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Item 1. Business

2024-02-20 compared with 2023-02-28 · 143 added, 142 removed, 263 unchanged (52% of the section changed)

Owens & Minor, Inc.

and subsidiaries (we, us, our or the Company), a Fortune 500 company headquartered in Richmond, Virginia, is a global healthcare solutions company that incorporates product manufacturing, distribution support and innovative technology services to deliver significant and sustained value across the breadth of the industry – from acute care to patients in their home.

Our business has two distinct segments:

Products & Healthcare Services and Patient Direct.

Products & Healthcare Services provides distribution, outsourced logistics and value-added services, and manufactures and sources medical surgical products through our production and kitting operations.

Patient Direct expands our business along the continuum of care through delivery of disposable medical supplies sold directly to patients and home health agencies and is a leading provider of integrated home healthcare equipment and related services in the United States (U.S.).

Owens & Minor, Inc., along with its subsidiaries (we, us, our or the Company), a Fortune 500 company headquartered in Richmond, Virginia, is a global healthcare solutions company that incorporates product manufacturing, distribution support and innovative technology services to deliver significant and sustained value across the breadth of the industry – from acute care to patients in their home.

We report our business under two segments:

Products & Healthcare Services and Patient Direct, which are described in further detail below.

Our teammates serve healthcare industry customers in approximately 80 countries, by providing quality products and helping to reduce total costs across the healthcare supply chain by optimizing point-of care performance, freeing up capital and clinical resources and managing contracts to optimize financial performance.

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Through organic growth and acquisitions over many years, we significantly expanded and strengthened our company, achieving international scale in the healthcare market.

Today, we have distribution, production, storage, customer service and sales facilities located across Asia, Australia, Europe, Latin America and the United States.

Today, we have production, distribution, storage, customer service and sales facilities located across the United States (U.S.), Canada, Asia, Australia, Europe and Latin America.

Acquisition of Apria

On March 29, 2022, we completed the acquisition of 100% of Apria, Inc.

On March 29, 2022 (Acquisition Date), we completed the acquisition of 100% of Apria, Inc.

(Apria) pursuant to the Agreement and Plan of Merger dated January 7, 2022 (Apria Acquisition), in exchange for approximately $1.7 billion, net of $144 million of cash acquired.

See Note 3, “Acquisitions and Discontinued Operations,” of the Notes to Consolidated Financial Statements included in this annual report for further information.

See Note 3, “Acquisitions,” of the Notes to Consolidated Financial Statements included in this annual report for further information.

This division is reported in the Patient Direct segment.

Products & Healthcare Services

In our Products & Healthcare Services segment, we offer a comprehensive portfolio of products and services to healthcare providers and manufacturers.

This segment is vertically-integrated, starting with America's-based manufacturing, using our proprietary technology, teammates, and leased or owned production facilities.

This segment is vertically-integrated, starting with Americas-based manufacturing, using our proprietary technology, teammates, and leased or owned production facilities.

We manufacture from raw material all the way to finished goods before transferring product to our distribution center network.

Our portfolio of medical and surgical supplies includes branded products purchased from manufacturers and our own proprietary products.

We store our products at our distribution centers and provide delivery of these products, along with related services, to healthcare providers around the U.S.

We store our products at our distribution centers and provide delivery of these products, along with related services, to healthcare providers around the world.

Our service offerings to healthcare providers include supplier management, analytics, inventory management, and clinical supply management.

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Program incentives can be earned on a monthly, quarterly or annual basis.

We operate a network of 54 distribution centers located throughout the United States, which are strategically located to efficiently serve our provider and manufacturer customers.

We operate a network of distribution centers located throughout the U.S., which are strategically located to efficiently serve our customers.

Investments in information technology support our business including warehouse management systems, customer service and ordering functions, demand forecasting programs, electronic commerce, data warehousing, decision support and supply chain management.

For the products we manufacture, we operate distribution centers located in the U.S.

that ship finished products to customers, as well as other distribution sites that also have customer shipping capabilities, in order to optimize cost and customer service requirements.

We customize product deliveries, whether the orders are “just-in-time,” “low-unit-of-measure,” pallets, or truckloads.

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We use low-unit-of-measure automated picking modules in our larger distribution centers to maximize efficiency, and our distribution center teammates use voice-pick technology to enhance speed and accuracy in performing certain warehousing processes.

We partner with a third party company to deliver most supplies in the United States.

We partner with a third party company to deliver most supplies in the U.S.

We also use contract carriers and parcel delivery services when they are more cost-effective and timely.

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In these cases, pricing depends upon the type, level and/or complexity of services that we provide to customers, and in some cases we do not take title to the product (although we maintain certain custodial risks).

As a result, this fee-for-service pricing model aligns the fees we charge with the cost of the services provided, which is a component of distribution, selling and administrative expenses, rather than with the cost of the product, which is a component of cost of goods sold.

As a result, this fee-for-service pricing model aligns the fees we charge with the cost of the services provided, which is a component of distribution, selling and administrative (DS&A) expenses, rather than with the cost of the product, which is a component of cost of goods sold.

Our Products & Healthcare Services segment manufactures and sources medical surgical products through our production and kitting operations.

We provide medical supplies and solutions for the prevention of healthcare-associated infections across the acute and alternate site channels.

Our manufacturing facilities are located in the United States, Thailand, Honduras, Mexico and Ireland.

Our manufacturing facilities are located in the U.S., Thailand, Honduras, Mexico and Ireland.

Our business has recognized brands across its portfolio of product offerings, including sterilization wrap, surgical drapes and gowns, facial protection, protective apparel, medical exam gloves, custom and minor procedure kits and other medical products.

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Additionally, we provide marketing programs to our strategic distribution partners throughout the world.

For the products we manufacture, we operate four major distribution centers located in North America and Asia that ship finished products to customers, as well as other distribution sites that also have customer shipping capabilities, in order to optimize cost and customer service requirements.

Our proprietary products are typically purchased pursuant to purchase orders or supply agreements in which the purchaser specifies whether such products are to be supplied through a distributor or directly.

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Patient Direct

Our Patient Direct segment expands our business along the continuum of care through delivery of disposable medical supplies sold directly to patients and home health agencies and is a leading provider of integrated home healthcare equipment and related services in the United States.

Our Patient Direct segment provides delivery of disposable medical supplies sold directly to patients and home health agencies and is a leading provider of integrated home healthcare equipment and related services in the U.S.

The segment offers a comprehensive range of products and services for in-home care and delivery across diabetes treatment, home respiratory therapy (including home oxygen and non-invasive ventilation services), and obstructive sleep apnea treatment (including continuous positive airway pressure (CPAP) and bi-level positive airway pressure devices, and patient support services).

Additionally, Patient Direct supplies a wide range of other home medical equipment, patient care product lines including ostomy, wound care (including negative pressure wound therapy), urology, incontinence and other products and services to help improve the quality of life for patients with home care needs.

Revenues are generated through fee-for-service and capitation arrangements with large government and commercial payors (Payors) for equipment, supplies, services and other items rented or sold to patients.

We provide patients with a variety of clinical and administrative support services and related products and supplies, most of which are prescribed by a physician as part of a care plan.

Patient Direct remains focused on being the industry’s highest-quality provider of home healthcare equipment, medical supplies and related services, while maintaining a commitment to being a low-cost operator.

Patient Direct is one of the industry’s highest-quality providers of home healthcare equipment, medical supplies and related services, while maintaining a commitment to being a low-cost operator.

We aim to provide a compelling value proposition to patients, providers and Payors by allowing patients to receive necessary care and services in the comfort of their own home, while, at the same time, reducing the costs of treatment.

Patient Direct has a nationwide sales force, focusing on managed care and key referral sources, six centers of excellence aligned with specific mail order product categories and a nationwide network to optimize shipping distance and time, with over 300 locations to serve patients.

Patient Direct has a nationwide sales force, focusing on managed care and key referral sources, along with centers of excellence strategically located in the U.S.

aligned with specific mail order product categories and a nationwide network with over 300 locations to optimize shipping distance and time, to serve patients.

Our Customers

Through Products & Healthcare Services we currently provide products and services to thousands of healthcare provider customers either directly or indirectly through third-party distributors.

Through Patient Direct, we provide delivery of disposable medical supplies and equipment sold or rented directly to patients and home health agencies, for which payments are received from managed care plans, the U.S.

The Products & Healthcare Services segment provides products and services to thousands of healthcare providers, along with certain retailers either directly or indirectly through third-party distributors.

Our Patient Direct segment provides delivery of disposable medical supplies and equipment rented and sold directly to patients and home health agencies, for which payments are received from managed care plans, the U.S.

federal government under the Medicare program, state governments under their respective Medicaid or similar programs, private insurers, home health agencies, and directly from patients.

Medicare contracts within our Patient Direct segment may be subject to a Competitive Bidding Process (CBP) for the durable medical equipment, prosthetics, orthotics and supplies (DMEPOS), as further described in the Regulation section.

Medicare contracts within our Patient Direct segment may be subject to a Competitive Bidding Process (CBP) for durable medical equipment, prosthetics, orthotics and supplies (DMEPOS), as further described in the Regulation section.

Our customers include multi-facility networks of healthcare providers offering a broad spectrum of healthcare services to a particular market or markets as well as smaller, independent hospitals.

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Below is a summary of these agreements:

GPO Year of Renewal or Extension Term Sales to Members as a % of Consolidated Net Revenue in 2022

Vizient 2021 2 years 35%

Premier 2021 5 years 19%

2022 4 years 12%

Sales to Members as a

Year of Renewal or

% of Consolidated

Net Revenue in 2023

We have our own independent relationships with most of our hospital customers through separate contractual commitments that may or may not be based upon the terms of our agreement with the GPO.

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We have arrangements with certain customers under which they make deposits on account, because they do not meet our standards for creditworthiness, to reduce past due balances, or in order to obtain more favorable pricing.

On March 14, 2023, we entered into the Master Receivables Purchase Agreement (RPA), pursuant to which accounts receivable with an aggregate outstanding amount not to exceed $200 million are sold, on a limited-recourse basis, to a third-party financial institution (Purchaser) in exchange for cash.

We account for these transactions as sales, with the sold receivables removed from our consolidated balance sheets.

Under the RPA, we provide certain servicing and collection actions on behalf of the Purchaser;

however, we do not maintain any beneficial interest in the accounts receivable sold.

The RPA is separate and distinct from the accounts receivable securitization program (Receivables Financing Agreement) .

The industries in which we operate are highly competitive.

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In addition, we compete with a number of regional and local distributors, and customer self-distribution models.

Major outsourced logistics competitors serving healthcare manufacturers in the United States include United Parcel Service and FedEx Corporation.

In our Patient Direct segment, we compete against national providers that deliver products and services to patients' homes, including AdaptHealth Corp., Lincare, Rotech, Aerocare, Inogen, Inspire Medical Systems, Inc., Viemed Healthcare, Inc., as well as regional providers and local organizations.

In addition, pharmacy benefit managers, such as CVS Health Corporation, are beginning to compete with us in the home healthcare market.

In the United States, several of our distribution partners and GPOs directly compete with us by sourcing their own brands.

Major outsourced logistics competitors serving healthcare manufacturers in the U.S.

include United Parcel Service and FedEx Corporation.

Within our Global Products division in the U.S., several of our distribution partners and GPOs directly compete with us by sourcing their own brands.

We compete against reusable products, or low usage of infection prevention products, due in large part to limited awareness and education on infection prevention practices and products.

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To successfully compete, we must demonstrate that our products offer higher quality, more innovative features or better value versus other products.

In our Patient Direct segment, we compete against national providers that deliver products and services to patients’ homes, including AdaptHealth Corp., Lincare, Rotech, Aerocare, Inogen, Viemed Healthcare, Inc., as well as regional and local providers.

In addition, pharmacy benefit managers, such as CVS Health Corporation, compete with us in the home healthcare market.

Research and Development

We continuously engage in research and development to commercialize new products and enhance the effectiveness, reliability and safety of our existing products.

In our Products & Healthcare Services segment, we are focused on maintaining and improving our market position by providing innovative customer-preferred product enhancements, with a particular focus on the operating room.

Leveraging customer insights and our vertically integrated manufacturing capabilities, we seek to continuously improve our product designs, specifications and features to deliver cost efficiencies while improving healthcare worker and patient protection.

We continuously refresh our surgical drape and gown portfolio to ensure that our products are aligned with the latest medical and procedural standards.

Our research team works with healthcare providers to develop and design exam glove and apparel portfolios that optimize comfort and fit and provide cost-effective infection prevention solutions for use throughout the hospital.

We are also investing in new categories and solutions that complement our technical expertise and existing intellectual property.

We are particularly focused on those new categories that we believe will leverage our existing scalable technology platforms as well as our sales and marketing expertise.

We incurred research and development costs of $13.2 million, $11.8 million, and $12.1 million for the years ended 2023, 2022 and 2021.

Intellectual Property

Patents, trademarks and other proprietary rights are very important to the growth of our business.

Patents, trademarks and other proprietary rights are very important to the growth of our Products & Healthcare Services segment.

We also rely upon trade secrets, manufacturing know-how, continuing technological innovations and licensing opportunities to maintain and improve our competitive position.

On a regular basis, we review third-party proprietary rights, including patents and patent applications, as available, in an effort to develop an effective intellectual property strategy, avoid infringement of third-party proprietary rights, identify licensing opportunities, and monitor the intellectual property owned by others.

We have approximately 825 patents and patent applications pending in the United States and other countries that relate to the technology used in many of our products.

We utilize patents in our surgical and infection protection products and currently have approximately 135 issued patents in the U.S.

and approximately 540 issued patents in countries outside the U.S.

We have approximately 825 patents and patent applications pending in the U.S.

and other countries that relate to the technology used in many of our products.

We utilize patents in our surgical and infection protection products and currently have approximately 580 issued patents.

These patents generally expire between 2024 and 2044.

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We also file patent applications for innovative product lines and solutions that result from our technical expertise.

In order to protect our ongoing research & development investments, we have approximately 40 pending patent applications in the U.S.

and approximately 110 pending patent applications in countries outside of the U.S.

With respect to trademarks, we have approximately 1,180 trademarks and trademark applications pending in the United States and other countries that are used to designate or identify our company or products.

We have approximately 160 U.S.

registration trademarks and approximately 850 registered trademarks outside of the U.S.

We also have approximately 60 pending trademark applications in the U.S.

and approximately 110 pending trademark applications outside of the U.S.

In order to protect our ongoing research & development investments, we have approximately 110 pending patent applications.

With respect to trademarks, we have approximately 1,280 trademarks and trademark applications pending in the U.S.

and other countries that are used to designate or identify our company or products.

We have approximately 1,100 registered trademarks and approximately 175 pending trademark applications.

We manufacture and distribute products bearing the well-known “Halyard” brand.

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and even the termination of our ability to provide services under certain government programs.

Healthcare is an area of rapid regulatory change.

Healthcare is an industry of rapid regulatory change.

Changes in the laws and regulations and new interpretations of or guidelines relating to existing laws and regulations may affect permissible activities and compliance requirements, licenses and approvals required to be held, the relative costs associated with doing business, and reimbursement amounts paid by federal, state and other third-party payors.

We cannot predict the future of federal, state, local and foreign regulation or legislation, or possible changes in national healthcare policies.

Future legislative and regulatory changes could have a material adverse effect on our financial condition and results of operations.

Future legislative and regulatory changes could have a material adverse effect on our financial condition, results of operations and cash flows.

General Regulation

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HIPAA includes a number of requirements pertaining to the privacy and security of certain PHI, as well as the standard formatting of certain electronic health transactions.

As part of the provision of, and billing for, healthcare equipment and services, our Patient Direct business is required to collect and maintain PHI and as such, are subject to HIPAA as a covered entity.

As part of the provision of, and billing for, healthcare equipment and services, our Patient Direct segment is required to collect and maintain PHI and as such, are subject to HIPAA as a covered entity.

HIPAA also applies to business associates of covered entities, which are individuals and entities that provide services for or on behalf of those covered entities.

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In many cases, these laws are more restrictive than, and not preempted by, the HIPAA and HITECH rules and requirements, and may be subject to varying interpretation by courts and government agencies, creating complex compliance issues for us and potentially exposing us to additional expenses, adverse publicity and liability.

We are also subject to privacy laws outside the United States.

We are also subject to privacy laws outside the U.S.

See “Products & Healthcare Services-Global Privacy Regulation.”

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The CCPA provides for civil penalties for violations, as well as a private right of action for data breaches that may result in data breach litigation.

Although there are limited exemptions for PHI and HIPAA regulated entities, and the CCPA’s implementation standards and enforcement practices are continuing to develop and remain uncertain for the foreseeable future, the CCPA may increase our compliance costs and potential liability.

Although there are limited exemptions for PHI and HIPAA regulated entities, and the CCPA’s

implementation standards and enforcement practices are continuing to develop and remain uncertain for the foreseeable future, the CCPA may increase our compliance costs and potential liability.

In November 2020, Californians approved the California Privacy Rights Act (the CPRA), which modified and expanded the CCPA and established a new California Privacy Protection Agency.

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Courts may also adopt the standards for fair information practices promulgated by the FTC, which concern consumer notice, choice, security, and access.

Consumer protection laws require us to publish statements that describe how we

handle personal information and choices individuals may have about the way we handle their personal information.

Consumer protection laws require us to publish statements that describe how we handle personal information and choices individuals may have about the way we handle their personal information.

If we publish information that is considered untrue, it may be subject to government claims of unfair or deceptive trade practices, which could lead to significant liabilities and consequences.

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Additionally, certain states may require certain of our teammates to complete training programs, undergo background checks, and maintain state certification.

In addition, various federal and state authorities and clinical practice boards regulate the licensure of our clinical specialists, working either directly as employees or on a per diem or contractual basis, and facilities.

We believe we are currently licensed appropriately as required by the laws of the jurisdictions in which we operate in all material respects, but additional licensing requirements may be imposed upon us in existing or future markets.

In the United States, the Federal Food, Drug, and Cosmetic Act (FFDCA), Food and Drug Administration (FDA) regulations and other federal and state statutes and regulations govern, among other things, medical device design and development, preclinical and clinical testing, premarket clearance or approval, registration and listing, manufacturing, labeling, storage, advertising and promotion, sales and distribution and post-market surveillance.

In the U.S., the Federal Food, Drug, and Cosmetic Act (FFDCA), Food and Drug Administration (FDA) regulations and other federal and state statutes and regulations govern, among other things, medical device design and development, preclinical and clinical testing, premarket clearance or approval, registration and listing, manufacturing, labeling, storage, advertising and promotion, sales and distribution and post-market surveillance.

We must also comply with laws and regulations governing operations, storage, transportation, manufacturing, sales, safety and security standards for each of our manufacturing and distribution centers.

This includes oversight by the FDA, the Centers for Medicare and Medicaid Services, the Drug Enforcement Agency, the Department of Transportation, the Environmental Protection Agency, the Department of Homeland Security, the Occupational Safety and Health Administration, the Department of Labor, the Equal Employment Opportunity Commission, and state boards of pharmacy, or similar state licensing boards and regulatory agencies.

This includes oversight by the FDA, the Centers for Medicare and Medicaid Services, the Drug Enforcement Agency, the Department of Transportation, the Environmental Protection Agency, the Department of Homeland Security (DHS), the Occupational Safety and Health Administration, the Department of Labor, the Equal Employment Opportunity Commission, and state boards of pharmacy, or similar state licensing boards and regulatory agencies.

For example, our locations that fill and distribute medical oxygen containers must register with the FDA as a medical gas manufacturer, and these registered locations are subject to extensive regulation.

Among other requirements, the FDA’s Good Manufacturing Practice (cGMP) regulations impose certain quality control, documentation and recordkeeping requirements on the receipt, processing and distribution of medical gas.

Among other requirements, the FDA’s Current Good Manufacturing Practice (cGMP) regulations impose certain quality control, documentation and recordkeeping requirements on the receipt, processing and distribution of medical gas.

Further, in each state in which we operate medical gas facilities, we are subject to regulation under varying state health and safety laws.

The FDA and state authorities conduct periodic, unannounced inspections at our facilities to assess compliance with cGMPs and other regulations.

Failure to comply with applicable requirements can lead to a variety of administrative or legal sanctions, such as warning letters, product recalls, product seizures, total or partial suspension of production or distribution, injunctions, fines, civil penalties and criminal prosecution.

Failure to comply with applicable requirements can lead to a variety of administrative or legal sanctions, such as warning letters, product recalls, product seizures, total

or partial suspension of production or distribution, injunctions, fines, civil penalties and criminal prosecution.

We expend significant resources to achieve compliance with federal and state law requirements at each of our facilities.

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Such liability can be imposed on current or former owners or operators of contaminated sites, or on persons who dispose or arrange for disposal of wastes at a contaminated site.

Based on available information, we do not believe that any known compliance obligations, releases or

investigations under environmental laws or regulations will have a material adverse effect on our business, financial condition and results of operations.

Based on available information, we do not believe that any known compliance obligations, releases or investigations under environmental laws or regulations will have a material adverse effect on our business, financial condition, results of operations and cash flows.

However, there can be no guarantee that these releases or newly-discovered information, more stringent enforcement of or changes in environmental requirements, or our inability to enforce available indemnification agreements will not result in significant costs.

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and abroad are considering new or expanded laws to address climate change.

Such laws may include limitations on greenhouse gas emissions, mandates that companies implement processes to monitor and disclose climate-related matters, additional taxes or offset charges on specified energy sources, and other requirements.

Such laws, including recent California legislation, may include limitations on greenhouse gas emissions, mandates that companies implement processes to monitor and disclose climate-related matters, additional taxes or offset charges on specified energy sources, and other requirements.

Compliance with climate-related laws may be further complicated by disparate regulatory approaches in various jurisdictions.

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We believe we are in compliance with such federal and state laws, but courts or regulatory authorities may reach a determination in the future that could adversely affect our operations.

Products & Healthcare Services

Global Operations

Our operations are subject to local, country and regional regulations, such as those promulgated by the European Medicines Agency and the Medical Devices Directive.

In addition, quality requirements are imposed by customers which audit our operations on a regular basis.

Each of our manufacturing locations is licensed or registered with the appropriate local authority.

We believe we are in material compliance with all applicable statutes and regulations, as well as prevailing industry best practices, in the conduct of our business operations outside of the United States.

Since we market our products worldwide, certain products of a local nature and variations of product lines must also meet other local regulatory requirements.

Certain additional risks are inherent in conducting business outside the United States, including price and currency exchange controls, changes in currency exchange rates, limitations on participation in local enterprises, expropriation, nationalization, and other governmental action.

Our operations are impacted by trade regulations in many countries that govern the import of raw materials and finished products, as well as data privacy laws that require safeguards for the protection of healthcare and other personal data.

In addition, we are subject to laws and regulations that seek to prevent corruption and bribery in the marketplace as well as laws and regulations pertaining to healthcare fraud and abuse, including state and federal anti-kickback and false claims laws in the United States.

Global Privacy Regulation

Our international operations are impacted by data privacy laws that require safeguards for the protection of healthcare and other personal data.

Data protection laws and regulations are evolving globally and may continue to add additional compliance costs and legal risks to our international operations.

In the European Union, the General Data Protection Regulation (EU GDPR) imposes a comprehensive data protection regime with the potential for regulatory fines as well as data breach litigation by impacted data subjects.

Under the EU GDPR, regulatory penalties may be passed by data protection authorities for up to the greater of 4% of worldwide turnover or €20 million.

The United Kingdom has implemented similar legislation (the UK GDPR) that may carry similar compliance and operational costs, and potential fines, as the EU GDPR.

The costs of compliance with, and other burdens imposed by, the EU GDPR, UK GDPR and other international data protection laws may impact our operations outside the U.S.

and may limit the ways in which we can provide services or use personal data collected while providing services.

Anti-bribery and Corruption

In addition, we are subject to laws and regulations that seek to prevent corruption and bribery in the marketplace, including the U.S.

Foreign Corrupt Practices Act (FCPA) and the United Kingdom Bribery Act.

These regimes have been the focus of increasing enforcement activity globally in recent years.

A violation of the FCPA or other similar laws by us and/or our agents or representatives could result in, among other things, the imposition of fines and penalties, changes to our business

practices, the termination of or other adverse impacts under our contracts or debarment from bidding on contracts, and/or harm to our reputation, any of which could have a material adverse effect on our business, results of operations, financial condition, cash flows and stock price.

Patient Direct

Reimbursement

To participate in and qualify for reimbursement under governmental reimbursement programs such as Medicare and Medicaid, we must comply with extensive conditions of participation imposed by federal and state authorities as well as third-parties administering such governmental reimbursement programs.

If we were to violate the applicable regulations or requirements governing participation, we could be excluded from participation in federal and state healthcare programs and be subject to substantial administrative, civil and criminal penalties.

Demand for many of the existing and new medical devices and supplies dispensed to our customers is, and will continue to be, affected by the extent to which government healthcare programs and private health insurers reimburse us and our customers for their members/beneficiaries’ medical expenses in the jurisdictions where we do business.

Statutory and regulatory requirements for Medicare, Medicaid and other government healthcare programs govern provider reimbursement levels.

From time to time, legislative changes are made to government healthcare programs that impact our business, and the federal and/or state governments may continue to enact measures in the future aimed at containing or reducing reimbursement levels for medical expenses paid for in whole or in part with government funds.

The Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010 (collectively, ACA), the Medicare Improvements for Patients and Providers Act of 2008 (MIPPA), the Deficit Reduction Act of 2005 (DRA) and the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA), each contain provisions that have directly impacted reimbursement for the products we provide.

Reimbursement from private third-party payors varies and is dependent on contract negotiations and there is no guarantee that such contracts will be profitable, and failure to comply with these contracts may result in termination or financial liabilities.

Efforts by Payors to reduce healthcare costs have intensified in recent years and will likely continue, which may result in reductions or slower growth in reimbursement for certain services provided by healthcare companies.

It is possible that healthcare companies will continue to experience a shift in Payor mix away from fee-for-service Payors, resulting in an increase in the percentage of revenues attributable to reimbursement based upon value-based principles and quality-driven managed care programs, and general industry trends that include pressures to control healthcare costs.

Pressures to control healthcare costs and a shift away from traditional health insurance reimbursement to payments based upon quality outcomes have increased the uncertainty of payments.

The ACA affects how healthcare services are delivered and reimbursed through the expansion of health insurance coverage, constraining Medicare and Medicaid program spending, and establishing programs that tie reimbursement to quality and integration.

Potential changes to the ACA may impact our business including but not limited to court challenges, and administration and legislative modifications.

Lower numbers of insured individuals, reduced coverage for insured individuals and reduced government funding for programs could each cause our revenues to decrease to the extent such legislation reduces reimbursement rates.

The MMA established a Competitive Bidding Process (CBP) for certain durable medical equipment, prosthetics, orthotics and supplies (DMEPOS) we provide.

The DMEPOS CBP impacts the Medicare reimbursement amounts for suppliers of certain DMEPOS items, and in the past, included some DMEPOS items that we provide to our patients.

Cumulatively, in previous competition rounds of the DMEPOS CBP in effect between 2011 and 2018, we were offered contracts for a substantial majority of the product categories for which we submitted bids.

Competitive bidding contracts are expected to be re-bid at least every three years.

While we cannot predict the outcome of the DMEPOS CBP on our business in the future nor the Medicare payment rates that will be in effect in future years, the program may materially adversely affect our financial condition and results of operations.

State Medicaid programs implement reimbursement policies for the products and services we provide which can vary from state to state.

We cannot predict whether states may consider adopting reimbursement reductions or whether any such changes could have a material adverse effect on our business.

Fraud and Abuse Laws

There are various federal and state laws that regulate the operation of healthcare providers, including those that prohibiting fraudulent and abusive business practices by healthcare providers, suppliers, and parties that contract with such providers and suppliers who participate in, receive payments from or are in a position to make or influence referrals in connection with government-sponsored healthcare programs, including the Medicare and Medicaid programs.

There are various federal and state laws that regulate the operation of healthcare providers, including those that prohibit fraudulent and abusive business practices by healthcare providers, suppliers, and parties that contract with such providers and suppliers who participate in, receive payments from or are in a position to make or influence referrals in

connection with government-sponsored healthcare programs, including the Medicare and Medicaid programs.

Of particular importance, each of which may be amended and updated from time to time, are:

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The statute also provides for a penalty of up to $185,009 for a circumvention scheme;

• The federal FCA and similar state laws provide, in part, that the federal government may bring a lawsuit against any person whom it believes has knowingly presented, or caused to be presented, a false or fraudulent request for payment from the federal government, or who has made a false statement or used a false record to get a claim approved..

● The FCA and similar state laws provide, in part, that the federal government may bring a lawsuit against any person whom it believes has knowingly presented, or caused to be presented, a false or fraudulent request for payment from the federal government, or who has made a false statement or used a false record to get a claim approved.

Among the many other potential bases for liability is the knowing and improper failure to report and refund amounts owed to the government within 60 days of identifying an overpayment.

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The FCA may be enforced directly by the federal government or by a whistleblower on the government’s behalf;

• The Eliminating Kickbacks in Recovery Act, which imposes criminal liability on individuals or entities that pay, receive, or solicit any remuneration in return for patient referrals to recovery homes, clinical treatment facilities, or laboratories;

● The federal Eliminating Kickbacks in Recovery Act, which imposes criminal liability on individuals or entities that pay, receive, or solicit any remuneration in return for patient referrals to recovery homes, clinical treatment facilities, or laboratories;

● The federal Civil Monetary Penalties Law prohibits, among other things, the offering or transfer of remuneration to a Medicare or state healthcare program beneficiary if the person knows or should know it is likely to influence the beneficiary’s selection of a particular provider, practitioner, or supplier of services reimbursable by Medicare or a state healthcare program, unless an exception applies;

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To enforce compliance with the federal laws, the U.S.

Department of Justice and the U.S.

Department of Justice (DOJ) and the U.S.

Department of Health and Human Services (HHS) Office of Inspector General (OIG) have continued their scrutiny of healthcare providers, which has led to a number of investigations, prosecutions, convictions and settlements in the healthcare industry.

An example of the continued prioritization by DOJ on corporate and healthcare matters is evidenced by the September 2022 release of the Monaco Guidelines, which reflect enhancements to long-standing DOJ Guidelines on corporate accountability.

An example of the continued prioritization by the DOJ on corporate and healthcare matters is evidenced by the September 2022 release of the Monaco Guidelines, which reflect enhancements to long-standing DOJ Guidelines on corporate accountability.

Dealing with investigations can be time- and resource-consuming and can divert management’s attention from the business.

Any such investigation or settlement could increase costs or otherwise have an adverse effect on operations.

In addition, because of the potential for large monetary exposure under the federal False Claims Act, which provides for treble damages and mandatory minimum penalties of $12,537 to $25,076 per false claim or statement, with such penalty amounts being updated from time to time, healthcare providers often resolve allegations without admissions of liability for significant and material amounts to avoid the uncertainty of treble damages that may be awarded in litigation proceedings.

In addition, because of the potential for large monetary exposure under the FCA, which provides for treble damages and mandatory minimum penalties of $13,508 to $27,018 per false claim or statement, with such penalty amounts being updated from time to time, healthcare providers often resolve allegations without admissions of liability for significant and material amounts to avoid the uncertainty of treble damages that may be awarded in litigation proceedings.

Such settlements often contain additional compliance and reporting requirements as part of a consent decree, settlement agreement or corporate integrity agreement.

Given the significant size of actual and potential settlements, it is expected that the government will continue to devote substantial resources to investigating healthcare providers’ compliance with the healthcare reimbursement rules and fraud and abuse laws.

We completed our acquisition of Apria on March 29, 2022.

On December 18, 2020, a federal judge approved a civil and administrative settlement between Apria and the United States and certain state Medicaid programs, in a complaint filed by three relators under the qui tam provisions of the FCA, 31 U.S.C.

On December 18, 2020, prior to the completion of the Apria Acquisition on the Acquisition Date, a federal judge approved a civil and administrative settlement between Apria and the U.S.

and certain state Medicaid programs, in a complaint filed by three relators under the qui tam provisions of the FCA, 31 U.S.C.

§ 3729 et seq., as well as comparable state false claims laws, in connection with the rental of non-invasive ventilation products (NIVs).

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Apria did not admit that any of its conduct was illegal or otherwise improper.

As part of the settlement, Apria also entered into a five-year CIA with the HHS OIG.

All amounts were paid prior to the Acquisition Date.

As part of the settlement, Apria also entered into a five-year Corporate Integrity Agreement (CIA) with the HHS OIG.

The CIA requires Apria to maintain its ongoing corporate compliance program and implement a set of defined corporate integrity activities for a period of five years from the effective date of the CIA.

Among other things, the CIA requires Apria to impose certain oversight obligations on our board of directors;

Among other things, the CIA requires Apria to impose certain oversight obligations on Apria’s board of directors;

provide certain management certifications;

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If a determination is made that our records or the patients’ medical records are insufficient to meet requirements for the claims, we could be subject to denials or overpayment demands for claims submitted for Medicare reimbursement.

In the rare event that such an audit results in major discrepancies of claims records which lacked medical necessity, we may be subject to broader corrective measures, including extrapolation of audit results across a wider population of claims, submission of recoupment demands for claims other than those examined in the audit, or placing the provider on a full pre-payment review.

Products & Healthcare Services

Global Operations

Our operations are subject to local, country and regional regulations, such as those promulgated by the European Medicines Agency and the Medical Devices Directive.

In addition, quality requirements are imposed by customers which audit our operations on a regular basis.

Each of our manufacturing locations is licensed or registered with the appropriate local authority.

We believe we are in material compliance with all applicable statutes and regulations, as well as prevailing industry best practices, in the conduct of our business operations outside of the U.S.

Since we market our products worldwide, certain products of a local nature and variations of product lines must also meet other local regulatory requirements.

Certain additional risks are inherent in conducting business outside the U.S., including price and currency exchange controls, changes in currency exchange rates, limitations on participation in local enterprises, expropriation, nationalization, and other governmental action.

Global Privacy Regulation

Our international operations are impacted by data privacy laws that require safeguards for the protection of healthcare and other personal data.

Data protection laws and regulations are evolving globally and may continue to add additional compliance costs and legal risks to our international operations.

Under the EU GDPR, regulatory penalties may be passed by data protection authorities for up to the greater of 4% of worldwide turnover or €20 million.

The United Kingdom (U.K.) has implemented similar legislation (the U.K.

GDPR) that carries similar compliance and operational costs, and potential fines, as the EU GDPR.

The costs of compliance with, and other burdens imposed by, the EU GDPR, U.K.

GDPR and other international data protection laws may impact our operations outside the U.S.

and may limit the ways in which we can provide services or use personal data collected while providing services.

Anti-bribery and Corruption

We are subject to laws and regulations that seek to prevent corruption and bribery in the marketplace, including the U.S.

Foreign Corrupt Practices Act (FCPA) and the U.K.

These regimes have been the focus of increasing enforcement activity globally in recent years.

A violation of the FCPA or other similar laws by us and/or our agents or representatives could result in, among other things, the imposition of fines and penalties, changes to our business practices, the termination of or other adverse impacts under our contracts or debarment from bidding on contracts, and/or harm to our reputation, any of which could have a material adverse effect on our business, results of operations, financial condition, cash flows and stock price.

Patient Direct

Reimbursement

Demand for many of the existing and new medical devices and supplies dispensed to our customers is, and will continue to be, affected by the extent to which government healthcare programs and private health insurers reimburse us and our customers for their members’/beneficiaries’ medical expenses in the jurisdictions where we do business.

Statutory and regulatory requirements for Medicare, Medicaid and other government healthcare programs govern provider reimbursement levels.

Reimbursement from private third-party Payors varies and is dependent on contract negotiations and there is no guarantee that such contracts will be profitable, and failure to comply with these contracts may result in termination or financial liabilities.

Pressures to control healthcare costs and a shift away from traditional health insurance reimbursement to payments based upon quality outcomes have increased the uncertainty of payments.

Potential changes to the ACA may impact our business including but not limited to court challenges, and administration and legislative modifications.

The MMA established a Competitive Bidding Process (CBP) for certain DMEPOS we provide.

The DMEPOS CBP impacts the Medicare reimbursement amounts for suppliers of certain DMEPOS items, and in the past, included some DMEPOS items that we provide to our patients.

Competitive bidding contracts are expected to be re-bid at least every three years.

State Medicaid programs implement reimbursement policies for the products and services we provide which can vary from state to state.

We cannot predict whether states may consider adopting reimbursement reductions or whether any such changes could have a material adverse effect on our business.

Marketing and Transparency Reporting Laws

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The scope and interpretation of the laws that are or may be applicable to the delivery of consumer phone calls, emails and text messages are continuously evolving and developing.

If we do not comply with these laws or regulations or if we become liable under these laws or regulations, we could face direct liability, could be required to change some portions of our business model, could face negative publicity and our business, financial condition and results of operations could be adversely affected.

If we do not comply with these laws or regulations or if we become liable under these laws or regulations, we could face direct

liability, could be required to change some portions of our business model, could face negative publicity and our business, financial condition, results of operations and cash flows could be adversely affected.

Fair Debt Collection Practices Act

Some of our operations may be subject to compliance with certain provisions of the Fair Debt Collection Practices Act and comparable statutes in many states.

Under the Fair Debt Collection Practices Act, a third-party collection company is restricted in the methods it uses to contact consumer debtors and elicit payments with respect to placed accounts.

Requirements under state collection agency statutes vary, with most requiring compliance similar to that required under the Fair Debt Collection Practices Act.

We believe we are in substantial compliance with the Fair Debt Collection Practices Act and comparable state statutes where applicable.

Some of our operations may be subject to compliance with certain provisions of the Fair Debt Collection Practices Act (FDCPA) and comparable statutes in many states.

Under the FDCPA, a third-party collection company is restricted in the methods it uses to contact consumer debtors and elicit payments with respect to placed accounts.

Requirements under state collection agency statutes vary, with most requiring compliance similar to that required under the FDCPA.

We believe we are in substantial compliance with the FDCPA and comparable state statutes where applicable.

If our collection practices are viewed as inconsistent with these standards, we may be subject to damages and penalties.

Human Capital Resources

Teamm ate Overview

Teammate Overview

Our teammates are at the heart of everything that we do.

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and 8,500 teammates outside of the U.S (OUS).

None of our domestic teammates are represented by a labor union or subject to a collective bargaining agreement (CBA), but certain OUS teammates are represented and covered by labor agreements.

None of our U.S.

teammates are represented by a labor union or subject to a collective bargaining agreement (CBA), but certain OUS teammates are represented and covered by labor agreements.

Throughout our operations, we continue to have positive relationships with our teammates, as well as the unions and works councils that represent our OUS teammates.

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Key programs focus on teammate safety, leadership development, health and wellness, work-life balance, talent management, diversity and inclusion, and teammate engagement.

We believe that diversity, inclusion, and teammate engagement are integral to our vision, strategy and business success.

We believe that diversity, inclusion, and teammate engagement are integral to our Life Takes Care purpose, vision, strategy and business success.

We pride ourselves on sustaining a culture that respects teammates and values concern for others.

We believe that fostering an environment that values diversity, inclusion and ethical conduct creates an organization that is able to embrace, leverage and respect differences among our teammates, customers and the communities where we live, work and serve.

As a result, we created Teammate Resource Groups (TRGs) that provide resources and support for underrepresented identity groups to improve innovation, promote belonging, increase team alignment, and boost engagement.

Our current TRGs include Black Heritage, Outreach, Mentorship and Enrichment, Asian Americans and Pacific Islanders Rising to Excellence, Hispanic Organization for Leadership and Achievement, LGBTQ+, Military and Veteran, Women Empowerment Network, and Women in Technology.

As a result, we created Teammate Resource Groups (TRGs) to provide support and help in personal and career development while creating a safe space where teammates can bring their authentic selves to work every day.

Our current TRGs include Black Heritage, Outreach, Mentorship and Enrichment, Asian and Pacific Islanders Rising to Excellence,

Hispanic Organization for Leadership and Achievement, LGBTQ+, Veterans, Women’s Empowerment Network, Women in Technology, Diverse Abilities Inclusion and Support, and Young Emerging Professionals.

We also believe that our teammates are the face of Owens & Minor, and we expect every teammate to model our values and commitment to ethical business practices as set forth in our Code of Honor.

In 2021, we established the Owens & Minor Foundation, which is dedicated to further our commitment towards impactful contributions to charitable and civic organizations in the communities we serve.

In 2021, we established the Owens & Minor Foundation, which is dedicated to building healthier communities through impactful contributions to the charitable and civic organizations it serves.

The Owens & Minor Foundation focuses on three primary areas, the environment, healthcare, and diversity and inclusion.

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We believe teammate benefits are an essential component of a competitive total compensation package.

Our benefits programs are designed to attract and retain top talent, and include medical, health and dental insurance, long-term disability insurance, accidental death and disability insurance, life insurance, travel and accident insurance, and our 401(k) savings and retirement plans.

Our benefits programs are designed to attract and retain top talent, and include medical, health and dental insurance, short-term and long-term disability insurance, accidental death and dismemberment insurance, life insurance, travel and accident insurance, our annual and long-term incentive plans, teammate stock purchase plan and our 401(k) savings and retirement plan.

Our Board of Directors’ Role in Human Capital Resource Management

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The Our People & Culture Committee has oversight of talent retention and development, including succession planning, and the Board provides input on important decisions in each of these areas.

COVID-19 Response

In response to the 2019 novel coronavirus (COVID-19) pandemic, we implemented health and safety protocols to protect our teammates and customers.

These protocols meet or exceed health and safety standards required by federal, state and local government agencies, and are based on guidance from the Centers for Disease Control (CDC) and Prevention, as well as, other public health authorities.

Actions taken to protect our teammates and customers in response to the COVID-19 pandemic include:

• Providing personal protective equipment (PPE) to teammates in distribution and manufacturing locations;

• Monitoring CDC community levels and taking actions to mitigate risks during high community level surges;

• Providing paid time off for teammates to receive COVID-19 vaccinations;

• Significantly increasing remote work arrangements and virtual interactions among teammates and with customers;

For additional discussion of the impact of the COVID-19 pandemic on our business, see Item 1A.

“Risk Factors – General Risk Factors – We are subject to risks related to public health crises or future outbreaks of health crises or other adverse public health developments such as the COVID-19 global pandemic.”

Available Information

The Company files annual reports, quarterly reports, proxy statements and other documents with the Securities and Exchange Commission (SEC) under the Securities Exchange Act of 1934 (Exchange Act).

The Company files annual reports, quarterly reports, proxy statements and other documents with the Securities and Exchange Commission (SEC) under the Securities Exchange Act of 1934.

We make these filings available free of charge through the SEC Filings link in the Investor Relations content section on our website located at www.owens-minor.com as soon as reasonably practicable after they are filed with or furnished to the SEC.

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Furthermore, the SEC also maintains a website that contains reports, proxy and information statements, and other information regarding Owens & Minor, Inc.

The public can obtain any documents that the Company files with the SEC at http://www.sec.gov.

Investors and others should note that we announce material financial information to our investors using our investor relations website, SEC filings, press releases, public conference calls and webcasts.

The public can obtain any documents that the Company files with the SEC at www.sec.gov.

We announce material financial information to our investors using our investor relations website, SEC filings, press releases, public conference calls and webcasts.

We use these channels as well as social media and blogs to communicate with our teammates and the public about our company, our services and other issues.

It is possible that the information we post on social media and blogs could be deemed to be material information.

Therefore, we encourage investors, the media, and others interested in our company to review the information we post on the social media channels and blogs listed on our investor relations website.

Therefore, we encourage

investors, the media, and others interested in our Company to review the information we post on the social media channels and blogs listed on our Investor Relations website.

Additionally, we have adopted a written Code of Honor that applies to all of our directors, officers and teammates, including our principal executive officer and senior financial officers.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business