reasons.
Added
Similarly, government agencies and their contractors periodically open investigations and obtain information from healthcare providers pursuant to the legal process.
Removed
It is unclear how long the potential shortages could last, but if the inability to purchase these products continues for an extended period of time, the impact could continue to materially adversely affect AdaptHealth’s business and results of operations. Facilities AdaptHealth does not own any properties and leases its operating locations.
Added
For instance, the California Consumer Privacy Act ("CCPA") became effective on January 1, 2020.
Removed
AdaptHealth believes that these facilities are adequate to meet its current needs and expects to add additional facilities in connection with its growth strategies. AdaptHealth believes that such additional space, when required, will be available on commercially reasonable terms. Human Capital Resources As of December 31, 2022, AdaptHealth had approximately 10,900 employees.
Added
In October 2023, the state of California enacted the Climate Corporate Data Accountability Act ("SB-253"), which mandates the disclosure of GHG emissions, including Scope 1, Scope 2 and Scope 3 emissions; and the Climate-Related Financial Risk Act ("SB-261"), which mandates the disclosure of climate-related financial risks, and measures adopted to reduce and adapt to such risks.
Removed
During the COVID-19 pandemic, AdaptHealth took significant steps to protect its workforce including, but not limited to, working remotely, introducing contact-free operational procedures, procuring personal protective equipment, communicating hygiene and cleaning protocols, and implementing mandatory face-covering usage, self-monitoring processes, and social distancing protocols consistent with guidelines issued by federal, state and local law.
Added
In December 2003, the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 ("MMA") was signed into law.
Removed
While the health and safety of AdaptHealth’s employees, patients and customers remain its primary concern, AdaptHealth has implemented policies around returning to offices and relaxed mask requirements. Diversity and Inclusion AdaptHealth’s values of belonging, inclusion and diversity for success enable it to unlock the strengths of its employees to transform healthcare and improve lives.
Added
The gap period commenced as anticipated and CMS has yet to announce when the temporary gap period for the CBP would end, but indicated that it would start bidding for the next CBP round after it completes the formal notice and comment rulemaking process and implements necessary changes to the CBP to establish sustainable process, save money for Medicare patients and taxpayers, help limit fraud, waste, and abuse, and ensure patient access to quality items and services.
Removed
For example, AdaptHealth’s approach to talent and performance is designed to ensure employees and managers have regular feedback conversations about performance goals and development, to enable its high-performance culture, and to create an environment where it achieves its strategy. AdaptHealth has career and development pathways designed for specific roles in consultation with operational management and human resources.
Added
During the temporary gap period, any Medicare-enrolled DMEPOS supplier may furnish DMEPOS items and services to patients, with payment in former CBAs based on 100% of the single payment amount for that CBA (increased by the projected percentage change in Consumer Price Index for All Urban Consumers), and payment in non-CBAs based on fully adjusted rates per the applicable methodology under 42 C.F.R. § 414.210(g).
Removed
Competition The HME market is fragmented and highly competitive.
Removed
Certain of AdaptHealth’s employees are subject to state laws and regulations governing the licensure and professional practice of respiratory therapy, pharmacy and nursing. AdaptHealth maintains a Compliance Program that is designed to meet the guidelines set forth by the U.S.
Removed
Numerous federal and state laws and regulations, including HIPAA and the HITECH Act, govern the collection, dissemination, security, use and confidentiality of patient-identifiable health information or personal information. As part of AdaptHealth’s provision of, and billing for, healthcare equipment and services, AdaptHealth is required to collect and maintain patient-identifiable health information.
Removed
The Patient Protection and Affordable Care Act, as amended ("ACA"), the Medicare Improvements for Patients and Providers Act of 2008 (“MIPPA”), the Medicare, Medicaid and SCHIP Extension Act of 2007 (“SCHIP Extension Act”), the Deficit Reduction Act of 2005 (“DRA”) and the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (“MMA”), contain provisions that directly impacted reimbursement for the primary respiratory and other durable medical equipment (“DME”) products provided by AdaptHealth.
Removed
In recent years, the U.S. Congress and certain state legislatures have considered and passed a number of laws that are intended to result in significant changes to the healthcare industry.
Removed
For example, there have been numerous political and legal efforts to expand, repeal, replace or modify the ACA, since the law’s enactment, some of which have been successful, in part, in modifying the law, as well as court challenges to the constitutionality of the law. The U.S.
Removed
Supreme Court rejected one such case on June 17, 2021, when the Court held that the plaintiffs lacked standing to challenge the ACA’s requirement to obtain minimum essential health insurance coverage or the individual mandate and dismissed the case without specifically ruling on the constitutionality of the ACA.
Removed
Federal regulatory agencies continue to modify ACA regulations and guidance related to the ACA, often as a result of presidential directives. The ultimate outcome of efforts to expand the ACA, substantially amend its provisions, or change funding for the ACA is unknown.
Removed
Though we cannot predict what, if any, reform proposals will be adopted, healthcare reform and legislation may have a material adverse effect on our business, financial condition and results of operations.
Removed
Any future efforts to challenge, repeal or replace the ACA or implement alternative reform measures may result in reduced funding for state Medicaid programs, lower numbers of insured individuals, reduced coverage for insured individuals, and could impact providers and other healthcare industry participants and cause AdaptHealth’s revenues to decrease to the extent such legislation reduces Medicaid and/or Medicare reimbursement rates. 10 Ta bl e of Contents In December 2003, the MMA was signed into law.
Removed
Congress further extended a blended higher Medicare reimbursement rate in non-competitive bidding/non-rural areas through the end of the public health emergency or December 31, 2023, whichever is later, when it reverts to 100% of the Medicare fee schedule. In total, AdaptHealth believes these changes to the competitive bidding program are significantly positive to the business.
Removed
The SEC maintains an internet website at www.sec.gov that contains reports, proxy and information statements and other information regarding issuers, including us, that file electronically with the SEC.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

128 edited+43 added−57 removed203 unchanged
Biggest changeOur Charter provides that our stockholders and our directors, including any who were designated by any of our stockholders, other than any such persons who are employees of us or any of our subsidiaries, do not have any obligation to offer to us any corporate opportunity of which he or she may become aware prior to offering such opportunities to other entities with which they may be affiliated, subject to certain limited exceptions.
Biggest changeOur Charter provides that our stockholders and our directors, including any who were designated by any of our stockholders, other than any such persons who are employees of us or any of our subsidiaries, do not have any obligation to offer to us any corporate opportunity of which he or she may become aware prior to offering such opportunities to other entities with which they may be affiliated, subject to certain limited exceptions. 32 Table of Con t ents Because AdaptHealth has no current plans to pay cash dividends on its Common Stock for the foreseeable future, you may not receive any return on investment unless you sell your Common Stock for a price greater than that which you paid for it.
AdaptHealth cannot ensure that it will be able to effectively manage the reimbursement process and collect payments for its equipment and services promptly. AdaptHealth generates a significant portion of its revenue from the provision of sleep therapy equipment and supplies to patients, and AdaptHealth’s success is therefore highly dependent its ability to furnish these items.
AdaptHealth cannot ensure that it will be able to effectively manage the reimbursement process and collect payments for its equipment and services promptly. AdaptHealth generates a significant portion of its revenue from the provision of sleep therapy equipment and supplies to patients, and AdaptHealth’s success is therefore highly dependent on its ability to furnish these items.
Even when a security breach is detected, the full extent of the breach may not be determined immediately. If AdaptHealth experiences a reduction in the performance, reliability, or availability of its information systems, its operations and ability to process transactions and produce timely and accurate reports could be adversely affected.
Even when a security breach is detected, the full extent of the breach may not be determined immediately. If AdaptHealth experiences a reduction in the performance, reliability, or availability of its information systems, its operations and ability to process transactions and produce timely and accurate reports could be materially adversely affected.
The Coronavirus Aid, Relief, and Economic Security Act (the "CARES Act") also provides for a temporary suspension of reduced rates for items and services provided by AdaptHealth. Previously, CMS applied a blended payment rate for DME furnished in rural or noncontiguous non-competitive bidding areas.
The Coronavirus Aid, Relief, and Economic Security Act (the "CARES Act") also provided for a temporary suspension of reduced rates for items and services provided by AdaptHealth. Previously, CMS applied a blended payment rate for DME furnished in rural or noncontiguous non-competitive bidding areas.
The home respiratory, mobility equipment and diabetes medical devices and supplies markets are highly competitive and include a large number of providers, some of which are national providers, but most of which are either regional or local providers, including hospital systems, physician specialists and sleep labs.
The sleep therapy equipment, home respiratory, mobility equipment and diabetes medical devices and supplies markets are highly competitive and include a large number of providers, some of which are national providers, but most of which are either regional or local providers, including hospital systems, physician specialists and sleep labs.
Simultaneously with the closing of our IPO, we issued in a private placement an aggregate of 4,333,333 private placement warrants, each exercisable to purchase one share of Common Stock at $11.50 per share. As of December 31, 2022, there were 3,871,557 private placement warrants outstanding, which have an expiration date of November 20, 2024.
Simultaneously with the closing of our IPO, we issued in a private placement an aggregate of 4,333,333 private placement warrants, each exercisable to purchase one share of Common Stock at $11.50 per share. As of December 31, 2023, there were 3,871,557 private placement warrants outstanding, which have an expiration date of November 20, 2024.
Goodwill represents the excess of cost over the fair market value of net assets acquired in business combinations. For example, if AdaptHealth’s market capitalization drops significantly below the amount of net equity recorded on its balance sheet, it might indicate a decline in its fair value and would require AdaptHealth to further evaluate whether its goodwill has been impaired.
Goodwill represents the excess of cost over the fair market value of net assets acquired in business combinations. If AdaptHealth’s market capitalization drops significantly below the amount of net equity recorded on its balance sheet, it might indicate a decline in its fair value and would require AdaptHealth to further evaluate whether its goodwill has been impaired.
AdaptHealth’s current insurance program may expose it to unexpected costs and negatively affect its business, financial condition and results of operations, particularly if it incurs losses not covered by its insurance or if claims or losses differ from its estimates. There is an inherent risk of liability in the provision of healthcare services.
AdaptHealth’s current insurance program is expensive to maintain and may expose it to unexpected costs and negatively affect its business, financial condition and results of operations, particularly if it incurs losses not covered by its insurance or if claims or losses differ from its estimates. There is an inherent risk of liability in the provision of healthcare services.
AdaptHealth may also be subject to pre-payment review of certain service lines or equipment segments as a result of negative audit findings or other third-party payor determinations, which can result in significant delays in claims processing and could materially impact its revenue.
AdaptHealth may also be subject to pre-payment review of certain service lines or products and equipment as a result of negative audit findings or other third-party payor determinations, which can result in significant delays in claims processing and could materially impact its revenue.
AdaptHealth currently outsources, and from time to time in the future may outsource, a portion of its internal business functions to third-party providers. Outsourcing these functions has significant risks, and AdaptHealth’s failure to manage these risks successfully could materially adversely affect its business, results of operations, and financial condition.
AdaptHealth currently outsources, and from time to time in the future may outsource, a portion of its internal business functions to third-party providers, which has significant risks, and AdaptHealth’s failure to manage these risks successfully could materially adversely affect its business, results of operations, and financial condition.
We concluded that our internal control over financial reporting was ineffective as of December 31, 2022 because material weaknesses existed in our internal control over financial reporting which were identified in connection with the preparation of the Company’s consolidated financial statements for the fiscal year ended December 31, 2022. As described in Item 9A.
We concluded that our internal control over financial reporting was ineffective as of December 31, 2023 because material weaknesses existed in our internal control over financial reporting which were identified in connection with the preparation of the Company’s consolidated financial statements for the fiscal year ended December 31, 2023. As described in Item 9A.
New entrants to the home respiratory/home medical equipment and diabetes medical devices and supplies markets could have a material adverse effect on AdaptHealth’s business, results of operations and financial condition. A number of manufacturers of home respiratory equipment currently provide equipment directly to patients on a limited basis.
New entrants to the sleep therapy equipment, home respiratory/home medical equipment and diabetes medical devices and supplies markets could have a material adverse effect on AdaptHealth’s business, results of operations and financial condition. A number of manufacturers of home respiratory equipment currently provide equipment directly to patients on a limited basis.
AdaptHealth is affected by continuing efforts by private third-party payors to control their costs. If AdaptHealth agrees to lower its reimbursement rates due to pricing pressures from private third-party payors, AdaptHealth’s financial condition and results of operations would likely deteriorate.
AdaptHealth's financial performance is affected by continuing efforts by private third-party payors to control their costs, and if AdaptHealth agrees to lower its reimbursement rates due to pricing pressures from such private third-party payors, AdaptHealth’s financial condition and results of operations would likely deteriorate.
“ Controls and Procedures ,” we concluded that our internal control over financial reporting was ineffective as of December 31, 2022 and our independent registered public accounting firm has expressed an adverse report on the operating effectiveness of our internal control over financial reporting as of December 31, 2022.
“ Controls and Procedures ,” we concluded that our internal control over financial reporting was ineffective as of December 31, 2023 and our independent registered public accounting firm has expressed an adverse report on the operating effectiveness of our internal control over financial reporting as of December 31, 2023.
These provisions include modifications of various requirements under CMS regulations and Medicare and Medicaid program rules that aim to expand the capacity of healthcare providers and suppliers to deliver healthcare services while minimizing the risk of viral exposure.
These provisions included modifications of various requirements under CMS regulations and Medicare and Medicaid program rules that aim to expand the capacity of healthcare providers and suppliers to deliver healthcare services while minimizing the risk of viral exposure.
Specific integration risks relating to the acquisition of other companies by AdaptHealth may include: • difficulties related to combining previously separate businesses into a single unit, including patient transitions, product and service offerings, distribution and operational capabilities and business cultures; • availability of financing to the extent needed to fund acquisitions; • customer loss and other general business disruption; • managing the integration process while completing other independent acquisitions or dispositions; • diversion of management’s attention from day-to-day operations; • assumption of liabilities of an acquired business, including unforeseen or contingent liabilities or liabilities in excess of the amounts estimated; • failure to realize anticipated benefits and synergies, such as cost savings and revenue enhancements; • potentially substantial costs and expenses associated with acquisitions and dispositions; • failure to retain and motivate key employees; • coordinating research and development activities to enhance the introduction of new products and services; 20 Ta bl e of Contents • difficulties in establishing and applying AdaptHealth’s internal control over financial reporting and disclosure controls and procedures to an acquired business; • obtaining necessary regulatory licenses and payor-specific approvals, which may impact the timing of when AdaptHealth is to bill and collect for services rendered; • AdaptHealth’s ability to transition patients in a timely manner may impact AdaptHealth’s ability to collect amounts for services rendered; • AdaptHealth’s estimates for revenue accruals during the integration of acquisitions may require adjustments in future periods as the transition of patient information is finalized; and • delays in obtaining new government and commercial insurance payor identification numbers for acquired branches, resulting in a slowdown and/or loss of associated revenue.
Specific integration risks relating to the acquisition of other companies by AdaptHealth may include: • difficulties related to combining previously separate businesses into a single unit, including patient transitions, product and service offerings, distribution and operational capabilities and business cultures; • availability of financing to the extent needed to fund acquisitions; • customer loss and other general business disruption; 19 Table of Con t ents • managing the integration process while completing other independent acquisitions or dispositions; • diversion of management’s attention from day-to-day operations; • assumption of liabilities of an acquired business, including unforeseen or contingent liabilities or liabilities in excess of the amounts estimated; • failure to realize anticipated benefits and synergies, such as cost savings and revenue enhancements; • potentially substantial costs and expenses associated with acquisitions and dispositions; • failure to retain and motivate key employees; • coordinating research and development activities to enhance the introduction of new products and services; • difficulties in establishing and applying AdaptHealth’s internal control over financial reporting and disclosure controls and procedures to an acquired business; • obtaining necessary regulatory licenses and payor-specific approvals, which may impact the timing of when AdaptHealth is to bill and collect for services rendered; • AdaptHealth’s ability to transition patients in a timely manner may impact AdaptHealth’s ability to collect amounts for services rendered; • AdaptHealth’s estimates for revenue accruals during the integration of acquisitions may require adjustments in future periods as the transition of patient information is finalized; and • delays in obtaining new government and commercial insurance payor identification numbers for acquired branches, resulting in a slowdown and/or loss of associated revenue.
Political and economic conditions, including significant global or regional developments such as economic and political events, international conflicts (including the ongoing conflict in Ukraine), natural disasters and public health crises that are out of AdaptHealth’s control, could adversely affect its revenue, financial condition and results of operations.
Political and economic conditions, including significant global or regional developments such as economic and political events, international conflicts (including the ongoing war in Ukraine and the Hamas-Israel conflict), natural disasters and public health crises that are out of AdaptHealth’s control, could adversely affect its revenue, financial condition and results of operations.
It was not possible to purchase these products from Philips, which led to shortages in the supply chain, and other suppliers were unable to meet the strong patient demand for these products, which materially affected AdaptHealth’s ability to service patient demand for these devices during the year ended December 31, 2021.
As a result, it was not possible to purchase these products from Philips, which led to shortages in the supply chain, and other suppliers were unable to meet the strong patient demand for these products, which materially affected AdaptHealth’s ability to service patient demand for these devices during the year ended December 31, 2021.
AdaptHealth’s Charter requires, to the fullest extent permitted by law, other than any claim to enforce a duty or liability created by the Exchange Act or other claim for which federal courts have exclusive jurisdiction, that derivative actions brought in AdaptHealth’s name, actions against directors, officers and employees for breach of fiduciary duty and other similar actions may be brought only in the Court of Chancery in the State of Delaware and, if brought outside of the State of Delaware, the stockholder bringing such suit will be deemed to have consented to service of process on such stockholder’s counsel.
AdaptHealth’s Charter requires, to the fullest extent permitted by law, other than any claim to enforce a duty or liability created by the Exchange Act or other claim for which federal courts have exclusive jurisdiction, that derivative actions brought in AdaptHealth’s name, actions against directors, officers and employees for breach of fiduciary duty and other similar actions may be brought only in the Court of Chancery in the State of Delaware and, if brought outside of the 34 Table of Con t ents State of Delaware, the stockholder bringing such suit will be deemed to have consented to service of process on such stockholder’s counsel.
Any failure, or perceived failure, by AdaptHealth or any of its third-party partners or service providers to comply with privacy policies or federal or state privacy or consumer protection-related laws, regulations, industry self-regulatory principles, industry standards or codes of conduct, regulatory guidance, orders to which they may be subject, or other legal obligations relating to privacy or consumer protection, could adversely affect AdaptHealth’s reputation, brand and business, and may result in claims, proceedings or actions against AdaptHealth by governmental entities, consumers, users, suppliers or others.
Any failure, or perceived failure, by AdaptHealth or any of its third-party partners or service providers to comply with privacy policies or federal or state privacy or consumer protection-related laws, regulations, industry self-regulatory principles, industry standards or codes of conduct, regulatory guidance, orders to 26 Table of Con t ents which they may be subject, or other legal obligations relating to privacy or consumer protection, could adversely affect AdaptHealth’s reputation, brand and business, and may result in claims, proceedings or actions against AdaptHealth by governmental entities, consumers, users, suppliers or others.
AdaptHealth derived approximately 61% of its net revenue for the years ended December 31, 2022 and 2021 from third-party private payors. Such payors continually seek to control the cost of providing healthcare services through direct contracts with healthcare providers, increased oversight and greater enrollment of patients in managed care programs and preferred provider organizations.
AdaptHealth derived approximately 60% and 61% of its net revenue for the years ended December 31, 2023 and 2022, respectively, from third-party private payors. Such payors continually seek to control the cost of providing healthcare services through direct contracts with healthcare providers, increased oversight and greater enrollment of patients in managed care programs and preferred provider organizations.
Moreover, provisions of the ACA implemented by CMS require that overpayments be reported and returned within 60 days of the date on which the overpayment is “identified.” Any overpayment retained after this deadline may be considered an “obligation” for purposes of the False Claims Act, liability for which can result in the imposition of substantial fines and penalties.
Moreover, provisions of the Patient Protection and Affordable Care Act ("ACA") implemented by CMS require that overpayments be reported and returned within 60 days of the date on which the overpayment is “identified.” Any overpayment retained after this deadline may be considered an “obligation” for purposes of the False Claims Act, liability for which can result in the imposition of substantial fines and penalties.
These provisions have been announced through blanket waivers under Section 1135 of the Social Security Act, two Interim Final Rules with Requests for Comment on April 6, 2020 and May 8, 2020, respectively, and through numerous forms of subregulatory guidance.
These provisions were announced through blanket waivers under Section 1135 of the Social Security Act, two Interim Final Rules with Requests for Comment on April 6, 2020 and May 8, 2020, respectively, and through numerous forms of subregulatory guidance.
In addition, AdaptHealth’s outsourced functions may be negatively impacted by any number of factors, including political unrest; public health crises; including the COVID-19 pandemic, social unrest; terrorism; war; vandalism; currency fluctuations; changes to the laws of India, the Philippines, the United States or any of the states or other jurisdictions in which AdaptHealth does business or outsources operations; or increases in the cost of labor and supplies in India and the Philippines or any other jurisdiction in which AdaptHealth outsources any portion of its internal business functions.
In addition, AdaptHealth’s outsourced functions may be negatively impacted by any number of factors, including: political unrest; public health crises; social unrest; cyber-attacks; terrorism; war; vandalism; currency fluctuations; changes to the laws of India, the Philippines, the United States or any other jurisdictions in which AdaptHealth does business or outsources operations; or increases in the cost of labor and supplies in India and the Philippines or any other jurisdiction in which AdaptHealth outsources any portion of its internal or other business functions.
AdaptHealth is subject, directly or indirectly, to United States federal and state healthcare fraud and abuse and false claims laws and regulations. Prosecutions under such laws have increased in recent years and AdaptHealth may become subject to such litigation. If AdaptHealth is unable to comply or has not fully complied with such laws, it could face substantial penalties.
AdaptHealth is subject to United States federal and state healthcare fraud and abuse and false claims laws and regulations, the prosecutions under which have increased in recent years and AdaptHealth may become subject to such litigation, and if AdaptHealth is unable to comply or has not fully complied with such laws, it could face substantial penalties .
If we are not able to implement additional internal controls and procedures in accordance with the requirements of Section 404 in a timely manner or with adequate compliance, we may not be able to conclude that our internal control over financial reporting is effective, which may subject us to adverse regulatory consequences and could harm investor confidence and the market price of our Common Stock.
If we are not able to implement additional internal controls and procedures in accordance with the requirements of Section 404 in a timely manner or with adequate compliance, we may not be able to conclude that our internal control over financial 30 Table of Con t ents reporting is effective, which may subject us to adverse regulatory consequences and could harm investor confidence and the market price of our Common Stock.
In such circumstances, the trading price of our Common Stock may not recover and may experience a further decline. 32 Ta bl e of Contents Factors affecting the trading price of our Common Stock may include: • actual or anticipated fluctuations in our quarterly financial results or the quarterly financial results of companies perceived to be similar to us; • changes in the market’s expectations about our operating results; • our operating results failing to meet the expectation of securities analysts, investors or our guidance in a particular period; • changes in financial estimates and recommendations by securities analysts concerning AdaptHealth or the home medical equipment industry in general; • operating and stock price performance of other companies that investors deem comparable to us; • our ability to market new and enhanced products on a timely basis; • changes in laws and regulations affecting our business; • our ability to meet compliance requirements; • commencement of, or involvement in, litigation involving us; • inability to quickly remediate material weaknesses or the continued identification of material weaknesses in internal control over financial reporting; • changes in our capital structure, such as future issuances of securities or the incurrence of additional debt; • the volume of shares of our Common Stock available for public sale; • any major change in our board of directors or management; • sales of substantial amounts of common stock by our directors, executive officers or significant stockholders or the perception that such sales could occur; and • general economic and political conditions such as recessions, interest rates, fuel prices, international currency fluctuations and acts of war or terrorism, including the ongoing conflict in Ukraine.
Factors affecting the trading price of our Common Stock may include: • actual or anticipated fluctuations in our quarterly financial results or the quarterly financial results of companies perceived to be similar to us; • changes in the market’s expectations about our operating results; • our operating results failing to meet the expectation of securities analysts, investors or our guidance in a particular period; • changes in financial estimates and recommendations by securities analysts concerning AdaptHealth or the home medical equipment industry in general; • operating and stock price performance of other companies that investors deem comparable to us; • our ability to market new and enhanced products on a timely basis; • changes in laws and regulations affecting our business; • our ability to meet compliance requirements; • commencement of, or involvement in, litigation involving us; • inability to quickly remediate material weaknesses or the continued identification of material weaknesses in internal control over financial reporting; • changes in our capital structure, such as future issuances of securities or the incurrence of additional debt; • the volume of shares of our Common Stock available for public sale; • any major change in our board of directors or management; • sales of substantial amounts of common stock by our directors, executive officers or significant stockholders or the perception that such sales could occur; and • general economic and political conditions such as recessions, interest rates, fuel prices, international currency fluctuations and acts of war or terrorism, including the war in Ukraine and the Hamas-Israel conflict.
In addition, various federal and state legislative and regulatory bodies, or self-regulatory organizations, may expand current laws or regulations, enact new laws or regulations or issue revised rules or guidance regarding privacy, data protection and consumer protection. For instance, the California Consumer Privacy Act (“CCPA”) became effective on January 1, 2020.
In addition, various federal and state legislative and regulatory bodies, or self-regulatory organizations, may expand current laws or regulations, enact new laws or regulations or issue revised rules or guidance regarding privacy, data protection and consumer protection. For instance, the CCPA became effective on January 1, 2020.
Shares may be repurchased from time to time on the open market, through privately negotiated transactions or otherwise, as permitted under Exchange Act Rule 10b-18. The timing and actual number of shares to be repurchased will depend upon market conditions and other factors.
If authorized by the board, shares may be repurchased from time to time on the open market, through privately negotiated transactions or otherwise, as permitted under Exchange Act Rule 10b-18. The timing and actual number of shares to be repurchased will depend upon market conditions and other factors.
If CMS or a state Medicaid agency determines that certain actions of the Company or an affiliated subsidiary present an undue risk of fraud, waste, or abuse, they may suspend the billing or payment privileges of the entity, deny the entity’s 26 Ta bl e of Contents enrollment or revalidation for Medicare or Medicaid participation, and potentially deny the re-enrollments of other commonly owned entities.
If CMS or a state Medicaid agency determines that certain actions of the Company or an affiliated subsidiary present an undue risk of fraud, waste, or abuse, they may suspend the billing or payment privileges of the entity, deny the entity’s enrollment or revalidation for Medicare or Medicaid participation, and potentially deny the re-enrollments of other commonly owned entities.
Even an unsuccessful challenge of AdaptHealth’s phone, email or SMS text practices by its consumers, regulatory authorities or other third parties could result in negative publicity and could require a costly response from and defense by AdaptHealth. 29 Ta bl e of Contents AdaptHealth may be adversely affected by global climate change or by legal, regulatory or market responses to such change.
Even an unsuccessful challenge of AdaptHealth’s phone, email or SMS text practices by its consumers, regulatory authorities or other third parties could result in negative publicity and could require a costly response from and defense by AdaptHealth. AdaptHealth may be adversely affected by global climate change or by legal, regulatory or market responses to such change.
If these types of disruptions continue to occur, it would have a material adverse effect on AdaptHealth’s business, financial condition, results of operations and cash flows. Continued labor shortages have driven a significant increase in competition throughout the industry to attract and retain talent and have also led to increased labor costs.
If these types of disruptions continue to occur, it would have a material adverse effect on AdaptHealth’s business, financial 12 Table of Con t ents condition, results of operations and cash flows. Continued labor shortages have driven a significant increase in competition throughout the industry to attract and retain talent and have also led to increased labor costs.
In addition, the prevalent use of mobile devices that access confidential information increases the risk of data security breaches, which could lead to the loss of confidential information or other intellectual property. It is possible that AdaptHealth or its third-party vendors may experience cybersecurity and other breach incidents that remain undetected for an extended period.
In addition, the prevalent use of mobile devices that access confidential information increases the risk of data security breaches, which could lead to the loss of confidential information or other intellectual property. AdaptHealth or its third-party vendors may experience cybersecurity and other breach incidents, including such incidents that remain undetected for an extended period.
To the extent that any governmental or private payor revises their resupply guidelines to reduce the number of times such supplies can be purchased, such reductions could adversely impact AdaptHealth’s revenue, financial condition and results of operations. If AdaptHealth fails to manage the complex and lengthy reimbursement process, its revenue, financial condition and results of operations could suffer.
To the extent that any governmental or private payor revises their resupply guidelines to reduce the number of times such supplies can be purchased, such reductions could adversely impact AdaptHealth’s revenue, financial condition and results of operations. 15 Table of Con t ents If AdaptHealth fails to manage the complex and lengthy reimbursement process, its revenue, financial condition and results of operations could suffer.
Purchases may be started or stopped at any time without prior notice depending on market conditions and other factors. 18 Ta bl e of Contents The Inflation Reduction Act of 2022, enacted on August 16, 2022, imposes a 1% excise tax on net repurchases of shares by AdaptHealth beginning January 1, 2023.
Purchases may be started or stopped at any time without prior notice depending on market conditions and other factors. The Inflation Reduction Act of 2022, enacted on August 16, 2022, imposes a 1% excise tax on net repurchases of shares by AdaptHealth beginning January 1, 2023.
In addition, pharmacy benefit managers, including CVS Health Corporation and the OptumRx business of UnitedHealth Group Incorporated, could enter the HME market and compete with AdaptHealth. Large technology companies, such as Amazon.com, Inc. and Alphabet Inc., have disrupted other supply businesses and 17 Ta bl e of Contents have entered the healthcare market.
In addition, pharmacy benefit managers, including CVS Health Corporation and the OptumRx business of UnitedHealth Group Incorporated, could enter the HME market and compete with AdaptHealth. Large technology companies, such as Amazon.com, Inc. and Alphabet Inc., have disrupted other supply businesses and have entered the healthcare market.
When an entity is determined to have violated the federal False Claims Act, it may be required to pay up to three times the actual damages sustained by the government, plus civil penalties for each separate false claim. Various states have also enacted laws modeled after the federal False Claims Act.
When an entity is determined to have violated the federal False Claims Act, it may be required to pay up to three times the actual damages sustained by the government, plus civil penalties for each separate false claim. Various states have also enacted laws modeled after the federal False Claims Act. On May 2, 2022, the U.S.
New health information standards, whether implemented pursuant to HIPAA, the HITECH Act, congressional action or otherwise, could have a significant effect on the manner in which AdaptHealth handles healthcare-related data and communicates with payors, and the cost of complying with these standards could be significant.
New health information standards, whether implemented pursuant to HIPAA, the HITECH Act, congressional action or otherwise, could have a significant effect on the manner in which AdaptHealth handles healthcare-related data and communicates with 27 Table of Con t ents payors, and the cost of complying with these standards could be significant.
Unanticipated changes in any applicable actuarial assumptions and management estimates underlying its liabilities for these losses could result in materially different expenses than expected under these programs, which could have a material 21 Ta bl e of Contents adverse effect on AdaptHealth’s financial condition and results of operations.
Unanticipated changes in any applicable actuarial assumptions and management estimates underlying its liabilities for these losses could result in materially different expenses than expected under these programs, which could have a material adverse effect on AdaptHealth’s financial condition and results of operations.
AdaptHealth is highly dependent on the performance and continued efforts of its senior management team. AdaptHealth’s future success is dependent on its ability to continue to attract and retain qualified executive officers and 19 Ta bl e of Contents senior management. Any inability to manage AdaptHealth’s operations effectively could adversely impact its financial condition and results of operations.
AdaptHealth is highly dependent on the performance and continued efforts of its senior management team. AdaptHealth’s future success is dependent on its ability to continue to attract and retain qualified executive officers and senior management. Any inability to manage AdaptHealth’s operations effectively could adversely impact its financial condition and results of operations.
Higher interest rates also impact the discount rate used in the valuation of intangible assets and the impact on the discount rate could result in impairment charges for such assets.
Higher interest rates also impact the discount rate used in the valuation of intangible assets, including goodwill, and the impact on the discount rate could result in additional impairment charges for such assets.
Although AdaptHealth’s insurance coverage reflects deductibles, self-insured retentions, limits of liability and similar provisions that it believes are reasonable based on its operations, the coverage under its insurance programs may not be adequate to protect it in all circumstances.
Although AdaptHealth’s insurance coverage reflects deductibles, 20 Table of Con t ents self-insured retentions, limits of liability and similar provisions that it believes are reasonable based on its operations, the coverage under its insurance programs may not be adequate to protect it in all circumstances.
Additionally, the continued expansion of its business 30 Ta bl e of Contents through the acquisition of existing facilities, expansion of existing facilities and construction of new facilities may require additional capital, particularly if AdaptHealth were to accelerate its acquisition and expansion plans. Financing may not be available or may be available only on terms that are not favorable.
Additionally, the continued expansion of its business through the acquisition of existing facilities, expansion of existing facilities and construction of new facilities may require additional capital, particularly if AdaptHealth were to accelerate its acquisition and expansion plans. Financing may not be available or may be available only on terms that are not favorable.
In March 2019, CMS announced that it would consolidate all rounds and areas of the DMEPOS Competitive Bidding Program into a single round of competition effective January 1, 2021 named “Round 2021”, to consolidate prior competitive bidding areas (“CBAs”). Round 2021 contracts became effective on January 1, 2021 and extend through December 31, 2023.
In March 2019, CMS announced that it would consolidate all rounds and areas of the DMEPOS Competitive Bidding Program into a single round of competition effective January 1, 2021 named “Round 2021”, to consolidate prior CBAs. Round 2021 contracts became effective on January 1, 2021 and extend through December 31, 2023. CMS included 16 product categories in the Round 2021.
On June 14, 2021, AdaptHealth received notice from Philips that certain ventilator, BiPAP, and CPAP devices would be included in a Philips voluntary recall due to potential health risks to patients.
For example, in June 2021, AdaptHealth received notice from Philips that certain ventilator, BiPAP, and CPAP devices would be included in a Philips voluntary recall due to potential health risks to patients.
CMS included 16 product categories in the Round 2021. On April 10, 2020, CMS announced that due to the COVID-19 pandemic, it removed the non-invasive ventilators product category from the Round 2021 DMEPOS Competitive Bidding Program.
On April 10, 2020, CMS announced that due to the COVID-19 pandemic, it removed the non-invasive ventilators product category from the Round 2021 DMEPOS Competitive Bidding Program.
Furthermore, certain of the key personnel of AdaptHealth may be unfamiliar with the requirements of operating a company regulated by the SEC, which could cause AdaptHealth to have to expend time and resources helping them become familiar with such requirements.
Furthermore, certain of the key personnel of AdaptHealth may be unfamiliar with the requirements of operating a company regulated by 29 Table of Con t ents the SEC, which could cause AdaptHealth to have to expend time and resources helping them become familiar with such requirements.
To the extent that its third-party providers fail to support, maintain and upgrade such software or systems, or if AdaptHealth loses its licenses with third-party providers, the efficiency of AdaptHealth’s operations could be disrupted or reduced.
To the extent that its third-party providers fail to 13 Table of Con t ents support, maintain and upgrade such software or systems, or if AdaptHealth loses its licenses with third-party providers, the efficiency of AdaptHealth’s operations could be disrupted or reduced.
Approximately 36% of AdaptHealth’s net revenue for the years ended December 31, 2022 and 2021 was generated from the provision of sleep therapy equipment and supplies to patients.
Approximately 39% and 36% of AdaptHealth’s net revenue for the years ended December 31, 2023 and 2022, respectively, was generated from the provision of sleep therapy equipment and supplies to patients.
AdaptHealth derived approximately 26% and 28% of its net revenue for the years ended December 31, 2022 and 2021, respectively, from Medicare and various state-based Medicaid programs.
AdaptHealth derived approximately 27% and 26% of its net revenue for the years ended December 31, 2023 and 2022, respectively, from Medicare and various state-based Medicaid programs.
The amount due and payable in those circumstances is determined based on certain assumptions, including an assumption that we would have sufficient taxable income to fully utilize all potential future tax benefits that are subject to the Tax Receivable Agreement.
The amount due and payable in those circumstances is determined based on certain assumptions, including an 33 Table of Con t ents assumption that we would have sufficient taxable income to fully utilize all potential future tax benefits that are subject to the Tax Receivable Agreement.
The cost to manufacture and distribute the equipment and products that AdaptHealth provides to patients is influenced by the cost of materials, labor, and transportation, including fuel costs. AdaptHealth has recently experienced inflationary pressure and higher costs as a result of the increasing cost of materials, labor and transportation.
The cost to manufacture and distribute the equipment and products that AdaptHealth provides to patients is influenced by the cost of materials, labor, and transportation, including fuel costs. AdaptHealth continues to experience inflationary pressure and higher costs as a result of the increasing cost of materials, labor and transportation.
Because the techniques used to obtain unauthorized access, disable or degrade service, or sabotage systems change frequently and may be difficult to detect, AdaptHealth may be unable to anticipate these techniques or implement adequate preventive measures.
Because the techniques used to obtain unauthorized access, disable or degrade service, or sabotage systems change frequently and may be difficult to detect, AdaptHealth its third-party software providers’ may be unable to anticipate these techniques or implement adequate preventive measures.
To the extent such costs continue to increase, AdaptHealth may be prevented, in whole or in part, from passing such cost increases through to its existing and prospective customers, or AdaptHealth’s customers may seek other competitive sources due to supply chain delays, which could have a material adverse impact on AdaptHealth’s business, financial position, results of operations and cash flows. 13 Ta bl e of Contents AdaptHealth may be negatively impacted by inflation.
To the extent such costs continue to increase, AdaptHealth may be prevented, in whole or in part, from passing such cost increases through to its existing and prospective customers, or AdaptHealth’s customers may seek other competitive sources due to supply chain delays, which could have a material adverse impact on AdaptHealth’s business, financial position, results of operations and cash flows.
If a cyber-security attack or other unauthorized attempt to access AdaptHealth’s systems or facilities were to be successful, it could result in the theft, destruction, loss, misappropriation or release of confidential information or intellectual property, and could cause operational or business delays that may materially impact AdaptHealth’s ability to provide various healthcare services.
If a cybersecurity attack or another unauthorized attempt to access AdaptHealth’s or its third-party vendors' systems or facilities were to be successful, it could result in the theft, destruction, loss, misappropriation or release of confidential information or intellectual property, and could cause operational or business delays that may materially impact AdaptHealth’s ability to provide various healthcare services.
In recent years, a number of health insurers have merged or increased efforts to consolidate with other non-governmental payors. Insurers are also increasingly pursuing alignment initiatives with healthcare providers. Consolidation within the health insurance industry may result in insurers having increased negotiating leverage and competitive advantages, such as greater access to performance and pricing data.
In recent years, there has been a continuing trend of health insurers merging or increasing efforts to consolidate with other non-governmental payors. Insurers are also increasingly pursuing alignment initiatives with healthcare providers. Consolidation within the health insurance industry may result in insurers having increased negotiating leverage and competitive advantages, such as greater access to performance and pricing data.
Materials, equipment and labor shortages, shipping, logistics and other delays and other supply chain and related disruptions, whether due to the COVID-19 pandemic or otherwise, have made it more difficult and costly for AdaptHealth to obtain products or services from third parties.
Materials, equipment and labor shortages, shipping, logistics and other delays and other supply chain and related disruptions have made it more difficult and costly for AdaptHealth to obtain products or services from third parties.
Failure to maintain the security and functionality of AdaptHealth’s information systems and related software, or a failure to defend a cyber-security attack or other attempt to gain unauthorized access to AdaptHealth’s or its acquisition targets’ systems, facilities or patient health information, could expose AdaptHealth to a number of adverse consequences, the vast majority of which are not insurable, including but not limited to disruptions in AdaptHealth’s operations, regulatory and other civil and criminal penalties, fines, investigations and enforcement actions (including, but not limited to, those arising from the SEC, Federal Trade Commission, the Office of Inspector General or state attorneys general), private litigation with those affected by the data breach, loss of customers, disputes with payors and increased operating expense, which could adversely impact AdaptHealth’s financial condition and results of operations.
Failure to maintain the security and functionality of AdaptHealth’s information systems and related software or to contract with third parties which do, or a failure to defend a cybersecurity attack or other attempt to gain unauthorized access to AdaptHealth’s, AdaptHealth’s third-party vendors’, or any of its or their acquisition targets’ systems, facilities or patient health information, could expose AdaptHealth to a number of adverse consequences, the vast majority of which are not insurable, including, but not limited to, disruptions in AdaptHealth’s operations, regulatory and other civil and criminal penalties, fines, investigations and enforcement actions (including, but not limited to, those arising from the SEC, FTC, the Office of Inspector General or state attorneys general), private litigation with those affected by the data breach, loss of 14 Table of Con t ents customers, disputes with payors and increased operating expense, all or any of which could adversely impact AdaptHealth’s financial condition and results of operations.
AdaptHealth’s failure to successfully outsource certain of its business functions could materially adversely affect its business, results of operations, and financial condition. AdaptHealth's ability to successfully operate our business is largely dependent upon the efforts of certain key personnel of AdaptHealth, including senior management. The loss of such key personnel could negatively impact AdaptHealth's operations and financial results.
AdaptHealth’s failure to successfully outsource certain of its business functions could materially adversely affect its business, results of operations, and financial condition. 18 Table of Con t ents AdaptHealth's ability to successfully operate its business is largely dependent upon the efforts of key personnel of AdaptHealth, including senior management, the loss of any of whom could negatively impact AdaptHealth's operations and financial results.
Unauthorized parties may attempt to gain access to AdaptHealth’s systems or facilities, or those of third parties with whom AdaptHealth does business, through fraud or other forms of deceiving its employees or contractors.
Unauthorized parties may attempt to gain access to AdaptHealth’s systems or facilities, or those of third parties with whom AdaptHealth does business, including its confidential managed file transfer software providers, through fraud or other forms of deceiving its employees or contractors.
Risks Related to Our Securities We may not be able to effectively implement controls and procedures required by Section 404 of the Sarbanes-Oxley Act that are applicable to us.
Risks Related to Our Securities We may not be able to effectively maintain controls and procedures required by Section 404 of the Sarbanes-Oxley Act that are applicable to us or remediate existing material weaknesses.
As a result of the Public Health Emergency Declaration, National Emergency Declaration, and pursuant to the provisions of the CARES Act, among other things, CMS has issued regulatory guidance indicating enforcement discretion and flexibility regarding the provisions of items and services by Durable Medical Equipment, Prosthetics, Orthotics, & Supplies (“DMEPOS”) suppliers like AdaptHealth.
As a result of the Public Health Emergency Declaration, National Emergency Declaration, and pursuant to the provisions of the CARES Act, among other things, CMS issued regulatory guidance indicating enforcement discretion and flexibility regarding the provisions of items and services by DMEPOS suppliers like AdaptHealth.
Any of the factors listed below could have a material adverse effect on your investment in our Common Stock and our Common Stock may trade at prices significantly below the price you paid for it.
Any of the factors listed below could have a material adverse effect on your investment in our Common Stock and our Common Stock may trade at prices significantly below the price you paid for it. In such circumstances, the trading price of our Common Stock may not recover and may experience a further decline.
AdaptHealth's ability to successfully operate its business is also dependent upon the efforts of certain other key personnel of AdaptHealth. It is possible that AdaptHealth will lose some key personnel, the loss of which could negatively impact its operations and profitability. AdaptHealth’s strategic growth plan, which involves the acquisition of other companies, may not succeed.
AdaptHealth's ability to successfully operate its business is also dependent upon the efforts of certain other key personnel of AdaptHealth. It is possible that AdaptHealth will lose some key personnel, the loss of which could negatively impact its operations and profitability.
A cyber security attack or other incident that bypasses AdaptHealth’s information systems security could cause a security breach which may lead to a material disruption to its information systems infrastructure or business and may involve a significant loss of business or patient health information.
A cybersecurity attack or other incident that bypasses AdaptHealth’s or its third-party vendors' information systems security could cause a security breach that may lead to a material disruption to AdaptHealth's information systems infrastructure or business and/or involve a significant loss of business or patient health or other protected data or information.
Pursuant to provisions of the CARES 22 Ta bl e of Contents Act, through the end of the public health emergency, that blended rate will be based on 50% of the adjusted fee schedule amount (adjusted based on competitively bid prices) and 50% of the unadjusted DMEPOS fee schedule amount.
Pursuant to provisions of the CARES Act, through the end of the public health emergency, that blended rate was based on 50% of the adjusted fee schedule amount (adjusted based on competitively bid prices) and 50% of the unadjusted DMEPOS fee schedule amount.
These include specific requirements imposed by the Durable Medical Equipment Medicare Administrative Contractor (“DME MAC”) Supplier Manuals, Medicare DMEPOS enrollment requirements and Medicare DMEPOS Supplier Standards.
These include specific requirements imposed by the Durable 24 Table of Con t ents Medical Equipment Medicare Administrative Contractor (“DME MAC”) Supplier Manuals, Medicare DMEPOS enrollment requirements and Medicare DMEPOS Supplier Standards.
As long as Q Management Services (PTC) Ltd., as Trustee of the Everest Trust, and/or OEP AHCO Investment Holdings, LLC own or control a significant percentage of our outstanding voting power, they will have the ability to significantly influence all corporate actions requiring stockholder approval, including the election and removal of directors and the size of our board of directors, any amendment to our Charter or Amended and Restated 33 Ta bl e of Contents Bylaws (our “Bylaws”), or the approval of any merger or other significant corporate transaction, including a sale of substantially all of our assets.
As long as OEP AHCO Investment Holdings, LLC and/or Deerfield Management Company, L.P. own or control a significant percentage of our outstanding voting power, they will have the ability to significantly influence all corporate actions requiring stockholder approval, including the election and removal of directors and the size of our board of directors, any amendment to our Charter or Amended and Restated Bylaws (our “Bylaws”), or the approval of any merger or other significant corporate transaction, including a sale of substantially all of our assets.
The CARES Act introduced a new blended rate for DME furnished in non-rural or contiguous non-competitive bidding areas that is based on 75% of the adjusted fee schedule amount and 25% of the unadjusted fee schedule amount.
The CARES Act introduced a new blended rate for DME furnished in non-rural or contiguous non-competitive bidding areas that is based on 75% of the adjusted fee schedule amount and 25% of the unadjusted fee schedule amount. The Consolidated Appropriations Act, 2023 further extended the 75/25 blended Medicare reimbursement rate in non-competitive bidding/non-rural areas through December 31, 2023.
Increases in inflation may have an adverse effect on AdaptHealth. Current and future inflationary effects may be driven by, among other things, general inflationary cost increases, supply chain disruptions and governmental stimulus or fiscal policies.
AdaptHealth has been negatively impacted by inflation and rising interest rates. Increases in inflation have had, and may continue to have, an adverse effect on AdaptHealth. Current and future inflationary effects may be driven by, among other things, general inflationary cost increases, supply chain disruptions and governmental stimulus or fiscal policies.
AdaptHealth relies on an external service provider to provide continual maintenance, upgrading and enhancement of AdaptHealth’s primary information systems used for its operational needs.
AdaptHealth’s business depends on the proper functioning and availability of its computer systems and networks. AdaptHealth relies on an external service provider to provide continual maintenance, upgrading and enhancement of AdaptHealth’s primary information systems used for its operational needs.
Any successful cyber security attack or other unauthorized attempt to access AdaptHealth’s or its acquisition targets’ systems or facilities also could result in negative publicity which could damage its reputation or brand with its patients, referral sources, payors or other third parties and could subject AdaptHealth to substantial penalties under HIPAA and other federal and state data protection laws, in addition to private litigation with those affected.
Any successful cybersecurity attack or other unauthorized access to AdaptHealth’s, AdaptHealth’s third-party vendors’, or any of its or their acquisition targets’ systems, facilities or patient health information also could result in negative publicity, which could damage AdaptHealth’s reputation or brand with its patients, referral sources, payors or other third parties and could subject AdaptHealth to substantial penalties under HIPAA and other federal and state data protection laws, in addition to costs and potential damages associated with private litigation related to those affected.
AdaptHealth has identified a number of areas throughout its operations, including revenue cycle management and fulfilment logistics, where it intends to centralize and/or modify current processes or systems in order to attain a higher level of productivity or ensure compliance.
AdaptHealth has identified a number of areas throughout its operations, including revenue cycle management, fulfillment logistics, and accounts payable, where it has centralized and/or modified processes or systems in order to attain a higher level of productivity or ensure compliance.
“ Controls and Procedures ”. With respect to the material weaknesses identified as of December 31, 2022, we plan to implement measures to remediate such material weaknesses as described in Item 9A.
With respect to the material weaknesses identified as of December 31, 2023, we plan to continue to implement measures to remediate such material weaknesses as described in Item 9A.
Costs and potential problems and interruptions associated with the implementation of new or upgraded systems and technology or with maintenance or adequate support of existing systems also could disrupt or reduce the efficiency of AdaptHealth’s operations.
Costs and potential problems and interruptions associated with any such unauthorized access or the implementation of new or upgraded systems and technology or with maintenance or adequate support of existing systems and technology, including systems and technology intended to protect against unauthorized access, also could disrupt or reduce the efficiency of AdaptHealth’s operations.
We are required to make payments under the Tax Receivable Agreement for certain tax benefits we may claim, and the amounts of such payments could be significant.
We are required to make payments under the Tax Receivable Agreement for certain tax benefits we may claim, and the amounts of such payments could be significant. AdaptHealth, f/k/a DFB Healthcare Acquisitions Corp.
Risks Related to Our Financial Condition If AdaptHealth were required to write down all or part of its goodwill its net earnings and net worth could be materially adversely affected. AdaptHealth had $3.5 billion of goodwill recorded on its Consolidated Balance Sheets at December 31, 2022.
These events and impacts could materially adversely affect AdaptHealth's business and results of operations. Risks Related to Our Financial Condition If AdaptHealth were required to write down all or part of its goodwill, its net earnings and net worth could be materially adversely affected. AdaptHealth had $2.7 billion of goodwill recorded on its Consolidated Balance Sheets at December 31, 2023.
For the years ended December 31, 2022 and 2021, net revenue generated 27 Ta bl e of Contents with respect to providing OTS knee and back braces (excluding amounts generated in non-rural and rural non-bid areas) were not material.
For the years ended December 31, 2023 and 2022, net revenue generated 25 Table of Con t ents with respect to providing OTS knee and back braces (excluding amounts generated in non-rural and rural non-bid areas) were not material.
Legal and contractual restrictions in agreements governing the indebtedness of subsidiaries of AdaptHealth Holdings may limit our ability to ultimately obtain cash from AdaptHealth Holdings. The earnings from, or other available assets of, AdaptHealth Holdings and its subsidiaries may not be sufficient to enable us to satisfy our financial obligations or pay any dividends on our Common Stock.
The earnings from, or other available assets of, AdaptHealth Holdings and its subsidiaries may not be sufficient to enable us to satisfy our financial obligations or pay any dividends on our Common Stock.
AdaptHealth currently, and from time to time in the future, may outsource portions of its internal business functions, including billing and administrative functions relating to revenue cycle management, to third-party providers in India and the Philippines.
AdaptHealth currently outsources, and from time to time in the future may outsource, portions of its internal business functions, including billing and administrative functions relating to revenue cycle management and accounts payable, to third-party providers in India and the Philippines, and utilizes third-party managed file transfer software providers to transfer its sensitive and protected customer data.

… 148 more changes not shown on this page.

Item 2. Properties

Properties — owned and leased real estate

1 edited+0 added−0 removed1 unchanged
Biggest changeAll facilities are leased pursuant to operating leases. We believe that our facilities are suitable and adequate for our planned needs.
Biggest changeAll facilities are leased pursuant to operating leases. We believe that our facilities are suitable and adequate for our planned needs. Item 3. Legal Proceedings See Item 7. “Management's Discussion and Analysis of Financial Results and Operations - Commitments and Contingencies ."

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

1 edited+1 added−71 removed4 unchanged
Biggest changeItem 5. Market Price of and Dividends on Registrant’s Common Equity and Related Stockholder Matters; Issuer Purchases of Equity Securities Market Information Our Common Stock is currently listed on Nasdaq under the symbol “AHCO.” As of February 24, 2023, there were 45 holders of record of shares of our Common Stock.
Biggest changeItem 5. Market Price of and Dividends on Registrant’s Common Equity and Related Stockholder Matters; Issuer Purchases of Equity Securities Market Information Our Common Stock is currently listed on Nasdaq under the symbol “AHCO.” As of February 23, 2024, there were 41 holders of record of shares of our Common Stock.
Removed
Issuer Purchases of Equity Securities There were no purchases of equity securities by the issuer or affiliated purchasers, as defined in Rule 10b-18(a)(3) of the Securities Exchange Act of 1934, during the quarter ended December 31, 2022. Item 6. [Reserved] Item 7.
Added
Issuer Purchases of Equity Securities The following table shows information with respect to purchases of our Common Stock made during the three months ended December 31, 2023 by us or any of our “affiliated purchasers” as defined in Rule 10b-18(a)(3) under the Exchange Act: Period Total number of shares purchased (1) Average price paid per share (1) Total number of shares purchased as part of publicly announced plans or programs (1) Approximate dollar amount remaining that may be used to purchase shares under the plans or programs (in thousands) (1) October 1 - 31, 2023 2,227,312 $ 7.88 2,227,312 $ 159,252 November 1 - 30, 2023 324,935 $ 7.51 324,935 $ 156,811 December 1 - 31, 2023 — $ — — $ 156,811 Total 2,552,247 2,552,247 (1) The Company’s board of directors authorized a share repurchase program for up to $200.0 million of the Company’s Common Stock, which expired on December 31, 2023.
Removed
Management's Discussion and Analysis of Financial Condition and Results of Operations The following discussion should be read in conjunction with AdaptHealth Corp.'s ("AdaptHealth" or the "Company") consolidated financial statements and the accompanying notes included in this report. All amounts presented are in accordance with U.S. generally accepted accounting principles ("U.S. GAAP"), except as noted.
Removed
In addition to historical information, this discussion contains forward-looking statements that involve risks, uncertainties and assumptions that could cause actual results to differ materially from management's expectations. Factors that could cause such differences include, but are not limited to, those discussed in Item 1A, " Risk Factors ", of this Annual Report on Form 10-K.
Removed
Certain amounts that appear in this section may not sum due to rounding. 37 Ta bl e of Contents AdaptHealth Corp. Overview AdaptHealth is a national leader in providing patient-centered, healthcare-at-home solutions including home medical equipment ("HME"), medical supplies, and related services.
Removed
The Company focuses primarily on providing (i) sleep therapy equipment, supplies and related services (including CPAP and bi PAP services) to individuals suffering from obstructive sleep apnea ("OSA"), (ii) medical devices and supplies to patients for the treatment of diabetes (including continuous glucose monitors and insulin pumps), (iii) home medical equipment to patients discharged from acute care and other facilities, (iv) oxygen and related chronic therapy services in the home, and (v) other HME devices and supplies on behalf of chronically ill patients with wound care, urological, incontinence, ostomy and nutritional supply needs.
Removed
The Company services beneficiaries of Medicare, Medicaid and commercial insurance payors. As of December 31, 2022, AdaptHealth serviced approximately 3.9 million patients annually in all 50 states through its network of approximately 725 locations in 47 states. The Company's principal executive offices are located at 220 West Germantown Pike, Suite 250, Plymouth Meeting, Pennsylvania 19462.
Removed
Impact of the COVID-19 Pandemic Federal, state, and local authorities have taken several actions designed to assist healthcare providers in providing care to COVID-19 and other patients and to mitigate the adverse economic impact of the COVID-19 pandemic.
Removed
Legislative actions taken by the federal government include the Coronavirus Aid, Relief, and Economic Security Act (the "CARES Act"), which was signed into law on March 27, 2020. Through the CARES Act, the federal government authorized payments that were distributed to healthcare providers through the Public Health and Social Services Emergency Fund ("Provider Relief Fund" or "PRF").
Removed
Additionally, the CARES Act revised the Medicare accelerated and advance payment program in an attempt to disburse payments to healthcare providers more quickly to mitigate the financial impact on healthcare providers.
Removed
AdaptHealth increased its cash liquidity by, among other things, seeking recoupable advance payments of $45.8 million made available by CMS under the CARES Act legislation, which was received in April 2020.
Removed
In addition, in connection with an acquisition completed in July 2020, AdaptHealth assumed a liability of $3.7 million relating to CMS recoupable advance payments received by the acquired company prior to the date of acquisition.
Removed
The recoupment of the advance payments by CMS began in April 2021 and were applied to services provided and revenue recognized during the period in which the recoupment occurred, which impacted AdaptHealth's cash receipts for services provided during the period in which the amounts were recouped.
Removed
As of December 31, 2022 the CMS advance payments have been recouped by or repaid to CMS in full and there is no liability to CMS for these amounts as of such date.
Removed
In addition, in April 2020, AdaptHealth received distributions of the CARES Act PRF of $17.2 million, and subsequent to April 2020, AdaptHealth completed several acquisitions in which the acquired companies received a total of $22.2 million of PRF payments prior to the applicable dates of acquisition.
Removed
In connection with the accounting for these acquisitions, AdaptHealth recorded assumed liabilities of $7.7 million relating to the PRF payments received by the acquired companies. The PRF payments are targeted to offset lost revenue and expenditures incurred in connection with the COVID-19 pandemic.
Removed
The PRF payments are subject to certain restrictions and are subject to recoupment if not used for designated purposes. As a condition to receiving distributions, providers were required to agree to certain terms and conditions, including, among other things, that the funds would be used for lost revenues and unreimbursed COVID-19 related expenses as defined by the U.S.
Removed
Department of Health and Human Services ("HHS"). All recipients of PRF payments were required to comply with the reporting requirements described in the terms and conditions and as determined by HHS.
Removed
As of December 31, 2021, AdaptHealth recognized all of the PRF payments it had received, and the liabilities assumed for PRF payments received from acquired companies, as grant income, as it was determined that AdaptHealth has complied with the terms and conditions associated with the grant.
Removed
As such, there is no liability recorded in AdaptHealth's consolidated balance sheet relating to the PRF payments as of December 31, 2022 and 2021.
Removed
HHS has indicated that the CARES Act PRF are subject to ongoing reporting and changes to the terms and conditions, and there have been several updates to such reporting requirements and terms and conditions since they were issued by HHS.
Removed
Such updates have related to changes to the guidance regarding utilization of the funds granted from the PRF and updates to the reporting requirements of such funds, among other updates.
Removed
To the extent that there is any future updated guidance from HHS or modifications to the terms and conditions, it may affect AdaptHealth's ability to comply and AdaptHealth could be required to reverse the recognition of the grant income recorded and return a portion of the funds received, which could be material to AdaptHealth.
Removed
AdaptHealth is continuing to monitor the terms and conditions issued by HHS. Furthermore, HHS has indicated that it will be closely monitoring and, along with the Office of Inspector General (United States) (OIG), auditing providers to ensure that recipients comply with the terms and conditions of relief programs 38 Ta bl e of Contents and to prevent fraud and abuse.
Removed
All providers will be subject to civil and criminal penalties for any deliberate omissions, misrepresentations or falsifications of any information given to HHS. Also, as permitted under the CARES Act, AdaptHealth elected to defer certain portions of employer-paid FICA taxes otherwise payable from March 27, 2020 to January 1, 2021.
Removed
In total, AdaptHealth deferred $8.6 million under this provision, and paid $4.3 million on January 4, 2022 and $4.3 million on December 14, 2022. There are no further amounts due under this provision as of December 31, 2022.
Removed
While the impact of the COVID-19 pandemic, the National Emergency Declaration and the various state and local government imposed stay-at-home restrictions did not have a material impact on AdaptHealth's consolidated operating results initially, AdaptHealth experienced declines in net revenue in 2021 and 2020 in certain services associated with elective medical procedures (such as commencement of new CPAP services and medical equipment and orthopedic supply related to facility discharges).
Removed
Offsetting these declines in net revenue, AdaptHealth experienced an increase in net revenue in 2021 and 2020 related to increased demand for certain respiratory products (such as oxygen), increased sales in its resupply businesses (primarily as a result of the increased ability to contact patients at home as a result of state and local government imposed stay-at-home orders) and the one-time sale of certain respiratory equipment (primarily ventilators, bi-level PAP devices and oxygen concentrators) to hospitals and local health agencies.
Removed
Additionally, the suspension of Medicare sequestration (which had resulted in an approximate 2% increase in Medicare payments to all providers through March 31, 2022 and a 1% increase from April 1, 2022 through June 30, 2022), and regulatory guidance from CMS expanding telemedicine and reducing documentation requirements during the public health emergency period, resulted in increased net revenues for certain products and services.
Removed
However, Medicare sequestration has resumed on July 1, 2022 and will result in a reduction of 2% applied to all Medicare Fee-for-Service claims, which will negatively affect AdaptHealth's net revenue. On January 30, 2023, President Biden announced the intent to end the public health emergency on May 11, 2023.
Removed
Impact of Inflation Current and future inflationary effects may be driven by, among other things, general inflationary cost increases, supply chain disruptions and governmental stimulus or fiscal policies. The cost to manufacture and distribute the equipment and products that AdaptHealth provides to patients is influenced by the cost of materials, labor, and transportation, including fuel costs.
Removed
AdaptHealth has recently experienced inflationary pressure and higher costs as a result of the increasing cost of materials, labor and transportation. The increase in the cost of equipment and products is due in part to a shortage in the availability of certain products, the higher cost of shipping, and general inflationary cost increases.
Removed
Additionally, it is not certain that AdaptHealth will be able to pass increased costs onto customers to offset inflationary pressures.
Removed
Continuing increases in inflation could impact the overall demand for AdaptHealth's products and services, its costs for labor, equipment and products, and the margins it is able to realize on its products, all of which could have an adverse impact on AdaptHealth's business, financial position, results of operations and cash flows.
Removed
In addition, future volatility of general price inflation and the impact of inflation on costs and availability of materials, costs for shipping and warehousing and other operational overhead could adversely affect AdaptHealth's financial results. Although there have been recent increases in inflation, AdaptHealth cannot predict whether these trends will continue.
Removed
AdaptHealth's primary mitigation efforts relating to these inflationary pressures include utilizing AdaptHealth's purchasing power in negotiations with vendors and the increased use of technology to drive operating efficiencies and control costs, such as AdaptHealth's digital platform for prescriptions, orders and delivery. Key Components of Operating Results Net Revenue .
Removed
Net revenue is recorded for services that AdaptHealth provides to patients for home healthcare equipment, medical supplies to the home and related services.
Removed
AdaptHealth' s primary service lines are (i) sleep therapy equipment, supplies and related services (including CPAP and bi PAP services) to individuals suffering from OSA, (ii) medical devices and supplies to patients for the treatment of diabetes (including continuous glucose monitors and insulin pumps), (iii) home medical equipment to patients discharged from acute care and other facilities, (iv) oxygen and related chronic therapy services in the home, and (v) other HME devices and supplies on behalf of chronically ill patients with wound care, urological, incontinence, ostomy and nutritional supply needs.
Removed
Revenues are recorded either (x) at a point in time for the sale of supplies and disposables, or (y) over the service period for equipment rental (including, but not limited to, CPAP machines, hospital beds, wheelchairs and other equipment), at amounts estimated to be received from patients or under reimbursement arrangements with Medicare, Medicaid and other third-party payors, including private insurers.
Removed
Certain trends or uncertainties that may have a material impact on revenue growth and operating results include the Company's ability to obtain new patient starts and to generate referrals from patient referral sources and the ability to meet the increased demand considering supply chain issues and inflationary pressures. 39 Ta bl e of Contents Cost of Net Revenue.
Removed
Cost of net revenue primarily includes the cost of non-capitalized medical equipment and supplies, distribution expenses, labor costs, facilities rental costs, revenue cycle management costs and depreciation for capitalized patient equipment. Distribution expenses represent the cost incurred to coordinate and deliver products and services to the patients.
Removed
Included in distribution expenses are leasing, maintenance, licensing and fuel costs for the vehicle fleet; salaries, benefits and other costs related to drivers and dispatch personnel; and amounts paid to couriers. General and Administrative Expenses.
Removed
General and administrative expenses consist of corporate support costs including information technology, human resources, finance, contracting, legal, compliance, equity-based compensation, transaction expenses and other administrative costs. Depreciation and Amortization, Excluding Patient Equipment Depreciation. Depreciation expense includes depreciation charges for capital assets other than patient equipment (which is included as part of the cost of net revenue).
Removed
Amortization expense includes amortization of identifiable intangible assets.
Removed
Factors Affecting AdaptHealth’s Operating Results AdaptHealth’s operating results and financial performance are influenced by certain unique events during the periods discussed herein, including the following: Acquisitions AdaptHealth accounts for its acquisitions in accordance with Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 805, Business Combinations , and the operations of the acquired entities are included in the historical results of AdaptHealth for the periods following the closing of the acquisition.
Removed
Refer to Note 3, Acquisitions , included in our consolidated financial statements for the year ended December 31, 2022 included in this Annual Report on Form 10-K for additional information regarding AdaptHealth’s acquisitions. Debt In August 2021, AdaptHealth issued $600.0 million aggregate principal amount of 5.125% senior unsecured notes (the “5.125% Senior Notes”).
Removed
The 5.125% Senior Notes will mature on March 1, 2030. Interest on the 5.125% Senior Notes is payable on March 1st and September 1st of each year, beginning on March 1, 2022. In January 2021, AdaptHealth issued $500.0 million aggregate principal amount of 4.625% senior unsecured notes (the “4.625% Senior Notes”).
Removed
The 4.625% Senior Notes will mature on August 1, 2029. Interest on the 4.625% Senior Notes is payable on February 1st and August 1st of each year, beginning on August 1, 2021. In July 2020, AdaptHealth issued $350.0 million aggregate principal amount of 6.125% senior unsecured notes (the “6.125% Senior Notes”).
Removed
The 6.125% Senior Notes will mature on August 1, 2028. Interest on the 6.125% Senior Notes is payable on February 1st and August 1st of each year, beginning on February 1, 2021. Refer to the section below, titled Liquidity and Capital Resources , for additional discussion related to AdaptHealth’s senior unsecured notes.
Removed
In January 2021, AdaptHealth refinanced its debt borrowings and entered into a new credit agreement with its existing bank group, which was subsequently amended in April 2021 (the “2021 Credit Agreement”). Refer to the section below, titled Liquidity and Capital Resources , for additional discussion related to the 2021 Credit Agreement.
Removed
In July 2020, AdaptHealth refinanced its then current debt borrowings and entered into a new credit agreement with a new bank group (the “2020 Credit Agreement”). The 2020 Credit Agreement consisted of a $250 million secured term loan (the “2020 Term Loan”) and $200 million in commitments for revolving credit loans.
Removed
The amount borrowed under the 2020 Term Loan bore interest quarterly at variable rates based upon the sum of (a) the Adjusted LIBOR Rate (subject to a floor) equal to the LIBOR (as defined in the 2020 Credit Agreement) for the applicable interest period, plus (b) an applicable margin ranging from 2.50% to 3.75% per annum based on the Consolidated Total Leverage Ratio (as defined in the 2020 Credit Agreement).
Removed
Outstanding amounts borrowed under the 2020 Credit Agreement were repaid in full in connection with the January 2021 refinancing transaction discussed above. In March 2019, AdaptHealth entered into a Note and Unit Purchase Agreement with an investor. Pursuant to the agreement, AdaptHealth issued a promissory note with a principal amount of $100 million (the "Promissory Note").
Removed
In November 2019, the Promissory Note was replaced with a new amended and restated promissory note with a principal amount of $100 million, and the investor converted certain of its members’ interests to a $43.5 million promissory note.
Removed
The new $100 million promissory note, together with the $43.5 million promissory note, are collectively referred to herein 40 Ta bl e of Contents as the "New Promissory Note". In June 2021, AdaptHealth repaid $71.8 million of the outstanding principal balance under the New Promissory Note.
Removed
In August 2021, AdaptHealth repaid the remaining outstanding principal balance of $71.7 million under the New Promissory Note. The outstanding principal balance under the New Promissory Note bore interest at 12%. Seasonality AdaptHealth’s business experiences some seasonality.
Removed
Its patients are generally responsible for a greater percentage of the cost of their treatment or therapy during the early months of the year due to co-insurance, co-payments and deductibles, and therefore may defer treatment and services of certain therapies until meeting their annual deductibles.
Removed
In addition, changes to employer insurance coverage often go into effect at the beginning of each calendar year which may impact eligibility requirements and delay or defer treatment.
Removed
Also, net revenue generated by the Company’s diabetes product line is typically higher in the fourth quarter compared to the earlier part of the year due to the timing of when patients meet their annual deductibles and their associated reordering patterns.
Removed
These factors may lead to lower net revenue and cash flow in the early part of the year versus the latter half of the year. Additionally, the increased incidence of respiratory infections during the winter season may result in initiation of additional respiratory services such as oxygen therapy for certain patient populations.
Removed
AdaptHealth’s quarterly operating results may fluctuate significantly in the future depending on these and other factors. Key Business Metrics AdaptHealth focuses on net revenue, EBITDA, Adjusted EBITDA and Free Cash Flow as it reviews its performance. Total net revenue is comprised of net sales revenue and net revenue from fixed monthly equipment reimbursements, less implicit price concessions.
Removed
Net sales revenue consists of revenue recognized at a point in time for the sale of supplies and disposables. Net revenue from fixed monthly equipment reimbursements consists of revenue 41 Ta bl e of Contents recognized over the service period for equipment (including, but not limited to, CPAP machines, oxygen concentrators, ventilators, hospital beds, wheelchairs and other equipment).
Removed
Three Months Ended Net Revenue March 31, 2022 June 30, 2022 September 30, 2022 December 31, 2022 (in thousands, except revenue percentage, "%") $ % $ % $ % $ % Total $ % (Unaudited) Net sales revenue - Point in time Sleep $ 192,335 27.2 % $ 194,693 26.8 % $ 198,206 26.2 % $ 208,787 26.8 % $ 794,021 26.7 % Diabetes 151,359 21.4 % 162,259 22.3 % 169,075 22.3 % 188,295 24.1 % 670,988 22.6 % Supplies to the home 39,865 5.6 % 43,881 6.0 % 47,793 6.3 % 47,787 6.1 % 179,326 6.0 % Respiratory 8,145 1.2 % 7,891 1.1 % 9,734 1.3 % 8,572 1.1 % 34,342 1.2 % HME 30,052 4.3 % 30,313 4.2 % 29,463 3.9 % 28,714 3.7 % 118,542 4.0 % Other 54,199 7.7 % 53,617 7.3 % 58,252 7.7 % 52,393 6.7 % 218,461 7.4 % Total Net sales revenue $ 475,955 67.4 % $ 492,654 67.7 % $ 512,523 67.7 % $ 534,548 68.5 % $ 2,015,680 67.9 % Net revenue from fixed monthly equipment reimbursements Sleep $ 57,938 8.2 % $ 65,661 9.0 % $ 72,423 9.6 % $ 76,683 9.8 % $ 272,705 9.2 % Diabetes 3,946 0.6 % 4,034 0.6 % 4,211 0.6 % 3,912 0.5 % 16,103 0.5 % Respiratory 132,580 18.8 % 128,865 17.7 % 130,618 17.3 % 128,634 16.5 % 520,697 17.5 % HME 25,725 3.6 % 25,547 3.5 % 25,482 3.4 % 25,502 3.3 % 102,256 3.4 % Other 10,059 1.4 % 10,853 1.5 % 11,238 1.4 % 11,004 1.4 % 43,154 1.5 % Total Net revenue from fixed monthly equipment reimbursements $ 230,248 32.6 % $ 234,960 32.3 % $ 243,972 32.3 % $ 245,735 31.5 % $ 954,915 32.1 % Total net revenue Sleep $ 250,273 35.4 % $ 260,354 35.8 % $ 270,629 35.8 % $ 285,470 36.6 % $ 1,066,726 35.9 % Diabetes 155,305 22.0 % 166,293 22.9 % 173,286 22.9 % 192,207 24.6 % 687,091 23.1 % Supplies to the home 39,865 5.6 % 43,881 6.0 % 47,793 6.3 % 47,787 6.1 % 179,326 6.0 % Respiratory 140,725 20.0 % 136,756 18.8 % 140,352 18.6 % 137,206 17.6 % 555,039 18.7 % HME 55,777 7.9 % 55,860 7.7 % 54,945 7.3 % 54,216 7.0 % 220,798 7.4 % Other 64,258 9.1 % 64,470 8.8 % 69,490 9.1 % 63,397 8.1 % 261,615 8.9 % Total Net revenue $ 706,203 100 % $ 727,614 100 % $ 756,495 100 % $ 780,283 100 % $ 2,970,595 100 % 42 Ta bl e of Contents Three Months Ended Net Revenue March 31, 2021 June 30, 2021 September 30, 2021 December 31, 2021 (in thousands, except revenue percentage, "%") $ % $ % $ % $ % Total $ % (Unaudited) Net sales revenue - Point in time Sleep $ 128,682 26.7 % $ 163,331 26.5 % $ 173,359 26.5 % $ 188,758 26.9 % $ 654,130 26.6 % Diabetes 95,017 19.7 % 123,314 20.0 % 134,228 20.5 % 175,523 25.0 % 528,082 21.5 % Supplies to the home 41,363 8.6 % 42,675 6.9 % 42,441 6.5 % 41,351 5.9 % 167,830 6.8 % Respiratory 5,621 1.2 % 13,154 2.1 % 6,228 1.0 % 6,013 0.9 % 31,016 1.3 % HME 23,401 4.9 % 29,268 4.7 % 29,919 4.6 % 31,217 4.4 % 113,805 4.6 % Other 23,181 4.7 % 28,855 4.7 % 45,996 7.1 % 46,511 6.6 % 144,543 6.0 % Total Net sales revenue $ 317,265 65.8 % $ 400,597 64.9 % $ 432,171 66.2 % $ 489,373 69.7 % $ 1,639,406 66.8 % Net revenue from fixed monthly equipment reimbursements Sleep $ 48,109 10.0 % $ 66,335 10.8 % $ 62,755 9.6 % $ 60,053 8.6 % $ 237,252 9.7 % Diabetes 2,853 0.6 % 3,216 0.5 % 3,722 0.6 % 3,332 0.5 % 13,123 0.5 % Respiratory 83,454 17.3 % 111,528 18.1 % 117,918 18.0 % 114,370 16.3 % 427,270 17.4 % HME 20,380 4.2 % 24,431 4.0 % 26,043 4.0 % 25,082 3.6 % 95,936 3.9 % Other 10,058 2.1 % 10,910 1.7 % 10,684 1.6 % 9,896 1.3 % 41,548 1.7 % Total Net revenue from fixed monthly equipment reimbursements $ 164,854 34.2 % $ 216,420 35.1 % $ 221,122 33.8 % $ 212,733 30.3 % $ 815,129 33.2 % Total Net revenue Sleep $ 176,791 36.7 % $ 229,666 37.3 % $ 236,114 36.1 % $ 248,811 35.5 % $ 891,382 36.3 % Diabetes 97,870 20.3 % 126,530 20.5 % 137,950 21.1 % 178,855 25.5 % 541,205 22.0 % Supplies to the home 41,363 8.6 % 42,675 6.9 % 42,441 6.5 % 41,351 5.9 % 167,830 6.8 % Respiratory 89,075 18.5 % 124,682 20.2 % 124,146 19.0 % 120,383 17.2 % 458,286 18.7 % HME 43,781 9.1 % 53,699 8.7 % 55,962 8.6 % 56,299 8.0 % 209,741 8.5 % Other 33,239 6.8 % 39,765 6.4 % 56,680 8.7 % 56,407 7.9 % 186,091 7.7 % Total Net revenue $ 482,119 100 % $ 617,017 100 % $ 653,293 100 % $ 702,106 100 % $ 2,454,535 100 % 43 Ta bl e of Contents Three Months Ended Net Revenue March 31, 2020 June 30, 2020 September 30, 2020 December 31, 2020 (in thousands, except revenue percentage, "%") $ % $ % $ % $ % Total $ % (Unaudited) Net sales revenue - Point in time Sleep $ 68,894 36.0 % $ 84,421 36.4 % $ 74,655 26.2 % $ 84,890 24.4 % $ 312,860 29.6 % Diabetes 5,307 2.8 % 6,372 2.7 % 52,887 18.6 % 94,924 27.2 % 159,490 15.1 % Supplies to the home 28,032 14.6 % 27,868 12.0 % 44,579 15.7 % 45,145 13.0 % 145,624 13.8 % Respiratory 2,768 1.4 % 18,114 7.8 % 5,152 1.8 % 2,571 0.7 % 28,605 2.7 % HME 11,579 6.0 % 12,727 5.5 % 14,998 5.3 % 18,725 5.4 % 58,029 5.5 % Other 12,393 6.6 % 11,463 4.9 % 14,869 5.2 % 15,964 4.6 % 54,689 5.2 % Total Net sales revenue $ 128,973 67.4 % $ 160,965 69.3 % $ 207,140 72.8 % $ 262,219 75.3 % $ 759,297 71.9 % Net revenue from fixed monthly equipment reimbursements Sleep $ 22,669 11.8 % $ 22,644 9.8 % $ 24,971 8.8 % $ 28,077 8.1 % $ 98,361 9.3 % Diabetes — — % — — % 946 0.3 % 1,521 0.4 % 2,467 0.2 % Respiratory 25,007 13.1 % 30,856 13.3 % 32,269 11.3 % 35,728 10.3 % 123,860 11.7 % HME 12,177 6.4 % 13,262 5.7 % 14,256 5.0 % 16,152 4.6 % 55,847 5.3 % Other 2,613 1.3 % 4,389 1.9 % 4,823 1.8 % 4,732 1.3 % 16,557 1.6 % Total Net revenue from fixed monthly equipment reimbursements $ 62,466 32.6 % $ 71,151 30.7 % $ 77,265 27.2 % $ 86,210 24.7 % $ 297,092 28.1 % Total Net revenue Sleep $ 91,563 47.8 % $ 107,065 46.2 % $ 99,626 35.0 % $ 112,967 32.5 % $ 411,221 38.9 % Diabetes 5,307 2.8 % 6,372 2.7 % 53,833 18.9 % 96,445 27.6 % 161,957 15.3 % Supplies to the home 28,032 14.6 % 27,868 12.0 % 44,579 15.7 % 45,145 13.0 % 145,624 13.8 % Respiratory 27,775 14.5 % 48,970 21.1 % 37,421 13.1 % 38,299 11.0 % 152,465 14.4 % HME 23,756 12.4 % 25,989 11.2 % 29,254 10.3 % 34,877 10.0 % 113,876 10.8 % Other 15,006 7.9 15,852 6.8 % 19,692 7.0 % 20,696 5.9 % 71,246 6.8 % Total Net revenue $ 191,439 100 % $ 232,116 100 % $ 284,405 100 % $ 348,429 100 % $ 1,056,389 100 % 44 Ta bl e of Contents Results of Operations Comparison of Year Ended December 31, 2022 and Year Ended December 31, 2021.
Removed
The following table summarizes AdaptHealth’s consolidated results of operations for the years ended December 31, 2022 and 2021: (in thousands, except percentages) Year Ended December 31, 2022 2021 Dollars Revenue Percentage Dollars Revenue Percentage Increase/(Decrease) Dollars Percentage (Unaudited) Net revenue $ 2,970,595 100.0 % $ 2,454,535 100.0 % $ 516,060 21.0 % Grant income — — % 10,595 0.4 % (10,595) (100.0) % Costs and expenses: Cost of net revenue 2,553,169 85.9 % 2,008,925 81.8 % 544,244 27.1 % General and administrative expenses 162,125 5.5 % 167,505 6.8 % (5,380) (3.2) % Depreciation and amortization, excluding patient equipment depreciation 64,890 2.2 % 63,095 2.6 % 1,795 2.8 % Total costs and expenses 2,780,184 93.6 % 2,239,525 91.2 % 540,659 24.1 % Operating income 190,411 6.4 % 225,605 8.8 % (35,194) (15.6) % Interest expense, net 109,414 3.7 % 95,195 3.9 % 14,219 14.9 % Change in fair value of warrant liability (17,158) (0.6) % (53,181) (2.2) % 36,023 (67.7) % Change in fair value of contingent consideration common shares liability — — % (29,389) (1.2) % 29,389 (100.0) % Loss on extinguishment of debt — — % 20,189 0.8 % (20,189) (100.0) % Other loss, net 253 — % 1,832 0.1 % (1,579) (86.2) % Income before income taxes 97,902 3.3 % 190,959 7.4 % (93,057) (48.7) % Income tax expense 24,769 0.8 % 32,806 1.3 % (8,037) (24.5) % Net income 73,133 2.5 % 158,153 6.1 % (85,020) (53.8) % Income attributable to noncontrolling interests 3,817 0.1 % 1,978 0.1 % 1,839 93.0 % Net income attributable to AdaptHealth Corp. $ 69,316 2.4 % $ 156,175 6.0 % $ (86,859) (55.6) % Net Revenue.
Removed
The comparability of AdaptHealth's net revenue between periods was impacted by certain factors as described below. The table below presents the items that impacted the change in AdaptHealth's net revenue between periods.
Removed
Variance 2022 vs. 2021 (in thousands, except percentages) $ % (Unaudited) Revenue change driver: Increase from acquisitions $ 439,817 17.9 % Increase from non-acquired growth 86,359 3.5 % Decrease in business to business revenue (10,116) (0.4) % Total change in net revenue $ 516,060 21.0 % 45 Ta bl e of Contents Net revenue for the years ended December 31, 2022 and 2021 was $2,970.6 million and $2,454.5 million, respectively, an increase of $516.1 million or 21.0%.
Removed
The increase in net revenue was primarily driven by acquisitions, which increased net revenue by $439.8 million, and an increase of $86.4 million related to non-acquired growth. Additionally, net revenue during the years ended December 31, 2022 and 2021 were negatively impacted by a recall of certain ventilator, BiPAP, and CPAP devices supplied to AdaptHealth by Philips Respironics ("Philips)".
Removed
On June 14, 2021, AdaptHealth received notice from Philips that these devices would be included in a Philips voluntary recall due to potential health risks to patients.
Removed
It was not possible to purchase these products from Philips, which led to shortages in the supply chain, and other suppliers were unable to meet the strong patient demand for these products, which materially affected AdaptHealth’s ability to service patient demand for these devices during the year ended December 31, 2021.
Removed
During 2022, there was improved ability to purchase these products from alternative suppliers but continued shortages in the supply chain materially impacted AdaptHealth's ability to service patient demand for these devices.
Removed
For the year ended December 31, 2022, net sales revenue (recognized at a point in time) comprised 68% of total net revenue, compared to 67% of total net revenue for the year ended December 31, 2021.
Removed
For the year ended December 31, 2022, net revenue from fixed monthly equipment reimbursements comprised 32% of total net revenue, compared to 33% of total net revenue for the year ended December 31, 2021. Grant income. Grant income for the year ended December 31, 2021 related to the recognition of amounts received under the CARES Act provider relief funds. See

Item 7. Management's Discussion & Analysis

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

78 edited+100 added−90 removed35 unchanged
Biggest changeNet cash provided by financing activities for 2020 was $643.2 million and consisted of proceeds of $591.3 million from borrowings on long-term debt and lines of credit, proceeds of $350.0 million from the issuance of senior unsecured notes, proceeds of $225.0 million from the sale of shares of Class A Common Stock and Preferred Stock in connection with private placement transactions, proceeds of $142.6 million from the issuance of shares of Class A Common Stock in connection with a public underwritten offering, proceeds of $24.5 million from the exercise of warrants, and proceeds of $0.1 million in connection with the employee stock purchase plan, offset by total repayments of $586.5 million on long-term debt and capital lease obligations, payments of $11.7 million for equity issuance costs, payments of $13.0 million for debt issuance costs, payments of $44.3 million in connection with the exchange of shares of Class B Common Stock for cash, payment of $29.9 million in connection with the Put/Call Agreement, distributions to noncontrolling interests of $0.8 million, payments of $4.0 million for contingent consideration and deferred purchase price related to acquisitions, and payments of $0.1 million relating to tax withholdings associated with equity-based compensation activity.
Biggest changeNet cash used in financing activities for 2023 was $92.5 million and consisted of repayments of $101.8 million on long-term debt and finance lease liabilities, payments of $29.3 million for Common Stock purchases under a share repurchase program, payments of $3.2 million in connection with the Company's liability relating to the TRA, payments of $5.8 million for tax withholdings associated with equity-based compensation and stock option exercises, a payment of $2.5 million for a distribution to the noncontrolling interest, and payments of $2.5 million for deferred purchase price in connection with acquisitions, offset by borrowings of long-term debt of $50.0 million, proceeds of $2.0 million in connection with the employee stock purchase plan and proceeds of $0.6 million relating to stock option exercises.
The increase was the result of (1) a $85.0 million reduction in net income, (2) a net increase of $139.4 million in non-cash charges, primarily from depreciation and amortization, the change in the estimated fair value of the warrant liability and contingent consideration common shares liability, equity-based compensation expense, and loss on extinguishment of debt, (3) an increase of $1.5 million in payments for contingent consideration related to acquisitions, and (4) a net $45.3 million increase resulting from the change in operating assets and liabilities, primarily from the change in accounts receivable, inventory and accounts payable and accrued expenses.
The increase was the result of (1) a $85.0 million reduction in net income, (2) a net increase of $139.4 million in non-cash charges, primarily from depreciation and amortization, the change in the estimated fair value of the warrant liability and contingent consideration common shares liability, equity-based compensation expense, and loss on extinguishment of debt, (3) an increase of $1.5 million in payments for contingent consideration related to acquisitions, and (4) a net $45.3 million resulting from the change in operating assets and liabilities, primarily from the change in accounts receivable, inventory and accounts payable and accrued expenses.
Critical Accounting Policies and Critical Estimates The discussion and analysis of the Company’s financial condition and results of operations is based upon the Company’s consolidated financial statements, which have been prepared in accordance with U.S. GAAP.
Critical Accounting Policies and Estimates The discussion and analysis of the Company’s financial condition and results of operations is based upon the Company’s consolidated financial statements, which have been prepared in accordance with U.S. GAAP.
(f) The 2022 period consists of $11.7 million of consulting expenses associated with systems implementation activities and post-implementation support services, $10.5 million of expenses associated with litigation, a $0.8 million loss related to the write-off of an investment, and $3.9 million of net other non-recurring expenses, offset by income of $2.9 million related to changes in AdaptHealth’s estimated TRA liability.
The 2022 period consists of $11.7 million of consulting expenses associated with systems implementation activities and post-implementation support services, $10.5 million of expenses associated with litigation, a $0.8 million loss related to the write-off of an investment, and $3.9 million of net other non-recurring expenses, offset by income of $2.9 million related to changes in AdaptHealth’s estimated TRA liability.
Mandatory prepayments are required under the 2021 Revolver when borrowings and letter of credit usage exceed the total commitments for revolving credit loans. Mandatory prepayments are also required in connection with the disposition of assets to the extent not reinvested, unpermitted debt transactions, and excess cash flow, as defined, if certain leverage tests are not met.
Mandatory prepayments are required under the 2021 Revolver when borrowings and letter of credit usage exceed the total commitments for revolving credit loans. Mandatory prepayments are also required in connection with the disposition of assets to the extent not reinvested, unpermitted debt transactions, and calculation of excess cash flow, as defined, if certain leverage tests are not met.
The reduction in free cash flow was primarily due to higher net cash provided by operating activities due to an increase in the source of cash for improved results from operations, offset by an increase in, and timing of, purchases of patient medical equipment for operating requirements.
The reduction in free cash flow was primarily due to an increase in, and timing of, purchases of patient medical equipment for operating requirements, partially offset by higher net cash provided by operating activities due to an increase in the source of cash for improved results from operations.
The Derivative Complaint seeks, among other things, an award of money damages. On March 4, 2022, the parties stipulated to stay the Hessler action pending final resolution of the Consolidated Class Action. On March 7, 2022, the court so-ordered the parties’ stipulation.
The Derivative Complaint seeks, among other things, an award of money damages. On March 4, 2022, the parties to the Derivative Action stipulated to stay the Derivative Action pending final resolution of the Consolidated Class Action. On March 7, 2022, the court so-ordered the parties’ stipulation.
Critical accounting policies and critical estimates are those that the Company’s management considers the most important to the portrayal of the Company’s financial condition and results of operations because they require management’s most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain.
Critical estimates are those that the Company’s management considers the most important to the portrayal of the Company’s financial condition and results of operations because they require management’s most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain.
Net cash provided by financing activities for 2021 was $1,598.7 million and consisted of proceeds of $1,165.0 million from borrowings on long-term debt and lines of credit, proceeds of $1,100.0 million from the issuance of senior unsecured notes, proceeds of $278.9 million from the issuance of shares of Common Stock in connection with a public underwritten offering, proceeds of $12.3 million from the exercise of stock options, and proceeds of $1.0 million in connection with the employee stock purchase plan, offset by total repayments of $869.4 million on long-term debt and 55 Ta bl e of Contents finance lease obligations, payments of $13.8 million for equity issuance costs, payments of $29.2 million for debt issuance costs, payments of $25.2 million for contingent consideration and deferred purchase price related to acquisitions, payments of $16.1 million for debt prepayment penalties, payments of $1.1 million for distributions to noncontrolling interests, and payments of $3.6 million relating to tax withholdings associated with equity-based compensation activity and stock option exercises.
Net cash provided by financing activities for 2021 was $1,598.7 million and consisted of proceeds of $1,165.0 million from borrowings on long-term debt and lines of credit, proceeds of $1,100.0 million from the issuance of senior unsecured notes, proceeds of $278.9 million from the issuance of shares of Common Stock in connection with a public underwritten offering, proceeds of $12.3 million from the exercise of stock options, and proceeds of $1.0 million in connection with the employee stock purchase plan, offset by total repayments of $869.4 million on long-term debt and finance lease obligations, payments of $13.8 million for equity issuance costs, payments of $29.2 million for debt issuance costs, payments of $25.2 million for contingent consideration and deferred purchase price related to acquisitions, payments of $16.1 million for debt prepayment penalties, payments of $1.1 million for distributions to noncontrolling interests, and payments of $3.6 million relating to tax withholdings associated with equity-based compensation activity and stock option exercises.
As a result, there can be no assurance that the estimates and assumptions made for purposes of the annual goodwill impairment test will prove to be accurate predictions of the future.
As a result, there can be no assurance that the estimates and assumptions made for purposes of the annual or interim goodwill impairment test will prove to be accurate predictions of the future.
Valuation of Goodwill The Company has a significant amount of goodwill on its balance sheet that resulted from the business acquisitions the Company has made. Goodwill is not amortized and is assessed for impairment annually and upon the occurrence of a triggering event or change in circumstances indicating a possible impairment.
Valuation of Goodwill The Company has a significant amount of goodwill on its balance sheet that resulted from the business acquisitions the Company has made. Goodwill is not amortized, rather, it is assessed for impairment annually and also upon the occurrence of a triggering event or change in circumstances indicating a possible impairment.
In January 2021, AdaptHealth refinanced its debt borrowings and entered into a new credit agreement, which was subsequently amended in April 2021 (the “2021 Credit Agreement”).
Debt In January 2021, AdaptHealth refinanced its debt borrowings and entered into a new credit agreement, which was subsequently amended in April 2021 and March 2023 (the “2021 Credit Agreement”).
AdaptHealth defines free cash flow as net cash provided by operating activities less cash paid for purchases of equipment and other fixed assets. For further discussion on free cash flow, including a reconciliation from cash flows provided by operating activities, refer to Liquidity and Capital Resources - Free Cash Flow below.
AdaptHealth defines free cash flow as net cash provided by operating activities less cash paid for purchases of equipment and other fixed assets. For further discussion on free cash flow, including a reconciliation from cash flows provided by operating activities, see Liquidity and Capital Resources - Free Cash Flow below.
The Company reviews its accruals at least quarterly and adjusts accordingly to reflect the impact of negotiations, settlements, rulings, advice of legal counsel, and updated information. At this time, the Company has no material accruals related to lawsuits, claims, investigations and proceedings.
The Company reviews its accruals at least quarterly and adjusts accordingly to reflect the impact of negotiations, settlements, rulings, advice of legal counsel, and updated information. At this time, the Company has no material accruals related to lawsuits, claims, investigations and proceedings, except as disclosed below.
AdaptHealth’s future capital expenditure requirements will depend on many factors, including its patient volume and revenue growth rates. AdaptHealth’s capital expenditures are made in advance of patients beginning service. Certain operating costs are incurred at the beginning of the equipment service period and during initial patient set up.
AdaptHealth’s future capital expenditure requirements will depend on many factors, including its patient volume and revenue growth rates. 48 Table of Con t ents AdaptHealth’s capital expenditures are made in advance of patients beginning service. Certain operating costs are incurred at the beginning of the equipment service period and during initial patient set up.
AdaptHealth believes that its expected operating cash flows, together with its existing cash, cash equivalents, and amounts available under its existing credit agreement, will continue to be sufficient to fund its operations and growth strategies for at least the next twelve months. 52 Ta bl e of Contents AdaptHealth may seek additional equity or debt financing in connection with the growth of its business, primarily for acquisitions.
AdaptHealth believes that its expected operating cash flows, together with its existing cash and amounts available under its existing credit agreement, will continue to be sufficient to fund its operations and growth strategies for at least the next twelve months. AdaptHealth may seek additional equity or debt financing in connection with the growth of its business, primarily for acquisitions.
The Company intends to vigorously defend against the allegations contained in the Consolidated Complaint, but there can be no assurance that the defense will be successful.
The Company intends to vigorously defend against the allegations contained in the Allegheny County Complaint, but there can be no assurance that the defense will be successful.
AdaptHealth defines EBITDA as net income (loss) attributable to AdaptHealth Corp., plus net income (loss) attributable to noncontrolling interests, interest expense, net, income tax expense (benefit), and depreciation and amortization.
AdaptHealth defines EBITDA as net income (loss) attributable to AdaptHealth Corp., plus net income (loss) attributable to noncontrolling interests, interest expense, net, income tax expense (benefit), and depreciation and amortization, including patient equipment depreciation.
Furthermore, AdaptHealth may be required to make an offer to purchase the 6.125% Senior Notes upon the sale of certain assets or upon specific kinds of changes of control. As of December 31, 2022 and 2021, AdaptHealth had working capital of $129.1 million and $170.2 million, respectively.
Furthermore, AdaptHealth may be required to make an offer to purchase the 6.125% Senior Notes upon the sale of certain assets or upon specific kinds of changes of control. As of December 31, 2023 and 2022, AdaptHealth had working capital of $112.0 million and $129.1 million, respectively.
Interest on the 4.625% Senior Notes is payable on February 1st and August 1st of each year, beginning on August 1, 2021.
Interest on the 4.625% Senior Notes is payable on February 1st and August 1st of each year.
Interest on the 6.125% Senior Notes is payable on February 1st and August 1st of each year, beginning on February 1, 2021.
Interest on the 6.125% Senior Notes is payable on February 1st and August 1st of each year.
Accordingly, the Company’s assessment may change in the future based upon availability of new information and further developments in the proceedings of such matters. The results of legal proceedings are inherently uncertain, and material adverse outcomes are possible.
Accordingly, the Company’s assessment may change in the future based upon availability of new information and further developments in the proceedings of such matters. The results of legal proceedings are inherently uncertain, and material adverse outcomes are possible. Professional legal fees are expensed as they are incurred.
AdaptHealth's presentation of free cash flow should not be construed as a measure of liquidity or discretionary cash available to AdaptHealth to fund its cash needs, including investing in the growth of its business and meeting its obligations.
AdaptHealth's presentation of free cash flow should not be construed as a measure of liquidity or discretionary cash available to AdaptHealth to fund its cash needs, including investing in the growth of its business and meeting its obligations. Free cash flow should not be considered as a measure of financial performance under U.S. GAAP.
A significant portion of AdaptHealth’s assets consists of accounts receivable from third-party payors that are responsible for payment for the products and services that AdaptHealth provides. 54 Ta bl e of Contents Cash Flow.
A significant portion of AdaptHealth’s current assets consists of accounts receivable from third-party payors that are responsible for payment for the products and services that AdaptHealth provides. Cash Flow.
AdaptHealth defines Adjusted EBITDA as EBITDA (as defined above), plus loss on extinguishment of debt, equity-based compensation expense, transaction costs, change in fair value of the warrant liability, change in fair value of the contingent consideration common shares liability, and certain other non-recurring items of expense or income.
AdaptHealth defines Adjusted EBITDA as EBITDA (as defined above), plus loss on extinguishment of debt, equity-based compensation expense, transaction costs, change in fair value of the warrant liability, goodwill impairment, 46 Table of Con t ents change in fair value of the contingent consideration common shares liability, litigation settlement expense, and certain other non-recurring items of expense or income.
Net cash used in investing activities for the years ended December 31, 2022, 2021 and 2020 was $411.2 million, $1,824.8 million and $815.7 million, respectively. The use of funds in 2022 consisted of $19.0 million for business acquisitions, $391.4 million for equipment and other fixed asset purchases and $0.7 million for other investments.
Net cash used in investing activities for the years ended December 31, 2023, 2022 and 2021 was $357.3 million, $411.2 million and $1,824.8 million, respectively. The use of funds in 2023 consisted of $337.5 million for equipment and other fixed asset purchases, $19.7 million for business acquisitions, and $0.1 million for other investments.
The Company is fully cooperating with the investigation. Given the investigation is in the early stages, it is not possible to determine whether it will have a material adverse effect on the Company.
The Company is fully cooperating with the investigation. Given the stage of the investigation, it is not possible to determine whether it will have a material adverse effect on the Company.
The 2021 Credit Agreement also contains certain customary events of default, including, among other things, failure to make payments when due thereunder, failure to observe or perform certain covenants, cross-defaults, bankruptcy and insolvency-related events, and non-compliance with healthcare laws.
The 2021 Credit Agreement also contains certain customary events of default, including, among other things, failure to make payments when due thereunder, failure to observe or perform certain covenants, cross-defaults, bankruptcy and insolvency-related events, and non-compliance with healthcare laws. AdaptHealth was in compliance with the applicable covenants in the aforementioned credit facility as of December 31, 2023.
For the year ended December 31, 2021, net sales revenue (recognized at a point in time) comprised 67% of total net revenue, compared to 72% of total net revenue for the year ended December 31, 2020.
For the year ended December 31, 2023, net sales revenue (recognized at a point in time) comprised 67% of total net revenue, compared to 68% of total net revenue for the year ended December 31, 2022.
Borrowings under the 2021 Revolver may be used for working capital and other general corporate purposes, including for capital expenditures and acquisitions permitted under the 2021 Credit Agreement. As of December 31, 2022, there were no outstanding borrowings under the 2021 Revolver. As of the date of this filing, there was $25.0 million of outstanding borrowings under the 2021 Revolver.
Borrowings under the 2021 Revolver may be used for working capital and other general corporate purposes, including for capital expenditures and acquisitions permitted under the 2021 Credit Agreement. As of December 31, 2023, there were no outstanding borrowings under the 2021 Revolver.
In March 2019, prior to its acquisition by the Company, AeroCare was served with a civil investigative demand (CID) issued by the United States Attorney for the Western District of Kentucky ("WDKY"). The CID seeks to investigate allegations that AeroCare improperly billed, or caused others to improperly bill, for oxygen tank contents that were not delivered to beneficiaries.
(“AeroCare”) was served with a civil investigative demand (“CID”) issued by the United States Attorney for the Western District of Kentucky (“WDKY”). The CID sought to investigate allegations that AeroCare improperly billed, or caused others to improperly bill, for oxygen tank contents that were not delivered to beneficiaries.
Income tax expense for the year ended December 31, 2022 was $24.8 million compared to income tax expense of $32.8 million for the year ended December 31, 2021.
Income Tax (Benefit) Expense. Income tax benefit for the year ended December 31, 2023 was $49.0 million compared to income tax expense of $24.8 million for the year ended December 31, 2022.
On October 14, 2021, the Delaware County Employees Retirement System and the Bucks County Employees Retirement System were named Lead Plaintiffs.
On October 14, 2021, the court appointed Delaware County Employees Retirement System and the Bucks County Employees Retirement System as Lead Plaintiffs.
These warrants are liability-classified, and the change in fair value of the warrant liability represents a non-cash gain in 2022 and 2021 for the change in the estimated fair value of such liability during the respective periods. Change in Fair Value of Contingent Consideration Common Shares Liability .
These warrants are liability-classified, and the change in fair value of the warrant liability represents a non-cash gain in 2023 and 2022 for the change in the estimated fair value of such liability during the respective periods. Other loss, net.
In accordance with FASB ASC Topic 450, Accounting 58 Ta bl e of Contents for Contingencies , the Company records accruals for such loss contingencies when it is probable that a liability has been incurred and the amount of loss can be reasonably estimated. Significant judgment is required to determine both probability and the estimated amount.
In accordance with FASB ASC Topic 450, Accounting for Contingencies , the Company records accruals for such loss contingencies when it is probable that a liability has been incurred and the amount of loss can be reasonably estimated.
Free Cash Flow The following table reconciles net cash provided by operating activities to free cash flow, which is a non-GAAP measure, for the years ended December 31, 2022, 2021 and 2020: Year Ended December 31, (in thousands) 2022 2021 2020 (Unaudited) Net cash provided by operating activities $ 373,867 $ 275,679 $ 195,634 Purchases of equipment and other fixed assets (391,423) (203,308) (39,755) Free cash flow $ (17,556) $ 72,371 $ 155,879 Free cash flow was negative $17.6 million for the year ended December 31, 2022, compared to positive $72.4 million and $155.9 million for the years ended December 31, 2021 and 2020, respectively.
Free Cash Flow The following table reconciles net cash provided by operating activities to free cash flow, which is a non-GAAP measure, for the years ended December 31, 2023, 2022 and 2021: 51 Table of Con t ents Year Ended December 31, (in thousands) 2023 2022 2021 (Unaudited) Net cash provided by operating activities $ 480,666 $ 373,867 $ 275,679 Purchases of equipment and other fixed assets (337,463) (391,423) (203,308) Free cash flow $ 143,203 $ (17,556) $ 72,371 Free cash flow was positive $143.2 million for the year ended December 31, 2023, compared to negative $17.6 million for the year ended December 31, 2022.
General and administrative expenses in 2022 included $6.0 million of transaction costs, $15.8 million of equity-based compensation 46 Ta bl e of Contents expense, and other non-recurring expenses of $19.7 million (including $11.7 million of consulting expenses associated with systems implementation activities and post-implementation support services and $7.4 million of legal fees associated with litigation).
General and administrative expenses in 2022 included $15.8 million of equity-based compensation expense, $6.0 million of transaction costs, and other non-recurring expenses of $19.7 million, primarily consisting of $11.7 million of consulting expenses associated with systems implementation activities and post-implementation support services and $7.4 million of expenses associated with litigation. Depreciation and amortization, excluding patient equipment depreciation.
Fair value determinations require considerable judgment and are sensitive to changes in underlying assumptions and factors, such as estimates of a reporting unit's fair value and judgment about impairment triggering events.
Fair value determinations require considerable judgment and are sensitive to changes in underlying assumptions and factors, such as estimates of a reporting unit's fair value, including the revenue growth rates, discount rate, and control premium used to estimate the reporting unit’s fair value, and judgment about impairment triggering events .
Net cash provided by operating activities for the years ended December 31, 2021 and 2020 was $275.7 million and $195.6 million, respectively, an increase of $80.1 million.
Net cash provided by operating activities for the years ended December 31, 2022 and 2021 was $373.9 million and $275.7 million, respectively, an increase of $98.2 million.
The following table presents selected data from AdaptHealth’s consolidated statements of cash flows for years ended December 31, 2022, 2021 and 2020: Year Ended December 31, (in thousands) 2022 2021 2020 (Unaudited) Net cash provided by operating activities $ 373,867 $ 275,679 $ 195,634 Net cash used in investing activities (411,171) (1,824,753) (815,703) Net cash (used in) provided by financing activities (66,051) 1,598,739 643,153 Net (decrease) increase in cash and cash equivalents (103,355) 49,665 23,084 Cash and cash equivalents at beginning of period 149,627 99,962 76,878 Cash and cash equivalents at end of period $ 46,272 $ 149,627 $ 99,962 Net cash provided by operating activities for the years ended December 31, 2022 and 2021 was $373.9 million and $275.7 million, respectively, an increase of $98.2 million.
The following table presents selected data from AdaptHealth’s consolidated statements of cash flows for years ended December 31, 2023, 2022 and 2021: Year Ended December 31, (in thousands) 2023 2022 2021 (Unaudited) Net cash provided by operating activities $ 480,666 $ 373,867 $ 275,679 Net cash used in investing activities (357,278) (411,171) (1,824,753) Net cash (used in) provided by financing activities (92,528) (66,051) 1,598,739 Net increase (decrease) in cash 30,860 (103,355) 49,665 Cash at beginning of period 46,272 149,627 99,962 Cash at end of period $ 77,132 $ 46,272 $ 149,627 50 Table of Con t ents Net cash provided by operating activities for the years ended December 31, 2023 and 2022 was $480.7 million and $373.9 million, respectively, an increase of $106.8 million.
Amounts borrowed under the 2021 Credit Agreement bear interest quarterly at variable rates based upon the sum of (a) the Adjusted LIBOR Rate (subject to a zero percent floor) equal to the LIBOR (as defined) for the applicable interest period multiplied by the statutory reserve rate, plus (b) an applicable margin (as defined) ranging from 1.50% to 3.25% per annum based on the Consolidated Senior Secured Leverage Ratio (as defined).
Amounts borrowed under the 2021 Credit Agreement bear interest quarterly at variable rates based upon, except in the case of Base Rate Loans (as defined), the sum of (a) the forward looking term rate based on a secured overnight financing rate ("Term SOFR") (subject to a zero percent floor) equal to Term SOFR plus a Term SOFR Adjustment (as defined) of 0.10%, plus (b) an Applicable Margin (as defined) ranging from 1.50% to 3.25% per annum based on the Consolidated Senior Secured Leverage Ratio (as defined).
The Company determines the transaction price based on contractually agreed-upon amounts or rates, adjusted for estimates of variable consideration, such as implicit price concessions. The Company utilizes the expected value method to determine the amount of variable consideration that should be included to arrive at the transaction price, using contractual agreements and historical reimbursement experience within each payor type.
The Company utilizes the expected value method to determine the amount of variable consideration, including implicit and explicit price concessions, that should be included to arrive at the transaction price, using contractual agreements and historical reimbursement experience within each payor type.
GAAP, to analyze its financial results and believes that they are useful to investors, as a supplement to U.S. GAAP measures. In addition, AdaptHealth’s ability to incur additional indebtedness and make investments under its existing credit agreement is governed, in part, by its ability to satisfy tests based on a variation of Adjusted EBITDA.
In addition, AdaptHealth’s ability to incur additional indebtedness and make investments under its existing credit agreement is governed, in part, by its ability to satisfy tests based on a variation of Adjusted EBITDA.
The following unaudited table presents the reconciliation of net income (loss) attributable to AdaptHealth Corp., to EBITDA and Adjusted EBITDA for the years ended December 31, 2022, 2021 and 2020: Year Ended December 31, (in thousands) 2022 2021 2020 (Unaudited) Net income (loss) attributable to AdaptHealth Corp. $ 69,316 $ 156,175 $ (161,632) Income (loss) attributable to noncontrolling interests 3,817 1,978 (32,454) Interest expense excluding change in fair value of interest rate swaps 109,414 95,195 41,430 Income tax expense (benefit) 24,769 32,806 (11,955) Depreciation and amortization, including patient equipment depreciation 351,178 258,053 82,445 EBITDA 558,494 544,207 (82,166) Loss on extinguishment of debt (a) — 20,189 5,316 Equity-based compensation expense (b) 22,397 25,323 18,670 Transaction costs (c) 6,003 49,081 26,573 Change in fair value of warrant liability (d) (17,158) (53,181) 135,368 Change in fair value of contingent consideration common shares liability (e) — (29,389) 98,717 Other non-recurring expense (income) (f) 24,034 9,688 3,141 Adjusted EBITDA $ 593,770 $ 565,918 $ 205,619 (a) Represents the write-off of unamortized deferred financing costs and other expenses related to refinancing of debt and prepayment penalties for early debt payoff. 51 Ta bl e of Contents (b) Represents equity-based compensation expense for awards granted to employees and non-employee directors.
The following unaudited table presents the reconciliation of net (loss) income attributable to AdaptHealth Corp., to EBITDA and Adjusted EBITDA for the years ended December 31, 2023, 2022 and 2021: Year Ended December 31, (in thousands) 2023 2022 2021 (Unaudited) Net (loss) income attributable to AdaptHealth Corp. $ (678,895) $ 69,316 $ 156,175 Income attributable to noncontrolling interest 4,115 3,817 1,978 Interest expense, net 130,299 109,414 95,195 Income tax (benefit) expense (49,004) 24,769 32,806 Depreciation and amortization, including patient equipment depreciation 382,783 351,178 258,053 EBITDA (210,702) 558,494 544,207 Loss on extinguishment of debt (a) — — 20,189 Equity-based compensation expense (b) 22,468 22,397 25,323 Transaction costs (c) 960 6,003 49,081 Change in fair value of warrant liability (d) (34,482) (17,158) (53,181) Goodwill impairment (e) 830,787 — — Change in fair value of contingent consideration common shares liability (f) — — (29,389) Litigation settlement expense (g) 25,140 — — Other non-recurring expenses, net (h) 36,624 24,034 9,688 Adjusted EBITDA $ 670,795 $ 593,770 $ 565,918 Net (loss) income attributable to AdaptHealth Corp. as a percentage of net revenue (21.2)% 2.3% 6.4% Adjusted EBITDA as a percentage of net revenue 21.0% 20.0% 23.1% (a) Represents the write-off of unamortized deferred financing costs and other expenses related to refinancing of debt and prepayment penalties for early debt payoff.
The following table summarizes the useful lives of the identifiable intangible assets acquired: Tradenames 5 to 10 years Payor contracts 10 years Contractual rental agreements 2 years Developed technology 5 years Recent Accounting Pronouncements Recently issued accounting pronouncements that may be relevant to the Company’s operations but have not yet been adopted are out lined in Note 2, Summary of Significant Accounting Policies - (cc) Recentl y Issued Accounting Pronouncements, to its consolidated financial statements included in this report.
Recent Accounting Pronouncements Recently issued accounting pronouncements that may be relevant to the Company’s operations but have not yet been adopted are out lined in Note 2, Summary of Significant Accounting Policies - (ee) Recentl y Issued Accounting Pronouncements, to its consolidated financial statements included in this report.
The Complaint generally alleges that the Company and certain of its current and former officers violated federal securities laws by making allegedly false and misleading statements and/or failing to disclose material information regarding the Company’s organic growth trajectory. The Complaint seeks unspecified damages.
The Allegheny County Complaint alleges, among other things, that the defendants violated federal securities laws by making allegedly false and misleading statements and/or failing to disclose material information regarding the Company’s organic growth in its diabetes business. The Allegheny County Complaint seeks unspecified damages.
Change in Fair Value of Warrant Liability . AdaptHealth has outstanding warrants to purchase shares of Common Stock, as discussed in Note 11, Stockholders' Equity – Warrants , to the accompanying December 31, 2022 consolidated financial statements.
These increases were offset by a reduction in interest expense of $8.3 million related to AdaptHealth's interest rate swap agreements. Change in Fair Value of Warrant Liability . AdaptHealth has outstanding warrants to purchase shares of Common Stock, as discussed in Note 11, Stockholders' Equity – Warrants , to the accompanying December 31, 2023 consolidated financial statements.
If additional capital is unavailable when desired, AdaptHealth’s business, results of operations, and financial condition would be materially adversely affected. As of December 31, 2022, AdaptHealth had approximately $46.3 million of cash and cash equivalents.
If additional capital is unavailable when desired, AdaptHealth’s business, results of operations, and financial condition could be materially adversely affected. As of December 31, 2023, AdaptHealth had approximately $77.1 million of cash. At December 31, 2023, AdaptHealth had $720.0 million outstanding under its existing credit facility.
The 2021 Revolver carries a commitment fee during the term of the 2021 Credit Agreement ranging from 0.25% to 0.50% per annum of the actual daily undrawn portion of the 2021 Revolver based on the Consolidated Senior Secured Leverage Ratio. 53 Ta bl e of Contents Under the 2021 Credit Agreement, AdaptHealth is subject to a number of restrictive covenants that, among other things, impose operating and financial restrictions on AdaptHealth.
The 2021 Revolver carries a commitment fee during the term of the 2021 Credit Agreement ranging from 0.25% to 0.50% per annum of the actual daily undrawn portion of the 2021 Revolver based on the Consolidated Senior Secured Leverage Ratio.
Attorney’s Office for the United States District Court for the Eastern District of Pennsylvania (“EDPA”) pursuant to 18 U.S.C. §3486 to produce certain audit records and internal communications regarding ventilator billing. The investigation focused on billing practices regarding one payor that contracted for bundled payments for certain ventilators.
On July 25, 2017, AdaptHealth Holdings was served with a subpoena by the U.S. Attorney’s Office for the United States District Court for the Eastern District of Pennsylvania (“EDPA”) pursuant to 18 U.S.C. §3486 to produce certain audit records and internal communications regarding ventilator billing.
(e) Represents a non-cash gain or charge for the change in the estimated fair value of the contingent consideration common shares liability. Refer to Note 11, Stockholders’ Equity – Contingent Consideration Common Shares , included in the accompanying notes to the consolidated financial statements for the year ended December 31, 2022 for additional discussion of such non-cash gain or charge.
See Note 5, Goodwill and Identifiable Intangible Assets , included in the 47 Table of Con t ents accompanying notes to the consolidated financial statements for the year ended December 31, 2023 for additional discussion of such impairment charges. (f) Represents a non-cash gain for the change in the estimated fair value of the contingent consideration common shares liability.
On July 29, 2021, Robert Charles Faille Jr., a purported shareholder of the Company, filed a purported class action complaint against the Company and certain of its current and former officers in the United States District Court for the Eastern District of Pennsylvania (the “Complaint”).
On October 24, 2023, Allegheny County Employees’ Retirement System, a purported shareholder of the Company, filed a purported class action complaint against the Company and certain of its current and former officers, and certain underwriters in the United States District Court for the Eastern District of Pennsylvania (the “Allegheny County Complaint”).
The Company first assesses qualitative factors to determine whether it is necessary to perform a quantitative goodwill impairment analysis. If determined necessary, the Company applies the quantitative impairment test to identify and measure the amount of impairment, if any.
If determined necessary, the Company applies the quantitative impairment test to identify and measure the amount of impairment, if any.
The Derivative Complaint generally alleges that the defendants breached their fiduciary duties owed to the Company by allegedly causing or allowing misrepresentations and/or omissions regarding the Company’s organic growth and the Company’s former Co-CEO’s alleged criminal activity, failing to maintain an adequate system of oversight, disclosure controls and procedures, and internal controls over financial reporting and due diligence into the Company’s management team, and engaging in insider trading.
The Derivative Complaint generally alleges that the defendants breached their fiduciary duties owed to the Company by, among other things, allegedly causing or allowing misrepresentations and/or omissions regarding changes made to the methodology used to calculate the Company’s organic growth and the Company’s former Co-CEO’s alleged criminal activity and engaging in insider trading.
If actual amounts of consideration ultimately received differ from the Company’s estimates, the Company adjusts these estimates, which would affect net revenue in the period such adjustments become known.
If actual amounts of consideration ultimately received differ from the Company’s estimates, the Company adjusts these estimates, which would affect net revenue in the period such adjustments become known. The estimated implicit price concession requires significant judgment as it involves the complexity of third-party billing arrangements, contractual terms and the uncertainty of reimbursement amounts.
Costs of products and supplies increased by $243.7 million primarily as a result of acquisition growth, increased product costs, increased sales revenue, and general inflationary cost increases. Salaries, labor and benefits increased by $175.0 million, primarily related to acquisition growth, increased headcount, higher wages and commissions, and workforce wage pressure driven by inflation.
Costs of products and supplies increased by $105.7 million primarily as a result of increased net sales revenue and general inflationary cost increases. Salaries, labor and benefits increased by $8.6 million, primarily due to increased benefit costs, annual merit increases, and workforce wage pressure driven by inflation, partially offset by cost savings actions driven by headcount reductions.
Financial covenants include a Consolidated Total Leverage Ratio and a Consolidated Interest Coverage Ratio, both as defined in the 2021 Credit Agreement.
Under the 2021 Credit Agreement, AdaptHealth is subject to a number of restrictive covenants that, among other things, impose operating and financial restrictions on AdaptHealth. Financial covenants include a Consolidated Total Leverage Ratio and a Consolidated Interest Coverage Ratio, both as defined in the 2021 Credit Agreement.
AdaptHealth was in compliance with all debt covenants as of December 31, 2022. In August 2021, AdaptHealth LLC issued $600.0 million aggregate principal amount of 5.125% senior unsecured notes (the “5.125% Senior Notes”). The 5.125% Senior Notes will mature on March 1, 2030.
In August 2021, AdaptHealth LLC issued $600.0 million aggregate principal amount of 5.125% senior unsecured notes (the “5.125% Senior Notes”). The 5.125% Senior Notes will mature on March 1, 2030. Interest on the 49 Table of Con t ents 5.125% Senior Notes is payable on March 1st and September 1st of each year.
(d) Represents a non-cash gain or charge for the change in the estimated fair value of the warrant liability. Refer to Note 11, Stockholders’ Equity – Warrants , included in the accompanying notes to the consolidated financial statements for the year ended December 31, 2022 for additional discussion of such non-cash gain or charge.
See Note 11, Stockholders’ Equity – Warrants , included in the accompanying notes to the consolidated financial statements for the year ended December 31, 2023 for additional discussion of such non-cash gains. (e) Represents non-cash goodwill impairment charges as a result of the fair value of the Company’s reporting unit being less than its carrying value.
The following table summarizes cost of net revenue for the years ended December 31, 2022 and 2021: (in thousands, except percentages) Year Ended December 31, 2022 2021 Dollars Revenue Percentage Dollars Revenue Percentage Increase/(Decrease) Dollars Percentage (Unaudited) Costs of net revenue: Cost of products and supplies $ 1,199,481 40.4 % $ 955,813 38.9 % $ 243,668 25.5 % Salaries, labor and benefits 770,669 25.9 % 595,668 24.3 % 175,001 29.4 % Patient equipment depreciation 286,288 9.6 % 194,958 7.9 % 91,330 46.8 % Rent and occupancy 64,375 2.2 % 48,586 2.0 % 15,789 32.5 % Other operating expenses 225,719 7.6 % 206,599 8.4 % 19,120 9.3 % Equity-based compensation 6,637 0.2 % 7,301 0.3 % (664) (9.1) % Total cost of net revenue $ 2,553,169 85.9 % $ 2,008,925 81.8 % $ 544,244 27.1 % Cost of net revenue for the years ended December 31, 2022 and 2021 was $2,553.2 million and $2,008.9 million, respectively, an increase of $544.2 million or 27.1%.
The following table summarizes cost of net revenue for the years ended December 31, 2023 and 2022: (in thousands, except percentages) Year Ended December 31, 2023 2022 Dollars Revenue Percentage Dollars Revenue Percentage Increase/(Decrease) Dollars Percentage (Unaudited) Costs of net revenue: Cost of products and supplies $ 1,305,219 40.8 % $ 1,199,481 40.4 % $ 105,738 8.8 % Salaries, labor and benefits 785,876 24.5 % 777,306 26.1 % 8,570 1.1 % Patient equipment depreciation 325,696 10.2 % 286,288 9.6 % 39,408 13.8 % Rent and occupancy 67,783 2.1 % 64,375 2.2 % 3,408 5.3 % Other operating expenses 236,039 7.4 % 225,719 7.6 % 10,320 4.6 % Total cost of net revenue $ 2,720,613 85.0 % $ 2,553,169 85.9 % $ 167,444 6.6 % Cost of net revenue for the years ended December 31, 2023 and 2022 was $2,720.6 million and $2,553.2 million, respectively, an increase of $167.4 million or 6.6%.
On December 6, 2021, a putative shareholder of the Company, Carol Hessler, filed a shareholder derivative complaint against certain current and former directors and officers of the Company in the United States District Court for the Eastern District of Pennsylvania (the “Derivative Complaint”).
There can be no assurance that the settlement will be finalized or the conditions to closing will be satisfied, and the actual outcome of this matter may differ materially from the terms of the settlement described herein. 54 Table of Con t ents On December 6, 2021, a putative shareholder of the Company, Carol Hessler, filed a shareholder derivative complaint against certain current and former directors and officers of the Company in the United States District Court for the Eastern District of Pennsylvania (as to the complaint, the “Derivative Complaint”; as to the action, the “Derivative Action”).
Depreciation and amortization, excluding patient equipment depreciation, for the years ended December 31, 2022 and 2021 was $64.9 million and $63.1 million, respectively, an increase of $1.8 million.
Depreciation and amortization, excluding patient equipment depreciation, for the years ended December 31, 2023 and 2022 was $57.1 million and $64.9 million, respectively, a decrease of $7.8 million, primarily related to lower intangible amortization expense. 45 Table of Con t ents Goodwill Impairment.
The Complaint purports to be asserted on behalf of a class of persons 59 Ta bl e of Contents who purchased the Company’s stock between November 11, 2019 and July 16, 2021.
The Allegheny County Complaint purports to be asserted on behalf of a class of persons who purchased the Company’s stock between August 4, 2020 and February 27, 2023.
Such changes in circumstance can include, among others, changes in the legal environment, reimbursement environment, operating performance, and/or future prospects. The Company performs its annual impairment assessment of goodwill during the fourth quarter of each year. The impairment assessment can be performed on either a quantitative or qualitative basis.
The Company performs its annual impairment assessment of goodwill during the fourth quarter of each year. The impairment assessment can be performed on either a quantitative or qualitative basis. The Company first assesses qualitative factors to determine whether it is necessary to perform a quantitative goodwill impairment analysis.
For the year ended December 31, 2021, net revenue from fixed monthly equipment reimbursements comprised 33% of total net revenue, compared to 28% of total net revenue for the year ended December 31, 2020. These changes are primarily due to a change in product mix, primarily from the acquisition of AeroCare. Grant income.
For the year ended December 31, 2023, net revenue from fixed monthly equipment reimbursements comprised 33% of total net revenue, compared to 32% of total net revenue for the year ended December 31, 2022. Cost of Net Revenue.
Interest on the 5.125% Senior Notes is payable on March 1st and September 1st of each year, beginning on March 1, 2022.
The 5.125% Senior Notes will mature on March 1, 2030. Interest on the 5.125% Senior Notes is payable on March 1st and September 1st of each year, and began on March 1, 2022. In January 2021, AdaptHealth issued $500.0 million aggregate principal amount of 4.625% senior unsecured notes (the “4.625% Senior Notes”).
The increase in income tax expense was primarily related to increased pre-tax income and AdaptHealth Holding’s change in U.S. federal income tax classification as a result of a tax restructuring completed in 2021. 50 Ta bl e of Contents EBITDA and Adjusted EBITDA AdaptHealth uses EBITDA and Adjusted EBITDA, which are financial measures that are not in accordance with generally accepted accounting principles in the United States, or U.S.
EBITDA and Adjusted EBITDA AdaptHealth uses EBITDA and Adjusted EBITDA, which are financial measures that are not in accordance with generally accepted accounting principles in the United States, or U.S. GAAP, to analyze its financial results and believes that they are useful to investors, as a supplement to U.S. GAAP measures.
The use of funds in 2020 consisted of $769.3 million for business acquisitions, primarily for the Solara, ActivStyle, Advanced and Pinnacle acquisitions, $39.8 million for equipment and other fixed asset purchases, $8.7 million for other investments, offset by $2.0 million of cash proceeds from the sale of an investment.
The use of funds in 2022 consisted of $19.0 million for business acquisitions, $391.4 million for equipment and other fixed asset purchases and $0.7 million for other investments.
The increase was the result of (1) a $352.2 million improvement in net income, (2) a net decrease of $85.4 million in non-cash charges, primarily from the change in the estimated fair value of the contingent consideration common shares liability and warrant liability, amortization, equity-based compensation expense, write-off of deferred financing costs, loss on extinguishment of debt, non-cash reduction in the carrying amount of operating lease right-of-use assets and changes in fair value of contingent consideration, (3) a $43.5 million change in deferred income taxes, (4) a net $139.2 million decrease resulting from the change in operating assets and liabilities, primarily from the change in accounts receivable, inventory and accounts payable and accrued expenses (excluding the impact of cash received in the 2020 period in connection with the CARES Act discussed below), and (5) a decrease of $28.0 million in operating lease obligations, which was offset by the receipt of $45.8 million of recoupable advanced payments from CMS and the receipt of $17.2 million of provider relief fund payments in connection with the CARES Act in 2020.
The increase was the result of a $747.9 million reduction in net income (loss), a net increase of $769.3 million in non-cash charges, primarily from goodwill impairment charges, depreciation and amortization, the change in the estimated fair value of the warrant liability, deferred income taxes, and the reduction in the carrying amount of operating and finance lease right-of-use assets, payments of contingent consideration related to acquisitions of $2.5 million in the 2022 period, and a net $82.9 million incre ase resulting from the change in operating assets and liabilities, primarily from the change in accounts receivable, inventory and accounts payable and accrued expenses.
General and administrative expenses as a percentage of net revenue was 6.8% in 2021, compared to 8.5% in 2020. General and administrative expenses in 2021 included $47.9 million of transaction costs, $18.0 million of equity-based compensation expense, and other non-recurring expenses of $2.4 million.
This increase is primarily due to higher professional fees and higher equity-based compensation expense, partially offset by lower transaction costs. General and administrative expenses as a percentage of net revenue was 5.9% in 2023, compared to 5.5% in 2022.
The WDKY has requested documents related to such oxygen tank content billing as well as other categories of information. AeroCare has cooperated with the WDKY and has produced documents and provided explanations of its billing practices.
The WDKY requested documents related to such oxygen tank content billing as well as other categories of information. AeroCare cooperated fully with the investigation and on June 23, 2022, the complaint filed in connection with this investigation was dismissed by the United States District Court in the Western District of Kentucky with the consent of the WDKY.
The Company’s critical accounting policies and critical estimates in relation to its consolidated financial statements include those related to revenue recognition, accounts receivable, and valuation of goodwill and long-lived assets. 56 Ta bl e of Contents Revenue Recognition The Company generates revenues for services and related products that the Company provides to patients for home medical equipment, related supplies, and other items.
The Company’s critical estimates in relation to its consolidated financial statements include those related to revenue recognition and valuation of goodwill.
Other loss, net for the year ended December 31, 2021 consisted of $3.9 million of expenses associated with legal settlements and $1.9 million of other charges, offset by $0.9 million of net reductions in the fair value of contingent consideration liabilities related to acquisitions, $0.7 million of equity income related to equity method investments, a gain of $0.5 million for the receipt of earnout proceeds in connection with an investment that was sold in 2020, and a $1.9 million gain in connection with the consolidation of an equity method investment.
Other loss, net for the year ended December 31, 2023 consisted of an expense of $25.1 million relating to an agreement to settle a previously disclosed securities class action lawsuit, net of expected contributions from the Company’s insurers, $4.8 million of lease termination costs associated with a cost management program, $0.9 million of impairments of operating lease right-of-use assets, $1.2 million of expenses associated with other legal settlements, and a $0.3 million charge for the increase in the fair value of a contingent consideration liability related to an acquisition, offset by income of $2.5 million related to changes in AdaptHealth’s estimated TRA liability, and $0.3 million of equity income related to an equity method investment.
The increase in other operating expenses includes increased shipping costs, including fuel costs which have increased by $2.6 million in 2022 compared to 2021. General and Administrative Expenses. General and administrative expenses for the years ended December 31, 2022 and 2021 were $162.1 million and $167.5 million, respectively, a decrease of $5.4 million or 3.2%.
Patient equipment depreciation was 10.2% of net revenue in 2023 compared to 9.6% in 2022, primarily as a result of higher medical equipment prices and rental counts. General and Administrative Expenses. General and administrative expenses for the years ended December 31, 2023 and 2022 were $190.1 million and $162.1 million, respectively, an increase of $28.0 million or 17.2%.
On January 20, 2022, the defendants filed a motion to dismiss the Consolidated Complaint. Lead Plaintiffs’ opposition to defendants’ motion was filed on March 21, 2022, and defendants’ reply was filed on April 15, 2022. On June 9, 2022, the court issued an opinion and order denying the defendants’ motion to dismiss the Consolidated Complaint.
On January 20, 2022, the defendants filed a motion to dismiss the Consolidated Complaint, which the court denied on June 9, 2022. On June 7, 2023, the court entered an order staying the Consolidated Class Action pending the outcome of a private mediation between the parties.
General and administrative expenses in 2021 included $47.9 million of transaction costs, $18.0 million of equity-based compensation expense, and other non-recurring expenses of $2.4 million. Excluding the impact of these charges, general and administrative expenses as a percentage of net revenue was 4.1% and 4.0% in 2022 and 2021, respectively. Depreciation and amortization, excluding patient equipment depreciation.
General and administrative expenses consist of corporate support costs including information technology, human resources, finance, contracting, legal, compliance, equity-based compensation, transaction expenses and other administrative costs. Depreciation and Amortization, Excluding Patient Equipment Depreciation. Depreciation expense includes depreciation charges for capital assets other than patient equipment (which is included as part of the cost of net revenue).
The increase was primarily related to amortization expense of $46.5 million related to identifiable intangible assets recognized during 2021, primarily as a result of the acquisition of AeroCare, as compared to $6.0 million recognized during 2020. Interest Expense, net. Interest expense, net for the years ended December 31, 2021 and 2020 was $95.2 million and $41.4 million, respectively.
See Note 5, Goodwill and Identifiable Intangible Assets , for additional details. Interest Expense, net. Interest expense, net for the years ended December 31, 2023 and 2022 was $130.3 million and $109.4 million, respectively.
General and administrative expenses in 2020 included $25.4 million of transaction costs, $10.8 million of equity-based compensation expense, and other non-recurring expenses of $1.1 million. Excluding the impact of these charges, general and administrative expenses as a percentage of net revenue was 4.0% and 4.9% in 2021 and 2020, respectively. Depreciation and amortization, excluding patient equipment depreciation.
General and administrative expenses in 2023 included $19.6 million of equity-based compensation expense, $1.0 million of transaction costs, and other non-recurring expenses of $28.9 million, primarily consisting of $12.8 million of expenses associated with litigation, $6.5 million of expenses associated with cost savings initiatives, and $5.6 million of expenses associated with systems implementation activities.
Removed
Item 7. “ Management's Discussion and Analysis of Financial Results and Operations – Impact of the COVID-19 Pandemic ." Cost of Net Revenue.
Added
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations The following discussion should be read in conjunction with AdaptHealth Corp.'s ("AdaptHealth" or the "Company") consolidated financial statements and the accompanying notes included in this report. All amounts presented are in accordance with U.S. generally accepted accounting principles ("U.S. GAAP"), except as noted.

… 188 more changes not shown on this page.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

1 edited+3 added−2 removed0 unchanged
Biggest changeItem 7A. Quantitative and Qualitative Disclosures About Market Risk Our exposure to market risk relates to fluctuations in interest rates from borrowings under the 2021 Credit Facility.
Biggest changeItem 7A. Quantitative and Qualitative Disclosures About Market Risk Our exposure to market risk relates to fluctuations in interest rates from borrowings under the 2021 Credit Agreement.
Removed
Our interest accrued on our debt borrowings is based on a variable rate which is tied to the Adjusted LIBOR Rate plus an applicable margin and therefore is exposed to changes in interest rates.
Added
As of December 31, 2023, there was $720.0 million outstanding under the 2021 Term Loan, no outstanding borrowings under the 2021 Revolver, $21.6 million outstanding under letters of credit, and based on the financial debt covenants under the 2021 Credit Agreement, the maximum amount the Company could borrow under the 2021 Revolver 55 Table of Con t ents and remain in compliance with the financial debt covenants under the agreement was $226.2 million.
Removed
As of December 31, 2022, there was $765.0 million outstanding under the 2021 Term Loan, $17.4 million outstanding under letters of credit, and additional availability under the 2021 Revolver, net of letters of credit outstanding, was $432.6 million. 60 Ta bl e of Contents
Added
Amounts borrowed under the 2021 Credit Agreement bear interest quarterly at variable rates based upon, except in the case of Base Rate Loans (as defined), the sum of (a) the forward looking rate based on Term SOFR (subject to a zero percent floor) equal to Term SOFR plus a Term SOFR Adjustment (as defined) of 0.10%, plus (b) an Applicable Margin (as defined) ranging from 1.50% to 3.25% per annum based on the Consolidated Senior Secured Leverage Ratio (as defined).
Added
Due to the interest rate being variable, fluctuations in interest rates may impact our earnings. Based on our current level of debt, we estimate that a 100 basis point change in interest rates would have a $5.5 million annual impact on our net income (loss) before taxes. 56 Table of Con t ents

Other AHCO 10-K year-over-year comparisons