What changed in this filing

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Item 1A. Risk Factors

2023-02-21 compared with 2022-02-28 · 61 added, 69 removed, 299 unchanged (30% of the section changed)

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, UnitedHealthcare's Preferred Lab Network);

CMS has set goals for value-based reimbursement to be achieved.

CMS has set goals for value-based reimbursement to be achieved by 2030.

Patients are encouraged to take increased interest in and responsibility for, and often are bearing increased responsibility for payment for, their healthcare.

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Increased IDN ownership of physician practices may enhance clinician ties to IDN-affiliated laboratories and may strengthen their competitive position.

The formation of ACOs and DCEs and their approach to contracts with healthcare providers also may increase competition to provide diagnostic information services.

The formation of ACOs and their approach to contracts with healthcare providers also may increase competition to provide diagnostic information services.

In addition, new players have recently started to provide clinical lab testing services ( e.g ., employers;

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In addition, state budget pressures have encouraged states to consider several courses of action that may impact our business, such as delaying payments, reducing reimbursement, restricting coverage eligibility, denying claims and service coverage restrictions.

Reimbursement for Medicare services also is subject to annual reduction under the Budget Control Act of 2011, the Statutory Pay-As-You-Go Act of 2010 and the Physician Fee Schedule.

From time to time, the federal government has considered whether competitive bidding could be used to provide clinical testing services for Medicare beneficiaries at attractive rates while maintaining quality and access to care.

Further, CMS has set goals for value-based reimbursement to be achieved by 2030.

Reimbursement for Medicare services also is subject to annual reduction under the Budget Control Act of 2011, and the Statutory Pay-As-You-Go Act of 2010.

From time to time, the federal government has considered whether competitive bidding could be used to provide clinical testing services for Medicare beneficiaries while maintaining quality and access to care.

Congress periodically considers cost-saving initiatives.

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We expect continuing efforts by third-party payers, including in their rules, practices and policies, to reduce reimbursements, to impose more stringent cost controls and to reduce utilization of clinical testing services.

ACOs, DCEs and IDNs also may undertake efforts to reduce utilization of, or reimbursement for, diagnostic information services.

The healthcare industry has experienced a trend of consolidation among health insurance plans, resulting in fewer but larger insurance plans with significant bargaining power to negotiate fee arrangements with healthcare providers, including clinical testing providers.

The increased consolidation among health plans also has increased pricing transparency and their bargaining power and the potential adverse impact of ceasing to be a contracted provider with any such insurer.

ACOs and IDNs also may undertake efforts to reduce utilization of, or reimbursement for, diagnostic information services.

The increased consolidation among health plans also has increased pricing transparency, insurer bargaining power and the potential adverse impact of ceasing to be a contracted provider with an insurer.

Health plans, and independent physician associations, may demand that clinical testing providers accept discounted fee structures or assume all or a portion of the financial risk associated with providing testing services to their members through capitated payment arrangements.

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Negligence in performing our services can lead to injury or other adverse events.

We may be sued under physician liability or other liability law for acts or omissions by our pathologists, laboratory personnel and IDN employees who are under the supervision of our IDN-based pathologists.

We may be sued under physician liability or other liability law for acts or omissions by our pathologists, laboratory personnel and IDN employees who are under our supervision.

We are subject to the attendant risk of substantial damages awards and risk to our reputation.

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Our business is subject to or impacted by extensive and frequently changing laws and regulations in the United States (including at both the federal and state levels) and the other jurisdictions in which we engage in business.

While we seek to conduct our business in compliance with all applicable laws, many of the laws and regulations applicable to us are vague or indefinite and have not been interpreted by the courts, including many of those relating to:

While we seek to conduct our business in compliance with all applicable laws, many of the laws and regulations applicable to us are vague or indefinite and have not been extensively interpreted by the courts, including many of those relating to:

• billing and reimbursement of clinical testing;

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• relationships with physicians and IDNs;

• marketing to consumers;

• privacy of patient data and other personal information;

• safety and health of laboratory employees;

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We may not be able to maintain, renew or secure required permits, licenses or any other regulatory approvals needed to operate our business or commercialize our services.

governmental healthcare programs and the loss of various licenses, certificates and authorizations necessary to operate our business, as well as incur additional liabilities from third-party claims.

If we fail to comply with applicable laws and regulations, or if we fail to maintain, renew or obtain necessary permits, licenses and approvals, we could suffer civil and criminal penalties, fines, exclusion from participation in governmental healthcare programs and the loss of various licenses, certificates and authorizations necessary to operate our business, as well as incur additional liabilities from third-party claims.

If any of the foregoing were to occur, our reputation could be damaged and important business relationships with third parties could be adversely affected.

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• injury to our reputation.

Changes in applicable laws and regulations may result in existing practices becoming more restricted, or subject our existing or proposed services to additional costs, delay, modification, withdrawal or reconsideration.

Such changes also could require us to modify our business objectives.

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As the FDA moves to regulate more clinical laboratory testing, its approach to regulation is impacting industry practices and participants, new competitors may enter the industry, and competition may come in new forms.

Legislation introduced in Congress would enable the FDA to regulate LDTs, in vitro diagnostics, software and other items used in the diagnosis of disease.

The FDA and the U.

Department of Health and Human Services also have expressed views regarding the regulation of LDTs.

Either new law or a revised approach to regulation of LDTs could have a significant impact on the clinical laboratory testing industry, including regulating LDTs in new ways, while creating avenues of opportunity and competition regarding clinical laboratory testing.

The FDA and HHS have expressed views regarding the regulation of LDTs.

Legislation introduced in recent sessions of Congress that would authorize the FDA to regulate LDTs has not become law.

If legislation that authorizes the FDA to regulate LDTs were to become law, it could have a significant impact on the clinical laboratory testing industry, including regulating LDTs in new ways, while creating avenues of opportunity and competition regarding clinical laboratory testing.

New competitors may enter the industry, and competition may come in new forms.

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In addition, failure to comply with applicable laws relating to billing government healthcare programs may result in various consequences, including:

civil and criminal fines and penalties,

exclusion from participation in governmental healthcare programs and the loss of various licenses, certificates and authorizations necessary to operate our business, as well as incur additional liabilities from third-party claims, all of which could have a material adverse effect on our business.

civil and criminal fines and penalties, exclusion from participation in governmental healthcare programs and the loss of various licenses, certificates and authorizations necessary to operate our business, as well as incur additional liabilities from third-party claims.

Certain violations of these laws may also provide the basis for a civil remedy under the federal False Claims Act, including fines and damages of up to three times the amount claimed.

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trade regulations and procedures and actions affecting approval, production, pricing, reimbursement and marketing of services;

existing and emerging data privacy regulations affecting the processing and transfer of personal data;

and challenges based on differing languages and cultures.

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Adverse results in material litigation could have an adverse financial impact and an adverse impact on our client base and reputation.

We are involved in various legal proceedings arising in the ordinary course of business including, among other things, disputes as to intellectual property, professional liability and employee-related matters, as well as inquiries from governmental

agencies and Medicare or Medicaid carriers.

Some proceedings against us involve claims that are substantial in amount and could divert management's attention from operations.

These proceedings also may result in substantial monetary damages.

Government rules and regulations concerning mandatory COVID-19 vaccination of U.S.-based employees of companies that work on or in support of federal government contracts, or other COVID-19 vaccine mandates, could have a material adverse impact on our business and consolidated results of operations.

In September 2021, President Biden issued an executive order requiring all employers with U.S.

Government contracts to ensure that their U.S.-based employees, contractors and subcontractors, that work on or in support of U.S.

government contracts, are fully vaccinated against COVID-19 as required by the executive order.

The executive order is being challenged in courts and is currently not in effect.

However, other federal, state and local government vaccine mandates are in effect;

some of these mandates have application to the Company (directly or indirectly), others do not have application to the Company.

Further, additional vaccine and testing mandates have been and may in the future be announced by private parties (such as contract counterparties) and in other jurisdictions in which we operate;

such mandates may conflict with each other.

Requirements to mandate COVID-19 vaccination of all or significant portions of our workforce could result in labor disruptions, employee attrition, difficulty in satisfying future labor needs and sanctions or penalties.

RISKS RELATED TO OUR INDEBTEDNESS

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Changes in our credit ratings, however, do not require repayment or acceleration of any of our debt.

Borrowings under our credit facilities may be made at interest rates that are based on the London Interbank Offered Rate (“LIBOR”), which is a widely used benchmark for establishing interest rates globally.

As a result of concerns regarding the accuracy of the calculation of LIBOR, the United Kingdom’s Financial Conduct Authority announced that it intends to no longer compel member banks to submit rates used to calculate LIBOR after December 31, 2021.

These reforms may cause LIBOR to cease to exist as a reference rate.

A committee established by the Federal Reserve Board announced a new index, based on overnight repurchase agreements collateralized by U.S.

Treasury securities, as an alternative to LIBOR;

other jurisdictions have proposed different alternatives.

At this time, it is not possible to predict the replacement rate for U.S.

dollar LIBOR (which is the LIBOR rate that we most frequently rely on), and the consequences to us cannot be predicted.

While we expect to be able to transition all LIBOR-based instruments and contracts to an alternative reference rate upon the cessation of LIBOR, there is no guarantee that we will be able to do so.

Borrowings under our unsecured credit facility may be made at interest rates that are based on the London Interbank Offered Rate (“LIBOR”), which has been a widely used benchmark for establishing interest rates globally, but which is being phased out as a reference rate.

While we expect to be able to transition the facility to an alternative reference rate upon the cessation of LIBOR, there is no guarantee that we will be able to do so.

Changes in market interest rates may negatively influence our financing costs and the valuation of derivative instruments.

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The diagnostic information services industry is faced with changing technology and new product introductions, including technology that enables more convenient or cost-effective testing.

For example, digital pathology is an emerging

technology that may change the practice of pathology.

For example, digital pathology is an emerging technology that may change the practice of pathology.

Information technology that includes self-learning or "artificial intelligence" features is growing and may impact the healthcare industry.

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Our business could be negatively affected if we are unable to continue to strengthen our efficiency.

It is important that we continue to strengthen our efficiency to promote our competitive position and to enable us to mitigate the impact on our profitability of steps taken by government payers and health insurers to reduce the utilization and reimbursement of healthcare services, including diagnostic information services.

Our business operations and reputation may be materially impaired if we do not comply with privacy laws or information security policies.

In our business, we collect, generate, process or maintain sensitive information, such as patient data and other personal information.

If we do use or not adequately safeguard that information in compliance with applicable requirements under federal, state and international laws, or if it were disclosed to persons or entities that should not have access to it, our business could be materially impaired, our reputation could suffer and we could be subject to fines, penalties and litigation.

If we do not use or adequately safeguard that information in compliance with applicable requirements under federal, state and international laws, or if it were disclosed to persons or entities that should not have access to it, our business could be materially impaired, our reputation could suffer and we could be subject to fines, penalties and litigation.

In the event of a data security breach, we may be subject to notification obligations, litigation and governmental investigation or sanctions, and may suffer reputational damage, which could have an adverse impact on our business.

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(a) the federal Health Insurance Portability and Accountability Act and the regulations thereunder, which establish (i) a complex regulatory framework including requirements for safeguarding protected health information and (ii) comprehensive federal standards regarding the uses and disclosures of protected health information;

(b) state laws, including the California Consumer Privacy Act and similar laws in other states;

and (c) laws outside the U.S., including the European Union's General Data Protection Regulation.

(b) state laws (e.g., California) and similar laws in other states;

and (c) laws outside the U.S., including the European Union's General Data Protection Regulation and similar laws in other jurisdictions.

Our approach to environmental, social and governance (ESG) matters may not satisfy all our stakeholders.

We regularly assess opportunities and risks related to environmental, social and governance (ESG) matters.

As part of this process, we make decisions related to ESG matters and may set goals and targets related to ESG matters.

We have a broad range of stakeholders, including our stockholders, employees, patients and communities we serve, some of whom increasingly focus on ESG matters.

In addition, some of our stockholders, employees and patients may consider ESG factors in making investment, employment and service provider decisions.

Our ability to achieve the goals we may set related to ESG matters are subject to numerous risks and uncertainties, many of which are outside of our control.

Despite our efforts, we may not achieve our ESG goals on the timetable we set or at all.

Additionally, certain of our stakeholders may not be satisfied with our decisions related to ESG matters, the goals we set regarding ESG matters, our progress towards these goals or the resulting outcomes.

This could lead to negative perceptions of, or loss of support for our business, difficulty recruiting or attracting new employees and our stock price being negatively impacted.

The IT systems that we rely on may be subject to unauthorized tampering, cyberattack or other security breach.

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Our ability to attract and retain qualified employees is critical to the success of our business and the failure to do so may materially adversely affect our performance.

The supply of qualified technical, managerial and other personnel, including phlebotomists and processors, is currently constrained;

The supply of qualified technical, professional, managerial and other personnel, including cytotechs, phlebotomists and processors, is currently constrained;

competition for qualified employees, even across different industries, is intense, including as individuals leave the job market.

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These events also may result in a decline in the number of patients who seek clinical testing services or in our employees' ability to perform their job duties.

The COVID-19 pandemic has significantly affected our consolidated results of operations, financial position and cash flows, and may continue to do so.

A pandemic caused by a novel strain of coronavirus (COVID-19) continues to severely impact the economy of the United States and other countries around the world.

Federal, state and local governmental authorities in the United States have implemented numerous policies and initiatives to try and reduce the transmission of COVID-19, such as travel bans and restrictions, quarantines, shelter-in-place orders, business shutdowns, and vaccination and masking mandates.

These policies and initiatives have resulted in, among other things, a significant reduction in physician office visits, the cancellation of elective medical procedures, customers closing or severely curtailing their operations (voluntarily or in response to government orders), increased unemployment, constrained labor supply and loss of healthcare insurance, and the adoption of work-from-home policies, all of which have had, and we believe will continue to have, an impact on our consolidated results of operations, financial position and cash flows.

Due to the COVID-19 pandemic, we have experienced significant volatility, including periods of material decline compared to prior year periods, in testing volume in our base business (which excludes COVID-19 molecular and antibody testing) and this volatility, including periods of material decline, could continue.

Although we also have experienced heavy demand for COVID-19 molecular testing as a result of the COVID-19 pandemic, which has had a positive impact on our overall testing volume, the duration and level of the demand for, and reimbursement for, COVID-19 molecular testing is uncertain.

We may also experience an adverse impact on cash collections and labor supply and supply chain disruptions, including shortages, delays and price increases in testing equipment and supplies, as a result of the impact of the COVID-19 pandemic.

A number of suppliers and manufacturers we rely upon have been experiencing and may continue to experience disruptions and delays, as a result of ongoing raw material and labor shortages, supply challenges, and business limitations or shutdowns resulting from the COVID-19 pandemic, which may prevent us from obtaining equipment and supplies in a timely manner or at a reasonable price.

The COVID-19 pandemic has also caused significant disruptions in transport and logistics services as a result of facility closures, labor shortages or other challenges, which may affect our ability to transport specimens, receive supplies or materials from our suppliers or otherwise provide our services.

These conditions may continue or deteriorate in the future.

Any of these events could have an adverse impact on our business, consolidated results of operation, financial position and cash flows.

We believe the COVID-19 pandemic’s adverse impact on our consolidated results of operations, financial position and cash flows will be primarily driven by:

the severity and duration of the COVID-19 pandemic (including any variants);

the COVID-19 pandemic’s impact on the U.S.

healthcare system and the U.S.

the timing, scope and effectiveness of federal, state and local governmental responses;

and effective and comprehensive COVID-19 vaccination across the U.S.

These primary drivers are beyond our knowledge and control and will change over time, and as a result, at this time we cannot reasonably estimate the adverse impact the COVID-19 pandemic will have on our businesses, consolidated results of operations, financial position and cash flows, and the adverse impact may be material.

Our business also may be impacted by changes in the severity of the COVID-19 pandemic at different times in the various cities and regions where we operate and offer services, and by challenges faced in implementing nationwide COVID-19 vaccinations, including the degree to which the public is vaccinated and the effectiveness of vaccines at preventing infection or illness in connection with new or existing variants of COVID-19.

Even after the COVID-19 pandemic has moderated and business conditions have eased, we may continue to experience similar adverse effects to our businesses, consolidated results of operations, financial position and cash flows arising from long-term changes in behavior by consumers or other healthcare system participants and resulting from a recessionary economic environment that may persist.

The impact that the COVID-19 pandemic will have on our businesses, consolidated results of operations, financial position and cash flows could exacerbate other risks identified in this Report.

The COVID-19 pandemic or any future pandemic may negatively affect us, including through its impact on the labor force and supply chain.

A pandemic caused by a novel strain of coronavirus (COVID-19) has severely impacted the economy of the United States and other countries around the world, including affecting labor supply and causing supply chain disruptions.

While certain of the economic impacts of the COVID-19 pandemic have eased and many COVID-19 related restrictions have been lifted or relaxed as a result of progress in COVID-19 vaccination, testing and treatment, a rise in infection rates, the emergence of new COVID-19 variants or any future pandemic could result in, among other things, a reduction in physician office visits and diagnostic testing volume, the cancellation of elective medical procedures, or customers closing or curtailing their operations, as well as increased unemployment and loss of health insurance.

We may also experience labor shortages and supply chain disruptions, including shortages, delays and price increases in testing equipment and supplies, as a result of the COVID-19 pandemic or any future pandemic.

A number of suppliers and manufacturers we rely upon have experienced, and may continue to experience, disruptions and delays stemming from raw material and labor shortages, supply challenges and

significant disruptions in transport and logistics services due to facility closures, labor constraints and other challenges.

These challenges may affect our ability to transport specimens, receive equipment, supplies or materials, or otherwise provide our services in a timely manner or at a reasonable price.

In addition, labor shortages may affect our ability to achieve our staffing or productivity goals.

These conditions may continue or deteriorate in the future, including in the event of a future pandemic outbreak.

The extent to which we may be impacted by the COVID-19 pandemic or any future pandemic will depend on many factors beyond our knowledge or control.

These factors include:

the timing, extent, trajectory and duration of any pandemic;

increases in COVID-19 infection rates and the geographic location of such increases;

the development, availability, distribution and effectiveness of vaccines and treatments;

the imposition of protective public safety measures;

and the impact of any pandemic on supply chain and the global economy.

To the extent the COVID-19 pandemic or any future pandemic adversely affects our business, results of operations and financial condition, it may also have the effect of heightening other risks described in this Report.

Inflationary pressures could adversely impact us because of increases in the costs of materials, supplies and services, and increased labor and people-related expenses.

Inflationary pressures have resulted in increases in the costs of the testing equipment, supplies and other goods and services that we purchase from manufacturers, suppliers and others.

Inflationary pressures, along with the competition for labor, have also resulted in a rise of our labor costs, which include the costs of compensation, benefits, and recruiting and training new hires.

Our ability to raise the prices and fees we charge for the services we provide is limited.

Continuation of the current inflationary environment may adversely impact us.

CAUTIONARY FACTORS THAT MAY AFFECT FUTURE RESULTS

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(a) Heightened competition from commercial clinical testing companies, IDNs, physicians and others.

(b) Increased pricing pressure from customers, including payers and patients.

(b) Increased pricing pressure from customers, including payers and patients, and changing relationships with customers, payers, suppliers or strategic partners.

(d) Impact of changes in payment mix, including increased patient financial responsibility and any shift from fee-for-service to discounted, capitated or bundled fee arrangements.

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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 1A. Risk Factors